SEC Comment Letter for ReoStar Energy CORP (REOS) (CIK 0001335288) (REOS) — Dec 2, 2005
ReoStar Energy CORP (REOS) (CIK 0001335288)
Date: Dec. 2, 2005 · CIK: 0001335288 · Accession: 0000000000-05-060568
AI Filing Summary & Sentiment
File numbers found in text: 333-128165
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Room 4561
October 5, 2005
Mr. Steve Bajic
President
Goldrange Resources, Inc.
c/o Inc. Plan of Nevada
613 Saddle River Court
Henderson, Nevada 89015
Re: Goldrange Resources, Inc.
Registration Statement on Form SB-2 filed September 8, 2005
File No. 333-128165
Dear Mr. Bajic:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Registration Statement on Form SB-2
General
1. The word "development" has a specific meaning under paragraph
(a)(4) of Industry Guide 7, (see
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
.
It refers to the "development stage" when companies are engaged in
preparing reserves for production. If you do not have any
"reserves," as defined by Industry Guide 7, please remove the
terms
"develop," or "development" throughout your disclosure, and
replace
them, as needed, with the terms "explore" or "exploration." This
includes the use of the terms in the headnotes and footnotes to
your
financial statements. Please see Instruction 1 to paragraph (a)
of
Industry Guide 7.
Prospectus Summary, page 6
2. We note your statement that you are "engaged in the exploration
and development of mineral properties." However, it appears from
your discussion elsewhere that you are focused specifically on
exploring and exploiting the Gold Creek property. If so, please
tailor your discussion accordingly. Otherwise, please elaborate
on
your business related to the Gold Creek property as well as your
business outside the Gold Creek property.
3. Please clarify your statement that you "were extra-provincially
registered" in British Columbia, Canada.
4. Please disclose the identity of your resident agent in Nevada.
5. Please revise your summary to disclose whether your selling
shareholders plan to sell their shares prior to your quotation on
the
OTC Bulletin Board or listing or quotation on another public
market
and if so, how. Please also discuss here and in your plan of
distribution discussion whether and how you plan to be quoted on
the
OTC Bulletin Board. We note your risk factor disclosure on page
12
that you "currently plan to have [y]our common stock quoted on the
National Association of Securities Dealers Inc.`s OTC Bulletin
Board
upon the effectiveness of th[e] registration statement."
6. Please update your outstanding share number information here
and
elsewhere in your prospectus to a more recent practicable date
than
June 30, 2005. Please see Items 403 and 507 of Regulation S-B for
additional guidance.
Summary of Financial Data, page 6
7. Please revise your disclosure of working capital in the summary
of
financial data, along with similar disclosure in your first risk
factor, to be consistent with the amounts in the financial
statements. Similarly, please reconcile your disclosure of
current
liabilities in the fourth paragraph on page 29 to the amount
reported
in the financial statements.
Risk Factors, page 7
8. Please revise the headings for your risk factors so that each
such
heading specifically identifies the risks to you posed by the risk
factors that you discuss. For example, the "We have had no cash
flows from operations" heading makes a factual statement but does
not
concisely convey the risk posed by the fact that you have had no
cash
flows from operations.
We have a history of losses and fluctuating operating results,
page 8
9. Your discussion with respect to this risk factor does not
necessarily appear applicable to your business of exploring
mineral
properties and exploiting any discovered mineral properties. We
note, for example, that you state that you are subject to the
"unpredictability of when customers will purchase [y]our
services."
Please revise and explain how the operating results from your
business may be subject to fluctuations and the resulting material
risk. Further, it appears that your statement regarding the risk
of
not generating positive cash flows or raising sufficient financing
merits a separate risk factor discussion.
We have a limited operating history..., page 8
10. Please advise us the reference to "continuing to grow [y]our
business" as it appears in the heading to this risk factor. From
your disclosure, it does not appear that the reference reflects
the
current exploration stage of your business.
11. We note your statement that your success is dependent on a
"successful acquisition, drilling, completion and production
program." Please explain to us how an acquisition program fits
within the framework of your business as it appears from your
later
discussion that your business is specifically focused on the
exploration and exploitation of mineral deposits, if any, on your
Gold Creek property.
12. With respect to your statement that investors "should be aware
of
the difficulties normally encountered by enterprises in the
development stage," please discuss and elaborate on the
difficulties
normally encountered by an exploration-stage company.
Because of the early stage of development..., page 8
13. We note your disclosure in this risk factor that you are
without
known reserves of oil and gas. Please explain to us the relevance
of
such disclosure in light of the fact that you are engaged in the
business of mineral exploration and exploitation.
The potential profitability of mineral ventures depends..., page 9
14. We note your statement that "due to worldwide economic
uncertainty, the availability and cost of funds for production and
other expenses have become increasingly difficult, if not
impossible,
to project." Please revise to discuss the basis for your
assertion
that there exists worldwide economic uncertainty and how such
uncertainty specifically impacts your business.
15. Please discuss how the factors you enumerate in the second
paragraph of this risk factor impacts the marketability of
minerals
and how such marketability relates to the world prices and markets
for minerals.
Competition in the mining industry is highly competitive..., page
9
16. Please revise this risk factor to include a discussion as to
how
the presence of competitors in the Kamloops area adversely affects
your ability to explore for minerals and exploit any discovered
minerals.
Mining operations are subject to comprehensive regulation..., page
9
17. It appears that this risk factor as well as the risk factors
titled "Exploration and development activities are subject to
certain
environmental regulations" and "Any change to government
regulation/administrative practices" provides overlapping
discussion
of related risks. Please revise your risk factors so that each
risk
factor discussion specifically addresses the risk alluded to in
your
headings. If possible, please also discuss specific instances
where
such risks have presented themselves such as the environmental
regulations that have or may specifically impact your operations
or
any changes currently contemplated in regulations that may affect
your business.
Our By-laws contain provisions indemnifying our officers and
directors..., page 10
18. Please revise this risk factor to expressly discuss the risk
posed to the company and/or investors as a result of the
indemnification provisions in your bylaws.
As a result of a majority of our directors and officers are
residents..., page 10
19. Please elaborate further in your disclosure on why it would be
difficult to enforce U.S. judgments against the company in light
of
the fact that the company is a Nevada corporation.
Because we do not intend to pay any dividends on our common
shares,
page 11
20. Please revise this risk factor to expressly discuss the risk
posed to the company and/or investors as a result of your current
intention to not pay any dividends.
Securities and Exchange Commission`s Public Reference, page 13
21. Please update our contact information in your prospectus.
Determination of Offering Price, page 13
22. We note the second sentence in this section. An offering
price
does bear a relationship to book value as both of these measures
are
typically expressed as a dollar amount per share. It appears that
what you are attempting to express is that the offering price was
not
based on any relationship to established criteria of value, such
as
book value or earnings per share. Please revise as appropriate.
Selling Stockholders, page 14
23. We note your reference in the first paragraph of this section
to
the 4,100,000 shares of common stock to be registered. Please
reconcile this reference with the fact that you are registering
2,050,000 shares of common stock and 4,100,000 shares of common
stock
underlying warrants held by your selling shareholders. Further,
please explain to us the basis for the last statement in this
paragraph. In your selling shareholders table, it appears that
you
have provided calculations of your selling shareholders` ownership
percentage after the offering assuming the sale of all shares
offered.
24. Please explain to us the basis for your qualification with
respect to whether any selling shareholder is a broker-dealer or
an
affiliate of a broker-dealer. Advise us whether you undertook a
good
faith effort to determine the broker-dealer, or affiliate thereof,
status of each of your selling shareholders.
25. With respect to your private placement disclosure, please
discuss
the material terms of the warrants such as their expiration date
and
the terms of exercise for the warrants after March 31, 2006 and
2007,
respectively. Please also file the form of warrants as required
pursuant to Item 601(b) of Regulation S-B.
Directors, Executive Officers, Promoters and Control Persons, page
18
26. We note that your officer and directors, Messrs. Bajic and
Hiner,
do not plan to contribute their full time to the business. Please
provide a risk factor disclosure regarding the part-time nature of
their efforts for the business and the competing demands for their
time.
27. Please revise the disclosure set forth for Mr. Bajic to
provide a
clear and understandable discussion of his business experience as
well as his current positions. For example, you mention and
identify
"completed qualifying transactions" for companies in which he
served
as president, chief executive officer and director, but do not
explain the significance of "completed qualifying transactions."
It
is also unclear when he served in the positions for the companies
identified. Further, he appears to be currently employed as an
officer in four companies, you, LF Ventures Inc., Cassidy Gold
Corp.
and Integrated Brand Solutions Inc., but you later note that he
serves as "a director and officer of three other public
companies."
It is unclear whether these are three other public companies or
such
companies include the companies in which he currently serves as an
officer. At least two of such companies are not public companies,
namely, you and LF Ventures Inc. Please clarify your disclosure,
identify all reporting companies for which he serves as a director
and identify the positions he is serving as in his various
employments. We note that Mr. Bajic serves as an officer in
Navasota
Resources. Please advise us why such disclosure has been omitted.
Please see Item 401 of Regulation S-B for additional guidance.
Lastly, please confirm that Mr. Bajic regularly works 60 or more
hours a week.
28. From Mr. Bajic`s business background, it does not appear that
he
has significant experience in accounting matters. In light of the
fact that he serves as your treasurer, please provide a risk
factor
disclosure regarding his apparent lack of accounting experience
and
his prospective role as the chief accounting officer for a
publicly
reporting company.
29. Please disclose Mr. Hiner`s business experience for the past
five
years. Please see Item 401 of Regulation S-B for additional
guidance. In addition, please confirm that Mr. Hiner regularly
works
50 or more hours a week.
Description of Property, page 22
30. The agreement pursuant to which you have use of your current
facilities appears to be a material agreement required to be filed
pursuant to Item 601(b)(10) of Regulation S-B. Please also
explain
your statement that you "have use of one office in packaged
space."
Description of Business, page 22
31. We note your statement that you "are an exploration stage
company
engaged in the acquisition and exploration of mineral properties
with
a view to exploiting any mineral deposits [you] discover." Please
address whether you are focused specifically on exploring and
exploiting the Gold Creek property. If so, please revise to
discuss
accordingly. Otherwise, please elaborate on your business related
to
the Gold Creek property as well as the plan for your business
outside
the Gold Creek property. Please review and revise your disclosure
throughout in light of this comment.
32. In the first paragraph of this section, you state that you
have
the right to acquire a 100% interest in and to the Gold Creek
property. Further in your disclosure, however, you state that you
have an option to purchase the interest in several mining claims
in
the Gold Creek property. Please clarify your disclosure to
appropriately characterize your rights with respect to the Gold
Creek
property. It appears that clarifying the relationship among the
mining claims, the Gold Creek property and the Kamloops Mining
Division may be helpful in this regard and that a map may assist
in
illustrating the relationship and the specific property for which
you
have an option in. Please also clarify whether your option
pertains
solely to mineral rights or relates to the property generally.
33. Please provide clear and understandable disclosure as to what
the
royalty and earn-back rights you mention are and how they may
impact
your business. We also note your use of the term "net smelter
return" in mentioning the royalty rights and the description of
earn-
back rights on page 23.
34. We note that your letter agreement with Navasota Resources
discusses a joint venture arrangement upon Navasota Resources
exercise of their earn-back rights. Please discuss in detail the
material terms of this prospective joint venture arrangement and
how
it impacts your business. Please also elaborate in greater detail
on
the material terms of the option in the mining claims under the
letter agreement including the operations and purpose of the
Technical Committee. Lastly, Section 4 of letter agreement
contemplates the entering into of a service agreement with
Navasota
Resources. Please discuss.
35. We note your statement that you plan to determine whether the
Gold Creek property possesses economic quantities of gold. Please
elaborate on whether you plan to identify and exploit other
economically viable mineral deposits or whether your business is
limited to gold deposits, if identified. If you plan to limit
your
business to gold deposits, please address what your plans are with
respect to other mineral deposits, if identified.
Gold Creek Property, page 23
36. Please provide additional disclosure with respect to the