-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VbA2f+5skYYgo6F6ZjIM1uPnRwthzW8+N43hyEfVXsCQDzKqIkMt5WHHk4f8JANq E0SKxVHD+DZAr7RM/9R4WA== 0000939802-04-000455.txt : 20040823 0000939802-04-000455.hdr.sgml : 20040823 20040820175816 ACCESSION NUMBER: 0000939802-04-000455 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040823 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RINCON RESOURCES, INC. CENTRAL INDEX KEY: 0001230795 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 870700927 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-105008 FILM NUMBER: 04989842 BUSINESS ADDRESS: STREET 1: 2920 N SWAN RD, SUITE 206 STREET 2: - CITY: TUCSON STATE: AZ ZIP: 85715 BUSINESS PHONE: 520-991-3335 MAIL ADDRESS: STREET 1: 2920 N SWAN RD, SUITE 206 CITY: TUCSON STATE: AZ ZIP: 85715 FORMER COMPANY: FORMER CONFORMED NAME: TWIN VENTURES LTD DATE OF NAME CHANGE: 20030505 10QSB 1 form10qsb063004.txt [As adopted in Release No. 34-32231, April 28, 1993, 58 F.R. 26509] U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2004 -------------------------------------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the transition period from to --------------- --------------- Commission file number 333-105008 --------------------------------------------------------- Rincon Resources, Inc. -------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 87-0700927 - ------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 2920 N Swan Road, Suite 206, Tucson, Arizona 85715 --------------------------------------------------------------------------- (Address of principal executive offices) (520) 991-3335 Issuer's telephone number Twin Ventures, Ltd. 6418 NE Agate Beach Lane, Bainbridge Island, WA 98110 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ----- No ----- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: August 18, 2004 92,570,000 Transitional Small Business Disclosure Format (check one). Yes ; No X ---- ----- PART I ITEM 1. FINANCIAL STATEMENTS RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) BALANCE SHEETS
June 30, December 31, ------------------ ----------------- 2004 2003 ------------------ ----------------- ASSETS Current Assets Cash and cash equivalents $ - $ 76 ------------------ ----------------- Total Assets $ - $ 76 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 5,774 $ 1,800 Accrued expenses & short term contract payable 4,825 4,825 ------------------ ----------------- Total Current Liabilities 10,599 6,625 Long-Term Liabilities Contract payable - the "Ritz Claim" 15,000 15,000 ------------------ ----------------- Total Liabilities 25,599 21,625 ------------------ ----------------- Stockholders' Equity Preferred stock, $.0001 par value, authorized 10,000,000 shares, -0- issued - - Common stock, $.0001 par value, authorized 500,000,000 shares, 92,570,000 issued at June 30, 2004 and December 31, 2003 9,257 9,257 Additional paid-in capital 122,993 122,993 Deficit accumulated during exploration state (157,849) (153,799) ------------------ ----------------- Total Stockholders' Equity (25,599) (21,549) ------------------ ----------------- Total Liabilities and Stockholders' Equity $ - $ 76 ================== =================
See accompanying notes. 3 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) STATEMENTS OF OPERATIONS
Accumulated Since November 21, 2002 For the Three Months For the Six Months Inception of Ended June 30, Ended June 30, Exploration -------------------------------- ------------------------------- 2004 2003 2004 2003 State ------------- ------------- ------------- ------------- ------------- REVENUES Revenues $ -- $ -- $ -- $ -- $ -- Cost of Services -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- Gross Profit (Loss) -- -- -- -- -- EXPENSES General and Administrative 3,176 2,134 4,050 2,814 124,349 General Exploration -- -- -- -- 33,500 ------------- ------------- ------------- ------------- ------------- Total Expenses 3,176 2,134 4,050 2,814 157,849 ------------- ------------- ------------- ------------- ------------- NET INCOME (LOSS) $ (3,176) $ (2,314) $ (4,050) $ (2,814) $ (157,849) ============= ============= ============= ============= ============= Weighted Average Shares 106,416,140 272,570,000 189,034,160 272,427,500 ============= ============= ============= ============= Loss per Common Share $ -- $ -- $ -- $ -- ============= ============= ============= =============
See accompanying notes. 4 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) STATEMENTS OF CASH FLOWS
Accumulated Since November 21, 2002 For the Six Months Inception of Ended June 30, Exploration ------------------------------------ 2004 2003 State ----------------- ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (4,050)$ (2,814)$ (157,849) Adjustments used to reconcile net loss to net cash provided by (used in) operating activities Depreciation - - 744 Compensation in the form of stock - - 102,000 Mineral rights expensed - 2,500 16,000 Increase (decrease) in accrued expenses - (9,750) 4,825 Increase (decrease) in contract payable - (2,500) 15,000 Increase (decrease) in accounts payable 3,974 700 5,774 ----------------- ------------------ ------------------ Net cash used in operating activities (76) (11,864) (13,506) ----------------- ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for website design - (744) (744) Cash paid for mineral rights - (2,500) (16,000) ----------------- ------------------ ------------------ Net cash used by investing activities - (3,244) (16,744) ----------------- ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock issuance - 16,750 30,250 ----------------- ------------------ ------------------ Net Cash Provided by Financing Activities - 16,750 30,250 ----------------- ------------------ ------------------ Net Increase (Decrease) in cash and cash equivalents (76) 1,642 - Cash and cash equivalents at beginning of the period 76 80 - ----------------- ------------------ ------------------ Cash and cash equivalents at end of the period $ - $ 1,722 $ - ================= ================== ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest $ - $ - $ - Income Taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: NONE See accompanying notes. 5 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION This summary of accounting policies for Rincon Resources, Inc. (formerly Twin Ventures, Ltd.) (an exploration state company) is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. The unaudited financial statements as of June 30, 2004 and for the three and six months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three and six months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Rincon Resources, Inc. (formerly Twin Ventures, Ltd.) (the Company), an exploration state company, was incorporated on November 6, 2002 in the State of Delaware and is headquartered in Tucson, Arizona. The Company is an exploration state mining and mineral company. On November 21, 2002 the Company became actively engaged in acquiring mineral properties, raising capital, and preparing properties for production. The Company did not have any significant mining operations or activities from inception; accordingly, the Company is deemed to be in the exploration state. For purposes of recording the Company's mineral claims in Canada, the Company acquired New Heights Capital Corporation (a Canadian corporation) and transferred the claims listed in the following paragraph into the subsidiary in exchange for 100% of the subsidiary's outstanding stock. On November 21, 2002, the Company acquired mineral claims (the "Ritz Claims") located in the Lillooet Lake Region of Southwest British Columbia, Canada. The property consists twenty unpatented two post mineral claims and one unpatented four post mineral claim representing forty units that have been staked and recorded in the Lillooet mining division. The Company has not commenced economic production and is therefore still considered to be in the exploration stage. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of the mineral properties and other assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses of from inception to June 30, 2004. The Company has not realized economic production from its mineral properties as of June 30, 2004. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management continues to actively seek additional sources of capital to fund current and future operations. There is no assurance that the Company will be successful in continuing to raise additional capital, establishing probable or proven reserves, or determining if the mineral properties can be mined economically. These financial statements do not include any adjustments that might result from the outcome of these uncertainties. 6 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue and Cost Recognition The Company uses the accrual basis of accounting for financial statement reporting. Revenues and expenses are recognized in accordance with Generally Accepted Accounting Principles for the industry. Certain period expenses are recorded when obligations are incurred. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those results. Accounts Receivable, Deposits, Accounts Payable and Accrued Expenses Accounts receivable have historically been immaterial and therefore no allowance for doubtful accounts has been established. Normal operating refundable Company deposits are listed as Other Assets. Accounts payable and accrued expenses consist of trade payables created from the normal course of business. Mineral Properties and Mining Equipment Mineral properties and mining equipment include land and mining equipment carried at cost. Mining equipment including mill facilities is depreciated using the straight-line method over estimated useful lives of 5 to 15 years, or the units-of-production method based on estimated tons of ore reserves if the equipment is located at a producing property with a shorter economic life. Mining equipment not in service is not depreciated. During 1997, the Securities and Exchange Commission (SEC) staff reconsidered existing accounting practices for mineral expenditures by United States junior mining companies. They now interpret generally accepted accounting policy for junior mining companies to permit capitalization of acquisition and exploration costs only after persuasive engineering evidence is obtained to support recoverability of these costs (ideally upon determination of proven and/or probable reserves based upon dense drilling samples and feasibility studies by a recognized independent engineer). Although the Company has obtained samples, and an independent engineer has deemed the properties may contain platinum group metals, management has chosen to follow the more conservative method of 7 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) accounting by expending all mineral costs, for which there is no feasibility study. Land Options As noted above, since the Company interprets generally accepted accounting policies to permit capitalization of acquisition costs including leases and land options only after persuasive engineering evidence has been obtained to support recoverability of these costs, these costs will be expensed. Non-Mining Property and Equipment Property and equipment purchased by the Company are recorded at cost. Depreciation is computed by the straight-line method based upon the estimated useful lives of the respective assets. Expenditures for repairs and maintenance are charged to expense as incurred as are any items purchased which are below the Company's capitalization threshold of $1,000. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from accounts, and any related gain or loss is reflected in income for the period. Reclamation and Environmental Costs Reclamation costs and related accruals are based on the Company's interpretation of environmental and regulatory requirements. Minimum standards for mine reclamation have been established by various governmental agencies. Reclamation, site restoration, and closure costs for each producing mine are accrued over the life of the mine using the units-of-production method. Ongoing reclamation activities are expensed in the period incurred. Income Taxes The Company accounts for income taxes using the liability method which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company's management determines if a valuation allowance is necessary to reduce any tax benefits when the available benefits are more likely than not to expire before they can be used. 8 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Inventory Inventory is stated at net realizable value. Stock Based Compensation In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (SFAS 123), which is effective for periods beginning after December 15, 1995. SFAS 123 requires that companies either recognize compensation expense for grants of stock, stock options, and other equity instruments based on fair value or provide pro-forma disclosure of the effect on net income and earnings per share in the Notes to the Financial Statements. The Company has adopted SFAS 123 in accounting for stock-based compensation. Cash and Cash Equivalents, and Credit Risk For purposes of reporting cash flows, the Company considers all cash accounts with maturities of 90 days or less and which are not subject to withdrawal restrictions or penalties, as cash and cash equivalents in the accompanying balance sheet. The portion of deposits in a financial institution that insures its deposits with the FDIC up to $100,000 per depositor in excess of such insured amounts are not subject to insurance and represent a credit risk to the Company. Foreign Currency Translation and Transactions The Company's functional currency is the US dollar. No material translations or transactions have occurred. Upon the occurrence of such material transactions or the need for translation adjustments, the Company will adopt Financial Accounting Standard No. 52 and other methods in conformity with Generally Accepted Accounting Principles. Earnings Per Share Basic earnings per common share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share for the three and six months ended June 30, 2004 and 2003 are not presented as it would be anti-dilutive. 9 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Leases The Company accounts for leases in accordance with Generally Accepted Accounting Principles which require operating leases to be expensed and capital leases to be capitalized and amortized over the lease term. Leased mining properties under capital leases are expensed until such time that an engineering study has been completed showing proven mining reserves. NOTE 3 - AFFILIATES AND RELATED PARTIES Significant relationships with (1) companies affiliated through common ownership and/or management, and (2) other related parties are as follows: The Company has ownership of the "Ritz Claims" which was purchased from a director of the Company. The purchase requires services to the Company from the Director per the purchase agreement dated November 21, 2002. See Footnote #5 for a description of this Project. The Company has stock-based compensation agreements with an officer and 2 directors of the Company as disclosed in Footnote No. 7. NOTE 4 - MINERAL PROPERTIES AND MINING EQUIPMENT The Company's net investment in mineral properties and mining equipment includes the "Ritz Claim" as described in footnote #1. All costs related to the claim have been expended in accordance with Generally Accepted Accounting Principles for the industry. NOTE 5 - INCOME TAXES The Company has available net operating loss carryforwards for financial statement and federal income tax purposes for the years ending December 31, 2002 and 2003. These loss carryforwards expire if not used by the year 2022 and 2023. The Company's management has decided a valuation allowance is necessary to reduce any tax benefits because the available benefits are more likely than not to expire before they can be used. The value of these tax benefits is $29,184 and $1,576, respectively. 10 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 6 - LONG-TERM DEBT On November 21, 2002, the Company entered into an agreement with Mr. Garth Barton for the purchase of mining property, the "Ritz Claim", located in the Lillooet Lake Region of Southwest British Columbia, Canada. The "Ritz Claim" is title to forty (40) mineral claim units that are unpatented. The total purchase price of the claim is $33,500 due per terms of the contract with advance royalties of $25,000 to be paid annually commencing 36 months from the date of signature of the agreement. The property is subject to a royalty agreement. The contract payment schedule calls for $13,500 to be paid upon delivery of a summary geological report and transfer of property title. The $13,500 was paid per the contract. On February 28, 2003 a payment of $2,500 was made per contract schedule. Twelve months from the date of title registration, $2,500 becomes due with another $2,500 due twenty four months from such date. No later than thirty six months from the date of signature on the contract, the balance of payment is due for a total purchase price of $33,500. NOTE 7 - SHAREHOLDERS' EQUITY Preferred Stock The Company has authorized ten million (10,000,000) shares of preferred stock with a par value of $.0001, none of which have been issued. Common Stock The Company has authorized five hundred million (500,000,000) shares of common stock with a par value of $.0001. Common Stock Subscribed and Issued for Cash During December, 2002, the Company undertook an offering exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 to raise $16,000 in the issuance of 3,200,000 shares of common stock for the purpose of the acquisition and exploration of mining properties. The Company's management considers this offering to be exempt under the Securities Act of 1933. A receivable for stock subscribed was recorded in the equity section of the financial statements at December 31, 2002 for cash amounts that had not yet been received by the Company. During the first quarter of 2003 the cash outstanding from stock subscribed was received and the stock subscribed was converted by memo to common stock and the stock certificates issued. 11 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 7 - SHAREHOLDERS' EQUITY (continued) During March 2003, the Company undertook a Regulation D Rule 506 private placement offering to raise $14,250 for the issuance of 57,000 shares of common stock for the purpose of mineral exploration. The Company's management considers this offering to be exempt under the Securities Act of 1933. Common Stock Recorded as Compensation The Company does not have an employee stock compensation package set up at this time. The stock compensation that has been granted falls under Rule 144. Compliance with Rule 144 is discussed in the following paragraph. In general, under Rule 144 as currently in effect, a person who has beneficially owned shares of a company's common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of: 1. 1% of the number of shares of the company's common stock then outstanding which, in our case, would equal approximately 280,380 shares as of the date of this prospectus; or 2. The average weekly trading volume of the company's common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale. Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company. The Company records stock issued for services and future services at the fair value of the stock issued, if known, or the fair value of the services if the fair value of the stock is not determined and no value is contemplated in the contract. The stock is recorded as issued in the equity section of the financial statements when a contract for services is entered into for stock compensation. On November 8, 2002, the Company entered into a service agreement with Mr. David Deering, the President of the Company, for a 12 month term which is renewable by both parties after the twelve month term. The agreement called for the issuance of twenty million (20,000,000) common shares of stock for the value of such services, $85,000. The value of the shares was established by the fair value of the services to be provided as a fair trading value of the stock had not been established. The number of shares issued was based on the price the shares were sold in the Company's first private placement with a 15% discount since such shares were restricted in accordance with Rule 144 of the Securities Act of 1933. Due to the uncertainty of the Company's 12 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 7 - SHAREHOLDERS' EQUITY (continued) ability to continue as a going concern, the amounts were recorded as an expense when the shares were issued. On November 8, 2002, the Company entered into a service agreement with Mr. Brian Bisset, a Director of the Company, for a 12 month term which is renewable by both parties after the twelve month term. The agreement called for the issuance of two million (2,000,000) common shares of stock for the value of such services, $8,500. The value of the shares was established by the fair value of the services to be provided as a fair trading value of the stock had not been established. The number of shares issued was based on the price the shares were sold in the Company's first private placement with a 15% discount since such shares were restricted in accordance with Rule 144 of the Securities Act of 1933. Due to the uncertainty of the Company's ability to continue as a going concern, the amounts were recorded as an expense when the shares were issued. On November 8, 2002, the Company entered into a service agreement with Mr. Andrew Norins, a Director of the Company, for a 12 month term which is renewable by both parties after the twelve month term. The agreement called for the issuance of two million (2,000,000) common shares of stock for the value of such services, $8,500. The number of shares issued was based on the price the shares were sold in the Company's first private placement with a 15% discount since such shares were restricted in accordance with Rule 144 of the Securities Act of 1933. Due to the uncertainty of the Company's ability to continue as a going concern, the amounts were recorded as an expense when the shares were issued. The value of the shares was established by the fair value of the services to be provided as a fair trading value of the stock had not been established. NOTE 8 - ACQUISITIONS On November 21, 2002, the Company entered into an agreement with Mr. Garth Barton for the purchase of mining property, the "Ritz Claim", located in the Lillooet Lake Region of Southwest British Columbia, Canada. The "Ritz Claim" is title to forty (40) mineral claim units that are unpatented. The total purchase price of the claim is $33,500 due per terms of the contract with advance royalties of $25,000 to be paid annually commencing 36 months from the date of signature of the agreement. Failure to pay the advance royalties will cause a reversion of the property within 10 days of such failure. The property is subject to a 2 1/2% Net Smelter Royalty (NSR) and a 7 1/2% Gross Rock Royalty (GRR). 1 1/2% of the NSR can be acquired for $1.0 million within 12 months from the commencement of commercial production. Mr. Barton is required to keep the claims in good standing for at least 18 months from the date of the agreement. In addition, Mr. Barton will 13 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 8 - ACQUISITIONS (continued) provide geological consulting services for the claims and will maintain the claims in good standing for a period of 36 months with fees advanced by the Company prior to the anniversary dates from signature of the agreement. Said fees are to be deducted from the total cost. On April 22, 2003, the Company acquired the outstanding common share (one common share) of New Heights Capital Corporation, an inactive Canadian corporation, for the purpose of recording the Company's Canadian "Ritz Claim" in a Canadian corporation as required. The "Ritz Claim" was transferred to the subsidiary in exchange for the subsidiary's outstanding common share of stock. New Heights Capital Corporation is a wholly owned Canadian subsidiary of the Company. NOTE 9 - COMMITMENTS AND CONTINGENCIES The Company's "Ritz Claims" will revert back to the seller within no less than a 10 day period if the Company fails to make the $25,000 annual advance royalty payments per the sales contract commencing 36 months from the date of the contract. Management is not aware of any contingent matters that could have a material adverse effect on the Company's financial condition, results of operations, or liquidity. On June 1, 2004, the Company entered into a consulting agreement with Mr. Robert McIntosh. Mr. McIntosh will provide geological and administrative services to the Company for $3,000 per month. NOTE 10 - LITIGATION, CLAIMS AND ASSESSMENTS From time to time in the normal course of business the Company will be involved in litigation. The Company's management has determined any asserted or unasserted claims to be immaterial to the financial statements. NOTE 11 - GOING CONCERN The accompanying financial statements have been prepared assuming that the company will continue as a going concern. As discussed in the notes to the financial statements, the Company has experienced losses from inception. The Company's financial position and operating results raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 14 RINCON RESOURCES, INC. (Formerly Twin Ventures, Ltd.) (An Exploration State Company) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (continued) NOTE 12 - SUBSEQUENT EVENTS On July 26, 2004, the Company executed an agreement and made a deposit of $55,000 to acquire a 75% interest in the Tudor Gold Property. The Tudor Gold Property is located in Tudor and Grimsthorpe Townships in the Madoc-Bancroft region of the Providence of Ontario and is located approximately 100 miles northeast of Toronto, Canada. The property consists of twenty-two contiguous unpatented mining claims containing sixty units covering approximately 2,965 acres of land. The Company intends to launch a comprehensive, property wide, surface exploration program immediately. Once further funding is acquired and the agreement can be fully executed, the Company intends to follow-up with drill testing of the mineralized zones of the property. The data derived from the drill testing of the various zones should enable the Company to identify and assess gold bearing structures to ultimately establish the size and grade of the gold resource. On July 6, 2004, the Company amended its articles of incorporation to change the authorized capital from 50,000,000 shares of common stock to 500,000,000 shares of common stock. On July 23, 2004, the Company did a 10 to 1 forward stock split of its issued and outstanding shares of common stock from 9,257,000 shares to 92,570,000 shares. All references to common stock have been adjusted to reflect the stock split. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with our financial statements and notes thereto appearing in this prospectus. The accompanying financial statements have been prepared assuming that we will continue as a going concern. As discussed in the notes to the financial statements, we have experienced losses from inception. Our financial position and operating results raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. 15 Overview Since our inception, our operations have been devoted primarily to identifying, purchasing and completing the initial exploration work on a mineral property. We intend to grow through exploration and of the Lillooet Lake property and the identification and acquisition of other properties with mineral exploration. This property does not have any known reserves and our proposed program is exploratory in nature. Because of uncertainties surrounding our exploration, we anticipate incurring exploration stage losses in the foreseeable future. Our ability to achieve our business objectives is contingent upon our success in raising additional capital until adequate revenues are realized from operations. We are an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on any of our property. The property is without any known reserves and the proposed program is exploratory in nature and therefore further exploration will be required before a final evaluation as to the economic and legal feasibility is determined. Reserves are measurable zones of minerals over a certain area and mineral deposits are reserves that can be economically exploited. Exploration state expenses from inception through June 30, 2004 were $33,500 for general exploration costs related to the mineral rights of the exploration property and $124,349 of general and administrative costs related mainly to stock compensation for services of $102,000, bank charges, accounting charges of $2,500, legal charges of $7,500, consulting charges of $3,000 and office/web site costs for a total expense of $157,849 as captioned in the financial statement's statement of operations. Included in the exploration expense was $16,000 of cash paid on the initial payment for the property and no money was spent on further evaluation of the property. These fees were in furtherance of Phase I to purchase and evaluate a property. Fees were incurred in the start-up costs of our company as well as the fees to prepare our audited financial statements and this registration statement. These fees were included in the general and administrative expense as discussed earlier in this paragraph. Plan of Operation We have completed phase one of a four step plan to evaluate our initial minerals prospect for exploration. Even if we complete all four phases, all we can hope to have accomplished is to be able to identify targets for further exploration which will consist of trenching, drilling and feasibility studies which will be the most expensive parts of the exploration process. Phase one consisted of identifying an area with promising geological properties, purchasing the initial 60 units of the Ritz property, securing a geological report on the property and completing the initial rock and silt samples on the prospect. We plan to complete phase two and three during the next 12 months. If we get positive results in phase two and three we will be required to seek additional capital as recommended by the consultant's report. We will attempt to raise capital from sale of our common stock, loans from investors, shareholders or management, and/or joint venture partners. However, there are currently no negotiations or arrangements for future financing at this point in time. Management will use its best efforts to raise the additional funds to carry out the planned exploration program but there is significant risk that we may not secure the necessary funding. The following table details the remaining 3 steps to our initial exploration of the Ritz property: 16
Phase II: Geological Traverses Senior Geologist 3 day @ $300 per day $900.00 Filing Fee $300.00 1 Geo-technician 3 days at $150.00 $450.00 (a Geo-technician is a person trained in the methods and procedures to collect geological, geochemical and geophysical data under the supervision of a qualified degree accredited geologist) Equipment Rental 4 wheel drive @ $50.00 per day $150.00 Assays 60 @ $10.00 each $600.00 Food, Fuel etc. $200.00 Report $600.00 ------- TOTAL $3,200.00 Phase III Follow-up Geochemical sampling and detailed geological mapping $5,000.00 --------- TOTAL $5,000.00 Phase IV Airborne EM Survey Airborne EM Survey 100 line kilometers @ $150 $15,000.00 per km Follow-up geological surveys $25,000.00 ---------- TOTAL $40,000.00
If we are successful in completing the 3 additional steps of exploration, management will access the results to determine the advisability of exploration of the property. If management determines the results merit further exploration the plan is to raise additional capital, and/or seek an industry partner to pay the further costs of operations. There is no assurance we will be successful in raising the funds or finding a joint venture partner in order to complete further exploration. We could be forced to abandon the property of sell it for a significant loss if we are unable to secure the necessary capital. If mineralization if not found on the property or if we can not recover the metals profitably, then we intend to pursue other properties for exploration. The purchase and explorations of such properties will depend on our ability to raise additional capital. If we are unable to raise additional capital, then we may need to cease operations if there is no mineral found on the property or if the metals can not be recovered profitably. 17 Capital Resources and Liquidity. As of June 30, 2004, the Company had no cash. The planned exploration expenditures of phase two and three are estimated to cost $8,200 and an additional $2,500 payment was due on the Lake Lillooet Property pursuant to the Mineral Claims Agreement on May 15, 2004 which is 12 months from the title registration on such claims. We have no plans to pay salaries to our officers or employees during the next 12 months. We do not believe we will have sufficient cash to meet our minimum exploration, including phase two and phase three, and operating costs for the next 12 months unless we are successful in raising additional capital. In addition, we will need to raise additional capital to continue or operations past 12 months, and there is no assurance we will be successful in raising the needed capital. ITEM 3. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this Quarterly Report on Form 10-QSB, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary to evaluate whether: (i) this Quarterly Report on Form 10-QSB contains any untrue statement of a material fact or omits 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 on Form 10-QSB, and (ii) the financial statements, and other financial information included in this Quarterly Report on Form 10-QSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report on Form 10-QSB. There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES On July 6, 2004, the Company amended its articles of incorporation to change the authorized capital from 50,000,000 shares of common stock to 500,000,000 shares of common stock. On July 23, 2004, the Company did a 10 to 1 forward stock split of its issued and outstanding 18 shares of common stock from 9,257,000 shares to 92,570,000 shares. All references to common stock have been adjusted to reflect the stock split. On July 23, 2004, the Company changed its stock symbol to RIRI. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION On July 26, 2004, the Company executed an agreement and made a deposit of $55,000 to acquire a 75% interest in the Tudor Gold Property. The Tudor Gold Property is located in Tudor and Grimsthorpe Townships in the Madoc-Bancroft region of the Providence of Ontario and is located approximately 100 miles northeast of Toronto, Canada. The property consists of twenty-two contiguous unpatented mining claims containing sixty units covering approximately 2,965 acres of land. The Company intends to launch a comprehensive, property wide, surface exploration program immediately. Once further funding is acquired and the agreement can be fully executed, the Company intends to follow-up with drill testing of the mineralized zones of the property. The data derived from the drill testing of the various zones should enable the Company to identify and assess gold bearing structures to ultimately establish the size and grade of the gold resource. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit Number Title of Document 10.1 Property Option Agreement between Louvicourt Gold Mines, Inc., a Quebec corporation, and Rincon Resources, Inc., a Delaware corporation, dated July 8, 2004. 31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K filed. On April 13, 2004, the Company filed on Form 8-K under Item 1, Changes in Control of Registrant. On April 30, 2004, the Company filed on Form 8-K under Item 1, Changes in Control of Registrant. 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Rincon Resources, Inc. (Registrant) DATE: August 19, 2004 --------------------------------- By: /s/ Graeme Scott Graeme Scott President, C.E.O., C.F.O. and Director (Principal Executive and Financial Officer) 20 EXHIBIT 31 SECTION 302 CERTIFICATIONS I, Graeme Scott, certify that: 1. I have reviewed this quarterly report on form 10-QSB of Rincon Resources, Inc. 2. Based on my knowledge, this 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 report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-15(e) and 15d-15(e) for the small business issuer and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. 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 factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 19, 2004 /s/ Graeme Scott Graeme Scott President, C.E.O., C.F.O. and Director (Principal Executive and Financial Officer) 22 EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Rincon Resources, Inc. on Form 10-QSB for the period ending June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Graeme Scott, Principal Executive and Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Graeme Scott Graeme Scott President, C.E.O., C.F.O. and Director (Principal Executive and Financial Officer) August 19, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 23 EX-10 2 form10qsb063004ex10-1.txt PROPERTY OPTION AGREEMENT BETWEEN LOUVICOURT GOLD MINES INC. AND RINCON RESOURCES INC. PROPERTY OPTION AGREEMENT THIS AGREEMENT is made and dated for reference the 8th day of July, 2004. BETWEEN: LOUVICOURT GOLD MINES INC., a Quebec corporation, (hereinafter called "OWNER") and RINCON RESOURCES INC., a Delaware corporation, (hereinafter called "RINCON") RECITALS: A. Pursuant to the Underlying Agreement, Owner holds an option to acquire certain Mineral Claims; B. Rincon wishes to acquire up to an undivided seventy five (75%) per cent interest in the Mineral Claims, upon the terms and subject to the conditions as are hereinafter set forth; and C. Owner is prepared to grant Rincon an option to acquire up to an undivided seventy five (75%) per cent interest in the Mineral Claims, upon the terms and subject to the conditions are hereinafter set forth. NOW THEREFORE, in consideration of the premises and the mutual obligations hereinafter set forth, and intending to be legally bound, the parties agree as follows: ARTICLE I INTERPRETATION AND DEFINITIONS Section 1.01 DEFINITIONS As used in this Agreement, the following words and phrases have the following meanings: (a) "Affiliate" means any person, partnership, limited liability company, joint venture, corporation, or other form of enterprise which controls, is controlled by, or is under common control with a party to this Agreement; (b) "Agreement" means this agreement as the term is defined in Section 1.03 hereof; (c) "Exploration Funds" means the exploration funding that Rincon has agreed to contribute pursuant to Section 2.04hereof to fund Work Programs (d) "Force Majeure" means any event beyond a party's reasonable control including laws which prohibit a party's ability to comply with its obligations; action or inaction of civil or military authority; mining casualty; damage to or destruction of mine, plant or facility; fire; explosion; flood; insurrection; riot; labour disputes; and acts of God, but does not include a party's inability to make any payments required under this Agreement; (e) "Mineral Claims" means the mineral claims described in Schedule "A" of the Underlying Agreement; (f) "Net Smelter Return" or "NSR" has the meaning given it in the Underlying Agreement.; (g) "Operator" means the Owner, in relation to its duty as the operator of any Work Programs on the Mineral Claims performed using Exploration Funds. The Operator shall operate shall retain personnel, supervise and otherwise administer Work Programs; (h) "Option" has the meaning given that term by Section 2.01; (i) "Option Exercise Date" means the date that the Option exercised, as to at least a 75% interest in the Mineral Claims, in accordance with the terms hereof; (j) "Option Payments" has the meaning given that term by Section 2.01; (k) "Option Period" means the period from and after the full execution of this Agreement to the date of its termination; (l) "Underlying Agreement" means the Agreement dated October 31, 2003 pursuant to which the Owner acquired rights to the Mineral Claims, a copy of which is attached hereto as Schedule "A"; (m) "Underlying Owners" means the underlying owners of the Mineral Claims, as noted in the Underlying Agreement; and (n) "Work Programs" means exploration programs on the Mineral Claims which are agreed to between the Owner and Rincon, acting on a commercially reasonable basis, which may include bulk sampling, line-cutting, geological mapping and sampling, geophysical surveys, back-hoe trenching and water stripping of trenches; humus sampling; or any forms of surface or subsurface exploration or drilling. Section 1.02 SCHEDULES The following schedule is attached to and forms part of this Agreement: (a) Schedule "A" - Underlying Agreement Section 1.03 ENTIRE AGREEMENT This Agreement, the attached schedules and all properly executed amendments are hereinafter collectively referred to as this Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all previous agreements and undertakings relating to the subject matter. The parties acknowledge that there are no agreements, undertakings, representations, warranties or conditions collateral to this Agreement except as specifically stated otherwise in this Agreement. Section 1.04 CAPTION AND HEADINGS The division of this Agreement into articles and sections and the insertion of headings is for convenience of reference only and shall not affect the interpretation of this Agreement. Any reference to a section or article shall be a reference to a section or article of this Agreement unless specifically stated otherwise. Section 1.05 EXTENDED MEANINGS In this Agreement, where the context so requires or permits, the masculine gender shall include the feminine and neuter genders, the plural shall include the singular and vice versa, and the words "person" and "persons" shall include corporations, partnerships, and all other entities of whatever description. Section 1.06 CURRENCY In this Agreement all statements of and references to dollar amounts shall mean United States dollars, unless stated otherwise. Section 1.07 GOVERNING LAW This Agreement shall be interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada as applicable therein. Section 1.08 SEVERABILITY If any provision of this Agreement is found invalid, illegal, or incapable of enforcement by any Court of competent jurisdiction, such provision and the remaining provisions of the Agreement shall continue to be enforceable to the extent permitted by such Court against any person(s) and in any circumstance(s) other than those to whom it has been found invalid, illegal or incapable of enforcement. Section 1.09 AMENDMENTS No amendments to this Agreement shall be of any force and effect unless executed in writing by all the parties to this Agreement. ARTICLE II Section 2.01 OPTION The Owner hereby grants Rincon an exclusive and irrevocable option (the "Option") to acquire up to an undivided seventy-five (75%) per cent interest in the Mineral Claims by advancing certain Exploration Funds, performing certain Work Programs and making certain share issuances and cash payments to the Owner: Section 2.02 CASH AND SHARE OPTION PAYMENTS As partial consideration for the granting of the Option, Rincon agrees to pay to the Owner (collectively the "Option Payments"): i) $55,000 upon the full execution of this Agreement; ii) $55,000 on or before one year from the date of full execution of this Agreement; iii) 100,000 shares upon the full execution of this Agreement; and iv) 200,000 shares on or before one year from the date of full execution of this Agreement. Section 2.03 UNDERLYING AGREEMENT It is agreed that the Owner will keep the Underlying Agreement in good standing during the time that this Agreement remains in effect. If for any reason the Owner fails to perform any action required by the Underlying Agreement that, in the reasonably held opinion of Rincon, could result in a default by the Owner under the Underlying Agreement, Rincon may perform such action as the authorized agent of the Owner, and offset any expense incurred against all amounts otherwise due or payable by Rincon hereunder. Section 2.03 (a) ACCELERATION OF PERFORMANCE FOR UNDERLYING AGREEMENT As noted in section 2.05 hereinbelow, in the event that Rincon has made the Option Payments and has advanced Exploration Funds totalling a minimum of $750,000 hereunder, at such time (the "Option Exercise Date") it shall have earned a minimum vested fifty (50%) percent interest in the Mineral Claims and shall have the right to register its interest within the time contemplated by Section 2.10. In the event that, at such time, there remain unsatisfied obligations of the Owner pursuant to the Underlying Agreement, Rincon shall have the right to advance funds for these obligations to the Owner and the Owner will forthwith satisfy such obligations with the result that it will be entitled to register its and Rincon's respective interests in the Mineral Claims. Section 2.04 EXPLORATION FUND ADVANCES a) As partial consideration for the granting of the Option, Rincon agrees to fund Work Programs on the Mineral Claims by advancing Exploration Funds to the Owner, acting as the Operator, on the following basis: i) by no later than July 31, 2004, Rincon will advance Exploration Funds of $150,000 ii) by no later than one year from the signing of this Agreement, Rincon will advance additional Exploration Funds of $350,000; iii) by no later than two years from the signing of this Agreement, Rincon will advance additional Exploration Funds of $250,000; and iv) by no later than 4 years from the signing of this Agreement, Rincon advance additional Exploration Funds of $1,250,000. It is agreed that Rincon will advance the required Exploration Funds not later than thirty (30) days after the parties have agreed on the implementation of a Work Program. b) After each advance of Exploration Funds for a Work Program by Rincon, the Owner, as Operator, shall not more than thirty (30) days thereafter arrange for the Work Program that is the subject of those Exploration Funds to be undertaken. The Owner, as Operator, shall ensure that the Work Program is completed efficiently in accordance with good mining practice. It its agreed that upon the completion of each significant Work Program, the Operator will arrange to have prepared a geological report in compliance with National Instrument 43-101 recommending additional Work Programs, or alternatively recommending the cessation of work on the Mineral Claims. The cost of such report will be paid from advanced Exploration Funds. Section 2.05 EXERCISE OF OPTION Provided Rincon has made the Option Payments and advanced the Exploration Funds required for Work Programs costing a total of $750,000, Rincon shall have earned an immediately vested fifty (50%) percent interest in the Mineral Claims and shall have the right to have register its interest within the time contemplated by Section 2.10. Provided Rincon has made the Option Payments and advanced the Exploration Funds required for Work Programs costing a total of $1,250,000, Rincon shall have earned an immediately vested further twenty-five (25%) percent interest in the Mineral Claims (bringing Rincon' interest in the Mineral Claims at such time up to seventy-five (75%) percent) and shall have the right to have register its interest within the time contemplated by Section 2.10. Section 2.06 NSR Any interest in the Mineral Claims earned by Rincon hereunder shall be earned free and clear of any mortgages, liens, charges, pledges, security interests, encumbrances and any other claims of any description, but shall remain subject to a three (3%) percent NSR in favour of the Owner (who is responsible for remitting up to two (2%) percent of this to the Underlying Owners, as described in Schedule A, determined and paid in accordance therewith. It is agreed that up to two-thirds (2/3) of the three (3%) percent NSR reserved unto the Owner herein may be purchased at any time by Rincon paying to Owner $1,000,000 per one-third (1/3) portion ($1,000,000 per one (1%) percent NSR). Section 2.07 JOINT VENTURE On or prior to the Option Exercise Date, Rincon and the Owner shall enter into a joint venture agreement to govern the future exploration and development of the Mineral Claims. Section 2.08 RESULTS OF PRIOR EXPLORATION WORK Immediately following the full execution of this Agreement, Owner shall deliver to Rincon all technical data for the Mineral Claims in its possession including, but without limitation, drilling, geophysics and geological information held by Owner. Should this Agreement be terminated, for whatever reason, prior to Rincon exercising the Option, in whole or in part, then Rincon shall return to Owner copies of data and information received from Owner, as well the exploration and technical data resulting from any exploration program and activities undertaken by Rincon, to the extent that the Owner does not already possess such information. Section 2.09 TITLE Within sixty (60) days following the exercise of the Option pursuant to Section 2.04, Owner will provide Rincon with executed transfers in proper form of an undivided fifty (50%) percent or seventy five (75%) percent interest, as the case may be, in the Mineral Claims. ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.01 REPRESENTATIONS AND WARRANTIES BY OWNER Owner represents and warrants that: (a) it has been duly incorporated and is a validly subsisting corporation under the laws of Quebec , is properly registered to carry on business and own property in the province of Ontario, and has all corporate power and authority to perform its obligations under this Agreement; (b) all necessary corporate action has been taken by Owner to authorize the execution, delivery and performance of this Agreement, and this Agreement constitutes a valid and binding obligation of Owner enforceable in accordance with its terms; and (c) to the best of Owner's knowledge the location of the Mineral Claims conforms to the description appearing on records in the appropriate records office, and the Mineral Claims were properly located according to the laws of Ontario and will be in good standing for at least Ninety (90) days after the execution of this Agreement; (d) it has not received notice of any violation of or investigation relating to any federal, provincial or local environmental or pollution law, regulation or ordinance with respect to the Mineral Claims; (e) to the best of Owner's knowledge there are no reclamation liabilities in connection with the Mineral Claims and, in particular, there are no obligations to monitor or clean up any preexisting mine sites or mine waste dumps or tailings; (f) its interest in the Mineral Claims is free and clear of any mortgages, liens, charges, pledges, security interests, encumbrances or other claims of any description and, upon exercise of the Option by Rincon, Rincon will acquire an undivided interest (either fifty (50%) percent or one hundred (75%) percent) in the Mineral Claims free and clear of any mortgages, liens, charges, pledges, security interests, encumbrances or other claims of any description, except for the NSR reserved in Section 2.06 and in the Underlying Agreement; (g) no person has any right or agreement, option, understanding, prior commitment or privilege capable of becoming an agreement for the purchase or acquisition from Owner of any interest in the Mineral Claims; (h) all assessment work required to maintain the Mineral Claims in full force and effect has been performed as of the execution of this Agreement; and (i) there are no royalties or other latent interests in the Mineral Claims owing to any other parties, except as outlined in Section 2.06 and in the Underlying Agreement. Section 3.02 SURVIVAL Owner acknowledges that Rincon is relying on the representations and warranties contained in Section 3.01 in entering into this Agreement and that such representations and warranties are continuing and survive the execution of this Agreement. Section 3.03 REPRESENTATIONS AND WARRANTIES BY RINCON Rincon represents and warrants that: (a) it has been duly incorporated and is a validly subsisting corporation under the laws of Delaware, has all corporate power and authority to perform its obligations under this Agreement and, prior to commencing any direct operations on the Mineral Claims, it will be properly registered to carry on business and own property in the province of Ontario; and (b) all necessary corporate action has been taken by Rincon to authorize the execution, delivery and performance of this Agreement, and this Agreement constitutes a valid and binding obligation of Rincon enforceable in accordance with its terms. Section 3.04 SURVIVAL Rincon acknowledges that the Owner is relying on the representations and warranties contained in Section 3.04 in entering into this Agreement and that such representations and warranties are continuing and survive the execution of this Agreement. Section 3.06 INDEMNITY Each party will indemnify and save the other party and its directors, officers, employees, agents, representatives, subcontractors and Affiliates harmless from all losses, damages, costs, actions, and suits arising out of or in connection with any breach by that party of any representation, warranty, covenant or agreement contained in this Agreement. This indemnity shall survive the termination of this Agreement. ARTICLE IV Section 4.01 RIGHT TO MONITOR EXPLORATION AND DEVELOPMENT Owner grants to Rincon' employees, directors, officers, agents, representatives and contractors the right to enter upon the property comprising the Mineral Claims for the purpose of monitoring exploration, development, mining and such other operations as Rincon considers necessary, upon prior notification to the Owner and at Rincon's sold discretion, risk and expense. Section 4.02 CONDUCT OF EXPLORATION AND DEVELOPMENT WORK As Operator, the Owner will act as manager of any exploration program under the direction of an operating committee comprised of one member appointed by Rincon and one member appointed by the Owner. The Owner, in its role as Operator, shall perform its exploration and development work on the property comprising the Mineral Claims in accordance with good mining practice and shall comply with all applicable laws and regulations. ARTICLE V Section 5.01 DRILL LOGS ASSAYS AND MAPS The Owner agrees to act as the Operator. As the Operator, the Owner shall maintain all customary drill logs, exploration information, assays, maps, metallurgical studies and other information relating to its exploration and development activities on the Mineral Claims and provide copies to Rincon in accordance with this Agreement. Section 5.02 REPORTING By no later than 60 days after the completion of each Work Program, Owner shall provide to Rincon a copy of the any geological reports prepared in relation to that Work Program. These items shall be kept confidential by the parties, subject to the terms of this Agreement. Section 5.03 ENVIRONMENTAL MATTERS During the Option Period, the Operator shall at all times occupy, manage and use the Mineral Claims in full compliance with all Environmental Laws. In this Agreement, "Environmental Laws" means all applicable federal, provincial, municipal, regional or foreign laws, statutes or rules, regulations, bylaw or orders (having the force of law) or environmental permits relating to the environment, including, without limitation, those pertaining to reporting, licensing, permitting, investigation, remediation and clean up in connection with any presence, release, discharge, escape or disposal of contaminants (being any substance or material that is prohibited, controlled or regulated pursuant to any applicable Environmental Laws) or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of contaminants. The Operator promptly perform any reclamation, remediation or pollution control, which is required and arises from all operations on the Mineral Claims during the Option Period, such performance to include, without limitation, the provision of all financial assurances required by applicable Laws with respect to the costs of such reclamation, remediation or pollution control. This provision shall survive the termination of this Agreement. Section 5.04 FILING OF ASSESSMENT WORK The Owner will submit all assessment eligible work that is completed on the Mineral Claims during the currency hereof for assessment credits and the credits will be applied to the Mineral Claims in order to maintain the Mineral Claims in good standing. ARTICLE VI Section 6.01 ASSIGNMENTS Rincon shall be entitled to assign its rights and obligations under this Agreement with the prior written consent of Owner. ARTICLE VII Section 7.01 RINCON'S RIGHT TO TERMINATE Rincon shall have the right to terminate this Agreement and its interest in the Mineral Claims at any time during the Option Period upon written notice to the Owner thirty (30) days prior to the contemplated termination date. Except for termination after the time that Rincon has earned an interest in the Mineral Claims, upon termination of this Agreement, Owner shall be entitled to retain all payments made by Rincon to date and Rincon shall return to Owner all copies of all data, maps, assays and reports pertaining to the Mineral Claims, including digital generated data, maps, assays and reports pertaining to the Mineral Claims. Section 7.02 TERMINATION FOR DEFAULT If at any time during the Option Period, Rincon fails to duly pay or cure any default in the performance of any obligation of this Agreement within a period of thirty (30) days after receipt of a default notice from Owner, Owner may terminate the Option. Exercise of such right by Owner shall be without prejudice to any other rights or remedies Owner may have at law or in equity as a result of such default of this Agreement by Rincon. ARTICLE VIII Section 8.01 FORCE MAJEURE If Rincon is prevented by Force Majeure from timely performance of any of its obligations under this Agreement (other than the payments made pursuant to Section 2.02), such failure shall be excused and the period for performance and the Option Period shall be extended for an additional period of time equal to the duration of such Force Majeure. Upon the occurrence and upon the termination of a Force Majeure, Rincon shall promptly notify Owner in writing. Rincon shall use reasonable efforts to remedy any Force Majeure, but shall not hereunder be obligated to contest the validity of any law or regulation, nor any action or inaction of any civil or military authority. ARTICLE IX MISCELLANEOUS Section 9.01 NOTICES Any notice under this Agreement will be given in writing, and delivered by registered mail to each party. A notice given will be deemed given only when received by the party to whom such notice is directed. Each party's address will be the following until such party specifies another address by written notice: To Owner at: LOUVICOURT GOLD MINES INC. 301-170 the Donway West Toronto, Ontario M3C 2G3 Tel.: (416) 441-3700 Facsimile: (416) 441-0535 Attention: Fenton Scott, president To Rincon: RINCON RESOURCES INC. 2920 N. Swan Road, Suite 206 Tucson, Arizona 85712 Tel: (520) 991-3335 with a copy to: RINCON RESOURCES INC. 24 Ternhill Crescent Toronto, Ontario M3C 2E5 Tel: (416) 997-9775 Facsimile: (416) 441-9775 Section 9.02 AREA OF INFLUENCE The parties agree that they shall be bound by the area of influence provisions set forth in paragraph 5. of the Underlying Agreement and any such property will be subject to the terms of this Agreement and the Underlying Agreement. Section 9.03 OTHER INTERESTS The rights and obligations of the parties under this Agreement are strictly limited to the subject matter of this Agreement. Each of the parties shall have the free and unrestricted right to enter into, conduct and benefit from any and all other business ventures of any kind whatsoever, whether or not competitive with the activities undertaken under this Agreement, without disclosing such activities to the other party or inviting or allowing the other party to participate therein. Section 9.04 RELATIONSHIP OF PARTIES This Agreement is not intended to create any partnership or agency relationship between the parties or fiduciary obligations of any description, and this Agreement shall not be construed so as to render the parties liable as partners or as creating a partnership, and no party shall be or shall be deemed to be, or shall hold itself out to be an agent of any other party. Section 9.05 SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties. Section 9.06 CONFIDENTIALITY During the term of this Agreement, neither Owner nor Rincon shall make any public disclosures of any technical data, reports, records or other information generated by either Owner or Rincon, without the prior written approval of the other party, which approval shall not be unreasonably withheld. The party desiring to disclose certain information will deliver the content of such intended disclosure to the other party for approval at least one (1) full business days prior to releasing this data or information and the other party will then respond in writing within that time period, and should they fail to respond in that time, such lack of communication will deemed to be consent to the public disclosure. For greater certainly "public disclosures" shall not include disclosures made to brokers, analysts, venture capitalists or industry partners or public disclosures required to comply with Canadian or US securities law. Section 9.08 PRIOR AGREEMENTS The Agreement contains the entire agreement and understanding of the parties and replaces all prior agreements bearing on the subject matter hereof. Section 9.09 ARBITRATION The parties hereto agree that any disputes arising hereunder will be submitted to arbitration and finally resolved by a single arbitrator in accordance with the provisions of the Arbitration Act (ONTARIO) S.O. 1991 Ch. 17. Section 9.10 COUNTERPARTS This Agreement may be executed in counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. IN WITNESS WHEREOF the parties make this Agreement effective as of the date first above written. LOUVICOURT GOLD MINES INC. RINCON RESOURCES, INC. - -------------------------------- ----------------------------------- Name: Name: Title: Title: - ------------------------------- ----------------------------------- Name: Name: Title: Title: SCHEDULE A UNDERLYING AGREEMENT (a copy of the Underlying Agreement is attached hereto) -----END PRIVACY-ENHANCED MESSAGE-----