-----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, BTjczwgf36s4luNOv0yV8rhpHdd0hU5mrTwBXiSkn1CivoReuwlUeXRoLiCSUfV0 9FaLDkV/3m66MhQnIb3fXQ== 0001009448-05-000027.txt : 20050316 0001009448-05-000027.hdr.sgml : 20050316 20050316161438 ACCESSION NUMBER: 0001009448-05-000027 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050316 DATE AS OF CHANGE: 20050316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Sparta Holding Corp. CENTRAL INDEX KEY: 0001305272 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 113195691 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-120691 FILM NUMBER: 05685659 BUSINESS ADDRESS: STREET 1: 8275 SOUTH EASTERN AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89123 BUSINESS PHONE: 702-938-0476 MAIL ADDRESS: STREET 1: 8275 SOUTH EASTERN AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89123 SB-2/A 1 sparta-sb2a.txt SPARTA HOLDING CORP. - SB-2/A As filed with the Securities and Exchange Commission on March 16, 2005 Registration No. 333-120691 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ Amendment No. 2 to FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SPARTA HOLDING CORP. (Exact name of small business issuer as specified in its charter) NEVADA 1040 11-3195691 - -------------- ------------------ ---------------------- (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Number) Identification Number) 203 Pebble Beach Path Riverhead, NY 11901 (631) 574-8862 (Address and Telephone Number of Principal Executive Offices and Principal Place of Business) Marilyn K. Radloff 115 Taurus Circle Reno, Nevada 89511 (775) 359-1703 ext. 7329 (Name, Address and Telephone Number of Agent for Service) Copies to: Irvin Brum Denise A. Menikheim Ruskin Moscou Faltischek, P.C. 190 EAB Plaza, East Tower, 15th Floor Uniondale, New York 11556 516-663-6600 Approximate Date of Commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE ======================== ===================== ===================== =================== ====================== Title of Each Class of Proposed Maximum Proposed Maximum Securities to be Number of Shares to Offering Price Per Aggregate Amount of Registered be Registered Share(1) Offering Price(2) Registration Fee(2) ======================== ===================== ===================== =================== ====================== Common stock, par 1,457,610 shares $0.35 $510,163.50 $60.05 value $.001 per share ======================== ===================== ===================== =================== ======================
(1) Our common stock is not traded on any national exchange and, in accordance with Rule 457, the offering price was determined by the price at which the shares were sold in a private placement. The price of $0.35 is a fixed price at which the selling security holders may sell their shares until our common stock is qualified on the OTC Bulletin Board, at which time the shares may be sold at the prevailing market prices or privately negotiated prices. (2) Estimated solely for purposes of calculating the amount of the registration fee pursuant to Rule 457(g) of the Securities Act of 1933 (the "Securities Act"). The registrant hereby amends the registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Acts of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. PROSPECTUS Subject to completion; Dated March 16, 2005 The information in this prospectus is subject to completion or amendment. The selling shareholders may not sell our common stock until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state. SPARTA HOLDING CORP. 1,457,610 Shares of Common Stock We are registering a total of 1,457,610 shares of our common stock, par value $.001 per share, on behalf of our selling shareholders. Upon the effectiveness of the registration statement, Castle Holding Corp. ("Castle") shall distribute our shares to its shareholders of record as of February 5, 2004 on a one share for every 100 shares of Castle common stock basis. The shareholders, together with Castle, are deemed to be selling shareholders. The selling shareholders will sell our shares at $0.35 per share until our shares are quoted on the OTC Bulletin Board, and thereafter, at prevailing market prices or privately negotiated prices. There can be no assurance that our shares will be quoted on the OTC Bulletin Board. The shares may be sold or distributed from time to time by the selling shareholders directly to one or more purchasers or through brokers or dealers who act solely as agents at market prices prevailing at the time of sale or at privately negotiated prices. We will not receive any of the proceeds from the sales of our shares by the selling shareholders. Our common stock is not listed on any national securities exchange or the Nasdaq Stock Market. Our common stock involves a high degree of risk. You should consider carefully the "Risk Factors" contained in this prospectus beginning on page 4. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is March 16, 2005. PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read this entire prospectus carefully, including "Risk Factors" and the financial statements and the notes to those financial statement included elsewhere in this prospectus. Our Company Sparta Holding Corp. ("we" or "us"), a Nevada corporation, was formed on December 23, 1993 as a wholly owned subsidiary of Castle Holding Corp. ("Castle"), a company trading on the Pink Sheets under the symbol "CHOD.PK". We are an exploration stage company. An exploration stage company is one engaged in the search for precious metals and base metals. We have not conducted any significant business operations. We have not generated any revenues or income. We are in the process of acquiring the mining interests associated with the Da-an Silver Mine located in Shouning County, Ningde City, Fujian Province, People's Republic of China (the "Da-an Project"). On August 14, 2004, we entered into the Share Purchase and Exchange Agreement (the "Share Purchase Agreement") with Fujian Tiancheng Mining Industry Corp. Ltd., a corporation registered with the Jianou City Industrial and Commercial Administrative Bureau, Fujian Province, People's Republic of China ("Fujian Tiancheng"). In the Share Exchange Agreement, it was contemplated that we would close the transactions described therein on or before December 31, 2004 and that, consideration for the Da-an Project, we agreed that on or before December 31, 2004, Fujian Tiancheng would receive 5,500,000 shares of our common stock. These shares have been issued and are being held in escrow by the transfer agent pending the closing of the transaction. At this time, we are preparing an amendment to the Share Purchase and Exchange Agreement extending the closing date to June 30, 2005 and amending the terms upon which we are to acquire the Da-an Project. A finder's fee of 220,000 shares of common stock will be issued to International Investment Group, who acted as the agent in bringing the Da-an Project to our attention and assisted us in completing the transaction. International Investment Group was also granted an option to acquire 240,000 additional shares of restricted common stock at $0.35 per share. The option expires on December 31, 2005. In order to raise additional capital to finance such mining projects, on June 25, 2004, we commenced a private placement offering seeking to raise $400,000, whereby we offered to accredited investors a total of 1,142,857 shares of common stock at $0.35 per share pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") and/or Rule 506 of Regulation D. We completed this offering on November 19, 2004. We raised $391,165 and issued 1,117,610 shares of our common stock in connection with such offering. On November 12, 2004, we commenced a Bridge Loan Financing whereby we are seeking to raise up to $500,000. The terms of the Bridge Loan are set forth in and evidenced by a convertible promissory note executed and delivered by us to the investor in the principal amount loaned by such investor. Among other things, the Note shall (i) be payable to the investor, (ii) bear interest from the date of issuance at a rate of eight percent per annum, (iii) be convertible by the investor into shares of our common stock on the terms provided therein, and (iv) have a maturity date which is twelve (12) months after date of issuance. In addition, we will issue to each investor warrants to purchase shares of our common stock, exercisable for a period of two (2) years at an exercise price of $1.50 per share. The number of shares of common stock issuable upon the exercise of each investor's warrant shall be determined by reference to the following formula: one (1) share of common stock for each $2.00 of the principal amount of the convertible promissory note. We are commencing the bridge loan financing pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation. We also are contemplating entering into a placement agent arrangement in connection with this offering. We are also in the process of commencing a private placement offering to be made to accredited investors in reliance on Section 4(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D, whereby we are seeking to raise up to $8,000,000 by offering to accredited investors the opportunity to purchase shares of our Series A Preferred Stock at a purchase price of $1.25 per share. Each share of the Series A Preferred Stock shall be automatically converted into shares of common stock on a one-for-one basis, twelve (12) months after the closing of the offering. The Offering closing date is March 31, 2005 unless extended at the Company's sole discretion. The Series A Preferred Stock shall pay an eight percent (8%) dividend per annum. Investors subscribing for shares of the Series A Preferred Stock prior to March 31, 2005 shall receive a warrant to purchase one share of common stock for every five shares of Series A Preferred Stock subscribed for. The Warrant is exercisable into shares of Common Stock for a period of two (2) years at an exercise price of $1.50 per share. Our executive office is located at 203 Pebble Beach Path, Riverhead, New York 11901. Our telephone number is (631) 574-8862. The Offering Issuer: Sparta Holding Corp. Selling Shareholders: Castle Holding Corp. and its shareholders of record as of February 5, 2004. See "Selling Shareholders" Common Shares Being Offered: Up to 1,457,610 shares of common stock $.001 par value Terms of the Offering: Castle will distribute approximately 336,695 shares to its shareholders of record as of February 2, 2004 on a one share for every 100 shares basis. The selling shareholders will determine when and how they will sell the common stock offered in this prospectus. Termination of the Offering: The offering will conclude when all of the 1,457,610 shares of common stock have been sold, the shares no longer need to be registered in order to be sold or we decide to terminate the registration of the shares. Securities Issued: 12,117,610 shares of our common stock are issued and outstanding as of the date of this prospectus. All of the common stock to be sold under this prospectus will be sold by existing shareholders. Use of Proceeds: We will not receive any proceeds from the sale of the common stock by the selling shareholders. Summary Financial Information The following information is derived from our audited financial statements for the year ended December 31, 2004. The financial information set forth below should be read in conjunction with the more detailed financial statements and related notes appearing elsewhere in this prospectus and should be read along with the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations. For the Period From Year Ended Inception December 23, December 31, 1993 to December 31, 2004 2004 -------------- ---------------- Income Statement Data: - ------------------------------ Revenues $0 $0 General and Administrative Expenses $126,015 $192,759 Net Income (Loss) ($126,015) ($192,759) Income (Loss) Per Share $ (0.01) (0.00) Average Shares Outstanding 12,329,815 100 Balance Sheet Data: - ------------------------ Cash $1,404 Total current assets $2,439,792 Total current liabilities $222,250 Stockholders Equity $2,217,543 RISK FACTORS An investment in our common stock is speculative in nature and involves a high degree of risk. You should carefully consider each of the risks described below, together with all of the other information contained in this prospectus, before deciding to invest in our common stock. If any of the following events actually occur, our business could be harmed and you may lose all or part of your investment. RISKS RELATED TO OUR BUSINESS WE ARE AN EXPLORATION STAGE COMPANY WITH NO HISTORY OF OPERATIONS, WHICH HAS INCURRED SUBSTANTIAL LOSSES AND, THEREFORE, THERE IS A STRONG LIKELIHOOD THAT WE MAY FAIL. Due to the fact that we have not commenced any business operations, we have no operating history upon which to evaluate the likelihood that our business will be successful. We have never earned any revenues. In order for us to achieve and maintain profitability, we must successfully locate a mineable mineral property. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such companies. We are subject to all of the risks inherent to a new business enterprise, such as established bank relationships, limited capital resources, lack of manpower, and possible cost overruns. In addition, we have incurred net losses of approximately $192,759 for the period from our inception in December 1993 through December 31, 2004 and, based upon current plans, expect that our losses will continue into the future. Potential investors must also weigh the likelihood of success in light of any problems, complications, and delays that may be encountered with the exploration of the Da-an Property. IF WE DO NOT RAISE THE ADDITIONAL FUNDS REQUIRED TO ACQUIRE THE MINING RIGHTS ASSOCIATED WITH THE DA-AN PROPERTY, WE WILL NOT HAVE ANY MINING PROPERTIES. Our current operating funds are less than is necessary to acquire the Da-an Property as set forth in the Share Purchase and Exchange Agreement. We are in the process of preparing an amendment to such agreement, which would provide for our acquisition of such property regardless of our ability to raise additional financing. However, we would still need significant additional funds to commence and complete our intended exploration of the Da-an Property. If adequate funds are not available to us or available to us on satisfactory terms, we may be required to substantially reduce, or eliminate, certain areas of our exploration activities or significantly limit our operations, which could have a substantial effect on the likelihood that we successfully locate property containing economic mineralization. We anticipate that most of our financing will derive from the sale of equity securities. Any sale of equity securities will result in dilution to our existing shareholders as there are no preemptive rights in connection with such securities. OUR VICE PRESIDENT/TREASURER/SECRETARY WILL ONLY DEVOTE A LIMITED AMOUNT OF TIME TO THE COMPANY. At the present time, Stephen J. Schmid, our Vice President/Treasurer/Secretary will devote only 50% of his time, or 20 hours per week, to the operation of the day-to-day affairs of the Company. His remaining time shall be spent acting as the President and Chief Executive Officer of Summit Capital Group, Inc. BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINERAL PROPERTIES, THERE IS A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that the exploration of the Da-an Property will uncover commercially exploitable mineral reserves. The probability of the Da-an Property containing commercial quantities of gold, silver and platinum is extremely remote. It is unlikely that the property contains any reserves and, in all likelihood, any funds spent on exploration will probably be lost. In addition, problems such as unusual or unexpected geological formations or other variable conditions are involved in exploration and, often result in unsuccessful exploration efforts. In addition, due to our limited capital and resources, we are limited in the amount of exploration work we can do. As a result, our already low probability of successfully locating mineral reserves will be reduced significantly further. Therefore, we may not find a commercial mineable ore deposit prior to exhausting our funds. Furthermore, exploration costs may be higher than anticipated, in which case, the risk of utilizing all of our funds prior to locating any ore deposits shall be greatly increased. Factors that could cause exploration costs to increase are: adverse conditions, difficult terrain and shortages of qualified personnel. FRED SCHMID, OUR PRESIDENT, MAY HAVE A CONFLICT OF INTEREST SINCE HE IS THE OWNER OF AN OPTION TO ACQUIRE OTHER MINING CLAIMS. Certain conflicts of interest now exist and will continue to exist between the Company and Fred R. Schmid, a director and our President/Chief Executive Officer due to the fact that Mr. Schmid has the option to acquire up to ten unpatented mining claims in Colorado. Therefore, in the future, there is the possibility that Mr. Schmid may choose to devote his time and focus his activities to the exploration of such claims. OUR FAILURE TO COMPETE WITH OUR COMPETITORS IN THE MINING INDUSTRY FOR FINANCING AND FOR QUALIFIED MANAGERIAL AND TECHNICAL EMPLOYEES WILL CAUSE OUR BUSINESS OPERATIONS TO SLOW DOWN OR BE SUSPENDED. Our competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing on terms we consider acceptable. We may also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration programs may be slowed down or suspended. RISKS RELATED TO OUR BUSINESS WE ARE SUBJECT TO ALL THE RISKS INHERENT TO THE MINING INDUSTRY, WHICH MAY HAVE AN ADVERSE AFFECT ON OUR BUSINESS OPERATIONS. We are subject to the numerous risks and hazards inherent to the mining industry including, without limitation, the following: o mining activities are subject to substantial operating hazard some of which are not insurable or may not be insured due to economic considerations; o the availability of water, which is essential to milling operations; o interruptions caused by adverse weather conditions; o unforeseen limited sources of supplies may resulted in shortages of material and equipment such as dynamite, earth moving equipment like bull dozers, backhoes and drilling equipment, fuel supplies, assaying and milling facilities, and availability of experienced manpower. The prices and availability of such equipment, facilities, supplies and manpower may change and have an adverse effect on our operations, causing us to suspend operations or cease our activities completely. RISKS RELATED TO THIS OFFERING IF AND WHEN WE COMMENCE MINING OPERATIONS WITH RESPECT TO THE DAAN PROJECT, WE WILL BE SUBJECT TO CHINESE LAW AND OTHER DIFFICULTIES WHICH ARISE FROM DOING BUSINESS IN A FOREIGN COUNTRY WHICH MAY INCREASE OUR OPERATING EXPENSES. If and when we commence mining operations with respect to the Da-an Project, we will be subject to applicable Chinese law, which is currently fashioned after Australian and Canadian law. While the restrictions imposed by such countries tend to be less restrictive than those of the United States, there can be no certainty that the laws in China will remain the same or that the enforcement of such laws will also be in line with Australia and Canada. In addition, we shall also be faced with those difficulties which arise from doing business in a foreign country including, but not limited to, translation of information, obtaining equipment and skillful labor. These obstacles may increase our operating expenses. THERE IS NO MARKET FOR OUR COMMON STOCK AND, DUE TO SUCH ILLIQUIDITY, YOU MAY BE UNABLE TO SELL YOUR SHARES. There is currently no market for our common stock and we can provide no assurance that a market will develop. We plan to apply for listing of our common stock on the OTC Bulletin Board upon the effectiveness of the registration statement. However, we can provide investors with no assurance that our shares will be traded on the bulletin board or, if traded, that a public market will materialize. If no market is ever developed for our shares, it will be difficult for shareholders to sell their stock. OUR SELLING SHAREHOLDERS MAY BE DEEMED TO BE UNDERWRITERS UNDER THE FEDERAL SECURITIES LAWS AND, THEREFORE, MAY INCUR LIABILITY The selling shareholders must comply with the requirements of the Securities Act and the Securities Exchange Act in the offer and sale of the common stock. In particular, during such times as the selling shareholders may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, they must comply with applicable law and, among other things, the following: (1) to not, directly or indirectly, bid for, purchase, or attempt to induce any person to bid for or purchase, any of our securities, except as otherwise permitted under the Securities Exchange Act; (2) furnish each broker or dealer through which common stock may be offered, such copies of this prospectus, as amended from time to time; and (3) to not engage in any stabilization activities in connection with our common stock. In the event the selling shareholders fail to comply with applicable law, they will incur personal liability. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Certain of the matters described in this prospectus contain forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements include, but are not limited to, statements about our: o business strategy; o ability to locate mineral reserves; o uncertainty regarding our future operating results; and o plans, objectives, expectations and intentions. Statements, other than statements of historical fact included in this prospectus regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, the words "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements speak only as of the date of this prospectus. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this prospectus are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We have included important factors that could cause our actual results to differ materially from our expectations under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements. USE OF PROCEEDS We will not receive any proceeds from the common shares offered through this prospectus by the selling shareholders. See the sections of this prospectus entitled "Selling Shareholders" and "Plan of Distribution." We will, however, incur all costs associated with this registration statement and prospectus. DETERMINATION OF OFFERING PRICE The selling shareholders will sell our shares at $0.35 per share until our shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market prices or privately negotiated prices. We determined this offering price, based upon the price of the last sale of our common stock to investors. DILUTION The common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding. Accordingly, there will be no dilution to our existing shareholders. SELLING SHAREHOLDERS The selling shareholders named in this prospectus are offering all 1,457,610 shares of common stock described in this prospectus. Some of the selling shareholders are acquiring our shares by way of a distribution by Castle, upon the effectiveness of the registration statement, of approximately 336,695 shares of the 340,000 shares of common stock described in this prospectus. Prior to such distribution, Castle held approximately 2.8% of our issued and outstanding common stock. After the distribution, Castle will be the holder of approximately 3,305 shares of our common stock. The remaining selling shareholders acquired our shares by investing in our private placement. The following table sets forth the name of the selling shareholders, the number of shares of common stock beneficially owned by each upon the distribution by Castle of our common stock to such persons, the amount to be offered by each selling shareholder, the amount to be owned by each selling shareholder after the offering is complete and the percentage held by each selling shareholder after the offering is complete. Except as may be indicated in the footnotes to the table below, none of the selling shareholders has, or within the past three years has had, any position, office or material relationship with us.
Name of Selling Shareholder Shares Owned Total Number of Shares Total Shares to Be Percentage of Shares Owned Prior to this to be Offered Owned Upon Completion Upon Completion of This Offering of This Offering Offering Nicholas Abadiotakis 8 8 0 0 Joseph R. Accurso 8 8 0 0 Rosa Alcala 1 1 0 0 Selena R. Alcala 1 1 0 0 Maria Dolores Arambul 1 1 0 0 Sehba S. Arif 1 1 0 0 Rohan Artwell 16 16 0 0 Armand C. Aurellano 1 1 0 0 Maria Azofeifa 11 11 0 0 Rowland Balcom 1 1 0 0 Suzanne Batchelor 1 1 0 0 Ken Baumer 1 1 0 0 Darrell R. Benjamin 80 80 0 0 Tazio Bent 1 1 0 0 Jeannie Benz 1 1 0 0 Veronica Browne 1 1 0 0 Mary Jane Buhain 1 1 0 0 Cheryl Bunales 1 1 0 0 Louis Butzgy 16 16 0 0 Josetina Cabagnot 1 1 0 0 Joe Cantore 1 1 0 0 Steven Caraco 1 1 0 0 Roxy Caranfil 1 1 0 0 Castle Advisors Limited 16400 16400 0 0 Partnership 94-1 Castle Holding Corp. Deferred 121600 121600 0 0 Compensation Plan for the benefit of George Herbert (1) Castle Holding Corp. Deferred 2600 2600 0 0 Compensation Plan for the benefit of Michael T. Studer (2) Anthony Catalfo 32 32 0 0 Frank Cavallaro 8 8 0 0 Cede & Co 17768 17768 0 0 Michael J. Chiodo 1 1 0 0 Denise Choy 1 1 0 0 Roger Ciriello 8 8 0 0 Michael Cormier 1 1 0 0 Bobbie Cortes 1 1 0 0 Christopher Cox 16 16 0 0 J E Crockett 3 3 0 0 David J. Dejesus 8 8 0 0 Georgene Deluca 176 176 0 0 Marissa Desilva 1 1 0 0 Richard Desulo 1 1 0 0 Steven L. Diaz 16 16 0 0 Diversified Financial Group Inc. 320 320 0 0 Juan Dominguez 1 1 0 0 Jamie Dufauchard 1 1 0 0 Delores Durant 1 1 0 0 Malcom L. Edwards 30 30 0 0 Tonnie R. Edwards 164 164 0 0 Amanda Elizaga 1 1 0 0 Equities Magazine LLC 160 160 0 0 Clifton B Erber 8 8 0 0 Les Erber 8 8 0 0 Lani Estipona 1 1 0 0 Zenovia N. Evans 1 1 0 0 Wycliffe A. Falconer 16 16 0 0 Joseph P. Fanning 8 8 0 0 Louis A. Farley 13 13 0 0 Robert Feldman 16 16 0 0 Frank Ferraro 300 300 0 0 Joseph Ferraro 5 5 0 0 Justin Ferraro 5 5 0 0 John Fisher 1 1 0 0 Kevin Flanagan 8 8 0 0 Mark W. Fuhlbruck & Mathilde A. 16 16 0 0 Fuhlbruck, JTTEN Jimmy Gabriel 1 1 0 0 Ronaldo Galang 1 1 0 0 Jorge R. Galero 1 1 0 0 Brian R. Gallagher 8 8 0 0 Henry Gallegos 1 1 0 0 Lee Gamer 1 1 0 0 Walter Gartner 8 8 0 0 Frank R. Giraldi 8 8 0 0 Frank P. Giraldi 56 56 0 0 Paul F. Giraldi 16 16 0 0 Melissa Gorz 8 8 0 0 John J. Gremmo III 20 20 0 0 Edgar Guzman 1 1 0 0 Scott Haahr 1 1 0 0 Michele Halder 1080 1080 0 0 Ratan Halder & Michele Halder 800 800 0 0 Marcia Hammarstron 16 16 0 0 David H. Hawk 2 2 0 0 George R. Hebert (1) 10880 10880 0 0 Arlene Hefferon 1 1 0 0 Brian Hendrickson 20 20 0 0 Teresa Hebert Ttee FBO Jaclyn M. 3959 3959 0 0 Hebert Robert Hendrickson 8 8 0 0 Teresa M Hebert 1048 1048 0 0 Teresa M. Hebert Ttee FBO Jaclyn 10000 10000 0 0 M. Hebert Robert M. Hinsch 80 80 0 0 Joseph M. Hoehn 1 1 0 0 D. W. Howard 48 48 0 0 Ebony N. Hoyte 1 1 0 0 Judy Ann Hyman 1 1 0 0 Joseph Incandela 500 500 0 0 Robert Ingram 1 1 0 0 Tom Jackson 1 1 0 0 Terrence E. Jones 4 4 0 0 James M. Jordan Iii 80 80 0 0 Elman San Jose 1 1 0 0 Charles S. Kafeiti 416 416 0 0 Karen A. Kafeiti 380 380 0 0 Tony S. Kafeiti 416 416 0 0 Joseph Kamide 16 16 0 0 Kevin Kane 1 1 0 0 Walentin Kardos 16 16 0 0 Sandra A. Kilbride 8 8 0 0 Michael Kimmel 8 8 0 0 Christopher T. Kline 8 8 0 0 Frank Labriola 8 8 0 0 Bruce M. Landreth 3 3 0 0 Charles Lane 8 8 0 0 Albert R. Laubenstein 1 1 0 0 Curtis Paul Lawson 1 1 0 0 James Leivas 1 1 0 0 Brian Lennox 1 1 0 0 Lewis C. Lepore 80 80 0 0 Eddie Lepper 1 1 0 0 David Levin 220 220 0 0 Lisa Lindberg 1 1 0 0 Merlyn J. Logsdon & Marjorie J. 3 3 0 0 Logsdon, JTTEN Joe Lyon, Jr. 96 96 0 0 Joseph Macdonald 16 16 0 0 Jesus Robert Magana 1 1 0 0 Mandrake Capital Corp. 320 320 0 0 Jeff Marchese 1 1 0 0 Matthew J Marcus & Erin A. Rahe, 385 385 0 0 JTTEN Kenneth J. Mcguire 8 8 0 0 Lincoln Mclean 16 16 0 0 Daniel Medina 1 1 0 0 Rosa I. Medrano 1 1 0 0 Noel Meeks 576 576 0 0 Marsha M. Melcher 3 3 0 0 Samuel Mellito & Theresa E. 320 320 0 0 Melliot, JTTEn Mitchell G. Menik 200 200 0 0 Salvatore Messina & Katherine 400 400 0 0 Messina Mark Milana 8 8 0 0 Pat Miller 8 8 0 0 Scott Monson 1 1 0 0 Teresita Montes 1 1 0 0 Mark Mooney 1 1 0 0 Dale Morisco 8 8 0 0 William L. Myers 13 13 0 0 William L. Namen 35 35 0 0 Alex Neria 1 1 0 0 Ian S. Netupsky 8 8 0 0 Sylvia M. Newkirk 1 1 0 0 Shakespeare Newsome 1000 1000 0 0 Mary B. Nolan 16 16 0 0 David C. Nuccio 8 8 0 0 Judd Odzer 8 8 0 0 Matthew T. Olson 8 8 0 0 Daniel O'Rourke 28 28 0 0 Manny Panlilio 1 1 0 0 Agapios W. Pavlides 8 8 0 0 Shyne Payne 1 1 0 0 David L. Perdie 8 8 0 0 Glenn A. Perkins 816 816 0 0 Richard Poirier 4 4 0 0 Jaime Pollak 1 1 0 0 Francis D. Pope, Sr. 400 400 0 0 Francis D. Pope, Jr. 400 400 0 0 John C. Power 80 80 0 0 Joseph C. Powell 120 120 0 0 Daniel J. Priscu 496 496 0 0 Stephen Pruitt 1 1 0 0 Celestina Pugliese 8 8 0 0 Faustino Pugliese 8 8 0 0 Joe Quesada 1 1 0 0 Sherry Ramirez & Keith Higgins 3 3 0 0 JTTEN Charles Rauch 8 8 0 0 Arthur Redler 80 80 0 0 Llewelyn Reid 16 16 0 0 Nita M. Renfrew 50 50 0 0 Michael G. Reppeto 12 12 0 0 Liza Reyes 1 1 0 0 Glenn A. Richardson 8 8 0 0 Sarah B. Rivera 1 1 0 0 Timothy Rizzoto 1 1 0 0 Kenneth N. Roth 48 48 0 0 Leslie S. Roth 48 48 0 0 Ricky Roxas 1 1 0 0 Victoria Roxas 1 1 0 0 Laforrest T. Roxbury 1 1 0 0 Cynthia A. Russo 5 5 0 0 Imelda Saldivar 1 1 0 0 Cheria Sallia 50 50 0 0 Juan Sanchez 1 1 0 0 Vivian Sanders 1 1 0 0 Sandor Marketing Group, Inc. 90 90 0 0 Eugene Sarbu 16 16 0 0 Susana Sarceno 1 1 0 0 Cindy Sarelis 8 8 0 0 Brian S. Savitch 8 8 0 0 Fred R. Schmid (2) 100 100 0 0 Jim Schmitt 1 1 0 0 Karen Shannon 1 1 0 0 Thomas Shaughnessy 400 400 0 0 Johnnie B. Shepheard Jr. & Ruth D. 3 3 0 0 Schepheard, JTTEN Galina Shuster 1 1 0 0 Warren Sicherman 8 8 0 0 Gayane Simonian 1 1 0 0 Mary B. Smith 80 80 0 0 Raymond T. Snediker 16 16 0 0 Dorothy Stames 1 1 0 0 Scott Stolper 8 8 0 0 Michael T. Studer (3) 6800 6800 0 0 Michael J. Studer 1 1 0 0 Michael T. Studer Ttee FBO 1760 1760 0 0 Kathleen E. Studer (3) Michael T. Studer Ttee FBO Kristin 1760 1760 0 0 A. Studer (3) Michael T. Studer Ttee FBO Michael 1760 1760 0 0 J. Studer (3) Michael T. Studer Family Trust (3) 129000 129000 0 0 Sheila Tessler 1 1 0 0 The Investor Relations Group, Inc. 25 25 0 0 The OTC Equity Fund Inc. 40 40 0 0 Henry Trimble 160 160 0 0 Henry W. Trimble III 192 192 0 0 Gerard Tuccillo 10 10 0 0 Michael J. Turner III 1 1 0 0 Ricardo Uribe 1 1 0 0 John Valdez 1 1 0 0 Michael B. Vanrensselar & Joseph 105 105 0 0 A. Vanrensselar, JTTEN Edwin Vargas 1 1 0 0 Albert E. Vatter 12 12 0 0 Jim Velasquez 1 1 0 0 Roland M. Villasenor 1 1 0 0 Jack Wagenti 400 400 0 0 Judith Walters 1 1 0 0 Joseph Ward 8 8 0 0 Beth D. Wargi 1 1 0 0 Jane Wachsmuth 8 8 0 0 Jerome W. Wenger 16 16 0 0 Fred Wheeler & Marian Wheeler, 35 35 0 0 JTTEN John Wihlen 19 19 0 0 Terry W. Wihlen 19 19 0 0 Mark Williams 8 8 0 0 Michael J. Williams 16 16 0 0 Clifford Coffey Wright 6 6 0 0 Kirby Wyllie 32 32 0 0 Harry W. Zacher, Jr. 16 16 0 0 Stanley Zahner 8 8 0 0 Sylvia Ang 14,286 14,286 0 0 Scott Balterman 142,857 142,857 0 0 Leslie Balterman Edward Borrelli 28,571 28,571 0 0 E. Borrelli-Custodian for 20,000 20,000 0 0 Keith Hernandez E. Borrelli-Custodian for Nicholle 20,000 20,000 0 0 Hernandez Reynold Chow 42,857 42,857 0 0 Shu K. Chow 57,143 57,143 0 0 Cong. Darkei Tshivo Dinov 68,571 68,571 0 0 Michael E. Kahan 105,500 105,500 0 0 Robert J. Lancelotti 15,000 15,000 0 0 Karin A. Lancellotti JTWROS Alfred O.P. Leubert 15,000 15,000 0 0 Lee Shuo Liu 31,428 31,428 0 0 Lin Chun Hui Liu 40,000 40,000 0 0 Bernt Nygaard 15,000 15,000 0 0 Robert Picciano 10,000 10,000 0 0 2P Management Holding AG 28,542 28,542 0 0 Hans G. Schmid 28,571 28,571 0 0 Robert Schneider 40,000 40,000 0 0 Sparten Establishment (Trust) 50,000 50,000 0 0 Anthony Swartz 28,571 28,571 0 0 Andreas Typaidos Family LP 28,571 28,571 0 0 Wang Li Tong 142,857 142,857 0 0 Joanne Yan 30,000 30,000 0 0 Dietmar Zessin 114,285 114,285 0 0
(1) From our inception to February 5, 2004, George R. Hebert served as a director, Chairman of the Board and our President and Chief Executive Officer. (2) From February 5, 2004 until the date of the registration statement, Fred R. Schmid has served as a director, Chairman of the Board and our President and Chief Executive Officer. (3) From our inception to February 5, 2004, Michael T. Studer served as a director and our Secretary and Treasurer. PLAN OF DISTRIBUTION Castle has authorized Atlas Stock Transfer Corporation, its stock transfer agent, to distribute, upon the effectiveness of the Registration Statement, approximately 336,695 shares of common stock described in this prospectus to the other selling shareholders, with each such individual receiving one share of our common stock for every one hundred shares of Castle common stock held. The selling shareholders may sell some or all of their shares at a fixed price of $0.35 per share, until our shares are quoted on the OTC Bulletin Board, and thereafter, at prevailing market prices or privately negotiated prices. We determined this offering price based upon the price per share offered to investors in connection with our most recent private placement. The selling shareholders may sell their shares directly to market makers acting as principals or brokers or dealers, who may act as agent or acquire the common stock as a principal. Any broker or dealer participating in such transactions as agent may receive a commission from the selling shareholders, or, if they act as agent for the purchaser of such common stock, from such purchaser. The selling shareholders will pay the usual and customary brokerage fees for such services. Brokers or dealers may agree with the selling shareholders to sell a specified number of shares at a stipulated price per share and, to the extent such broker or dealer is unable to do so acting as agent for the selling shareholders, to purchase, as principal, any unsold shares at the price required to fulfill the respective broker's or dealer's commitment to the selling shareholders. Brokers or dealers who acquire shares as principals may thereafter resell such shares from time to time in transactions in a market, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices, and in connection with such re-sales may pay or receive commissions to or from the purchasers of such shares. These transactions may involve sales to and through other brokers or dealers. If applicable, the selling shareholders may distribute shares to one or more of their affiliates who are unaffiliated with us. Such affiliates may, in turn, distribute such shares as described above. We can provide no assurance that all or any of the common stock offered will be sold by the selling shareholders. We are bearing all costs relating to the registration of the common stock. These are estimated to be $45,000. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock. Our common stock may be deemed a "penny stock". Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our common stock is neither listed nor quoted. Penny stock regulations impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these regulations, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the penny stock regulations require the delivery, prior to the transaction, of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker dealer also must disclose the commissions payable to both the broker dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the penny stock regulations may restrict the ability of broker dealers to sell our common stock and may have an adverse effect on any trading of our common stock. LEGAL PROCEEDINGS We currently are not a party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS Our executive officers and directors are as follows: Name Age Position - ---- --- -------- Fred R. Schmid 69 Director and Chairman of the Board; Chief Executive Officer and President Stephen J. Schmid 44 Director; Chief Financial Officer, Vice President, Secretary and Treasurer All of our Directors have held office since February 5, 2004 and shall continue to hold office until the next annual meeting of shareholders or until their successors are elected and qualified. Officers serve at the discretion of our Board of Directors. Fred R. Schmid and Stephen J. Schmid are father and son. None of our directors are currently serving as directors of reporting companies. The following is a brief description of the background and business experience of each of our executive officers and directors for the past five years: Fred R. Schmid has acted as a director, and Chairman of the Board, and as our President and Chief Executive Officer since February 2004. From January 2000 to January 2004, he held the following positions: (i) the Managing Partner of Feltsen Partners, LLC, a company that provides business consulting services; (ii) business consultant for Atlantic Manufacturing Company, which is engaged in the business of manufacturing and distributing skin and hand care products; and (iii) business partner is SES Designs, a company engaged in the business of designing and manufacturing jewelry. From January 2000 to September 2000, Mr. Schmid was engaged as the business consultant to Nexland, Inc., a network hardware manufacturer and distributor of interconnection and communication products in the Ethernet network environment. This past year, Fred Schmid devoted 100% of his business time to our business affairs. Stephen J. Schmid has acted as a director and as our Chief Financial Officer, Vice President, Secretary and Treasurer since February 2004. From August 1996 to the present, he has acted as President and Chief Executive Officer of Summit Capital Group, Inc., a company engaged in the business of arranging commercial real estate debt and equity among institutional, public and private companies. His main responsibilities are related to brokering investment property sales. From January 2004 to October 2004, he also served as the Vice President and Chief Financial Officer of Trefoil Properties, Inc. where he assisted with equity and debt raising activities and, from February 2002 to October 2003, he served as the Vice President of Capital Markets at Liberty Property Trust, where he assisted the Chief Financial Officer with accounting and finance projects. This past year, Stephen Schmid devoted 50% of his business time to our business affairs. Committees of the Board of Directors. We currently do not have any committees of the Board of Directors, including audit, compensation and nominating. In order to comply with the Sarbanes-Oxley Act of 2002, we have plans to add additional members to our board of directors who are "independent" as such term is defined under the Act and to create audit, compensation and nominating committees. Director Compensation Our directors do not receive any cash compensation for their service as members of the board of directors, but they are reimbursed for reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the board of directors. Significant Employees Currently, we do not have any employees. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of December 31, 2004, regarding the beneficial ownership of our common stock held by each of our executive officers and directors, our officers and directors as a group; and each person who beneficially owns in excess of five (5%) percent of our common stock. Other than as set forth in the table, there are no other beneficial owners. The number of shares of common stock beneficially owned by each person or entity is determined under the rules promulgated by the SEC. Under those rules, beneficial ownership includes any shares as to which the person or entity has sole or shared voting power or investment power and shares which that person or entity has the right to acquire from options, warrants, rights and conversion privileges within sixty (60) days after December 31, 2004. The inclusion in this section of any shares deemed beneficially owned does not constitute an admission by that person of beneficial ownership of those shares.
Before Offering After Offering Number of shares of Percent of Common Number of shares of Percent of Common Common Stock Stock beneficially Common Stock Stock beneficially Name of Beneficial Owner beneficially owned (1) owned (1)___ beneficially owned (2) owned (2)____ - ------------------------ ---------------------- ------------ ---------------------- ------------- Fred R. Schmid 1,150,000(3) 9.5% 1,150,000 9.2% 203 Pebble Beach Path Riverhead, New York 11901 Stephen J. Schmid 350,000(4) 2.9% 350,000 2.8% 51 Summit Road Malvern, Pennsylvania 19355 Michael T. Hines 1,750,000 14.4% 1,750,000 14.0% 101 West 57th Street New York, New York 10019 Fujian Tiancheng Mining 5,500,000(5) 45.4% 5,500,000 44.1% Industry Corp. Ltd. New Construction Industrial Zone Nanya Town, Jianou City, Fujian Province, P.R. of China Officers and Directors as a 1,500,000(6) 12.4% 1,500,000 12.0% group (2 persons)
(1) Such figures are based upon 12,117,610 shares of our common stock outstanding as of the date of this filing. Except as otherwise noted in these footnotes, the nature of beneficial ownership for shares reported in this table is sole voting and investment power. (2) Such figures are based upon the number of shares of our common stock outstanding after the distribution of 340,000 shares to Castle. (3) Fred R. Schmid is the direct beneficial owner of 575,000 shares. In addition, he is an indirect beneficial owner of the 575,000 shares held by Maryanna Schmid. (4) Stephen J. Schmid is the direct beneficial owner of 100,000 shares and the indirect beneficial owner of the 100,000 shares held by Signature Development Group, Inc. and the 150,000 shares held by the Signature Development Group, Inc. Retirement Plan. (5) Represents shares of common stock that have been issued to Fujian Tiancheng but are being held in escrow pending the closing of the Share Purchase and Exchange whereby we shall indirectly acquire the mining rights to the Da-an Siver Mine by acquiring the equity securities of China Mining Corp, Ltd., a British Virgin Island corporation. Fujian Tiancheng shall have no rights as a shareholder with respect to such common stock until the closing of the Share Purchase and Exchange and the delivery to it of such shares. (6) Includes the shares over which Fred R. Schmid and Stephen J. Schmid maintain indirect beneficial ownership. DESCRIPTION OF SECURITIES Our authorized capital consists of 102,000,000 shares of capital stock, $.001 par value per share, 100,000,000 shares of which are common stock and 2,000,000 shares of which are preferred stock. We are in the process of amending our Articles of Incorporation to increase the number of shares of preferred stock authorized for issuance to 10,000,000. Common Stock The holders of shares of our common stock are entitled to share ratably in such dividends and distributions as may be legally declared by the Board of Directors with respect to our common stock and in any of our assets available for distribution to shareholders upon their liquidation. Upon our liquidation, assets will only be available for distribution after satisfaction or provision for all of our debts and other obligations, including to holders of preferred stock designated as senior in right of payment upon liquidation. The holders of shares of our common stock have one vote per share, in person or by proxy, at all meetings of shareholders. There are no cumulative voting rights with respect to the election of our directors, which means that holders of a majority of the shares of our common stock voting in an election for directors, so long as the holders of a majority of our outstanding common stock are present in person or by proxy, can elect all of the directors then to be elected. There are no preemptive, conversion, or redemption rights applicable to our common stock. All shares of common stock issued and outstanding are fully paid for and non-assessable and all shares of common stock which are the subject of this offering, when issued, will be fully paid for and non-assessable. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities. Preferred Stock Our Articles of Incorporation provides that we are authorized to issue preferred stock, which may be issued from time to time in one or more series upon authorization by our Board of Directors. Our Board of Directors, without approval of our shareholders, is authorized to fix any dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences and any other rights, preferences, privileges and restrictions applicable to each such series of preferred stock. The issuance of preferred stock, while providing us flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of the common stock. Under certain circumstances, the issuance of our preferred stock could also make it more difficult for a third party to gain control of us, discourage bids for our outstanding securities at a premium or otherwise adversely affect the price of our outstanding securities. Non-cumulative Voting Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors. After the distribution of the shares described in this prospectus to the Castle shareholders, such shareholders will own approximately 2.7% of our outstanding shares. Cash Dividends As of the date of this prospectus, we have not paid any cash dividends to shareholders. The declaration of any future cash dividend to the holders of our common stock will be at the discretion of our Board of Directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends with respect to the Common Stock in the foreseeable future, but rather to reinvest earnings, if any, in our business operations. Our Series A Preferred Stock pay an annual dividend of 8% per annum. Common Stock Held in Escrow As of December 31, 2004, we authorized Atlas Stock Transfer Corporation, our transfer agent to issue 5,500,000 shares of common stock to Fujian Tiancheng and instructed them to hold such shares in escrow until further instructed. Upon the closing of the Share Purchase and Exchange, we will instruct the transfer agent to release such shares to Fujian Tiancheng. Fujian Tiancheng shall have no rights as a shareholder with respect to such common stock until then. Stock Transfer Agent Our stock transfer agent for our securities is Atlas Stock Transfer Corporation, 5899 South State Street, Salt Lake City, Utah 84107 and its telephone number is (801) 266-7151. INTEREST OF NAMED EXPERT AND COUNSEL No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or upon other legal matters in connection with the registration or offering of the common shares was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the company. Nor was any such person connected with the company as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee. DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our directors and officers are indemnified as provided by the Nevada Revised Statutes. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. DESCRIPTION OF BUSINESS General We were incorporated under the laws of Nevada on December 23, 1993 as a wholly owned subsidiary of Castle Holding Corp., a company trading on the Pink Sheets under the symbol "CHOD.PK" ("Castle"). We are an exploration stage company. An exploration stage company is one engaged in the search for precious metals and base metals. As an exploration stage company, we seek opportunities to acquire properties, which may contain economically mineable minerals such as gold, silver and platinum group metals. We have never conducted any significant business operations and have never generated any revenues or income. Da-an Silver Mine Property On May 25, 2004, we executed a Letter of Understanding with Feltsen, Tiancheng (China) Corp. ("Tiancheng") and Fujian Tiancheng Mining Industry Corp. LTD. ("Fujian Tiancheng") to acquire certain mining rights associated with property located in China and referred to as Da-an Silver Mine Property ("Da-an Property"). These rights were held by Fujian Tiancheng and may contain economically mineable precious metals for extraction. As part of our due diligence, we hired Dr. Linus T. Keating, D. Sc., a consulting geologist to visit the Da-an Silver Mine Property and report on his observations. Dr. Keating graduated from the University of Arizona in Tucson, Arizona with a Bachelors of Science in Geological Engineering (Mining & Exploration Option) in 1984 and, in 1998, from the Vrije Universiteit Brussel, Brussels, Belgium with a Doctor of Science - High Distinction in Geology. He is a registered geologist in Arizona (Registration #40815) and a Certified Professional Geologist (#10742) in the American Institute of Professional Geologists (AIPG). He is also a member of the Arizona Geological Society. Dr. Keating first visited the property from May 29, 2004 through June 6, 2004. He reported all observations in a written document entitled "Initial Geological Report On The Da-an Property, Fujian Province, People's Republic Of China" dated July 3, 2004 (the "Geological Report"), which provides a description of the property and its location, climate, physiology, mineralization and history. In addition, the Geological Report states that the Da-an Property is uncommon in that it represents a large cordilleran vein system that is relatively unexplored in this century and that there exists good potential to discover high-grade silver and/or gold deposits. The following are the proposed work plan recommendations for the Da-an Silver Mine property as outlined by Dr. Keating: o Clarify legal status (land position, land obligations, reports required and/or available) with complete copies of all relevant documents sent to the Sparta USA headquarters; o Establish a consistent sample and drill-hole numbering system to be used by all personnel working on the property for all samples collected, no matter what type of sample, so that a coherent database can be constructed. Assign all previous samples collected a distinctive series number that fits into the new database; o Establish shipping, laboratory and quality control protocols for all laboratory work performed on samples; o Obtain copies of all prior sample and geologic reports for the property no matter the age and send to the Company's USA headquarters, for translation into English; o Establish a Base Map for the USA and Chinese geologic teams use (topographic for China use - streams and roads for USA use) that uses a single coordinate system. All new information generated must fit perfectly onto this base map; o Coordinate schedules for USA geologists and Chinese technical teams; o Provide GPS and train the Chinese technical team in their use so at to accelerate the mapping of old mines and stream sediment locations; o Complete a thorough Geologic Map of the entire property with structural (faults and folds) emphasis at 1:10,000 scale using US geologists working in tandem with the Chinese technical team and sharing technology; o Complete computerized geo-chemical processing and analysis for all soil survey areas sampled to date on the property using USA software to identify subtle patterns for both key and pathfinder elements; o Carry out a comprehensive Stream Silt / Panned Concentrate geo-chemical survey over the entire property: collect 1 sample per 0.5 km along creeks, compile at 1:10,000 scale; o Old Hole Catalog: find and locate on 1:10,000 base map all old mines, show size of mine, shape, and trend direction; collect at least one high-grade sample from each mine found; compile at 1:10,000 scale; o Complete detail Geologic Mapping at 1:2,000 scale for the Tan Shan and Shen Ji Keng areas jointly with the Chinese and USA geologic teams; map other areas as appropriate; o Evaluate effectiveness of geophysical methods in probing for underground targets - design and contract out a geophysical survey if necessary; o Obtain government agency approvals, if necessary, for geophysical line-cutting and cut lines through heavy vegetation if necessary to permit geophysical surveying; o Drill Site Identification: Use the relationship of old mines to mapped geology and structure, geo-chemical and geophysical data of the entire area to define drill targets; o Obtain government agency permits if necessary, for drilling and trail / road construction; design and build access to each drill site, making trails and roads as necessary; o Drilling: depending on drill targets identified, drill from 5 to 20 holes for a total of up to 5,000m using up to two angle-capable core-drilling machines; o Evaluate drilling results and propose send tranch drilling plan, if appropriate. The following table outlines the major milestones with approximate completion dates related to the proposed Plan of Operation noted above: Table 1. Major Milestones: Phase # Critical Tasks Approximate Completion Date - -------------- ------------------------------------------- --------------------- 1 Da'an Project start-up March 15, 2005 - -------------- ------------------------------------------- --------------------- 1 Team Preparation Complete March 30, 2005 - -------------- ------------------------------------------- --------------------- 1 Mobilization / Field Work Begins April 1, 2005 - -------------- ------------------------------------------- --------------------- 1 "Old Hole" Surveying Complete April 30, 2005 - -------------- ------------------------------------------- --------------------- 1 Stream Sediment Survey Complete May 31, 2005 - -------------- ------------------------------------------- --------------------- 1 District-wide mapping Complete June 6, 2005 - -------------- ------------------------------------------- --------------------- 1 Detail Mapping Completed July 15, 2005 - -------------- ------------------------------------------- --------------------- 1 Geophysical Survey (if needed) Completed September 16, 2005 - -------------- ------------------------------------------- --------------------- 2 Drilling Starts October 10, 2005 - -------------- ------------------------------------------- --------------------- 2 1st Phase Drilling Completed March 10, 2006 - -------------- ------------------------------------------- --------------------- 3 2nd Phase Drilling Proposal Due April 13, 2006 - -------------- ------------------------------------------- --------------------- On August 14, 2004, we entered into a Share Purchase and Exchange Agreement (the "Share Purchase Agreement") with Fujian Tiancheng whereby we shall acquire two Da-an Silver Mine Prospecting Rights (the "Da-an Mining Rights"). In consideration for the Da-an Mining Rights, we agreed to issue, on or before December 31, 2004, 5,500,000 shares of our common stock to Fujian Tiancheng. In addition, we agreed to raise by December 31, 2004, $3,600,000 in order to finance the Da-an Project operations. It was contemplated in the agreement that this money shall be raised by way of private placements or a public offering of our common stock. Prior to the execution of the Share Purchase Agreement, we loaned to Fujian Tiancheng an amount equal to $200,000 to be used in connection with the Da-an Project. In return, on July 26, 2004, we received from Fujian Tiancheng a Promissory Note in the amount of $200,000 evidencing our loan. The note was canceled upon the execution of the Share Purchase Agreement and applied to the $3,600,000 that we are required to raise. At the present time, we do not own the Da-an Mining Rights or any interests in Fujian Tiancheng or the Da-an Property. Since the execution of the Share Purchase Agreement, we have been informed by Chinese counsel that Chinese law prohibits the acquisition of all of the capital stock of a Chinese entity by a non-Chinese entity. Therefore, in order to effectuate the purpose of the Share Purchase Agreement, Fujian Tiancheng formed China Mining Corp., Ltd., a British Virgin Island corporation ("CMC"), and shall transfer the Da-an Mining Rights into such company. We shall then acquire the equity securities of CMC and, indirectly the Da-an Mining Rights. In addition, all contributions required to be made to Fujian Tiancheng in order to finance the Da-an Project operations shall be made to CMC. As of the date hereof, we have not been able to raise the $3,600,000 required by the Share Purchase Agreement. Therefore, Fujian Tiancheng has verbally agreed to extend such deadline to June 30, 2005. We are in the process of preparing an amendment to the Share Purchase Agreement to reflect the extension as well as those items discussed in the previous paragraph. In the event that we are unable to raise the $3,600,000 by June 30, 2005, then Fujian Tiancheng will provide us with an amount equal to the difference between the total amount raised and $3,600,000 and, Fujian Tiancheng shall have the right to receive additional shares of our common stock. The amount of additional shares that Fujian Tiancheng shall be entitled to receive shall be equal to the total amount of funds provided to us by Fujian Tiancheng divided by the price per share being offered to prospective investors in the private placement. Therefore, regardless of whether we raise $3,600,000, we will acquire CMC and the Da-an Mining Rights. Current State of Exploration To date, our exploration consists only of two visits to the Da-an Property by Dr. Keating. No systematic surveys or investigations have been conducted. The purpose of both visits were to gather as much information regarding the property as possible, both on the ground and from Fujian Tiancheng, in order to lay the groundwork for a more comprehensive exploration program leading to target drilling. During his first visit, Dr. Keating personally inspected a number of different locations on and adjacent to the property and recorded his notes, photographed such locations and collected 19 outcrop grab samples. His second visit took place on January 3, 2005 through January 17, 2005. He is in the process of updating the Geological Report with the information collected during this visit. Competition The precious metals mining industry is fragmented. In comparison to other participants in the gold and silver mining market, we are one of the smallest companies. Although, we compete with other exploration companies looking for gold, silver and other minerals, there will be no competition for the exploration or removal of minerals from the Da-an Property once we have acquired the mining rights to such property. There are readily available markets for gold and silver in the United States and around the world. Therefore, we will be able to sell any gold and/or silver that is recovered. Government Regulations The Mineral Resources Law of the People's Republic of China is China's principal mining law. Such law is currently fashioned after similar statutes in Canada and Austrailia. Employees Initially, we intend to use the services of subcontractors for manual labor exploration work and technical evaluation on our property. At the present time, we have no employees, other than Fred R. Schmid and Stephen J. Schmid, our officers and directors, who at the present time are not being compensated for their services. The approximate amount of time per week that Fred R. Schmid and Stephen J. Schmid will devote to our business affairs is 40 hours and 20 hours, respectively. At some point in the future, Mr. Fred Schmid and Mr. Stephen J. Schmid will enter into employment agreements with the Company for their services. We intend to retain a translator for the field and office use. 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. Reports to Security Holders After we complete this registration, we will not be required to furnish you with an annual report. Further, we will not voluntarily send you an annual report. We will be required to file reports with the SEC under section 15(d) of the Securities Act. The reports will be filed electronically. The reports we will be required to file are Forms 10-KSB, 10-QSB, and 8-K. We have filed with the SEC under the Securities Act a registration statement on Form SB-2 with respect to shares of the common stock offered hereby, and of which this prospectus is a part. This prospectus does not contain all the information shown in the registration statement or the exhibits and schedules which are part of the registration statement, portions of which may be omitted as permitted by the rules and regulations of the SEC. Statements made in this prospectus regarding the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. For further information pertaining to us and the common stock offered hereby, reference is made to the registration statement, including the exhibits and schedule thereto, copies of which may be inspected without charge at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all or any portion of the registration statement may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website that contains reports and other information that is filed through the SEC's EDGAR System. The website can be accessed at http://www.sec.gov. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION This section of the prospectus includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or out predictions. Plan of Operation We have provided Fujian Tiancheng with Dr. Linus Keating's independent Geological Report dated July 3, 2004 and Trip Report dated January 28, 2005; which both contain his recommendations for the 1st and 2nd stage of the exploration program. We believe a relatively unexplored property must be examined in detail using sound western exploration standardized methods to determine viable drilling and trenching sites to substantiate a mineral resource on the property, if any. Dr. Keating's Reports provides a plan of operation that Sparta would follow and is the basis of the cost estimates shown below, based on USA standards. Such costs, when based on Chinese-equivalent figures could be 25% less than USA based estimates. Dr. Keating has also created a Gant Chart showing the start and completion times for each activity under his exploration plan. During the exploration period there are approximate decision points (milestones) that occur when the collected data is reviewed in detail and adjustments made based on the information captured and the exploration and mining experience of our technical staff. These milestones will permit management and technical staff to more efficiently utilize budget funds in such a fashion as to achieve maximum results. Key milestones are shown on Table 1, below. Sparta, with a western geological team of approximately four consulting geologists (senior and junior), will provide a rotating consulting pool of accomplished explorationists which, working together with its Chinese counterparts as a joint technical group, will enhance the Chinese geologists and engineering staff with its western exploration and mining experiences to carry out the proposed 2005 exploration plan of operation. Concomitantly, the presence of Sparta geologists in the field at every stage of the exploration process will insure the quality of the work carried out and adherence to western professional standards. The rotation plan calls for each Sparta geologist to be in the field with his Chinese counterparts for a two-month tranch. Dr. Keating will be present to review progress at each shift change. The following are the proposed work plan recommendations for the Da-an Silver Mine property as outlined by Dr. Keating: o Clarify legal status (land position, land obligations, reports required and/or available) with complete copies of all relevant documents sent to the Sparta USA headquarters; o Establish a consistent sample and drill-hole numbering system to be used by all personnel working on the property for all samples collected, no matter what type of sample, so that a coherent database can be constructed. Assign all previous samples collected a distinctive series number that fits into the new database; o Establish shipping, laboratory and quality control protocols for all laboratory work performed on samples; o Obtain copies of all prior sample and geologic reports for the property no matter the age and send to the Company's USA headquarters, for translation into English; o Establish a Base Map for the USA and Chinese geologic teams use (topographic for China use - streams and roads for USA use) that uses a single coordinate system. All new information generated must fit perfectly onto this base map; o Coordinate schedules for USA geologists and Chinese technical teams; o Provide GPS and train the Chinese technical team in their use so at to accelerate the mapping of old mines and stream sediment locations; o Complete a thorough Geologic Map of the entire property with structural (faults and folds) emphasis at 1:10,000 scale using US geologists working in tandem with the Chinese technical team and sharing technology; o Complete computerized geo-chemical processing and analysis for all soil survey areas sampled to date on the property using USA software to identify subtle patterns for both key and pathfinder elements; o Carry out a comprehensive Stream Silt / Panned Concentrate geo-chemical survey over the entire property: collect 1 sample per 0.5 km along creeks, compile at 1:10,000 scale; o Old Hole Catalog: find and locate on 1:10,000 base map all old mines, show size of mine, shape, and trend direction; collect at least one high-grade sample from each mine found; compile at 1:10,000 scale; o Complete detail Geologic Mapping at 1:2,000 scale for the Tan Shan and Shen Ji Keng areas jointly with the Chinese and USA geologic teams; map other areas as appropriate; o Evaluate effectiveness of geophysical methods in probing for underground targets - design and contract out a geophysical survey if necessary; o Obtain government agency approvals, if necessary, for geophysical line-cutting and cut lines through heavy vegetation if necessary to permit geophysical surveying; o Drill Site Identification: Use the relationship of old mines to mapped geology and structure, geo-chemical and geophysical data of the entire area to define drill targets; o Obtain government agency permits if necessary, for drilling and trail / road construction; design and build access to each drill site, making trails and roads as necessary; o Drilling: depending on drill targets identified, drill from 5 to 20 holes for a total of up to 5,000m using up to two angle-capable core-drilling machines; o Evaluate drilling results and propose send tranch drilling plan if appropriate. The following table outlines the major milestones with approximate completion dates and estimated budgetary expenses related to the proposed Plan of Operation noted above: Table 1. Major Milestones: Phase # Critical Tasks Approximate Completion Date - -------------- ------------------------------------------- --------------------- 1 Da'an Project start-up March 15, 2005 - -------------- ------------------------------------------- --------------------- 1 Team Preparation Complete March 30, 2005 - -------------- ------------------------------------------- --------------------- 1 Mobilization / Field Work Begins April 1, 2005 - -------------- ------------------------------------------- --------------------- 1 "Old Hole" Surveying Complete April 30, 2005 - -------------- ------------------------------------------- --------------------- 1 Stream Sediment Survey Complete May 31, 2005 - -------------- ------------------------------------------- --------------------- 1 District-wide mapping Complete June 6, 2005 - -------------- ------------------------------------------- --------------------- 1 Detail Mapping Completed July 15, 2005 - -------------- ------------------------------------------- --------------------- 1 Geophysical Survey (if needed) Completed September 16, 2005 - -------------- ------------------------------------------- --------------------- 2 Drilling Starts October 10, 2005 - -------------- ------------------------------------------- --------------------- 2 1st Tranch Drilling Completed March 10, 2006 - -------------- ------------------------------------------- --------------------- 3 2nd Tranch Drilling Proposal Due April 13, 2006 - -------------- ------------------------------------------- --------------------- Budget Items: - ------------- Preparation.............................................................$10,000 Old Hole Survey.........................................................$14,000 2 engineers, 2 assistants, 4 local guides; 100 rock chip samples Stream Sediment Survey..................................................$43,000 2 engineers, 2 assistants, 4 local guides, 350 samples District Mapping........................................................$50,000 2 geologists, 2 assistants, 4 local guides, 1 translator, Detail Mapping..........................................................$40,000 2 geologists, 2 assistants, 1 translator Geophysical Survey......................................................$80,000 Contractor Data Compilation & Analysis.............................................$20,000 Permitting...............................................................$5,000 Land Holding Costs......................................................$20,000 Drilling...............................................................$691,000 5000m, diamond core, 2 angle rigs Logistics..............................................................$250,300 Drivers, Vehicles, warehouse, translation, communication, travel, tickets, expat insurance, executive travel, maintenance, sample boxes and bags, local casual labor Sampling...............................................................$245,300 Preparation, shipping, analysis, check assays, standards Contingency (5%)........................................................$61,700 Total................................................................$1,530,000 Off Balance Sheet Arrangements There are no off balance sheet arrangements. Foreign Currency Translation. The Company's Chinese operation will maintain its books and accounting records in Renminbi ("RMB"), the People's Rebublic of China's currency. Translation of amounts from RMB in United States dollars ("US$) is being made currently at a single rate of exchange of approximately US$1.00:RMB8.27. No representation can be made that RMB amounts will be converted into US Dollars at that rate in the future. On January 1, 1994, the PRC government introduced a single rate of exchange as quoted daily by the People's Bank of China (the "unified Exchange Rate"). The quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the Bank of China or other institutions requires submitting a payment application form together with supplier's invoices, shipping documents and signed contracts. Cash Requirements For the Next Twelve Months: To implement the Plan of Operations and manage the Company, we estimate that our expenses for the next twelve months will be approximately $3,960,000, expended as follows: Exploration: $1,530,000 Acquire the Da-an Silver Mining Property: $1,500,000 Payroll ($180,000) and related taxes ($45,000): 225,000 Consulting and Research Report Services: 45,000 SG&A: 180,000 Accounting and Legal Counsel: 75,000 Printing and Engraving Expense: 25,000 Offering Expenses: 20,000 10% Misc. Expense: 360,000 --------- Total: $3,960,000 To date, the Company has raised $387,167 in an initial private placement equity offering and $311,000 through a private placement Convertible Bridge Loan for a total of $698,167. Under the amended Share Purchase and Exchange Agreement between Sparta Holding and Fujian Tiancheng, the Company is required to pay $3,600,000 by June 30, 2005 (the "Closing Date") to Fujian Tiancheng in order to acquire control of the Da-an Silver Mine property and undertake the ongoing exploration / development program. To date, the Company has advanced $518,414 as loans to the Fujian Tiancheng toward the $3,600,000 payment, which is being applied toward ongoing exploration work on the property. Should the Company not raise the full $3,600,000 amount by March 31, 2005, Fujian Tiancheng has agreed to lend the Company any balance still due, which the Company can repay from proceeds it raises through its private placement offerings. The Company is undertaking a private placement up to $8,000,000 through a Series A Preferred Stock convertible into Common Stock. At this time we have not raised any funds under the preferred stock offering. Any additional funds raised above the required $3,960,000 estimated expenses for the next twelve months may be used to acquire additional mining properties in China and to conduct exploration work to establish mineral resources on said properties, if any. Failure to raise sufficient funds through our private placement offerings would require the Company to significantly curtail its planned acquisition and exploration programs and we may be forced to make other arrangements to continue to operate the Company, which there can be no assurances that we will be able to do so, or cease our activities completely. Sparta Holding Corp. completed a private placement of shares of unregistered common stock for sale at $0.35 per share to a small group of qualified purchasers without registration under the Securities Act of 1933, as amended (the "1933 Act") or the securities laws of any state, in reliance on the exemption contained in Section 4 (2) of the 1933 Act and on similar exemption under applicable state laws. The Company raised $391,165 and issued 1,117,610 shares of common stock in this offering. Sparta Holding Corp. is completing a $500,000 Bridge Loan Financing with a small group of Lenders, issuing them a Note bearing interest at 8% per annum, with conversion privileges of one share of Common Stock for each One ($1.00) Dollar of Note principal and interest being converted. The Note is due and payable at the end of 12 months from the Note date. In addition, the Lender received a 1/2 Warrant for each dollar of loan principal, exercisable for a period of two (2) years at an exercise price of $1.50 per share. This Warrant or the Warrant Shares or any other security issued or issuable upon the exercise of this Warrant may not be sold or otherwise disposed of unless the Holder provides the Company with an opinion of counsel reasonably satisfactory to the Company in form that this Warrant or the Warrant Shares or such other security may be legally transferred without violating the Securities act of 1933, as amended (the "1933 Act") and any other applicable securities law and then only against receipt of an agreement of the transferee to comply with the provisions of this Section (g) with respect to any resale or other disposition of such securities. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, that the Warrant Shares are being acquired solely for the Holder's own account and that Holder or Holder's purchaser representative is an accredited investor, as defined in Rule 501 under the 1933 Act. Sparta Holding Corp. is offering up to $8,000,000 private placement of Series A Preferred Stock (each, a "Share") at a purchase price of $1.25 per Share (the "Offering") for 6,400,000 Shares, which are callable by the Company into shares of Common Stock at One share of Preferred Stock for One share of Common Stock at the end of twelve months from the closing date of the offering. The Offering closing date is March 31, 2005 unless extended at the Company's sole discretion. The Preferred Stock pays an eight percent (8%) dividend per annum. Purchasers of the Preferred Stock prior to March 31, 2005 receive twenty percent (20%) warrant coverage (the "Warrant") on the shares of Common Stock. The Warrant is exercisable into shares of Common Stock for a period of two (2) years at an exercise price of $1.50 per share. Since there is not a minimum offering amount in this Offering, all subscription amounts will not be placed in an escrow account and will be immediately available to the Company for its use. The Company reserves the right to pay commissions and/or finder's fees in cash, securities of the Company, a combination thereof, or other combinations to individuals and/or entities in connection with the sale of the Shares in this Offering, in amounts the Company deems appropriate in the Company's sole and exclusive discretion. As of the date hereof, in addition to a cash finder's fee, the Company intends to grant to such individuals, upon the closing of such sale, a warrant to purchase a number of shares of the Company's Common Stock equal to 10% of the purchase price of the Sale, at a purchase price of $1.25 per share. The warrant shall have a term of two years from the date of issuance. The Company has not raised any funds under this private placement. The Offering is being made in reliance upon an exemption from registration under the Securities Act for an offer and sale of securities, which does not involve a public offering. It is offered to accredited investors who acknowledge that they understand that the Shares being purchased have not been registered under the Securities Act of 1933, as amended (the "Act") or any state securities laws and neither the Shares nor any interest therein may be offered, sold, pledged, assigned or otherwise transferred unless (1) a registration statement with respect thereto is effective under the Act and any applicable state securities laws or (2) the Company receives an opinion of counsel to the holder of such shares, which counsel and opinion are reasonably satisfactory to the Company, that such securities may be offered, sold, pledge, assigned or transferred in the manner contemplated without an effective registration statement under the Act or applicable state securities laws. DESCRIPTION OF PROPERTY Our satellite business office is located at 8275 South Eastern Avenue, Las Vegas, Nevada 89123. These premises are comprised of approximately 300 square feet and are subject to a month-to-month lease. The monthly rental payment under such lease is $150.00 per month. Da-an Property Description, Location and Access The Da-an Property is located in northern-most corner of Fujian Province, 160 air-kilometers due north of the city of Fuzhou, capital of the province. The Fujian Province lies on the eastern seaboard of the People's Republic of China, across the straits from Taiwan. The property is accessible by road year-round from Fuzhou. Located approximately 30 minutes north of Shouning, a modern city with full emergency and support services, the town of Da-an can be reached by a paved two-lane mountain highway. From the town of Da-an, the Da-an Property is a 40-minute drive on a local access maintained dirt road. The property consists of over 20,000 acres of contiguous land, which is subject to two "Mine Prospecting Rights" issued by the Fujian Province Department of Land Resources pursuant to regulations promulgated by the Ministry of Land Resources of the People's Republic of China to Fujian Tiancheng. There is no time limit for the paid transfer of mineral rights, but these rights cannot be left unused. As a result, a system of annual inspection was introduced and accordingly, the owners of such rights annually report their prospecting and exploration plans to the proper land and resource departments of the provinces. The department of land and resources at the provincial level will conduct its examination and verification on the implementation of the plans and issue new certificates as substitutes for the previous ones, provided the work of the previous year is in progress. Physiographically, the property comprises steep vegetation-covered slopes, with a moderate to thick soil profile typical of the tropics, dissected by deep valleys. Year-round creeks occupy most valleys. Chest-high tropical vegetation is thick throughout the area except at the higher elevations on the ridges. Sporadic bamboo and cedar forests occur at the middle elevations. Except in the main valley of Da-an village, no roads are present; access is limited to an extensive network of footpaths. Off the footpaths, outcrops are present but can be challenging to find. Exploration History The Da-an Property has a long history of silver mining, dating back at least 450 years to the Ming Dynasty. Numerous old mine workings dot the countryside, most of which do not appear to have been touched in many years. There are no mines currently producing on the Da-an Property. No mining or exploration infrastructure exists at the present time. Work to date has been performed by the Fujian Provincial Geological Research and Investigation Institute under the direction of Mr. Li Changze, Brigade Chief Engineer. The Brigade is a provincial government entity that conducted this work under contract with Fujian Tiancheng. A report "Profile of the Project in Shouning" which appears to have been written in 2000 summarizes early exploration work. In the 1972, the Brigade engineers, first visited the Da-an Property and focused on the Guan Tian Chang zone. According to the summary report, two high-grade samples collected from old workings on that visit yielded silver values ranging from 16,000 ppm to 17,000 ppm. In 1979, the Brigade conducted a systematic exploration over the entire district at that time assayed from 39 ppm to 800ppm silver. From 1989 - 1992, the 4th Brigade finished surveying the Guan Tian Chang, Wailou, Fuji, Tanchatou, Zhaiping, Wenyang, Tanshan, and Da-an zones. A report detailing their findings is in our possession, has not been translated into English at the date of this prospectus. Soil, stream sediment, heavy cons, and rock chip sampling was conducted erratically throughout this period. In 1999, a follow-up of stream sediment and panned concentrate led to the discovery of a gold anomalous area near the Da-an Mine area and from Tanshan to Laocuo. Later in 1999, one vertical core hole was drilled adjacent to old stopes at Guantianchang but failed to cut ore grade mineralization or intersect key structures. Mineralization consists of high-grade cordilleran-style silver (+/- gold), lead, zinc veins hosted in a Jurassic-Cretaceous age calc-alkaline volcanic complex. Ongoing field recognizance work is proceeding on the Da-an Property area by Fujian Tiancheng's technical team, which is independent of the Company until we have completed our acquisition of the company. At the present time, we are not actively involved in any exploration activities on the Da-an Property. Physiography The Da-an Property in China is located in Shouning County at an elevation of 750 to 1,150 meters and consists of geomorphologic structure of mountainous areas. The property area boasts of deep terrain incisions and valleys with full vegetation growth. Shouning County is part of a subtropical monsoon climate zone. It enjoys warm weather and abundant sunlight. It has an annual average temperature of 15.1(degree)C, annual precipitation of 247.2mm and non-frost duration of 235 days. It is a rural agricultural area. There are over 1,700 rivers and streams in the whole county with an annual average runoff of 1.8 billion m3 of water. Electric Power is in the vicinity of the property area and hydroelectric power can be developed. The property area is accessible by major highway and good secondary roadways. Ownership Interest At the present time the Company does not possess any rights to the Da-an Property. [Insert Map Here - Map will be included in amendment]] CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Fred Schmid, a director and Chairman of the Board of Directors, and our President/Chief Executive Officer, had loaned us approximately $7,500 for start-up costs and operating capital. As of the date hereof, such loans have been repaid from the financing raised in connection with the private placement. There were no documents reflecting the loan, which did not bear any interest and had no maturity date or other repayment terms. On February 5, 2004, we entered into the Exchange Agreement with Feltsen Partners, LLC, a Pennsylvania limited liability company ("Feltsen"), whereby we acquired certain rights to explore several mining claims that are under the jurisdiction of the United States Department of the Interior, Bureau of Land Management and located in Greenlee County, Arizona. Fred Schmid is the Managing Partner and sole member of Feltsen. In consideration for the mining claims, we issued to Feltsen 11,000,000 shares of our common stock, of which 5,500,000 have been distributed to its members and related parties and the balance returned to us for no consideration. The shares were returned in order to keep the number of shares issued and outstanding at a reasonable number. The Exchange Agreement also called for the distribution of 340,000 shares of our common stock to Castle for distribution to the Castle shareholders of record on February 5, 2004. Upon the effectiveness of the registration statement, such shares shall be distributed to the Castle Shareholders on a one share for every 100 shares of Castle held basis. As a result of this distribution, Fred R. Schmid will receive 100 shares of our common stock. Conflicts of Interest Certain conflicts of interest now exist and will continue to exist between the Company and Fred R. Schmid, a director and our President/Chief Executive Officer due to the fact that Mr. Schmid has the option to acquire up to ten unpatented mining claims in Colorado. Therefore, in the future, there is the possibility that Mr. Schmid may choose to devote his time and focus his activities to the exploration of such claims. We have formulated and adopted a policy to handle potential conflicts of interest among our officers and directors relating to precious metals mining interests which in the future come to the attention of our officers and directors, who are also involved with other firms or ventures seeking precious metals mining opportunities. This policy excludes precious metals properties presently owned, subject to option or located in North America, by either of our officers and directors or affiliated companies. Our policy requires that each such officer or director shall disclose and offer to us all opportunities to acquire and develop precious metals mining properties located outside of North America which either come to their attention as being available or in which they have either a controlling or majority interest before acquiring then for other companies unless such opportunities (a) are not, by their terms, available to public companies in general, or (b) require investments or other commitments by us, which in our reasonable opinion, we are unable to make at the time such opportunities are initially presented. Except for the policy described in the preceding paragraph, we have established no other policies or procedures for the resolution of current or potential conflicts of interests between our officers and directors or affiliated entities and us. In the opinion of management, this policy is adequate to protect us from current or potential conflicts of interests. However, potential investors should carefully consider the potential conflicts of interest provision, which exists before purchasing our shares. Because the policy recognizes that certain conditions need to be satisfied before business opportunities as described herein are offered to us, there can be no assurance that such opportunities, which are brought to the our attention will be offered to us. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS No Market for Common Stock At the present time, there is no public trading market for our common stock. We anticipate applying for trading of our common stock on the OTC Bulletin Board upon the effectiveness of the registration statement. However, we can provide no assurance that our shares will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize. Accordingly, you may need to hold our common stock for an indefinite period. Stock Option Grants As of the date of the registration statement, we have granted to International Investment Group an option to purchase 240,000 shares of our common stock at $0.35 per shares as a finder's fee for bringing the Da-an Project to our attention and assisted us in negotiating and completing the transaction. This option expires on December 31, 2005. Convertible Promissory Notes As of the date of the registration statement, we have issued Convertible Promissory Notes in the aggregate amount of $311,000 in our Bridge Loan Financing. Each note bears interest at a rate of eight percent per annum and is convertible, at the option of the investor, into shares of our common stock on a one share of common stock for every dollar of principal and interest being converted. The term of the notes shall be 12 months from the date of their issuance. Warrant Grants As of the date of the registration statement, we have issued to the investors, in our Bridge Loan Financing, the right to purchase 155,500 shares of our common stock at a $1.50 per share for a period of two years from the date of issuance. Rule 144 Shares As of the date of the date of the registration statement, none of our shares of common stock are available for resale to the public in accordance with Rule 144 of the Securities Act. Registration Rights As of the date of the registration statement, the Bridge Loan Financing investors have been granted piggy-back registration rights. Therefore, if at any time following the effectiveness of the registration statement, we propose to register our securities under the Securities Act for sale to the public, whether for our own account or for the account of our shareholders for sale to the public, we will give written notice to the Bridge Loan investors of such proposed registration and, upon their request, we will use reasonable efforts to cause their common stock to be covered by the proposed registration statement. Shareholders As of the date of this registration statement, we have approximately 48 record holders of our common stock. Dividend Policy We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the expansion of our business and we do not expect to declare or pay any cash dividends on our common stock in the foreseeable future. We will, however, pay a dividend of eight (8%) percent per annum on all issued and outstanding shares of our Series A Preferred Stock. EXECUTIVE COMPENSATION Mr. Fred Schmid and Mr. Stephen Schmid, our officers and directors, have not been compensated for their services and there are no plans to compensate them in the near future until such time as we have raised a total of $1,000,000 in connection with our private placement offering. At such time, Mr. Fred Schmid and Mr. Stephen Schmid will enter into employment agreements and be compensated for their services, commensurate to industry standards. Executive Officer Compensation Summary Compensation: The table below shows summary information concerning annual and long-term compensation awarded to, earned by or paid to Fred Schmid, our President and Chief Executive Officer and Stephen Schmid, our Vice President, Secretary and Treasurer, for the year ended September 30, 2004. SUMMARY COMPENSATION TABLE
Other Compensation Annual Compensation Long-Term Compensation Name and Principal Position Year Salary Bonus Options Compensation - ---------------------------- --------- -------------- --------------- ------------ ---------------- --------------------- Fred Schmid, President and 2004 _______(1) - - - Chief Executive Officer - 2005 _______(1) - - - - Stephen Schmid, 2004 _______(1) - - - - Vice President, Secretary and Treasurer 2005 _______(1) - - - - (1) Salary was not paid and was not contributed to them.
Employment Agreements At this time, Fred Schmid and Stephen J. Schmid, our officers, are not being compensated for their services. When $1,000,000 of capital is raised, Mr. Fred Schmid and Mr. Stephen Schmid will both enter into employment agreements and be compensated for their services commensurate to industry standards. 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. Stock Option Plans At this time, there are no stock option plans. Limitation of Liability and Indemnification Matters We may provide liability insurance for each director and officer for certain losses arising from claims or changes made against them while acting in their capabilities as our directors or officers, whether or not we would have the power to indemnify such person against such liability, as permitted by law. FINANCIAL STATEMENTS Our fiscal year end is September 30. We will provide audited financial statements on an annual basis prepared by an Independent Certified Public Accountant. After we complete this registration, we will not be required to furnish you with an annual report. Further, we will not voluntarily send you an annual report. We will be required to file reports with the SEC under section 15(d) of the Securities Act. The reports will be filed electronically. The reports we will be required to file are Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports we file electronically. The address for the Internet site is www.sec.gov. Our audited financial statement from inception to September 30, 2004 immediately follows: SPARTA HOLDING CORP. (An Exploration Stage Company) INDEX ----- PAGE ---- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F2 BALANCE SHEETS F3 STATEMENTS OF OPERATIONS F4 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) F5-F6 STATEMENTS OF CASH FLOWS F7 NOTES TO FINANCIAL STATEMENTS F8-F15 KEMPISTY & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, P.C. 15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930 Report of Independent Registered Public Accounting Firm ------------------------------------------------------- Board of Directors Sparta Holding Corp. (An Exploration Stage Company) We have audited the accompanying balance sheet of Sparta Holding Corp. (An Exploration Stage Company) as of September 30, 2004, and the related statements of operations, changes in stockholders' equity (deficit) and cash flows for the two years in the period ended September 30, 2004 and the period December 23, 1993 (date of inception) to September 30, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sparta Holding Corp. (An Exploration Stage Company) as of September 30, 2004, and the results of its operations and its cash flows for the two years in the period ended September 30, 2004 and the period December 23, 1993 (date of inception) to September 30, 2004 in conformity with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenue and has incurred start-up losses to date. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Kempisty & Company Certified Public Accountants PC New York, New York November 1, 2004 SPARTA HOLDING CORP. (An Exploration Stage Company) BALANCE SHEETS
December 31, September 30, 2004 2004 ------ -------- (unaudited) ----------- ASSETS Current Assets Cash $ 1,404 $ 30,614 ------------------- ------------------- Total current assets 1,404 30,614 Other assets Fujian Deposit (Note 3) 2,437,914 2,133,914 Other 475 475 --- --- Total Assets $ 2,439,793 $ 2,165,003 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 6,250 $ 12,670 Bridge loans payable (Note 8) 216,000 - - ------- Total Current Liabilities 222,250 12,670 Commitments and contingencies (Note 7) Stockholders' Equity Preferred stock $.001 par value; authorized 2,000,000 shares, issued and outstanding none - - Common stock $.001 par value; authorized 100,000,000 shares, issued and outstanding 12,677,610 and 12,153,252 shares (Note 5) 12,678 12,153 Additional paid in capital 2,397,624 2,206,924 Deficit accumulated during the development stage (192,759) (66,744) -------- ------- Stockholders' Equity 2,217,543 2,152,333 --------- --------- Total Liabilities and Stockholders' Equity $ 2,439,793 $ 2,165,003 =================== ===================
SPARTA HOLDING CORP. (An Exploration Stage Company) STATEMENTS OF OPERATIONS
For the Period For the Quarter Ended For the Year Ended December 23, 1993 December 31, September 30, (inception) to 2004 2003 2004 2003 December 31,2004 ---- ---- ---- ---- ---------------- (unaudited) Revenues $ - $ - $ - $ - $ - Expenses Consultant geologic 1,250 - 8,626 - 1,250 Interest expense 2,423 - - - 11,049 Mining claims cost 1,000 - 11,000 - 12,000 Travel 2,275 - 12,003 - 14,278 Legal 13,992 - 17,773 - 31,765 Accountant 1,500 - 5,000 - 6,500 Finder's fee 89,000 - - - 89,000 Other expenses 14,575 - 7,700 304 26,917 ------ ----- --- ------ 126,015 - 62,102 304 192,759 ------- ------ --- ------- Net (loss) $ (126,015) $ - $ (62,102)$ (304) $ (192,759 ================== ================ ================== ================== ================= Net loss per share basic and diluted $ (0.01) $ - $ (0.01)$ (0.00) ================== ================ ================== ================== Weighted average number of shares outstanding $ 12,329,815 $ 340,000 $ 12,104,685 $ 340,000 ================== ================= ================== ==================
SPARTA HOLDING CORP. (An Exploration Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD DECEMBER 23, 1993 (INCEPTION) TO SEPTEMBER 30, 2004 AND FOR THE QUARTER ENDED DECEMBER 31, 2004 (UNAUDITED)
Total Common Stock Additional Stockholders' Paid-In Treasury Retained Equity Shares Amount Capital Stock Earnings (Deficit) ------ ------ ------- ----- -------- --------- Sale of common stock at inception 340,000 $ 340 $ 660 $ - $ - $ 1,000 Loss for year ended September 30, 1994 - - - - (237) (237) Loss for year ended September 30, 1995 - - - - (821) (821) Loss for year ended September 30, 1996 - - - - (554) (554) Loss for year ended September 30, 1997 - - - - (540) (540) Loss for year ended September 30, 1998 - - - - (565) (565) Loss for year ended September 30, 1999 - - - - (455) (455) Loss for year ended September 30, 2000 - - - - (392) (392) Loss for year ended September 30, 2001 - - - - (381) (381) Loss for year ended September 30, 2002 - - - - (393) (393) Loss for year ended September 30, 2003 - - - - (304) (304) Balance September 30, 2003 340,000 340 660 - (4,642) (3,642)
SPARTA HOLDING CORP. (An Exploration Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD DECEMBER 23, 1993 (INCEPTION) TO SEPTEMBER 30, 2004 AND FOR THE QUARTER ENDED DECEMBER 31, 2004 (UNAUDITED)
Total Common Stock Additional Stockholders' Paid-In Treasury Retained Equity Shares Amount Capital Stock Earnings (Deficit) ------ ------ ------- ----- -------- --------- Forgiveness of debt - - 3,635 - - 3,635 Issued for mining claims 11,000,000 11,000 - - - 11,000 Sale of common stock in a private placement 813,252 813 283,129 - - 283,942 Contribution of 5,500,000 shares of common stock (5,500,000) - - (5,500) - (5,500) Common stock held in escrow 5,500,000 - 1,919,500 5,500 - 1,925,000 Loss for year ended September 30, 2004 - - - - (62,102) (62,102) --- ---- --- ---- ------- ------- Balance September 30, 2004 12,153,252 12,153 2,206,924 - (66,744) 2,152,333 Sale of common stock in a private placement 304,358 305 101,920 - - 102,225 Common stock and option issued for a finder's fee 220,000 220 88,780 - - 89,000 Loss for quarter ended December 31, 2004 - - - - (126,015) (126,015) --- ---- --- ---- ------- ------- Balance December 31, 2004 12,677,610 $ 12,678 $ 2,397,624 $ - $ (192,759) $ 2,217,543 ========== ============ =============== ============ ============== ==================
SPARTA HOLDING CORP. (An Exploration Stage Company) STATEMENTS OF CASH FLOWS
For the Period For the Quarter Ended For the Year Ended December 23, 1993 December 31, September 30, (inception) to 2004 2003 2004 2003 December 31, 2004 ---- ---- ---- ---- ----------------- (unaudited) (unaudited) Operating Activities - -------------------- Net loss for period $ (126,015)$ - $ (62,102) $ (304) $ (192,759) Stock and option issued for a finder's fee 89,000 - - - 89,000 Adjustments to reconcile net (loss) to net cash used by operating activities: Expenses not requiring the use of cash - - 11,000 - 11,000 Changes in operating assets and liabilities: - (Increase) in deposits and other assets - - (475) - (475) (Decrease)increase in accrued expenses (6,420) - 12,663 142 6,250 ------ ------ --- ----- Net cash (used) by operating activities (43,435) - (38,914) (162) (86,984) Investing Activities - -------------------- Deposit for investment in mining company (304,000) - (214,414) - (518,414) -------- -------- -------- Net cash (used) by investing activities (304,000) - (214,414) - (518,414) Financing Activities - -------------------- Bridge loan payable 216,000 - - - 216,000 Loans from related parties - - 2,135 - 5,770 Repayment of loans from related parties - - (2,135) - (2,135) Sale of common stock 102,225 - 283,942 - 387,167 ------- ------- ------- Net cash provided by financing activities 318,225 - 283,942 - 606,802 ------- ------- ------- Increase (decrease) in cash (29,210) - 30,614 (162) 1,404 Cash at beginning of period 30,614 162 - 162 - ------ --- --- Cash at end of period $ 1,404 $ 162 $ 30,614 $ - $ 1,404 =============== =============== ============== ============= ================ Supplemental Cash Flow Information: Non-cash investing activities: Issuance of 220,000 shares of common stock and an option to purchase 240,000 shares @ $0.35 per share for a finder's fee $ 89,000 $ - $ - $ - $ 89,000 =============== ============== ============= ============= ================ Exchange of 11,000,000 shares of common stock for mining claims $ - $ - $ 11,000 $ - $ 11,000 ============== ============== ============== ============= ================ Non-cash financing activities: Forgiveness of loan payable $ - $ - $ 3,635 $ - $ 3,635 ============== ============== ============== ============= ================
SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 1- ORGANIZATION AND OPERATIONS Sparta Holding Corp. (the "Company") was incorporated in Nevada on December 23, 1993. The Company is primarily engaged in the acquisition and exploration of mineral properties in the United States and Peoples Republic of China ("PRC"). In June 2004, the Company formed Canberra Resources, Inc. ("Canberra") a Nevada corporation to hold its United States interests. These financial statements are prepared in accordance with accounting principles applicable to a going concern. The Company is in the exploration stage and has not, as yet, achieved commercial production. At present, management devotes most of its activities to raise sufficient funds to fund its asset purchase agreement and to further explore and develop its mineral properties. Planned principal activities have not yet begun. The ability of the Company to emerge from the exploration stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing and/or attain profitable mining operations. The Company has raised additional capital during the period through a private placement of common stock, as described in Note 5. There is no guarantee that the Company will be able to complete any of the above objectives. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. Note 2- SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Canberra. All significant intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments For financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, it was assumed that the carrying amount approximated fair value because of the short maturities of such intruments. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 2- SIGNIFICANT ACCOUNTING POLICIES Income Taxes The Company follows SFAS No. 109, "Accounting for Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Net Loss Per Common Share Basic and diluted net loss per common share has been calculated based upon the weighted average number of common shares outstanding. Evaluation of Long-Lived Assets Long-lived assets are assessed for recoverability on an on-going basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management's estimate of the anticipated undiscounted future net cash flows of the related long-lived asset. Interests in Mineral Properties Property acquisition costs and exploration and development costs are capitalized until the property to which they relate is placed into production, sold, abandoned or management has determined there to be an impairment in value. These costs are to be charged to future operations on a unit-of-production basis following commencement of production using estimated recoverable reserves of the property as a base or written off if the property is sold, abandoned or where there is an impairment in value. If the recoverability of acquisition costs is presumed to be insupportable in accordance with FASB 144 they will be charged to current operations. On an on-going basis, the Company evaluates each property based on results to date to determine the nature of exploration and development work that is warranted in the future. If there is little prospect of further work on a property being carried out, the deferred costs related to that property are written down to the estimated amount recoverable. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 2- SIGNIFICANT ACCOUNTING POLICIES (continued) Interim financial information The unaudited balance sheet, the unaudited statements of income and cash flows have been prepared in accordance with United States generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows as at December 31, 2004, and 2003, have been included. Readers of these financial statements should note that the interim results for the three month period ended December 31, 2004, are not necessarily indicative of the results that may be expected for the fiscal year as a whole. New Financial Accounting Standards In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan. The Company adopted SFAS No. 146 on January 1, 2003. The adoption of SFAS No. 145 did not have a material impact on the Company's result of operations or financial position. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. Management believes that this statement did not have a material impact on the Company's results of operations or financial position. In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and Interpretation of FASB Statements No. 5, 57, and 107 and Recission of FASB Interpretation No. 34. FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies, relating to the guarantor's accounting for, and disclosure of, the issuance of certain types of guarantees. This interpretation clarifies that a guarantor is required to recognize at the inception of certain types of guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 2- SIGNIFICANT ACCOUNTING POLICIES (continued) The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted FIN 45 on January 1, 2003. The adoption of FIN 45 did not have a material impact on the Company's results of operations or financial position. In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. In DecemberJanuaryt31,F2003,sthed FIN No. 46 (Revised) ("FIN 46-R") to address certain FIN 46 implementation issues. This interpretation requires that the assets, liabilities, and results of activities of a Variable Interest Entity ("VIE") be consolidated into the financial statements of the enterprise that has a controlling interest in the VIE. FIN 46R also requires additional disclosures by primary beneficiaries and other significant variable interest holders. For entities acquired or created before February 1, 2003, this interpretation is effective no later than the end of the first interim or reporting period ending after March 15, 2004, except for those VIE's that are considered to be special purpose entities, for which the effective date is no later than the end of the first interim or annual reporting period ending after December 15, 2003. For all entities that were acquired subsequent to or financial position. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 clarifies the accounting for certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as liabilities in statements of financial position. Previously, many of those financial instruments were classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of the provisions of SFAS No. 150 did not have a material effect on the Company's financial position. Note 3- MINING CLAIMS On February 5, 2004, the Company acquired the Terra Mining Company Claims in exchange for 11,000,000 shares of the Company's Common Stock. The $11,000 cost of the Terra Mining Company Claims has been charged to expense for the year ended September 30, 2004. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 3- MINING CLAIMS (continued) On August 14, 2004, the Company entered into an Asset Purchase and Exchange Agreement with Fujian Tiancheng Mining Industry Corp, LTD ("Fujian") of China. Pursuant to the Agreement, the Company has made deposit payments totaling $214,414 and also issued 5,500,000 common shares to be held in escrow, valued at $.35 per share, or $1,925,000 for a total deposit valued at $2,133,914 at September 30, 2004. The Company is required to raise an additional $3,600,000 to explore the site but if they can not, then Fujian may lend the money to the Company. During the quarter ended December 31, 2004 the Company increased its deposit by $304,000 to $2,437,914. Under United States GAAP, mineral property expenditures are expensed as incurred. Once a final feasibility study has been completed, additional costs incurred to bring the mine into production are capitalized as development costs. Costs incurred to access ore bodies identified in the current mining plan after production has commenced are considered production costs and are expensed as incurred. Costs incurred to extend production beyond those areas identified in the mining plan where additional reserves have been established are deferred as development costs until the incremental reserves are produced. Capitalized costs are amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves. Note 4- INCOME TAXES No provision for income taxes has been recorded in the accompanying financial statements as a result of the Company's net operating losses. The Company has unused tax loss carry forwards of approximately $50,000 to offset future taxable income. Such carryforward expires beginning 2014. The deferred tax asset recorded by the Company as a result of this tax loss carryforward is approximately $10,000. The Company has reduced the deferred tax asset resulting from its tax loss carryforwards by a valuation allowance of an equal amount as the realization of the deferred tax asset is uncertain. The net change in the deferred tax asset and valuation allowance from September 30, 2003 to September 30, 2004 was an increase of $10,000. From December 23, 1993 (inception) to September 30, 2003, the Company filed a consolidated federal income tax return with Castle, its then parent. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 5- STOCKHOLDERS' EQUITY Common Stock ------------ In November 2003, the Company declared a 3,400 to 1 stock split, thereby increasing the number of issued and outstanding shares of Common Stock from 100 to 340,000. All references to shares and per share amounts in the accompanying financial statements have been restated to retroactively reflect this stock split. On February 5, 2004, the Company issued 11,000,000 newly issued shares of Common Stock valued at $11,000 to a related party, Feltsen Partners LLC ("FP") in exchange for eight mining claims owned by FP known as the Terra Mining Company Claims located in Greenlee County, Arizona. Subsequently, FP contributed 5,500,000 shares of the common stock back to the Company. Under a related agreement, Castle (at the Company's expense) is to distribute pro rata 340,000 shares of the Company's common stock that it owns, to the approximately 350 Castle shareholders of record as of February 5, 2004. On August 14, 2004, the Company entered into an Asset Purchase and Exchange Agreement ("Agreement") with Fujian Tiancheng Mining Industry Corp, LTD ("Fujian") of China, whereby the Company will acquire Fujian Tiancheng and its Daan Silver Mining District in exchange for Fujian receiving 5,500,000 shares of the Company's common stock and the Company raising $3,600,000 for Fujian mining operations. If the Company cannot raise the $3,600,000, then Fujian may loan the Company the funds but the agreement would then be renegotiated. In June 2004, the Company commenced a private placement of shares of Common Stock at $.35 per share. The Company expects to offer a total of approximately 1,142,857 shares of Common Stock for $400,000 total. Through September 30, 2004, the Company has sold 813,252 shares of common stock for proceeds of $283,942. On September 30, 2004, the Company received a contribution of 5,500,000 shares of its common stock from FP and subsequently issued them to be held in escrow for Fujian subject to the agreement. These shares were valued at $1,925,000 or $0.35 per share. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 5- STOCKHOLDERS' EQUITY (continued) In the quarter ended December 31, 2004 the Company sold an additional 304,358 shares of common stock for proceeds of $102,225. During the quarter ended December 31, 2004 the Company issued 220,000 shares of common stock and an option to purchase 240,000 common shares for $0.35 per share that expires December 31, 2005 as a finder's fee which was valued at $89,000. Note 6- RELATED PARTY TRANSACTION On February 5, 2004, the Company issued 11,000,000 shares of common stock to ("FP"), a company controlled by its President, in exchange for mining claims (see Notes 3 and 5). Subsequently FP contributed 5,500,000 shares back to the Company. Note 7- COMMITMENTS AND CONTINGENCIES The Company's main operations will be conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC economy. The Company's operations in the PRC will be subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. SPARTA HOLDING CORP. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS (Amounts and Disclosures at and for the Quarter Ended December 31, 2004 and 2003 Are Unaudited) Note 8- BRIDGE LOANS PAYABLE During the quarter ended December 31, 2004 the Company borrowed $216,000 in a bridge loan financing. The bridge notes bear interest at 8% and are convertible into the common stock of the Company at $1.00 per share. The notes are due twelve months from their issue date. The following notes are outstanding at December 31, 2004: Amount Maturity Date ------ ------------- $ 100,000 11/22/05 36,000 11/29/05 20,000 12/8/05 10,000 12/27/05 50,000 12/28/05 ------ $ 216,000 ========= Additionally, each bridge note holder received warrants to purchase shares of the Company's common stock, exercisable for a period of 2 years at an exercise price of $1.50 per share. At December 31, 2004 the Company issued warrants to purchase 108,000 shares. These warrants had no material value as determined by using the Black-Scholes option pricing model. Note 9- SUBSEQUENT EVENTS During January and February 2005, the Company borrowed an additional $95,000 by the issuance of twelve month bridge notes under the same terms as the bridge notes described in Note 8. PROSPECTUS SPARTA HOLDING, INC. TABLE OF CONTENTS ----------------- Page ---- Prospectus Summary..........................................................2 Risk Factors................................................................5 Disclosure Regarding Forward Looking Statements.............................7 Use of Proceeds.............................................................8 Selling Shareholders........................................................8 Plan of Distribution.......................................................15 Legal Proceedings..........................................................16 Directors, Executive Officers, Promoters and Control Persons...............16 Security Ownership of Certain Beneficial Owners and Management.............17 Description of Securities..................................................19 Interest of Named Expert and Counsel.......................................20 Disclosure of Commission Position of Indemnification for Securities Act Liabilities.................................................20 Description of Business....................................................21 Management's Discussion and Analysis of Financial Condition and Plan of Operation.....................................................25 Description of Property....................................................30 Certain Relationships and Related Transactions.............................32 Market for Common Equity and Related Shareholder Matters...................33 Executive Compensation.....................................................34 You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information other than that contained in this prospectus. This prospectus is not an offer to sell nor is it a solicitation of an offer to purchase our common stock in any jurisdiction where such offer is not permitted. Until _________, all dealers that effect transactions in these securities, whether or not participating in this Offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 24. Indemnification of Directors and Officers Articles of Incorporation and Bylaws do not provide for indemnification of directors and officers. Item 25. Other Expenses of Issuance and Distribution The following table sets forth our expenses in connection with this registration statement. All of these expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission. Filing Fee -- Securities and Exchange Commission $ 0.00 Fees and Expenses of accountants and legal counsel $30,000.00 Printing and Engraving Expenses $ 5,500.00 Miscellaneous expenses $ 9,500.00 ----------- Total $45,000.00 Item 26. Recent Sales of Unregistered Securities ..........No securities of the registrant which were not registered under the Securities Act of 1933, as amended have been issued or sold by the registrant within the past three years except as follows (none of the securities listed below are being registered in this registration statement): ..........On February 5, 2004, we entered into the Exchange Agreement with Feltsen Partners, LLC, a Pennsylvania limited liability company ("Feltsen") whereby we acquired certain rights to explore several mining claims that are under the jurisdiction of the United States Department of the Interior, Bureau of Land Management and located in Greenlee County, Arizona. Fred Schmid is the Managing Partner and sole member of Feltsen. In consideration for the mining claims, we issued to Feltsen 11,000,000 shares of our common stock, of which 5,500,000 have been distributed to its members and related parties and the balance returned to us for no consideration. The shares were returned in order to keep the number of shares issued and outstanding at a reasonable number. Commencing July 2004, pursuant to a private placement offering made to accredited investors in reliance on Section 4(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D, we offered up to 1,142,857 shares of our common stock at $0.35 per share. A total of 1,117,610 shares of common stock were purchased pursuant to this private offering which was terminated on November 16, 2004, and we raised approximately $391,165 after costs and expenses. The purchasers listed below were accredited investors with access to all relevant information necessary to evaluate these investments. Name/Address/City-State No. of Shares Amount Issue - ----------------------- ------------- ------ ----- Common Stock Paid Date ------------ ---- ---- Sylvia Ang .................................. 14,286 $ 5,000 10/25/04 150 Baxter St. #23 New York, NY 10013 Scott Balterman ............................. 142,857 $ 50,000 10/25/04 Leslie Balterman Joint Tenants w/right of survivorship 31 Fall Lane Jericho, NY 11753 Edward Borrelli ............................. 28,571 $ 10,000 10/25/04 350 East 79th St. #5E New York, NY 10021 E. Borrelli-Custodian for ................... 20,000 $ 7,000 10/25/04 Keith Hernandez 350 East 79th St. #5E New York, NY 10021 E. Borrelli-Custodian for ................... 20,000 $ 7,000 10/25/04 Nicholle Hernandez 350 East 79th St. #5E New York, NY 10021 Reynold Chow ................................ 42,857 $ 15,000 10/25/04 26-15 Parson Blvd. #5F Whitestone, NY 11354 Shu K. Chow ................................. 57,143 $ 20,000 10/25/04 149-48 Beech Ave Flushing, NY 11355 Cong. Darkei Tshivo Dinov ................... 68,571 $ 24,000 12/07/04 574 East 9th St Brooklyn, NY 11218 Michael E. Kahan ............................ 105,500 $ 36,925 10/25/04 6 Horizon Road Fort Lee, NJ 07024 Robert J. Lancelotti ........................ 15,000 $ 5,250 10/25/04 Karin A. Lancellotti Joint Tenants w/right of survivorship 659 Andover Road Valley Cottage, NY 10989 Alfred O.P. Leubert ......................... 15,000 $ 5,250 12/07/04 One Lincoln Plaza Apt. 25J New York, NY 10023 Lee Shuo Liu ................................ 31,428 $ 11,000 10/25/04 45-11 195 Street Flushing, NY 11358 Lin Chun Hui Liu ............................ 40,000 $ 14,000 10/25/04 45-11 195 Street Flushing, NY 11358 Bernt Nygaard ............................... 15,000 $ 5,250 12/07/04 127 South 4th St New Hyde park, NY 11040 Robert Piccianno ............................ 10,000 $ 3,500 12/07/04 14 Capitol St Williston Park, NY 11596 2P Management Holding AG .................... 28,542 $ 9,990 10/25/04 Zugerstrasse 70 CH-8810 Horgen, Switzerland Hans G. Schmid .............................. 28,571 $ 10,000 12/07/04 26 Locust Lane Huntington Bay, NY Robert Schneider ............................ 40,000 $ 14,000 10/25/04 30 Pond Hill Road Chappaqua, NY 10514 Sparten Establishment (Trust) ............... 50,000 $ 17,500 10/25/04 9490 - Vaduz Liechtenstein Anthony Swartz .............................. 28,571 $ 10,000 10/25/04 3012 NE 21st Street Ft. Lauderdale, FL 33305 Andreas Typaidos Family ..................... 28,571 $ 10,000 10/25/04 Limited Partnership 130 West 79th St. #19A New York, NY 10024 Wang Li Tong ................................ 142,857 $ 50,000 10/25/04 19-6 Jin Tang Tower 53 Jin Tang Street Yuzhong District, Chong Qing 400010 China Joanne Yan .................................. 30,000 $ 10,500 12/07/04 2102 - 989 Nelson St ........................ Vancouver, BC V6Z 2S1 Canada Dietmar Zessin .............................. 71,428 $ 25,000 10/25/04 7, Avenue St. Roman ......................... 42,857 $ 15,000 12/07/04 Monte-Carlo, Monaco, 98000 TOTALS: ..................................... 1,117,610 $ 391,165 On November 12, 2004, we commenced a Bridge Loan Financing whereby we are seeking to raise up to $500,000. The terms of the Bridge Loan are set forth in and evidenced by a convertible promissory note executed and delivered by us to the investor in the principal amount loaned by such investor. Among other things, the Note shall (i) be payable to the investor, (ii) bear interest from the date of issuance at a rate of eight percent per annum, (iii) be convertible by the investor into shares of our common stock on the terms provided therein, and (iv) have a maturity date which is twelve (12) months after date of issuance. In addition, we will issue to each investor warrants to purchase shares of our common stock, exercisable for a period of five (5) years at an exercise price of $1.50 per share. The number of shares of common stock issuable upon the exercise of each investor's warrant shall be determined by reference to the following formula: one (1) share of common stock for each $2.00 of the principal amount of the convertible promissory note. The following were accredited investors with access to all relevant information necessary to evaluate these investments: Name & Address Amount Loaned Date of Loan - -------------- ------------- ------------ Kitty Chow ............................. $ 50,000.00 11/19/04 149-48 Beech Ave Flushing, NY 11355 Mabel Gong ............................. $ 50,000.00 11/19/04 1350 - 70th Street Brooklyn, NY 11228 Mark Balaban ........................... $ 36,000.00 11/19/04 44 Wall St., 4th Fl New York, NY 10005 Robert Schneider ....................... $ 20,000.00 12/7/04 30 Pond Hill Rd Chappaqua, NY 10514 Stephen Schloss ........................ 10,000.00 12/27/04 17 Serenite Lane Muttontown, NY11791 James Ladner ........................... $ 50,000.00 12/28/04 Gartenstrasse 10 8002 Zurich, Switzerland John Cathersides ....................... $ 25,000.00 1/6/05 139 Kingsway Pettswood Kent BR5 1PP UK Andreas Typaldos Family ................ $ 20,000.00 1/7/05 Limited Partnership 40 West 77th Street Penthouse West New York, NY 10024 Umberto Fetz-Rapp ...................... $ 20,000.00 1/11/05 Bergstrasse 318 Uctikon am See 8707 Switzerland Kahala Capital ......................... $ 25,000.00 1/25/05 c/o 115 Taurus Circle Reno, NV 89511 Werner Ullman .......................... $ 5,000 2/10/05 c/o 115 Taurus Circle Reno, NV 89511 On December 31, 2004, a finder's fee of 220,000 shares of common stock will be issued to International Investment Group, who acted as the agent in bringing the Da-an Project to our attention and assisted management in completing the transaction. International Investment Group also has an option to purchase 240,000 additional shares of our common stock at $0.35 per share. The option period expires on December 31, 2005. We are also in the process of commencing a private placement offering to be made to accredited investors in reliance on Section 4(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D, whereby we are seeking to raise up to $8,000,000 by offering to accredited investors the opportunity to purchase shares of our Series A Preferred Stock at a purchase price of $1.25 per share. Each share of the Series A Preferred Stock shall be automatically converted into shares of common stock on a one-for-one basis, twelve (12) months after the closing of the offering. The Offering closing date is March 31, 2005 unless extended at the Company's sole discretion. The Series A Preferred Stock shall pay an eight percent (8%) dividend per annum. Investors subscribing for shares of the Series A Preferred Stock prior to March 31, 2005 shall receive a warrant to purchase one share of common stock for every five shares of Series A Preferred Stock subscribed for. The Warrant is exercisable into shares of Common Stock for a period of two (2) years at an exercise price of $1.50 per share. Item 27. Exhibits Exhibits The following exhibits are filed as part of this registration statement: Exhibit Number Description - ------ ----------- 3.1 Articles of Incorporation of the registrant and amendments* 3.2 Bylaws of the registrant and amendments* 3.3 Specimen common stock certificate* 5.1 Opinion of Ruskin Moscou Faltischek, P.C. as to the legality of securities being registered** 10.1 Exchange Agreement* 10.2 Option* 10.3 Stock Purchase and Exchange Agreement* 23.1 Consent of Ruskin Moscou Faltischek, P.C. (included in Exhibit 5.1)** 23.2 Consent of Kempisty & Company Certified Public Accountants, P.C. 24.1 Power of Attorney (part of signature page) 99.1 Initial Geological Report on The Da-an Property * Previously filed with Form SB-2 on November 22, 2004. ** To be filed by amendment. Item 28. Undertakings. The undersigned registrant hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. 2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in Uniondale, New York. March 16, 2005 SPARTA HOLDING CORP. By:/s/ Fred R. Schmid - --------------------- Name: Fred R. Schmid Title: President /s/ Stephen J. Schmid - --------------------- Stephen J. Schmid Chief Financial Officer, Vice President, Secretary, and Treasurer In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated. The undersigned hereby constitute Fred R. Schmid as the attorney-in-fact of the undersigned to sign any amendment, and any post effective amendment, of this registration statement. By:/s/ Fred R. Schmid - --------------------- Name: Fred R. Schmid Chief Executive Officer, President and Chairman of the Board /s/ Stephen J. Schmid - --------------------- Stephen J. Schmid Chief Financial Officer, Vice President, Secretary, and Treasurer EX-23 2 ex232.txt EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We consent to the use in this Registration Statement on Amendment No. 2 to Form SB-2 of our report dated November 1, 2004, relating to the financial statements of Sparta Holding Corp. /s/ Kempisty & Company, CPAs, P.C. - ---------------------------------- Kempisty & Company, CPAs, P.C. New York, New York Dated: March 16, 2005 EX-99.1 3 ex991.txt EXHIBIT 99.1 CONFIDENTIAL INITIAL GEOLOGICAL REPORT ON THE DA-AN PROPERTY, FUJIAN PROVINCE, PEOPLE'S REPUBLIC OF CHINA Detailing Initial Data Collection and Field Work Completed May 29 - June 5, 2004 For: Sparta Holding Corp. P.O. Box 1686 Westhampton Beach, NY 11978 USA Author: Linus T. Keating, D.Sc. Arizona Registered Geologist #40815 AIPG Certified Professional Geologist #10742 Effective Date: July 3, 2004 Table of Contents 1.0 SUMMARY...................................................................3 2.0 INTRODUCTION AND TERMS OF REFERENCE.......................................4 3.0 DISCLAIMER................................................................5 4.0 PROPERTY DESCRIPTION AND LOCATION.........................................5 5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY.6 5.1 MAP DATUM / COORDINATE SYSTEMS.........................................8 6.0 HISTORY...................................................................8 7.0 GEOLOGICAL SETTING.......................................................10 7.1 REGIONAL SETTING......................................................10 7.2 PROPERTY GEOLOGY......................................................11 8.0 DEPOSIT TYPES............................................................12 9.0 MINERALIZATION...........................................................13 10.0 EXPLORATION.............................................................16 11.0 DRILLING................................................................17 12.0 SAMPLING METHOD AND APPROACH............................................17 13.0 SAMPLE PREPARATION, ANALYSIS, AND SECURITY..............................18 14.0 DATA VERIFICATION.......................................................19 15.0 ADJACENT PROPERTIES.....................................................19 16.0 MINERAL PROCESSING AND METALURGICAL TESTING.............................20 17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTSIMATES.........................20 18.0 OTHER RELEVANT DATA AND INFORMATION.....................................20 19.0 INTERPRETATION AND CONCLUSIONS..........................................20 20.0 RECOMMENDATIONS.........................................................21 21.0 REFERENCES..............................................................24 21.1 INVENTORY OF FTMC MAPS AND REPORTS IN SPARTA'S POSSESSION............25 LIST OF FIGURES...............................................................27 LIST OF TABLES................................................................27 LIST OF APPENDICES............................................................27 LIST OF PLATES................................................................27 APPENDICES....................................................................28 INITIAL GEOLOGICAL REPORT ON THE DA-AN PROPERTY, FUJIAN PROVINCE, PEOPLE'S REPUBLIC OF CHINA 1.0 SUMMARY The Da-an property is located in northern Ning De County, Fujian Province, eastern People's Republic of China. Da-an is not a mere property - it is actually an ancient mining district that has remained virtually unexplored for more than 100 years. It consists of 81 square kilometres in a region that boasts a history of gold and silver mining stretching back at least to the Ming Dynasty 450 years ago. Mineralization consists of high-grade cordilleran-style silver (+/- gold), lead, zinc veins hosted in a Jurassic-Cretaceous age calc-alkaline volcanic complex. Sample 420401 taken by the author assayed 334.9g/mt (9.78opt) silver with 7.3% lead and 8.6% zinc; samples as high as 16,000g/mt (467opt) silver have been reported by other reliable workers. Another sample, 420413, taken by the author from an unrelated structure in a roadcut 3km south of sample 401 assayed 15.2g/mt (0.44opt) gold and 437.1g/mt (12.76 opt) silver. At least 98 ancient mined-out stopes have been identified across the property, all that remains of the surface expression of their veins. The author suggests that excellent potential remains to discover further mineralization at shallow depths below the limit of stoping or in undiscovered structural "traps" elsewhere in the district. Several active mines operate in the province presently and gold dredging is active in many of the major rivers of the region. The Zinjinshan deposit 400 km (245 miles) southeast of Da-an is a major Cu-Au porphyry deposit reporting 1.6Mmt (3.5 billion lbs) of copper and 15mt (480,000 tr oz) gold discovered since 1988 (So, et. al., 1998). 230 km (143 miles) east-northeast of Da-an is the very large (but reserves unavailable) Lenshuikeng Ag, Pb, Zn vein and replacement deposit (Yu, 1996). The Yongpi porphyry copper deposit located 185 km (115 miles) northeast of Da-an is said to contain 144Mmt (159Mst) at 0.72% copper (Wang, 2003). Other smaller Pb-Zn and Mo prospects surround the Da-an district (Shuhe, 1992). The property is controlled by the Fujian Tiancheng Mining Industry Corporation, Ltd. (FTCM) through two Mine Prospecting Rights. Sparta has proposed to acquire all the stock of FTCM and towards that end entered into a Letter of Intent agreement with FTCM in May 2004. Modern exploration to date consists of mapping and sampling conducted by the Fujian Province Geological Survey (the Brigade) primarily focused on discreet clusters of ancient mine workings. Only one hole has been drilled, parallel to a vein, and it encountered no ore-grade values. The Brigade also carried out stream sediment and panned con surveys in the District, but the methods have met with limited success and large areas of the property remain unsurveyed. In terms of modern exploration, Da-an remains a "virgin" mining district notwithstanding indications of a highly productive past. No mine development has occurred and there are no active operations. This report documents a recently completed three-day initial visit to the property by the author on behalf of Sparta Holding Corp. ("Sparta"). Field observations from this trip are integrated with previous data generated by others and with the geological setting and mineral deposits of the region. The report has been written in compliance with the specifications as outlined in Canada National Instrument 43-101, and is intended to provide technical information on the Da-an project in support of securities related filings. The author concludes that Da-an is an extremely fertile and promising area to conduct exploration for high-grade silver veins. It is strongly recommended that Sparta undertake an intensive program of geologic mapping and sampling across the entire district in order to clearly define drill targets. A proposed work program and budget are included with this report. 2.0 INTRODUCTION AND TERMS OF REFERENCE This report has been prepared at the request of Sparta Holding Corp. ("Sparta") to provide a scientific and technical data summary of the mineral exploration potential of the Da-an property. It should be noted that the Da-an property does not contain any known body of commercial ore and any exploration programs thereon are early stage and exploratory in nature. The author personally visited a number of sites on the Da-an property June 1st through June 5th, 2004 as part of a cursory initial examination. He was accompanied by Mr. Yuan Shou Hua, Deputy General Manager in charge of the Da-an project for Fujian Tiancheng Mining Co. Ltd. (hereinafter "FTCM"), Ms Maggie Li, interpreter retained by FTCM from an agency in Shang Hai, Mr. Wu Jin Shun engineer from the 4th Brigade - Fujian Geological Survey who worked on the project for FTCM, and a driver. In this report, the term "New Data" refers only to observations by the author, geological data and geochemical samples, together with the corresponding laboratory results, collected from the Da-an property during the period May 30 - June 5, 2004. The background geological data contained and cited in this report is taken from the various published and unpublished technical reports as listed in Section 21.0: "References", as well as from the author's personal knowledge of the geological setting of the region. For the purposes of this report, data generated from work completed prior to May 2004 are termed "Old Data". Old Data has been copied from proprietary documents provided by FTCM. Mr. Yuan Shou Hua, Deputy General Manager of FTCM, facilitated access to these documents and provided copies of documents for Sparta's files. Since originals of all such documents are in Mandarin Chinese, translation into English by an independent third party translator was required. As of the effective date of this report, translation of the maps and cross-sections had been completed, however the three reports relating to these maps had not yet been translated. Data contained in these reports will most likely add significant information and could materially effect the conclusions of this author when the English language versions are completed. A fourth report, "Profile of the Project in Shouning" was provided to Sparta by FTCM in translated English. These maps and other documents provided by FTCM appear to be authentic and the authors have no reason to doubt their validity or accuracy; copies of all proprietary documents may be found in Sparta's files at their corporate office. 3.0 DISCLAIMER The "Old Data" in the current report was collected previous to the New Data by parties neither under the supervision of the author nor responsible to Sparta. The author has met on the property with some of those responsible for the Old Data and believes that the data was professionally collected and that the maps and documents generated adequately portray the results. As the author's visit to the property was cursory in nature, the Old Data forms the basis for many of the impressions and conclusions expressed in this report. The New Data in this report was collected directly by the author. There are sections of the current report that combine Old and New Data. Such combinations are clearly noted in the text and have only been attempted with great care as regards differences between sampling and analytical methods, statistical treatment, and interpretations. Although such combinations are attempted only in situations for which the author's best judgment suggests they are valid, it is conceivable that unforeseen factors could impact these conclusions; the reader should treat such combinations with special care. All original Old Data is in the Mandarin Chinese language. An ATA-certified technical translator independent of both Sparta and FTCM was employed to render Old Data into English under the supervision of the author. Although the author believes that the translator's best effort was applied, it is still possible that translation errors could result in misinterpretation of the data. Every effort has been made to insure against this possibility. Original versions of all Old Data together with the translated equivalents are available for inspection at Sparta's offices. Analyses taken from Old Data were reportedly determined at the Fujian Provincial Laboratories and are derived by the author from old reports. No certificates of assay have been seen and it is doubtful that these analyses can be independently verified. They are presented here only as part of the historical summary of the District. Information regarding land status, tenure, current agreements, mining legal requirements, and business environment was supplied by Sparta and has not been independently verified by the author. Information such as drill results and ore reserves quoted from surrounding projects in the region has been taken from published information, believed by the authors to be accurate. 4.0 PROPERTY DESCRIPTION AND LOCATION As shown in Figure 1, the Da-an Property is located in the northern-most corner of Fujian Province, 160 air-kilometers due north of the city of Fuzhou, capital of the province. Fujian province lies on the eastern seaboard of the Peoples Republic of China, across the straits from Taiwan. The center of the Da-an property, given in latitude / longitude, is approximately: 27d 31' 54.42"N, 119d 33' 03.18"E. The property consists of 8100Ha (20,015.10 acres) of contiguous land. This land is held under two "Mine Prospecting Rights" issued by the Fujian Province Department of Land Resources pursuant to regulations promulgated by the Ministry of Land Resources of the People's Republic of China to Fujian Tiancheng Mining Industry Corporation, Ltd. (FTCM). The spatial relationship between known mineralized areas and the property boundary is presented in Plate 1; Appendix 2 documents size, type, ownership, and payments required on each claim. Sparta is presently acquiring 100% of the stock of Fujian Tiancheng Mining Industry Corp., Ltd. at which time FTCM will become a wholly owned subsidiary of Sparta. The author is not aware of any environmental studies of any kind that have been carried out on the property. Sparta has advised the author that it is "not aware of any environmental liabilities and as part of our agreement with FTCM they will indemnify Sparta as part of the agreement to acquire them." As with any old mining district, some hazards and / or potential liabilities are present but these appear to be of small-scale and manageable. Potential hazards include open vertical and horizontal workings of considerable age, and waste "dump" piles from small artisanal mining operations proximal to drainages and existing rice paddies. Work conducted on the property to date by FTCM was done under the auspices of the Mine Prospecting Rights that include an Annual Business Plan detailing proposed work. Research needs to be done to ascertain the specific provincial and federal permitting and reclamation requirements applicable to exploration in general. FTCM officials have indicated that permits are required to proceed with exploration activities such as vegetation clearing, road building and drilling. The author was assured that permitting for these sorts of activities could be facilitated through FTCM with 30-day lead-time. To the author's knowledge, no such permits currently apply to the property. Care needs to be taken to insure that any exploration activity would be conducted in an entirely legal fashion as determined by due diligence. 5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY The Da-an prospect area presents moderate to steep mountainous sub-tropical terrain at elevations varying from 740m to 1000m above sea level (2420' - 3300' a.s.l.). During June, the heart of the rainy season, some 20cm (7.8") of rain will saturate the area; yearly rainfall totals some 150cm (55"). During the summer season, temperatures can reach 26.7dC (80dF) with very high humidity; the rest of the year temperatures are moderate with only rare snow in the winter. It is not thought that climate will impact in any way a well-designed year-round underground operation. Physiographically, the property comprises steep vegetation-covered slopes, with a moderate to thick soil profile typical of the tropics, dissected by deep valleys. Year-round creeks occupy most valleys. These wet areas are generally cultivated as rice paddies and can be quite boggy - mosquitoes are a problem at dusk and around dawn. Chest-high tropical vegetation is thick throughout the area except at the higher elevations on the ridges. Sporadic bamboo and cedar forests occur at the middle elevations. Except in the main valley of Da-an village, and outward to the smaller villages, no roads are present; access is limited to an extensive network of footpaths. Off the footpaths outcrops are present but can be challenging to find. No animals were seen, however several varieties of poisonous snakes are reported in the area; they are generally never seen, but can be more common mid-May through mid September and particularly in mid-June during the wheat harvest. The property is accessible by road year-round from Fuzhou, capital of the province, site of a large international airport, and home to 6.8 million people. A 4X4 vehicle is not required except perhaps during the rainy season; a high clearance vehicle is a good idea however. To reach the center of the property from Fuzhou, drive north-northwest 110km to Ningde city; thence 230 km north to Shouning via modern highways in good condition. Shouning is home to 30,000 people and is a modern city with full emergency and support services; services not available in Shouning can be procured in Ningde. Located approximately 30 minutes north of Shouning, the town of Da-an can be reached by good paved two-lane mountain highway. From Da-an town a 40-minute drive on local access #944, a maintained dirt road, brings one to the center of the property. The complete journey from Fuzhou to the center of the property requires about 4 hours driving. During the most recent field campaign the author stayed in good accommodations in Shouning. The project area hosts perhaps 10 small villages including Da-an village. These are all primitive, rural communities with a combined population of perhaps 300 people. There is a high-tension electric line across the project area and most villages have electricity though few of the people can afford to use it. Several towns have one phone line but these are seldom used. Only the most primitive of supplies and support services can be found in these communities. The proximity of Shouning with its good quality hotels, restaurants, and infrastructure make it an ideal staging site. The people of the Da-an region are quite amiable and are aware of their mining heritage. The profoundly impoverished nature of the area and some comments from locals (through an interpreter) suggest that they are quite amenable to a modern mining project. Small tombs are occasionally found on the hillsides throughout the project area, but the author's hosts assured him upon repeated questioning that these features are not an impediment to development; with government assistance, families would be willing to relocate any remains for a relatively small compensation. As with any indigenous population, it will be quite important to establish and maintain a close personal relationship with all the communities involved from the beginning of any work. To date it appears that the representatives of the FTCM and the 4th Brigade have done a good job in this regard and are respected and well received by the locals. Figure 3 is a topographic map of the project area showing locations of roads and villages on the property. 5.1 Map Datum / Coordinate Systems Maps provided by FTCM appear to utilize at least two different datum / coordinate system combinations, depending upon when the map was made. Direct comparison between different generations of maps is therefore very difficult. The author has determined that many of the more recent maps were made using the Gauss-Kruger (zone 20) coordinate system with the WGS 1984 datum, in accordance with modern China map-making policy. These maps have eastings prefixed by "207". Other maps however have easting prefixes of "404" and grids which do not coincide with the G-K maps - it has been confirmed by the author that the 404 grid is not Universal Transverse Mercator (UTM). For the purpose of data analysis in this report, these maps have been merged to the G-K grid, however currently there are insufficient ground control points to confirm positively that either grid is in the correct position. Correcting this situation is a top priority if work at Da-an is to continue (see Section 20 - Recommendations). From this point on in this report all coordinates including those on maps, sample locations, and other information will be in Gauss-Kruger (China) - WGS `84 coordinates unless specifically indicated otherwise. 6.0 HISTORY The property has a long history of silver mining, dating back at least 450 years to the Ming Dynasty. It is said that back then an Imperial eunuch supervised prisoners who worked the mines. Numerous old mine workings dot the countryside, most of which do not appear to have been touched in many years. There are no mines currently producing on the property. No mining or development infrastructure exists at the present time. To the author's knowledge, no reliable reserve or resource estimates have been put forward. Insert "Prior Ownership of Property and Ownership Changes" here... Work to date has been performed by the Fujian Provincial Geological Research and Investigation Institute (formerly the Fujian Geological Survey 4th Brigade) presently under the direction of Mr. Li Changze, Brigade Chief Engineer. The Brigade is a provincial government entity that conducted this work under contract to FTCM. A report "Profile of the Project in Shouning" (FTCM Report #1 - - author unknown) apparently written in year 2000(?) summarizes early exploration work. The first visit by Brigade engineers was in 1972 and focused on the Guan Tian Chang zone 2.5km northeast of Da-an village. According to the summary report, two high-grade samples collected from old workings on that visit yielded silver values ranging from 16,000 ppm to 17,000 ppm (515 - 547 troy ounces / ton). Mr. Wu Jiangshe, currently an engineer with the Brigade who conducted much of the later work on the property, has stated that he visited this sample locality some years ago but failed to find similar material. He suggests that the first sampler trimmed all the available material off the wall of a stope and there was no more to be had. With the help of Mr. Wu the author attempted to reach this sample locality but the precise location could not be found due to dense jungle overgrowth. In 1979, the Brigade conducted exploration over the entire district, "investigating all the old holes systematically". Ninety-eight workings "with larger scale" were found. Sampling of mineralized or altered zones at that time assayed from 39 ppm to 800ppm silver (1.2 - 25.7 tr opt). From 1989 - 1992, the 4th Brigade finished surveying the Guan Tian Chang, Wailou, Fuji, Tanchatou, Zhaiping, Wenyang, Tanshan, and Da-an zones. A report detailing their findings (FTCM Report #2 - author unknown) is in Sparta possession but had not been translated into English at the date of this writing. Soil, stream sediment, heavy cons, and rock chip sampling was conducted erratically throughout this period. Maps from this work showing sample locations and some detailed geology have been translated into English and are in Sparta's possession. In 1993, the Zhaibaojian zone was examined and geologic mapping and sampling was conducted in the area from Dushu to Houxixi. Follow-up of stream sediment and panned concentrate gold anomalies led to discovery in 1999 of a gold anomalous area near the Da-an Mine area and from Tanshan to Laocuo. Later in 1999, one 111.6m vertical core hole was drilled adjacent to old stopes at Guantianchang but failed to cut ore grade mineralization or intersect key structures. A map and cross-section summarizing the results of drilling have been translated and are in Sparta's possession - no formal report addressing the drilling has yet come to light. Core from this hole is stored in Da-an village and is available for examination. Two other reports in Sparta possession (not yet translated), FTCM Report #3 (2000) and FTCM Report #4 (2002) focus on further geochemical sampling and detail mapping conducted over small portions of the District. The 2002 report describes work in the Shan-Ji-Keng area that discovered a high-grade gold-silver zone in a road cut - this area is particularly interesting and will be discussed below. Maps related to this work have been translated and are in Sparta's possession. FTCM Report #1 attempts to estimate a "reserve" based upon the size of old workings, geochemical results surrounding these workings, and using "1/2 the ore body depth as the ore body slope depth" (perhaps meaning that twice the depth of each mine opening was assumed to be ore body depth???). The report suggests that 1081 m-tonnes (1191 st) of silver are present at Da-an. This estimate is not based on any meaningful underground data and does not meet any western government standard for reserve calculations. Historic production from the District is difficult to estimate however the Brigade estimated the volume of each major working in FTMC Report #1. Based on their figures and using a tonnage factor of 3.5 metric tonnes / cubic meter for volcanic sulfide ore, some 32,400 metric tonnes were mined previously. The author's limited examination of some workings indicates that mined widths are smaller than those used by the Brigade; a more conservative figure might fall in the range of 10,000 metric tonnes. Historic production might be extrapolated using the more conservative 10,000mt volume estimate and grade figures ranging from 200g/t to 16,000 g/t, at 2,000,000 to 160,000,000 grams (58,400 to 4,672,000 troy ounces) of silver produced. Whatever the actual production was, there can be no doubt that the District has seen substantial silver production in the past. A complete listing of all maps, drawings, and reports in Sparta possession can be found in Section 21 - References. 7.0 GEOLOGICAL SETTING 7.1 Regional Setting Located on the southeastern margin of the Eurasian plate and adjacent to the Pacific plate along the circum-Pacific "Ring of Fire" magmatic zone, Fujian province has a long history of collision, deformation, and sedimentation (Unknown, 1998). To this day, it remains a center of tectonic controversy. The province lies within the South China Mobile Belt (see Figures 2 and 2a), a zone of accommodation wedged between the continental Yangtze Landmass to the north and east, and an old continental mass "Cathaysia" partially consumed within the Pacific subduction zone (Chen, 1999). On Figure 2 the east-west trending gray line just north of the Yongpi porphyry district, and only 150km north of Da-an, roughly traces a deep-seated tectonic fault boundary between the continent and adjacent mobile orogenic zone (Hongfei, 1996). Northeast trending synform / antiform pairs on a regional scale parallel the major South China Suture Zone (Chen, 1999) which runs from Guanzhou to Shanghai. Consistent with the strongly folded fabric, southeast verging thrusting and folding dominate the structural fabric. Shortening on the order of 45% has been suggested for the region due primarily to middle Jurassic compression. Basement consists of meso-Proterozoic (1100 - 1400Ma (Unknown, 1998)) greenschist facies mica-quartz to plagioclase-amphibole schists from intermediate acidic volcanic protoliths intermingled with dirty sediments (Longheixi Formation near Da-an - Figure 2). Regionally (but not in the immediate Da-an area), a thick sequence of Cambrian to Ordovician age pelagic rocks overlie basement and may represent a "thick accretionary wedge built up on the northwestern active margin of Cathaysia" (Chen, 1999). A transgressive platform sequence evolved in the late Devonian and progressed to deeper water sediments through the early Triassic. Terrestrial sediments mark the upper Triassic above an unconformity with the missing middle Triassic. Early to middle Jurassic red clastic foreland basin rocks conformably or disconformably overlie the Triassic. Chen (1999) suggests these represent syn-tectonic molasse deposits. The late Jurassic to early Cretaceous marked a major deviation in tectonics and rock types. This period is dominated by acid volcanic rocks probably attributed to the west verging subduction of the Pacific plate. At Da-an these rocks are represented by the Jurassic Changlin Formation, the dominant country rock in the project area, composed of tuffs, sandstones, conglomerates and siltites (units J2 & J3 on Figure 2). The Jurassic - Cretaceous transition around Da-an is marked by the Xiaoxi Formation dominantly grayish tuffs, siltites and tuffaceous conglomerates. Red dacites, dacitic ignimbrites, and basalt represent the lower Cretaceous Huangkeng Formation. Late Cretaceous sediments were deposited in rift valleys, suggesting a major deviation in stress direction and style. The Shaxian Formation consisting of purple-red siltites, mudstones, and sand conglomerates occupies the upper Cretaceous around Da-an. Stress regime changes in and around the Jurassic - Cretaceous boundary at Da-an and elsewhere in Fujian may be critical to the formation of mineralized districts. A east-northeast to east-west compressional regime related to subduction seems to have dominated the late Jurassic (Shuhe, 1992). The early Cretaceous however witnessed a major change from compressional to extensional stress with structural directions oriented more north-northeast concomitant with a tremendous increase in back-arc style extensional magmatism (Xu, 1999). Fujian thus became one of the largest calc-alkaline intrusive regions in the world. Adjacent to the Da-an prospect, the early Cretaceous Makeng medium to fine-grained red "moyite" (granite?) was emplaced, followed by the late Cretaceous Shipaiqian light-red granite porphyry. 7.2 Property Geology Plate 2 of this report, based on a map created by the Brigade (1992, 1999), is a geologic map of the prospect. Symbols and abbreviations in this report can be found on the map legend. The country rock across the property is the Jurassic-Cretaceous Nan Yuan Formation, a unit that is part of the widespread Mesozoic volcanic belt that covers much of northeastern Fujian (J2 & J3 on the regional map, Figure 2) and the neighboring provinces of Guangdong and Zhejiang. The Nan Yuan is subdivided into three entities called, from oldest to youngest J3nb, J3nc, and J3nd. J3nb is primarily rhyolitic crystal tuff and sand conglomerate; dacite crystal tuff, conglomerate and crystal tuff typify J3nc. J3nd can be characterized by rhyolitic tuff flows and welded flows at the base, an intermediate member of tuffaceous siltstone, carbonaceous shale, and volcaniclastic tuffs (called J3nd2); topped by upper intercalated rhyolite crystal tuff and welded tuff. J3nd2 as mapped by the Brigade is a very interesting marker unit that helps define the structural style of the district and therefore is marked in green hatch on Plate 2. Three kilometers northeast of the center of the property, a late-Yanshanian (70-195Ma) age granite intrudes the Mesozoic volcanics. This red colored granite is medium-grained and extensive in outcrop with a hornfelsed zone extending at least 200m into the enclosing volcanics. Several other intrusive phases, probably post-granite in age, are found in the project area; these include quartz monzonite porphyry, quartz trachyte, syenite, quartz porphyry, and diabase. Engineer Wu suggests that a molybdenum porphyry may exist at depth. Mineralization appears to be post-granite in age. At sample site 420404 (Plate 2) on the eastern edge of the property, a quartz dacite was observed intruding the margin of the granite; it contained fresh black biotite along with scattered blebs of pyrite and chalcopyrite and overall looked very similar to some of the dykes seen around the property that are closely associated with alteration and mineralization. Geologic structure, based on the author's cursory examination and the Brigade maps, is very complex. A series of small synforms and antiforms can be defined by tracing the outcrop of unit J3nd2 across the property (green hatch, Plate 2). A larger synform can be postulated trending similar to the J3nd2 folding, northeast to southwest, plunging southwest; on the basis of Mesozoic volcanic stratigraphy younging from northwest to southeast and older units enclosing younger ones to the east and west. J3nd2 folding is dissected by a series of roughly northeast trending, northwest dipping thrust (?) faults. Figure 3 is a cartoon sketch of the possible structural scenario in the District. This sort of situation fits well with the regional tectonics described above. The majority of mineralized zones in the District (outlined in red on Plate 2) trend slightly oblique to the postulated fold axis; a few zones can be found perpendicular to the axis. Furthermore, there seems to be a crude periodicity to the mineralized zones, each separated by three kilometers moving from west to east across the property. It seems very likely that a combination of folding and thrusting controls mineralization, however much more fieldwork is needed to fully understand this relationship and use it to design drill holes. "Flower structures" and zones of pressure relief might be outstanding targets for major mineralization. Although the author feels that mapping by the Brigade is of very high quality, it seems to have focused more on detail work around the mineralized zones, neglecting somewhat the district as a whole. More intensive district-wide mapping is recommended to help place known zones into a better perspective and help predict less obvious, but highly prospective targets not yet defined. 8.0 DEPOSIT TYPES High-grade silver +/- gold, lead, zinc cordilleran vein type deposits (Guilbert & Park, 1986) are the most reasonable model for this property. This type of vein is world renowned for its richness and productivity; they are found at such places as Ouray, Colorado and Couer d' Alene, Idaho as well as numerous other locations around the Pacific Rim and the world. Such veins typically occur on convergent margins in zones of abundant calc-alkaline magmatism. Silicious volcanic rocks frequently host such veins. They are emplaced at relatively shallow depths and tend to be sulfide-rich fault, fracture, or breccia fillings in zones where open spaces are structurally developed. Not uncommonly they may be spatially associated with porphyry copper or molybdenum bodies within a few miles of the veins. The Da-an area meets all of these criteria. Using cordilleran veins as a model, exploration can be focused on certain key aspects of these systems. Structure plays a huge role in these deposits - understanding the structural setting of the old stopes at Da-an can give tremendous insight into the trends and plunge of undeveloped workings below them, and facilitate modeling of potential ore "traps" applicable to the rest of the district. By extension, careful mapping of the district as a whole can help predict additional new zones that may not have surface outcrop. Studying district metal zoning and alteration zoning in and around the old stopes and other structural zones will also provide valuable vectors to mineralization. Stream sediment and perhaps soil geochemistry can be used to zero in on key areas. In some cases, geophysics can be used to seek out sulfides along key structures. To begin with, exploration at Da-an should focus on geologic mapping and geochemical sampling. The work previously done by the Brigade locating and detailing old workings is particularly valuable and will form an excellent basis upon which to build some target concepts. Sampling and mapping combined with the detail work already done should produce a model of local mineralization that defines optimum structural settings. When combined with district-wide mapping and more detailed district-wide geochemistry, target areas will emerge. Detail soil geochemistry and/or ground geophysics (such as CSAMT) can then be applied if needed to further tie down targets. Angled diamond core drill holes can then be sited either on the basis of geologic mapping or on more detailed geochemical / geophysical work. See "Section XX - Recommendations" for more details. 9.0 MINERALIZATION During the recent brief visit by the author, several mineralized zones around the district were examined cursorily. Areas visited included (see Plate 1): Guan Tian, Tan Shan, Wai Lou, and Wen Yang Tin. The author's impressions and observations for each of these areas follow below. Note that all mention below of "stream sed" or "panned con" samples refers to Old Data generated by FTCM - see "Section 12 - Sampling Method" for more information. The only site visited that displayed obvious polymetallic silver mineralization was the northern part of the Tan Shan zone. Here an adit was driven 101m N20E sinuously following a series of veins. The adit is flooded and was not entered; however some good high-grade material was found near the entrance on the dump (sample 420401 - Appendix 3). The rock is a silica-flooded dacite cut by white milky quartz veins and multi-episode veinlets of dark pyrite, galena, sphalerite, +/- chalcopyrite. Assay indicated 0.32 g/mt (.0093 opt) gold, 334.9 g/mt (9.78 opt) silver, 7.3% lead, 8.6% zinc and 0.1% copper. Engineer Wu stated that silver almost always occurs with lead - he also reported that the tunnel was mapped and sampled by the Brigade; Sparta does not yet have a copy of this data. Although jungle vegetation and soil obscured alteration immediately around the adit, there appears to be pronounced alteration up to at least 30m or more perpendicular to the vein system in the hanging wall. Weak silicification of the volcanics extends for 10 or so meters to the west, then gives way to a moderately strong pyrite / argillic stockwork which continues away from the vein for another 20 meters or more. Craggy cliffs up some of the nearby canyons paralleling the vein strike suggest that there may be multiple silicified zones in this area. This is an easily accessible and important zone definitely worthy of detailed examination. The Tan-Shan alteration zone itself extends approximately 1.3km along a northerly trend. Only two of four stream sed samples taken from the area showed anomalous values; of nine panned con samples collected, none reported unusual values. Notwithstanding this poor geochemical showing, the area is riddled with extensive old workings. To the south on the opposite side of a major drainage two panned con samples found gold grains - this area has not been investigated. An area of two anomalous stream sed samples to the west also has not yet been followed up. Another major mining area, the Wai-Lou zone occurs on the southern end of Tan-Shan - it too is riddled with old workings. Numerous panned con samples on the north end of Wai Lou found gold grains. The Shan Ji Keng zone (Plate 1), site of sample number 420413 (Plate 2), was very interesting. Here a roadcut slices through a 35m wide zone of strong silicification and pyritization. A sample of dark gray clay gouge taken from a 1m wide fault zone assayed an impressive 15.2g/mt (0.44 opt) gold, 437.1g/mt (12.7 opt) silver, and 400ppm (0.04%) molybdenum. Both lead and zinc were very low. These results coincide well with sampling done by the Brigade in year 2000. The immediate area has been detail mapped by the Brigade; they suggest that this structural zone extends at least 350m to the west-northwest, but limited sampling along the zone yielded only trace levels of gold and silver. To the east the gouge zone is cut by north trending quartz trachyte and diabase dykes but an extension is certainly possible. Translated, detail maps of this zone are in Sparta possession. A soil survey was conducted in the area, methodology and results of which remain unclear. No stream sed or panned con samples have been collected in this area; this entire zone deserves intensive follow-up. The Wen Yang Tin area on the eastern side of the district consists of several interesting areas and is the closest to the granite intrusive. Sample 420404 was taken from a quartz dacite intrusive dyke that cuts the edge of the granite. The sample assayed 1.0ppm (0.029opt) silver, 125ppm zinc, and 903ppm barium - the highest barium assay seen. Surprisingly, molybdenum was not elevated at all. Although not ore-grade, the assays suggest that this sort of dyke is related to the overall precious metal distribution in the district. No stream sed or panned con work has been done in the area. Adjacent to Wen Yang Tan, the Pan Di road proved to be very interesting. Driving west from the village of Pan Di, several good looking roadcuts were encountered, both exhibiting silicified, pyritized volcanics cut by east-trending quartz and sulfide veinlets; neither cut had been sampled previously. Samples 420405 and 06 were collected from the same roadcut, approximately 3m apart. Sample 405 assayed 0.09g/mt (0.0026opt) gold, 11g/mt (0.32opt) silver, 174ppm copper, 110 ppm zinc, 103 ppm moly, and 192 ppm barium. Sample 406 assayed 0.18g/mt (0.005opt) gold, 42.8g/mt (1.25opt) silver, 75ppm moly, and 288ppm barium; both samples reported elevated antimony as well. The elevated barium and antimony, together with depressed lead and zinc suggests that this area is "higher" in the mineralizing system than other areas to the west. These roadcuts are very exciting because they represent the relatively underexplored nature of the district as a whole, as well as an additional exploration target. This area too has not been subjected to stream sed or panned con sampling. Commander Ridge, located about a kilometer west-northwest of the Pan Di road area, is exciting because it may represent a high-level (near-surface) exposure of a large vein system. The top of the ridge consists of weathering-resistant rock "ribs" that stretch at least 2kms west across a major canyon and up the next ridge. Rock here is acid-leached, vuggy quartz latite that displays quartz finger and red limonite veinlets. The vuggy texture probably formed from acid leaching of phenocrysts; many vugs have an interior lining of secondary silica and perhaps alunite (?). Two samples collected here 420410 and 411 assayed nil gold, 0.6g/mt (0.0176opt) silver in 410, strongly elevated arsenic, antimony and molybdenum. This is one of the only areas sampled where arsenic was found; arsenic and antimony, again with low lead and zinc, are suggestive of "high" level veins. Silver and gold might not be found at such higher levels. Sample 420412 illustrates very well the vein elevation concept of Commander Ridge. It was collected from an old stope exposed along a trail some 50m (160') perhaps below the top of the ridge. Alteration appeared similar to that seen along the Pan Di road: quartz latite cut by strong milky quartz veins with margins of black sulfides and some sympathetic sulfide veinlets. The sample assayed weakly anomalous gold, 11.5g/mt (0.33opt) silver, 177ppm zinc, moderate arsenic, moderately elevated moly, and 211ppm barium. The series of rock "ribs" which cut Commander Ridge and continue for at least another mile put forward another very interesting target, a possible series of parallel veins with good widths and extensive strike lengths. No stream sed or panned con work has been done in this zone or along the trend. The Guan Tian Chang Mine located near the center of the district is a complex of old stopes and workings with a mapped strike length of 90m (295') trending roughly north-south. Sample 420414 was collected along the wall of an old stope located 10m above diamond core drill hole ZX-0001. This sample was taken from a greenish, silicified latite tuff cut by white quartz veins with black sulfide selvages, in turn cut by red limonite veinlets. Curiously these veinlets trend N20-50E, roughly perpendicular to the old stope. The assay returned 0.22g/mt (0.0064opt) gold, 13.6g/mt (0.40 opt) silver, 108ppm lead, 169ppm zinc, and moderately anomalous moly. The author was told that the famous 16,000g/mt (467opt) silver sample taken around 1992 came from a stope uphill and slightly east of the drill hole stope. Some time was spent working through the dense vegetation in that area, but the working could not be found. Sample 420415, taken from another old stope 30m below 414, was collected from an oxidized fault gouge zone where the stope pinched out. It contained fragments of white quartz vein material and oxidized material with some quartz-limonite veinlets. Assay indicates the sample contains traces of gold, 20.5g/mt (0.60opt) silver, weak moly and 112ppm barium; lead, zinc, arsenic and antimony were very low. Core hole ZK-0001 was drilled S70E at -85 degrees just below the stope of sample 414 in an attempt to cut vein material at depth. The stope above trends N15E and dips 87 degrees south, so the drill hole closely paralleled the stope rather than cutting it. Unfortunately an angle hole could not be drilled since no such rig was to be had at the time. The hole intersected several broken zones of "mineralization" in volcanic rocks varying from 2-8m apparent width, together with spotty pyritized zones and increasing silicification / pyrophylitization towards the bottom at 111.6m. Silver was weakly anomalous from 95m downward; the high silver assay obtained was 30g/mt (0.88opt) from two approximately 1m intervals. The high gold value was 0.21g/mt (0.006opt) obtained from a 1.12m interval near the bottom of the hole. In addition to the orientation of the hole, the failure to cut significant ore may also be attributed to the observation from sample 414 that the quartz veinlets of the stope seem to be running perpendicular to it, and thus parallel to the core hole. Nevertheless, the hole is interesting in that it proves that there is significant width (10's of meters or more) of alteration away from the stope. Core from the hole is said to be stored in the village immediately adjacent. A graphic log and assay results can be found in map D-8, translated and in Sparta possession. Two other samples were taken from inside an old stope on the south end of the Guan Tian Chang Mine area. Samples 420416 & 417 assayed 209 and 384ppm barium respectively but only trace amounts of silver and no lead or zinc. Similarly, stream sed and panned con sampling around the zone has not been useful. Overall Guan Tian is a large area of ancient mining activity and deserves a thorough inspection. Careful siting of several drill holes in this area may be warranted. In conclusion, a few useful observations come from this data. Arsenic and / or antimony appear to mark higher level altered zones. Barium seems to be more characteristic of slightly lower levels below arsenic and antimony. Ore grade silver +/- gold with strong lead and zinc tend to occur below the barium level. Molybdenum is anomalous across the project area and may not be a useful pathfinder for ore. Of course these observations are based on only a few samples collected from disparate locales across a large district and so should be used with care. Finally, it is not clear from the author's work to date whether there is a clear structural "trend" to mineralization. Although most of the old workings trend roughly north-northeast, several developed and undeveloped anomalous zones appear to be nearly perpendicular to that trend. In particular, the very high grade gold zone at sample 420413, the white quartz/sulfide selvage veinlets at Guan Tian, and the altered "ribs" of Commander Ridge all suggest that mineralization can deviate from the established north-northeast direction. 10.0 EXPLORATION To date, exploration conducted by Sparta consists only of the cursory introductory visit by the author. No systematic surveys or investigations have been conducted. The purpose of this visit was to gather as much information regarding the property as possible, both on the ground and from the owners, in order to lay the groundwork for a more comprehensive exploration program leading to target drilling. In the short time span available for his visit, the author personally inspected a number of different locations on and adjacent to the property. Notes were recorded, photographs taken, and 19 outcrop grab samples were collected. During his visit, the author met with representatives of FTCM and the 4th Brigade. Twenty-five maps and cross-sections together with three reports were obtained from FTCM (see "Section 21.1 - References"). These show detailed geologic mapping, locations of other detail work, and local / regional sampling. Many, but by no means all, of the locations documented in the maps and sections were visited in the field. Numerous rock chip sample sites were verified and sampling methodology confirmed. The author's work has confirmed that there is good potential to discover at least one high-grade polymetallic silver +/- gold, lead, zinc vein on the property and that further exploration is warranted. The Da-an property is a rare opportunity to acquire a large part of a very old district that has not been subjected to in-depth modern exploration methods. A better understanding of the potential size and geological nature of the property has been achieved. Local geology has been placed into a regional perspective to demonstrate its affinities with other nearby districts. Concepts likely to be helpful to continued exploration have been developed including a structural scenario, basic metallogenic model, and geochemical zoning patterns. Finally logistical details have been clarified and positive initial contacts made with key participants. The stage is set for intensive exploration of the area. The author is an independent contractor employed by the Issuer. Mr. Fred R. Schmid, President of Sparta, retained the author's services for Sparta and directed the work to be done. Data collected by the author during the recent campaign is considered to be reliable within the constraints of any conscientiously managed early-stage exploration program. Uncertainty exists in that the entire property has not yet been examined and much data from FTCM remains to be assembled and integrated into a coherent district-wide picture. 11.0 DRILLING Sparta has not conducted any drilling on the property to date. The Brigade drilled one diamond core hole ZK-0001 at coordinates 20750612E, 3048482N in the Guan Tian Chang Mine area. Details for this hole are given in "Section 9.0 - Mineralization" above. Core is stored in an unsecured location at an adjacent village and was not examined by the author. No other drilling to the author's knowledge has been conducted in the district. 12.0 SAMPLING METHOD AND APPROACH The nineteen samples collected to date were collected as part of a preliminary reconnaissance program. Eighteen of the samples collected during the most recent campaign at Da-an were grab samples of rock from outcrop; one sample was of mine dump material focused on high-grade material. Samples were collected at sites that, in the judgment of the author, appeared to be well mineralized. Each sample was intended to be representative of the site from which it was collected. Samples were not collected to represent "true widths" but only to ascertain potential tenor of ore-grade material. High-grade material was found to be sulfide-rich, commonly with quartz veinlets and dark veinlets of galena +/- sphalerite. This rock sampling is considered to be reliable within the normal constraints of a reconnaissance exploration program. A summary list of the author's samples can be found in Appendix 3. Old Data stream sediment and panned concentrate samples were collected by FTCM. The sample locations can be found on Plate 2, but no serious analysis has been attempted due to the lack of substantive information regarding sampling methodology and sample medium. It is notable that in several of the large old mining areas (such as Guan-Tian), said sampling failed to indicate an anomaly of any kind. Soil sampling was carried out at Shan-Ji-Keng, but again precise details on methodology and medium have not been found. Lacking background information, results of these Old Data sampling methods are only commented on in the text and have not been compiled in any rigorous way. 13.0 SAMPLE PREPARATION, ANALYSIS, AND SECURITY Samples collected by Sparta during the recent fieldwork were bagged in new, clean plastic bags, wrapped in clean canvas bags and shipped to the International Plasma Laboratory (iPL) prep lab at Kunming, Yunnan Province, China. Samples were prepped at Kunming and then shipped by iPL directly to Vancouver for analysis. Rejects remain in Kunming, while pulps reside in Vancouver. iPL is an internationally accepted laboratory that is ISO 9001:2000 Certified for the "provision of assay and geochemical analytical services," as defined by KPMG Quality Registrars, and is a certified assayer in British Columbia. Rock samples were dried and then crushed to 70% passing minus 10-mesh, split to 250gms, then pulverized to 90% passing minus 150-mesh. Coarse rejects were saved. Gold and silver were determined using a 30-gram fire assay with AAS (atomic absorption spectroscopy) finish with a detection limit of 0.01g/mt. A standard multi-acid digestion 30-element ICP package that includes silver was also run - silver lower detection limit 0.10ppm. The pulps are currently still available at the laboratory in Vancouver, should any additional analytical work or check assaying be required. A weakness in the sample handling process arose in the shipping of samples from the author in Fuzhou, China to the prep facility in Kunming. FTCM, the owner of the property, arranged the shipping and handling of the samples and had the samples in their possession for a short time, out of the author's presence, while arranging shipment. Absolutely no tampering with the samples is suspected. iPL confirmed with the author that the samples arrived in intact condition. Careful analysis by the author confirms that the sample results conform well to field observations. As planning continues for the next phase of exploration, a well-conceived plan for sample shipping must be implemented to assure that samples are shipped in a completely secure fashion minimizing opportunities for tampering. It is recommended that samples be shipped from the hands of Sparta personnel directly to the lab using an established and reliable common carrier such as UPS. All work conducted by Sparta on the project was carried out under the direct supervision of the author. At no time did an employee, officer or director of Sparta have any involvement with the sample preparation or analysis process. In the opinion of the author, the security and integrity of this sampling is believed to have been adequate for such early stage reconnaissance work, except as noted in the paragraph above. 14.0 DATA VERIFICATION During the recent field campaign, the author personally conducted all field operations. Due to the small number of samples collected during this work, the laboratories own quality control standards were deemed sufficient and no special measures on the part of the Issuer were used. As silver was the primary element of concern, determinations were done by both FA/AAS and by multi-acid digestion ICP. In general silver assays using FA/AAS agreed very well with ICP results - within 15%. Gold assays over 1g/mt and silver assays over 100ppm were re-assayed using FA/AAS. iPL included one lab "blank", one lab standard and one lab "repeat" - all of which checked out well (see lab results - Appendix 3). As a further check, high Sparta assays collected from known areas of high values recorded previously by FTCM have been correlated and are within reasonable limits. The author has verified the data used in this report and feels confident that the conclusions drawn therefrom are valid. As the next stage of exploration is planned, a consistent program of assay checks should be put into place and the prep lab in Kunming should be inspected personally. 15.0 ADJACENT PROPERTIES Although published information on adjacent properties (particularly precise locations, grade & tonnage) is difficult to obtain. Three properties deserve mention in relation to Da-an: Zijinshan, Yongpi, and Lenshuikeng (Figure 4). Zijinshan, the best known of the three, is located about 360km southwest of Da-an. An acid-sulfate porphyry-copper related system, "reserves" are quoted at 1.6 million metric tonnes copper and 15 metric tonnes gold (So, 1998). Note that no documentation is available concerning the nature or manner of calculation of these "reserves". Copper - gold mineralization occurs around a dacitic volcanic pipe in the central part of a Cretaceous age dacite dome complex. The dome intruded a late Jurassic granite. At depth the dacite grades into potassic altered granodiorite porphyry. Similarities to Da-an include: Cretaceous age dacitic volcanics, dacite intruding late Jurassic granite, and alteration consisting of dickite, zunyite, alunite - analogs of pyrophyllite found at Da-an. However, Zijinshan is centered on an anticlinorium rather than a synform and regional basement consists of a thick sequence of Paleozoic sedimentary rocks. The Yongpi porphyry copper mine is located 185kms northwest of Da-an. Little is know about it except the deposit is said to contain 144Mmt at 0.72% copper (Wang, 2003). No documentation is available concerning the nature or manner of calculation of these "reserves". It too is surrounded by Paleozoic sediments but is adjacent to late Jurassic granite similar to that of Da-an. The most interesting of the deposits near Da-an is Lenshuikeng, located about 210kms west-northwest of the project area. This district is reported as a very large silver producer, but precise numbers could not be found. Shiqing (1996) reports the deposit is mainly a silver polymetallic deposit with associated lead, zinc, cadmium, gold and copper. "Porphyry type and stratabound superimposition type" is found here; some 70% of the silver is associated with the "porphyry" type. In reviewing the description, it appears that "porphyry" might better be termed "dyke" - superimposition might be the equivalent of "strataform". Faults are often filled with rhyolite porphyry and high-grade vein material. Strataform mineralization appears to be replacing an iron-manganese rich dolomite sandwiched within the volcanics. Reading between the lines, Mesozoic folding deformed by thrusting is the dominant structural theme, quite reminiscent of Da-an. A visit to this district could be very valuable towards understanding ore controls at Da-an. The author has no interest or relationship whatsoever to the above-mentioned three occurrences. This information is compiled from published sources and the author has been unable to verify this published data. Information provided in this Section 15 is not necessarily indicative of the mineralization at Da-an. 16.0 MINERAL PROCESSING AND METALURGICAL TESTING Neither mineral processing nor metallurgical testing has been carried out on samples from the property. 17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTSIMATES No mineral resource or mineral reserve has been estimated for the Da-an property. 18.0 OTHER RELEVANT DATA AND INFORMATION Appended to this report is the author's Statement of Qualifications (Appendix 5). 19.0 INTERPRETATION AND CONCLUSIONS Based on his professional experience, it is the conclusion of the author that the Da-an prospect represents a significant exploration opportunity of unusual quality. Potential for discovery of a major high-grade silver (+/- gold), lead, zinc cordilleran vein system is very high. This conclusion is based upon the author's brief visit to the property, rock samples collected by the author at a variety of different sites across the property, and data assembled by FTCM. The widespread distribution of ancient workings (particularly high-angle stopes) across some 70 square kilometres of the property is reminiscent of some of the world's great mining districts - Rio Tinto, Spain and Kuroko, Japan are just two instances. The intrusive history of the area is very similar to the important Lenshuikeng silver deposits to the east of the district, and to many similar deposit localities around the world. Da-an exhibits classic calc-alkaline volcanism and hypabyssal intrusives of the type and age that have proven productive throughout east China and the Pacific Rim. Tectonic history of Da-an and the region records strong shortening and compression followed by release through extension at just the geologic time when volcanism was active and other large deposits were forming. Structure of the prospect lends itself well to large-scale structural traps such as "flower structures", stacked thrusts, and fold / thrust intersections of sufficient size to host significantly large orebodies. Strongly anomalous geochemical samples collected by FTCM and by the author confirm the potential for high-grade mineralization intensity. Furthermore they help to establish a possible vertical and perhaps horizontal zonation across the district that may be a vital exploration clue. Finally relatively dense jungle vegetation and a lack of any publications have kept the district a well-hidden secret for many years. The Da-an prospect represents a rare opportunity to explore a "virgin" mining district of potentially world-class scale. Data developed by FTCM appears to be reliable and professionally developed, but is limiting in the sense that it tends to focus only on small, discreet areas of known mineralization rather than treating the district as a whole. Data density therefore may be sufficient for these studied zones, but is insufficient when used to seek larger targets. As a result, large areas of uncertainty represented by zones of very little or no mapping, and insufficient sampling, exist across the district. The original objectives of the author's visit to Da-an have been accomplished. From a situation in which there was no detailed information of any kind, the project has progressed to a stage where good concepts are beginning to form and an exploration program should, and can, be proposed. Key professional relationships have been established and infrastructure characterized. Thanks to the helpfulness and professionalism of both the FTCM staff and the Fujian Geological Survey 4th Brigade, a wealth of new information can now be integrated into a coherent district-wide conceptualization. Much work remains to be done before drill targets can be reasonably proposed, but a good groundwork has been laid and a path towards discovery can now be envisioned. The recommendations that follow have been uniquely designed for Da-an and are meant to minimize uncertainty while efficiently developing new targets. 20.0 RECOMMENDATIONS The Da-an prospect is uncommon in that it represents a large cordilleran vein system that is relatively unexplored in this century. Good potential exists to discover high-grade silver +/- gold deposits. In the opinion of the authors, the character of mineralization observed on the Da-an Property is of sufficient merit to justify the following exploration steps: 1) Acquire a digital topographic basemap at 1:10,000 scale and insure that its coordinate grid is properly registered to conform to current Chinese legal and to international standards. 2) Finish compilation of FTCM data and transfer data to one map with overlays for old workings, sample locations of various types, geology and structure, and infrastructure. 3) On the ground, establish verifiable control points that correspond accurately to the topo map grid and register accurately on any global positioning system (GPS) devices employed. Confirm that all roads are located correctly on the map. 4) Sparta should employ a translator for field and office use, independent of translators or agencies used by FTCM. 5) Begin hunting for a drilling contractor with angle hole diamond core capability; insure that good mud/cement support is available for bad drilling / watery conditions. 6) Discuss with a qualified geochemist stream sediment and soil sampling possibilities for this particular terrain. Conduct a small stream sediment sample control test to determine best methodology of stream sampling; do the same for soil sampling. 7) Contract one additional geologist and one assistant geologist to assist with mapping / sampling / core logging duties. 8) Hire five or six local fellows to assist with vegetation clearing and act as guides. 9) Conduct a surprise visit to the iPL prep lab in Kunming, inspect the facilities and meet key personnel. Design a system for secure transportation of reconnaissance samples to the laboratory and place into effect a system of random assay checks on duplicate pulps at a second laboratory in Vancouver. 10) Acquire government permits if required to allow basic clearing of vegetation (by machete?) over key portions of the district. 11) Visit all areas of FTCM's previous detailed mapping and sampling to confirm locations and trends of old workings, to sample alteration / mineralization, and further refine geology. 12) Conduct reconnaissance geologic mapping at scale of 1:10,000 along all key drainages and ridgetops of the district to better constrain local geology and structure and confirm that all old workings have been found and cataloged; collect rock chip and stream sediment samples at the same time. Confirm on the ground the location of the Jn3d2 horizon across the district. Follow major structures (such as the Commander Ridge "ribs") across the district, mapping alteration, trends, and taking rock samples as necessary. 13) Compile all new data in the office, establish mineralization models, derive drill targets if appropriate and / or design geophysical surveys if needed. 14) Discuss structural concepts with a qualified structural geologist. *** Decision Point *** 15) Acquire appropriate permits for geophysical surveys (if required), roadbuilding for drill access and pad construction, and drilling. 16) Rent sufficient secure space in Shouning or Da-an as a drill staging / core storage & splitting facility; 17) Build road / trail access to pads; sample and map road outcrop whenever possible. 18) Drill 10 - 20 angle core holes with average depths of 100 to 300m. 19) Assay core, await results, plot geology and alteration logs. ***Decision Point*** 20) Make second-stage recommendations. It is the opinion of the author that the character of the property is of sufficient merit to justify the above-detailed exploration program. A proposed budget for the Recommendations is attached as Appendix 4. This report is effective as of midnight July 3rd, 2004. Respectfully Submitted, - ----------------------------------- Linus T. Keating, D.Sc. 21.0 REFERENCES Chen, A. (1999): Mirror-Image Thrusting in the South China Orogenic Belt: Tectonic Evidence from Western Fujian, Southeastern China; in Tectonophysics v. 305, p. 497-519. Cheng, Y.C. (1990): Geological Map of China 1:5,000,000 scale w/ explanatory notes; Ministry of Geology & Mineral Resources, People's Republic of China - Geological Publishing House, Beijing. Guilbert, John and Charles F. Park (1986): The Geology of Ore Deposits; W.H. Freeman Company, New York. Harper, Damian et. al. (2002): China; Lonely Planet Publications, 8th ed., Melbourne. Ishihara, Shunso & Sukune Takenouchi (1980): Granitic Magmatism and Related Mineralization; Mining Geology Special Issue #8: Society of Mining Geologists of Japan. Shuhe, Song (1992): Metallic Mineral Resources Map of China 1:5,000,000 scale, part of "Mineral Resources Maps of China" series with explanatory notes; Chinese Institute of Geology & Mineral Resources Information - Geological Publishing House, Beijing. So, Chil-Sup, De-Quan Zhang, Seong-Taek Yun, and Da-Xing Li (1998): Alteration-Mineralization Zoning and Fluid Inclusions of the High Sulfidation Epithermal Cu-Au Mineralization at Zijinshan, Fujian Province, China; Economic Geology: v. 93, #7, p. 961. Unknown (1998): Geological Map of Fujian Province 1;500,000 Scale; with English Abstract. Wang, Jingbin (2003): "Chinese Copper Mine Resources and New Exploration"; paper presented at 16th International Copper Conference hosted by the Metal Bulletin. Paper available on their website. -------------- Xu, Xisheng; Chuanwan Dong, Wuxian Li, & Xinmin Zhou (1999): Late Mesozoic Intrusive Complexes in the Coastal Area of Fujian, SE China: the Significance of the Gabbro-Diorite-Granite Association; in Lithos v. 46, p. 299-315. Yu, Shiqing, Li Fang, and Fan Chuanbi (1996): Geology of U, Au, Ag Ore Deposits Related to Mesozoic Volcanism in Jiangxi Province; in Field Trip Guide Volume 4 - - 30th International Geological Congress: Geological Publishing House, Beijing, China. 21.1 Inventory of FTMC Maps and Reports in Sparta's Possession The following table summarizes all information received to date from FTCM. Copies of all these documents may be found at Sparta's offices. Items with (**) have not yet been translated to English. Items with an "R" in the Sparta # are written reports - all other items are maps or cross-sections. "n/a" indicates "not applicable". Table #1: FTCM Data in Sparta's Possession
- -------------------- ------------------------------------------------------------- ---------- ------------ Sparta Map # Title (translated) Scale Date - -------------------- ------------------------------------------------------------- ---------- ------------ D-1 Topographic / Geological Map of Silver Mine in Da-an ... 1:10,000 11/20/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-2 Topographic / Geological Map of Wai Lou Ag Ore Site... 1:2,000 11/15/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-3 Engineering Sampling Map of Wai Lou Ag Ore Site... 1:1,000 9/3/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-4 Analysis of Ag, Mo, As, Sb Anomalies in Soil at...Shan Ji 1:5,000 8/5/01 Keng... - -------------------- ------------------------------------------------------------- ---------- ------------ D-5 Geological Profile of Line 7 in Guan Tian Chang Ag, Au 1:500 9/5/00 Multi-metal Anomaly... - -------------------- ------------------------------------------------------------- ---------- ------------ D-6 Pit Engineering and Sampling Map of Wai Lou Au, Ag ... 1:1,000 1/5/00 - -------------------- ------------------------------------------------------------- ---------- ------------ D-7 Map of Sampling and Engineering in Shan-Ji-Keng Ag, Au 1:2,000 12/18/00 Multi-Metal... - -------------------- ------------------------------------------------------------- ---------- ------------ D-8 Geological Profile of Line Zero of Shan-Ji-Keng Ag, Au 1:500 12/6/01 Multi-Metal Anomaly - -------------------- ------------------------------------------------------------- ---------- ------------ D-9 Topographic / Geological Map of Tan-Shan Ag, Au Multi-Metal 1:1,000 7/21/01 Ore Site... - -------------------- ------------------------------------------------------------- ---------- ------------ D-10 Topographic / Geological Map of Shan-Ji-Keng Ag, Au 1:2,000 9/15/01 Multi-Metal Ore Site... - -------------------- ------------------------------------------------------------- ---------- ------------ D-11 Sampling and Engineering Map of Feng-Yang-Ting Ag, Au 1:2,000 10/28/01 Multi-Metal Anomaly - -------------------- ------------------------------------------------------------- ---------- ------------ D-12 Sampling and Engineering Map of Guan Tian Chang Ag, Au 1:2,000 11/30/01 Multi-Metal... - -------------------- ------------------------------------------------------------- ---------- ------------ D-13 Geological Profile of Line Zero of Wai-Lou Ag Mining ... 1:500 8/31/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-14 Legend n/a ? - -------------------- ------------------------------------------------------------- ---------- ------------ D-15 Vertically Projected Profile of Vein Zone #1-2 and 1-3 at 1:1,000 9/5/92 Guan Tian Chang Ag Mining Site... - -------------------- ------------------------------------------------------------- ---------- ------------ D-16 Geological Profile of Line #8 at Guan-Tian-Chang Ag ... 1:500 9/20/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-17 Geological Profile of Line #0 at Guan-Tian-Chang Ag ... 1:500 8/30/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-18 Geological Profile of Line #7 at Wai-Lou Ag Mining Site 1:500 8/31/92 - -------------------- ------------------------------------------------------------- ---------- ------------ D-19 Vertically Projected Profile of Altered Zone III-1 at Wai 1:1,000 9/5/92 Lou - -------------------- ------------------------------------------------------------- ---------- ------------ D-20 Map of Ag Element Anomalies in Deposits of Hydro... 1:25,000 3/14/01 - -------------------- ------------------------------------------------------------- ---------- ------------ D-21 Map of Pb, Zn Element Anomalies in Deposits of Hydro... 1:25,000 3/14/01 - -------------------- ------------------------------------------------------------- ---------- ------------ D-22 Map of Au Element Anomalies in Deposits of Hydro... 1:25,000 3/14/01 - -------------------- ------------------------------------------------------------- ---------- ------------ D-23 Composite Map of Ag, Au, Pb, Zn Anomalies in Deposits... 1:25,000 3/14/01 - -------------------- ------------------------------------------------------------- ---------- ------------ D-24 Geological Map of Results from Natural Heavy Sand... 1:10,000 11/10/99 - -------------------- ------------------------------------------------------------- ---------- ------------ D-25 Topographic / Geological Map of ShanJiKeng - Tan Shan.. 1:5000 9/21/01 - -------------------- ------------------------------------------------------------- ---------- ------------ D-R1 Profile of the Project in Shouning n/a 5/26/04 - -------------------- ------------------------------------------------------------- ---------- ------------ D-R2 (**) n/a - -------------------- ------------------------------------------------------------- ---------- ------------ D-R3 (**) n/a - -------------------- ------------------------------------------------------------- ---------- ------------ D-R4 (**) n/a - -------------------- ------------------------------------------------------------- ---------- ------------ *** End of Table***
LIST OF FIGURES Error! No table of figures entries found. LIST OF TABLES Table 1: FTCM Data in Sparta's Possession.....................................25 LIST OF APPENDICES Appendix 1: GPS Programming and Da-an Control Points.. ......................40 Appendix 2: Land Status and Obligations ......................................69 Appendix 3: Geochemical Sample Summary........................................87 Appendix 4: Proposed Budget 2004 - 2005.......................................88 Appendix 5: Statement of Qualifications.......................................93 LIST OF ENCLOSED PLATES Plate I: Da-an Property Map Showing Key Localities - 1:25,000 Plate II: Da-an Geologic Map & Sample Locations - 1:10,000 APPENDICES APPENDIX I GPS Programming and Da-an Control Points All Global Positioning System (GPS) devices used during the current field campaign were checked and double-checked to insure that the proper "Coordinate System" and "Datum" were in place. Following are the settings used: Coordinate System: User Grid Projection: Transverse Mercator Latitude of Origin: 00.00000N Longitude of Origin: 117.00000E Scale Factor: 1.0000000 Units to Meters Conversion: 1.0000000 False East at Origin: 20500000.0 False North at Origin: 0.0 Datum: WGS `84 Note: Not all GPS devices can be programmed as above; even those with "User Grids" frequently do not allow enough decimal places to permit this level of programming. GPS used on site was a Magellan Meridian. Control Points Used for GPS Coordination The following points were established on the ground to coordinate GPS with topographic maps used on the project - these points are shown on the geologic map (Plate 2). "BRIDGE" Gauss Kruger coordinates: 20750386E, 03049117N. "SADDLE" Gauss Kruger coordinates: 20749453E, 03046944N Neither of these points coincided particularly well with the grids on the paper maps, partially due to copier stretch; however they are considered to be sound from a GPS standpoint. Gauss Kruger grids for the project maps were re-generated to fit these control points. APPENDIX 2 Land Status and Obligations Claim Status, Da-an Project
- -------------------------------------------------------------------------------------------------------- Certificate Number Claim # Claim Name Claim Type Has. Owner Annual Work / (Atlas#) Payments Required - -------------------------------------------------------------------------------------------------------- 3500000230216 G50E007013 Fengyang Mine 2800 FTMC* Pavilion Prospecting Right - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Same as Above G50E003015 Liushu Fuji Mine 5300 FTMC* Tanshan Prospecting Right - -------------------------------------------------------------------------------------------------------- * FTMC = Fujian Tiancheng Mining Industry Corporation, Ltd.
APPENDIX III Geochemical Sampling by the Author APPENDIX IV Statement of Qualification CERTIFICATE of AUTHOR I, Linus T. Keating, D.Sc. do hereby certify that: 1. I am a self-employed Consulting Geologist with residence at 4325 East Cooper Circle, Tucson, Arizona, USA 85711. 2. I am a graduate of the University of Arizona in Tucson, Arizona, USA with a B.Sc. in Geological Engineering (Mining & Exploration Option): 1984; and of the Vrije Universiteit Brussel, Brussels, Belgium with a D.Sc. (Doctor of Science) - High Distinction in Geology: 1998. 3. I am a Registered Geologist in the State of Arizona, USA (Registration #40815) and a Certified Professional Geologist (#10742) in the American Institute of Professional Geologists (AIPG). I am a member of the Arizona Geological Society. 4. Since graduation I have worked as a geologist for more than 19 years in the USA, Mexico, Honduras, Chile, Argentina, Japan, and mainland China. I have worked as a Consulting Geologist from 1998 through the present day for a number of private and corporate clients in Chile, Argentina, and mainland China. I was permanently employed by RTZ Mining and Exploration, Ltd. as Principal Geologist - Argentina from 1996 through 1998, and previous to that held a number of technical and management positions with Kennecott Exploration Company (a wholly-owned subsidiary of RTZ) from 1984 through 1996. In 1983 through 1984 I held a number of junior positions with Molycorp, Inc., SAGE Associates, and Jucevic Consulting. 5. I worked at the Da-an property as a Consultant for Sparta from May 29th through June 6th, 2004. 6. I have no direct or indirect interest in the Da-an Property, nor in Sparta Holding Corporation, nor do I expect to receive any. 7. I am not aware of any material fact or material change with respect to the subject matter of this Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical report misleading. 8. I am independent of the issuer applying all the tests set out in Section 1.5 of N.I. 43-101. 9. I have read N.I.43-101, and this Technical Report has been prepared in compliance with that instrument and Form 43-101F1. 10. I consent to the filing of this Technical Report with any stock exchange and other regulatory authority and any publication by them, including electronic publication in the public company files on their websites accessible by the public. Dated this 30th Day of June, 2004. - ---------------------------------------------- Linus T. Keating, D.Sc., (This page intentionally left blank.) -----END PRIVACY-ENHANCED MESSAGE-----