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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
COMMISSION FILE NUMBER 333-46886
KEYSTONE MINES LIMITED
(Exact name of registrant as specified in its charter)
NEVADA 88-0467848
(State of other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1040 West Georgia
Suite 1160
Vancouver, British Columbia
Canada V6E 4H1
(Address of principal executive offices)
(604) 605-0885
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of December 31, 2000: 5,000,000
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PART I
ITEM 1. FINANCIAL STATEMENTS
Board of Directors
Keystone Mines Limited
Vancouver, BC CANADA
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying balance sheet of Keystone Mines
Limited (an exploration stage enterprise), as of December 31, 2000,
and the related statements of operations, stockholders' equity
(deficit), and cash flows for the three and six months ended December
31, 2000, and for the period from June 26, 2000 (inception) to
December 31, 2000. All information included in these financial
statements is the representation of the management of Keystone Mines
Limited.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.
The financial statements for the period from June 26, 2000
(inception) to June 30, 2000 were audited by us and we expressed an
unqualified opinion on it in our report dated September 6, 2000,
except for Note 7, which was dated December 7, 2000. We have not
performed any auditing procedures since that date.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2, the Company has been in the exploration stage since its
inception on June 26, 2000 and has no revenues. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters also are
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
January 9, 2001
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
BALANCE SHEETS
December 31, June 30,
2000 2000
(Unaudited) (Restated)
ASSETS
CURRENT ASSETS
Cash $ 77 $ -
----------- ---------
Total Current Assets 77 -
----------- ---------
OTHER ASSETS
Mining claims 27 -
Prepaid expenses - 682
----------- ---------
Total Current Assets 27 682
----------- ---------
TOTAL ASSETS $ 104 $ 682
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 10,975 $ -
Related party payables 13,152 400
----------- ---------
Total Current Liabilities 24,127 400
----------- ---------
COMMITMENTS AND CONTINGENCIES - -
----------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized,
$0.00001 par value; 5,000,000 shares
issued and outstanding 50 50
Additional paid-in-capital 499,950 499,950
Stock subscriptions receivable - (795)
Deficit accumulated during
exploration stage (524,023) (498,923)
----------- ---------
Total Stockholders' Equity (Deficit) (24,023) 282
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 104 $ 682
=========== =========
See accompanying notes and accountant's review report.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
From
Three Months Six Months From 6-26-00
Ended Ended 6-26-00 (Inception)
12-31-00 12-31-00 (Inception) to 12-31-00
(Unaudited) (Unaudited) (Restated) (Unaudited)
REVENUES $ - $ - $ - $ -
------------ --------- ---------- ---------
EXPENSES
Accounting expenses 975 3,727 - 3,727
Consulting services
provided by directors - - 498,523 498,523
Mining exploration
expense - 1,337 - 1,337
Legal expenses 10,000 20,000 - 20,000
Filing fees - - 400 400
Office expense 15 56 - 56
TOTAL EXPENSES 10,990 25,120 498,923 524,043
------------ --------- ---------- ---------
LOSS FROM OPERATIONS (10,990) (25,120) (498,923) (524,043)
------------ --------- ---------- ---------
OTHER INCOME (EXPENSE)
Miscellaneous income - 20 - 20
------------ --------- ---------- ---------
TOTAL OTHER INCOME - 20 - 20
------------ --------- ---------- ---------
LOSS BEFORE INCOME TAXES (10,990) (25,100) (498,923) (524,023)
INCOME TAXES - - - -
------------ --------- ---------- ---------
NET LOSS $ (10,990) $ (25,100)$ (498,923) $(524,023)
============ ========= ========== =========
NET LOSS PER COMMON SHARE,
BASIC AND DILUTED $ nil $ nil $ (0.10) $ (0.10)
============ ========= ========== =========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING,
BASIC AND DILUTED 5,000,000 5,000,000 5,000,000 5,000,000
============ ========= ========== =========
See accompanying notes and accountant's review report.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit Total
Accumulated Stock Stock-
Common Stock Additional During the Sub- holders'
Number Paid-in Exploration scriptions Equity
of Shares Amount Capital Stage Receivable (Deficit)
Issuance of
common stock
for services
and in payment
of advances
at 5,000,000 $ 50 $ 499,950 $ - $ (795) $ 499,205
approximately
$0.10 per share
Loss for period
ending, 6-30-00 - - - (498,923) - (498,923)
--------- ----- ---------- ----------- ------- ----------
Balance, 6-30-00,
restated 5,000,000 50 499,950 (498,923) (795) 282
Payment of
subscriptions
receivable - - - - 795 795
Loss for the
six months
ended
12-31-00 - - - (25,100) - (25,100)
--------- ----- ---------- ----------- ------- ----------
Balance,
12-31-00
(Unaudited) 5,000,000 $ 50 $ 499,950 $ (524,023) $ - $ (24,023)
========= ===== ========== =========== ======= ==========
See accompanying notes and accountant's review report.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
From From
Six Months 6-26-00 6-26-00
Ended (Inception) (Inception)
12-31-00 to 6-30-00 to 12-31-00
(Unaudited) (Restated) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (25,100) $ (498,923) $ (524,023)
Adjustments to reconcile net
loss to cash provided (used)
in operating activities:
Increase in related party
payables 12,752 400 13,152
Decrease (increase) in
prepaid expenses 682 (682) -
Increase in mining claims (27) - (27)
Increase in accounts payable 10,975 - 10,975
Payment of expenses from
issuance of stock - 499,840 499,840
---------- ----------- ----------
Net cash provided (used) in
operating activities (718) 635 (83)
---------- ----------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES - - -
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock subscriptions
(sold) paid 795 (795) -
Proceeds from advances - 160 160
---------- ----------- ----------
Net cash provided (used) by
financing activities 795 (635) 160
---------- ----------- ----------
Change in cash 77 - 77
Cash, beginning of period - - -
---------- ----------- ----------
Cash, end of period $ 77 $ - $ 77
========== =========== ==========
Supplemental cash flow disclosures:
Interest paid $ - $ - $ -
========== =========== ==========
Income taxes paid $ - $ - $ -
========== =========== ==========
Non-cash transactions:
Stock issued in payment of consulting
and other expenses $ - $ 499,840 $ 499,840
========== =========== ==========
Stock issued in payment
of advances $ - $ 133 $ 133
========== =========== ==========
Stock issued in payment of
mining claims $ - $ 27 $ 27
========== =========== ==========
See accompanying notes and accountant's review report.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENT
December 31, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Keystone Mines Limited (hereinafter "the Company") was incorporated
on June 26, 2000 under the laws of the State of Nevada for the
purpose of acquiring, exploring and developing mining properties.
The Company maintains offices in Vancouver, British Columbia. The
Company's fiscal year end is June 30.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to
assist in understanding the financial statements. The financial
statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of
the financial statements.
Interim Financial Statements
The interim financial statements as of December 31, 2000 and for the
six months ended December 31, 2000, included herein, have been
prepared for the Company without audit. They reflect all
adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. All such
adjustments are normal recurring adjustments. The results of
operations for the periods presented are not necessarily indicative
of the results to be expected for the full fiscal year.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Exploration Stage Activities
The Company has been in the exploration stage since its formation in
June 2000 and has not yet realized any revenues from its planned
operations. It is primarily engaged in the acquisition, exploration
and development of mining properties. Upon location of a commercial
minable reserve, the Company will actively prepare the site for
extraction and enter a development stage.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENT
December 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all short-term debt securities purchased with a maturity of three
months or less to be cash equivalents.
Foreign Currency Valuation
The Company's functional currency is the United States dollar.
Occasional transactions occur in Canadian currency, and management
has elected to value foreign currency transactions on the date the
transaction concludes. The conversion is calculated by multiplying
the foreign currency value by the exchange rate at the close of the
nearest trading day.
Concentration of Risk
The Company maintains its cash accounts in primarily one commercial
bank in Vancouver, British Columbia, Canada. The Company's cash
account is a business checking account maintained in U.S. dollars,
which totaled $77 as of December 31, 2000. This account is not
insured.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at
fair value.
At December 31, 2000, the Company has not engaged in any transactions
that would be considered derivative instruments or hedging
activities.
Fair Value of Financial Instruments
The carrying amounts for cash and payables approximate their fair
value.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement, SFAS No. 121, titled "Accounting for Impairment of Long-
lived Assets." In complying with this standard, the Company reviews
its long-lived assets quarterly to determine if any events or changes
in circumstances have transpired which indicate that the carrying
value of its assets may not be recoverable. The Company does not
believe any adjustments are needed to the carrying value of its
assets at December 31, 2000.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENT
December 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Exploration Costs
In accordance with generally accepted accounting principles, the
Company expenses exploration costs as incurred.
Compensated Absences
Currently, the Company has no employees; therefore, no policy
regarding compensated absences has been established. The Company
will establish a policy to recognize the costs of compensated
absences at the point in time that it has employees.
Provision for Taxes
At December 31, 2000, the Company had accumulated net operating
losses of approximately $520,000. No provision for taxes or tax
benefit has been reported in the financial statements, as there is
not a measurable means of assessing future profits or losses.
Basic and Diluted Loss Per share
Loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the period. The weighted
average number of shares was calculated by taking the number of
shares outstanding and weighting them by the amount of time that they
were outstanding. Basic and diluted loss per share were the same, as
there were no common stock equivalents outstanding.
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company
incurred a net loss of $524,023 for the period of June 26, 2000
(inception) to December 31, 2000 and had no sales. The future of the
Company is dependent upon its ability to obtain financing and upon
future successful exploration for and profitable operations from the
development of mineral properties.
Management has plans to seek additional capital through a private
placement and public offering of its common stock. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENT
December 31, 2000
NOTE 3 - MINING CLAIMS
The Company, through Mr. Mike Muzylowski, its president and a member
of the board of directors, acquired 100% of the rights, titles and
interests in four mining claims in the Greenwood Mining Division,
Beaverdell, British Columbia, Canada.
Payment of $27 was required to record the four mining claims. This
amount was paid by the shareholders and repaid by the Company in the
form of stock. See Note 4. Although the claims are recorded in Mr.
Muzylowski's name for tax purposes, title to the claims has been
conveyed to the Company via an unrecorded deed.
NOTE 4 - COMMON STOCK
During June 2000, a total of 5,000,000 shares of common stock were
issued to officers and directors only. There was no public offering
of any securities. The value of the shares issued to the officers
was determined by multiplying the number of shares issued by the
price being asked in the initial public offering of the Company's
stock. The aforementioned shares were issued in payment of services
of $499,840 and advances of $160. A portion of the shares was
initially issued in anticipation of payment of expenses on behalf of
the Company by the Company's officers and directors. The unpaid
portion of issued shares was deemed to be a stock subscription and
classified as such on the June 30, 2000 balance sheet. As of
December 31, 2000, the subscribed shares were paid in full.
NOTE 5 - RELATED PARTIES
The Company occupies office space provided by Mr. Muzylowski, its
president, in his capacity as president and director of Callinan
Mines Limited at no charge. The value of this space is not
considered materially significant for financial reporting purposes.
Mr. Muzylowski and Mr. Carlo Civelli, both directors of the Company,
have advanced monies to the Company to open a checking account, and
in payment of expenses. The funds advanced were repaid as part of
the original stock issuance transaction. See Note 4.
In addition, Mr. Muzylowski, who has advanced $13,152 in payment of
incorporation, audit fees, attorney's fees, and other incidental
expenses, has agreed to receive reimbursement when the Company has
the appropriate cash flow for such reimbursement. The funds advanced
are uncollateralized and non-interest bearing.
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KEYSTONE MINES LIMITED
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENT
December 31, 2000
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Mining Industry
The Company is engaged in the exploration and development of mineral
properties. At present, there are no feasibility studies
establishing proven and probable reserves.
Although the minerals exploration and mining industries are
inherently speculative and subject to complex environmental
regulations, the Company is unaware of any pending litigation or of
any specific past or prospective matters which could impair the value
of its mining claims.
Foreign Operations
The accompanying balance sheet includes $104 relating to the
Company's assets in Canada. Although this country is considered
politically and economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Company's
operations.
NOTE 7 - CORRECTION OF AN ERROR
The accompanying financial statements for June 30, 2000, have been
restated to correct an error in the valuation of shares received by
officers in June 2000. The effect of the restatement was to decrease
net income for June 30, 2000 by $225,000 ($0.05 per share).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section 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 states are
subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results or out
predictions.
We are a start-up, exploration stage company and have not yet
generated or realized any revenues from our business operations.
Our auditors have issued a going concern opinion. This means
that our auditors believe there is doubt that we can continue as an
on-going business for the next twelve months unless we obtain
additional capital to pay our bills. This is because we have not
generated any revenues and no revenues are anticipated until we begin
removing and selling minerals. Accordingly, we must raise cash from
sources other than the sale of minerals found on our property. That
cash must be raised from other sources. Our only other source for
cash at this time is investments by others in our company. We must
raise cash to implement our project and stay in business.
To meet our need for cash we are attempting to raise money from
this offering. There is no assurance that we will be able to raise
enough money through this offering to stay in business. What ever
money we do raise, will be applied first to exploration and then to
development, if development is warranted. If we do not raise all of
the money we need from this offering, we will have to find
alternative sources, like a second public offering, a private
placement of securities, or loans from our officers or others. We
have discussed this matter with our officers, however, our officers
are unwilling to make any commitment to loan us any money at this
time. At the present time, we have not made any arrangements to
raise additional cash other than through our public offering. If we
need additional cash and can't raise it we will either have to
suspend operations until we do raise the cash, or cease operations
entirely.
We will be conducting research in connection with the
exploration of our property. We are not going to buy or sell any
plant or significant equipment. We do not expect a change in our
number of employees.
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Limited Operating History; Need for Additional Capital
There is no historical financial information about our company
upon which to base an evaluation of our performance. We are an
exploration stage company and have not generated any revenues from
operations. We cannot guarantee we will be successful in our business
operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital
resources, possible delays in the exploration of our properties, and
possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we conduct into the
research and exploration of our properties before we start
production of any minerals we may find. We are seeking equity
financing to provide for the capital required to implement our
research and exploration phases.
We have no assurance that future financing will be available to
us on acceptable terms. If financing is not available on
satisfactory terms, we may be unable to continue, develop or expand
our operations. Equity financing could result in additional dilution
to existing shareholders.
Results of Operations
From Inception on June 26, 2000
We just recently acquired our first property and are commencing
the research and exploration stage of our mining operations on that
property at this time.
Since inception, we have used our common stock to raise money
for our property acquisition, for corporate expenses and to repay
outstanding indebtedness.
Liquidity and Capital Resources
As of the date of this report, we have yet to generate any
revenues from our business operations.
We issued 5,000,000 shares of common stock through a Section
4(2) offering in June 2000. This was accounted for as a compensation
expense of $498,523 and advances and reimbursement expenses of
$1,477.
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Since our inception, Mr. Muzylowski, has paid expenses from us
in the total sum of $13,152, which included organizational and
start-up costs and operating capital. The loans do not bear interest
and have not been paid as of the date hereof. There are no documents
reflecting the loan and they are not due on a specific date. Mr.
Muzylowski will accept repayment from us when money is available. We
intend to repay the $13,152 loaned to us from the proceeds of our
public offering.
As of December 31, 2000, our total assets were $104 and our
total liabilities were $24,127.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on this 6th day
of February, 2001
KEYSTONE MINES LIMITED
(Registrant)
By: /s/ Mike Muzylowski
Mike Muzylowski, President
Treasurer, Principal Accounting
Officer and a member of the Board
of Directors