UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended December 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________to___________
Commission file number 333-102117
MAYFAIR MINING & MINERALS, INC.
-------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 45-0487294
- ------ ----------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
South Lodge, Paxhill Park, Lindfield, West Sussex, RH16 2QY, UK
- ---------------------------------------------------------------
(Address of principal executive offices)
44-(1444)-220210
- ----------------
(Issuer's Telephone Number)
The Priory, Haywards Heath, West Sussex, RH16 3LB, UK
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Outstanding as of July 30, 2007: 16,369,000 common shares.
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that are not based on historical
fact and that involve predictions of future events based on assessments of
certain risks, developments, and uncertainties. Such forward looking statements,
within the meaning of the Private Securities Litigation Reform Act of 1995, can
be identified by the use of forward-looking terminology such as "may", "will",
"should", "expect", "anticipate", estimate", "intend", "continue", or "believe",
or the negatives or other variations of these terms or comparable terminology.
Forward looking statements may include projections, forecasts, or estimates of
future performance. Forward looking statements are based upon assumptions that
we believe to be reasonable at the time such forward looking statements are
made. Whether those assumptions will be realized will be determined by future
factors, developments, and events, which are difficult to predict and may be
beyond our control. Actual factors, developments, and events may differ
materially from those assumed. Such uncertainties, contingencies, and
developments, including those discussed in Item 2 in Management's Discussion and
Analysis of Financial Condition and Results of Operations, could cause our
future operating results to differ materially from those set forth in any
forward looking statement. Accordingly, there can be no assurance that any such
forward looking statement, projection, forecast or estimate can be realized or
that actual returns or results will not be materially lower than those that may
be estimated.
Given these uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements. The Company disclaims any obligation to update
any such factors or to publicly announce the results of any revisions to any of
the forward-looking statements contained herein to reflect future results,
events or developments.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following interim unaudited financial statements for the period ended
December 31, 2006 have been prepared by the Company.
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
(STATED IN U.S. DOLLARS)
3
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------
DECEMBER 31 MARCH 31
2006
(UNAUDITED) 2006
- --------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 12,032 $ 1,122,532
Accounts receivable 144,070 -
Prepaid expenses 2,358 -
----------------------------------------
TOTAL CURRENT ASSETS 158,460 1,122,532
PROPERTY AND EQUIPMENT 192,256 58,940
MINERAL PROPERTY INTERESTS 716,376 64,286
----------------------------------------
$ 1,067,092 1,245,758
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities 506,824 101,952
Related party payable $ 23,000 $ 2,000
----------------------------------------
529,824 103,952
MINORITY INTEREST - 9,218
----------------------------------------
TOTAL LIABILITIES 529,824 113,170
----------------------------------------
SHAREHOLDERS' EQUITY
COMMON STOCK
Authorized:75,000,000 shares , par value $0.001 per share Issued and
outstanding:
16,365,000 common shares at December 31, 2006 and
12,149,000 common shares at March 31, 2006 16,365 12,149
Common stock subscribed - 1,170,500
Additional paid-in capital 5,071,469 1,759,935
DEFICIT ACCUMULATED DURING EXPLORATION STAGE (4,550,566) (1,809,996)
----------------------------------------
TOTAL SHAREHOLDERS EQUITY 537,268 1,132,588
----------------------------------------
$ 1,067,092 $ 1,245,758
=====================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
4
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
PERIOD FROM
INCEPTION
AUGUST 14
THREE MONTHS ENDED NINE MONTHS ENDED 2002 TO
DECEMBER 31 DECEMBER 31 DECEMBER 31
2006 2005 2006 2005 2006
- ------------------------------------------------------------------------------------------------------------------------------------
SALES $ 12,195 $ - $ 100,192 $ - $ 100,192
EXPENSES
Exploration expense $ 146,266 $ 27,127 $ 676,397 $ 64,208 $ 808,661
Office and sundry 28,883 7,079 103,122 42,441 202,446
Organizational costs - - - - 1,215
Professional fees 39,887 8,818 180,234 42,046 348,700
Salaries 38,776 18,964 112,890 53,780 198,182
Stock-based compensation - - 1,372,000 - 2,407,000
Travel 37,816 15,074 99,876 47,230 221,272
Mineral property acquisition
costs (Note 3) - - 40,461 - 41,832
Management fees 90,000 36,000 265,000 113,000 485,736
----------------------------------------------------------------------------------------------
LOSS FOR PERIOD BEFORE MINORITY
INTERESTS (369,433) (113,062) (2,749,788) (362,705) (4,614,852)
MINORITY INTEREST LOSS OF
SUBSIDIARY - 11,228 9,218 28,891 64,286
----------------------------------------------------------------------------------------------
NET LOSS FOR PERIOD $ (369,433) $ (101,834) $ (2,740,570) $ (333,814) $ (4,550,566)
====================================================================================================================================
BASIC DILUTED (LOSS) PER
SHARE $ (0.02) $ (0.01) $ (0.17) $ (0.03)
=================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 16,635,000 12,149,000 14,686,006 12,128,276
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
5
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
CUMULATIVE
PERIOD FROM
INCEPTION
NINE MONTHS ENDED AUGUST 14 2002
DECEMBER 31 TO DEC 31
2006 2005 2006
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,740,570) $ (333,814) $(4,550,566)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY
OPERATING ACTIVITIES
Stock-based compensation 1,372,000 -- 2,407,000
Minority interest in loss of consolidated subsidiary (9,218) (28,891) (64,286)
Charitable donation of office furniture 50,000 -- 50,000
Amortization -- 3,381 --
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable (144,070) -- (144,070)
Prepaid expenses (2,358) 225 (2,358)
Accounts payable and accrued liabilities 425,872 3,299 529,824
-------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (1,048,344) (355,800) (1,774,456)
-------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (417,906) (37,462) (476,846)
-------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (417,906) (37,462) (476,846)
-------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued 355,750 74,500 2,282,750
Share subscriptions received -- 140,000 --
Capital stock issue costs -- -- (19,416)
-------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 355,750 214,500 2,263,334
-------------------------------------------------
NET (DECREASE) INCREASE IN CASH (1,110,500) (178,762) 12,032
CASH, BEGINNING OF PERIOD 1,122,532 495,745 --
-------------------------------------------------
CASH, END OF PERIOD $ 12,032 $ 316,983 $ 12,032
=======================================================================================================================
INTEREST PAID $ -- $ -- $ --
INCOME TAXES PAID $ -- $ -- $ --
=======================================================================================================================
NON CASH INVESTING AND FINANCING ACTIVITIES
Issuance of stock in exchange for acquisition of equipment $ 50,000 $ -- $ 50,000
6
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
DECEMBER 31, 2006
(UNAUDITED)
COMMON STOCK DEFICIT
--------------------------------------------- ACCUMULATED
ADDITIONAL SHARE DURING THE
PAID-IN SUBSCRIPTIONS EXPLORATION
SHARES AMOUNT CAPITAL RECEIVED STAGE TOTAL
--------------------------------------------------------------------------------------------------
Shares issued for cash at
$0.001 7,000,000 $ 7,000 $ -- $ -- $ -- $ 7,000
Related party loan payable
contributed as capital -- -- 16,536 -- -- 16,536
Net loss for the period -- -- -- -- (3,291) (3,291)
-----------------------------------------------------------------------------------------------
Balance, March 31, 2003 7,000,000 7,000 16,536 -- (3,291) 20,245
Related party loan payable
Contributed as capital -- -- 7,075 -- -- 7,075
Shares issued for cash at
$0.10, net of share issue
costs of $19,416 1,500,000 1,500 129,084 -- -- 130,584
Net loss for the year -- -- -- -- (31,472) (31,472)
-----------------------------------------------------------------------------------------------
Balance, March 31, 2004 8,500,000 8,500 152,695 -- (34,763) 126,432
Repayment of related party
loan contributed as capital -- -- (23,611) -- -- (23,611)
Shares issued for cash at $0.15 3,500,000 3,500 521,500 -- -- 525,000
Stock-based compensation -- -- 659,000 -- -- 659,000
Net loss for the year -- -- -- -- (801,478) (801,478)
-----------------------------------------------------------------------------------------------
Balance, March 31, 2005 12,000,000 12,000 1,309,584 -- (836,241) 485,343
Shares issued for cash at
$0.50 149,000 149 74,351 -- -- 74,500
Share subscriptions received -- -- -- 1,170,500 -- 1,170,500
Stock-based -- 376,000
Compensation
Net loss for the year -- -- 376,000 -- (973,755) (973,755)
-----------------------------------------------------------------------------------------------
Balance, March 31, 2006
Continued 12,149,000 $ 12,149 $ 1,759,935 $ 1,170,500 $(1,809,996) $ 1,132,588
===========
The accompanying notes are an integral part of these consolidated financial statements
7
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
DECEMBER 31, 2006
(UNAUDITED)
COMMON STOCK DEFICIT
--------------------------------------------- ACCUMULATED
ADDITIONAL SHARE DURING THE
PAID-IN SUBSCRIPTIONS EXPLORATION
SHARES AMOUNT CAPITAL RECEIVED STAGE TOTAL
--------------------------------------------------------------------------------------------------
Continued
- ---------
Balance, March 31, 2006 12,149,000 $ 12,149 $ 1,759,935 $ 1,170,500 $ (1,809,996) $ 1,132,588
Shares issued for cash at
$0.50 430,000 430 214,570 215,000
Shares allocated from share
subscriptions 2,341,000 2,341 1,168,159 (1,170,500) --
Shares issued for acquisition
of office furniture 100,000 100 49,900 50,000
Shares issued for acquisition
of subsidiary 490,000 490 367,010 367,500
Share options received 30,000 30,000
Stock based compensation 1,372,000 1,372,000
Net loss for the period (1,913,820) (1,913,820)
-----------------------------------------------------------------------------------------------
Balance, June 30, 2006 15,510,000 $ 15,510 $ 4,931,574 $ 30,000 $ (3,723,816) $ 1,253,268
Share options received 93,750 93,750
Share subscriptions received 17,000 17,000
Net loss for the period (457,317) (457,317)
-----------------------------------------------------------------------------------------------
Balance, 30 Sept, 2006 15,510,000 $ 15,510 $ 4,931,574 $ 140,750 $ (4,181,133) 906,701
Shares allocated from share
subscriptions 855,000 855 139,895 (140,750) --
Net loss for the period (369,433) (369,433)
-----------------------------------------------------------------------------------------------
Balance, December 31, 2006 16,365,000 16,365 5,071,469 -- (4,550,566) 537,268
==============================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
8
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of Mayfair Mining &
Minerals, Inc. and Subsidiaries (the "Company") have been prepared with
generally accepted accounting principles in the United States of America
for interim consolidated financial information. Accordingly, they do not
include all of the information and notes necessary for comprehensive
consolidated financial statements.
The unaudited financial information in the accompanying financial
statements reflects all adjustments, based on management's estimates, which
in the opinion of management are necessary to fairly state the Company's
financial position and the results of its operations for the periods
presented. This report on Form 10-QSB should be read in conjunction with
the Company's financial statements and notes thereto included in the
Company's Form 10-KSB for the fiscal year ended March 31, 2006. The Company
assumes that the users of the interim financial information herein have
read or have access to the audited financial statements for the preceding
fiscal year and that the adequacy of additional disclosure needed for a
fair presentation may be determined in that context. Accordingly, footnote
disclosure, which would substantially duplicate the disclosure contained in
the Company's Form 10-KSB for the fiscal year ended March 31, 2006, has
been omitted. The results of operations for the six-month period ended
December 31, 2006, are not necessarily indicative of results for the entire
year ending March 31, 2007.
As further described in note 3, the Company does not have an independent
valuation for the assets and liabilities assumed in the acquisition of
Union Prospection Miniere. Accordingly, the recorded amounts of the
purchase price allocation is subject to further adjustment, as the Company
is awaiting additional information related to the fair value of the
licences acquired. Accordingly, the values assigned are based on the
estimated values for assets and liabilities assumed relating to mineral
property licences, accounts receivable, property plant and equipment,
intangible assets and accounts payable and accrued expenses. The Company
initially expected to receive this information no later than twelve months
following the date of the acquisition. However, difficulties in identifying
a qualified valuation specialist has delayed this process. The Company
recently retained a valuation specialist and expects to complete the
evaluation by August 2007. The accompanying financial statements do not
reflect any adjustment that may result from the outcome of the valuation
report, should any adjustment be required.
The accompanying consolidated financial statements have, in management's
opinion, been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies summarized
below:
9
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Consolidation.
The accompanying consolidated financial statements include the accounts of
Mayfair Mining & Minerals, Inc., its wholly-owned subsidiaries Mayfair
Mining & Minerals (UK) Ltd. Mayfair Mining & Minerals (Madagascar) and
Mayfair Gemstones Ltd, and its 70%-owned subsidiary Mayfair Mining and
Minerals (Zambia) Ltd. All significant inter-company balances and
transactions have been eliminated in consolidation.
Organization
The Company was incorporated in the State of Nevada, U.S.A., on August 14,
2002.
Exploration Stage Activities
The Company has been in the exploration stage since its formation and has
realized minimal revenues from its planned operations in the last three
quarters. It is primarily engaged in the acquisition and exploration of
mining properties. Upon location of commercial minable reserves, the
Company expects to actively prepare the site for its extraction and enter a
development stage.
Going Concern
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company has accumulated a deficit of $4,550,566
and a working capital deficiency of $371,364 at December 31, 2006, and has
had continuous net losses since inception, including a net loss of $369,433
and $2,740,570 during the three and nine months ended December 31, 2006,
respectively. The future of the Company is dependent upon its ability to
obtain financing and upon future profitable operations from the development
of its mineral properties. Management has plans to seek additional capital
through a public offering of its common stock. Accordingly there is
substantial doubt about the company's ability to continue as a going
concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts
of and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.
10
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Organizational and Start Up Costs
Costs of start up activities, including organizational costs, are expensed
as incurred.
Cash and Cash Equivalents
Cash equivalents comprise certain highly liquid instruments with a maturity
of three months or less when purchased. As of December 31, 2006 and 2005,
cash and cash equivalents consists of cash only.
Accounts Receivable
No allowance has been made for doubtful accounts. The Company believes that
the receivables are fully collectible.
Mineral Property Acquisition Payments and Exploration Costs
The Company records its interest in mineral properties at cost. The Company
expenses all costs incurred on mineral properties to which it has secured
exploration rights, other than acquisition costs, prior to the
establishment of proven and probable reserves. If and when proven and
probable reserves are determined for a property and a feasibility study
prepared with respect to the property, then subsequent exploration and
development costs of the property will be capitalized.
Property and Equipment
Vehicle, equipment and web-site costs are depreciated on a straight-line
basis over useful lives ranging from 3 to 8 years.
11
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 for
the reporting period. Actual results could differ from these estimates.
Foreign Currency Translation
The Company's functional currency is the U.S. dollar. Transactions in
foreign currency are translated into U.S. dollars as follows:
i) monetary items at the rate prevailing at the balance sheet date;
ii) non-monetary items at the historical exchange rate;
iii) revenue and expense at the average rate in effect during the
applicable accounting period.
Gains and losses on translation are recorded in the consolidated statement
of operations.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
- "Accounting for Income taxes" (SFAS 109). This standard requires the use
of an asset and liability approach for financial accounting, and reporting
on income taxes. If it is more likely than not that some portion or all of
a deferred tax asset will not be realized, a valuation allowance is
recognized.
Stock Based Compensation
The Company has adopted Statement of Financial Accounting Standards No. 123
(revised 2004) - "Stock Based Payment" to account for stock based
transactions with employees, officers, directors, and outside consultants.
Accordingly, the fair value of stock options is charged to operations or
resource property costs as appropriate, with an offsetting credit to
contributed surplus. The fair value of stock options which vest immediately
is recorded at the date of grant; the fair value of options which vest in
future is recognized on a straight-line basis over the vesting period. Any
consideration received on exercise of stock options together with the
related portion of contributed surplus is credited to share capital.
12
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Environmental Remediation and Reclamation Expenditures
The operations of the Company may in the future be affected from time to
time in varying degree by changes in environmental regulations, including
those for future removal and site restoration costs. Both the likelihood of
new regulations and their overall effect upon the Company vary greatly and
are not predictable.
The Company is in the early stages of exploring its resource properties.
Remediation and reclamation expenditures will be charged against earnings
as incurred. No remediation and reclamation expenditure have been incurred
to date.
Basic and Diluted Loss Per Share
In accordance with SFAS No. 128 - "Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding.
Diluted loss per common share is computed similar to basic loss per common
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. At December 31, 2006 and 2005, any outstanding stock equivalents
were anti-dilutive so basic and diluted loss per share are the same.
Financial Instruments
The carrying amounts of all financial instruments, reflected in the
accompanying financial statements, approximate their fair value.
13
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-Lived Assets Impairment
Long-lived assets are reviewed for impairment when circumstances indicate
the carrying value of an asset may not be recoverable in accordance with
the guidance established in Statement of Financial Accounting Standards
("SFAS") No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
ASSETS . For assets that are to be held and used, an impairment loss is
recognized when the estimated undiscounted cash flows associated with the
asset or group of assets is less than their carrying value. If impairment
exists, an adjustment is made to write the asset down to its fair value,
and a loss is recorded as the difference between the carrying value and
fair value. Fair values are determined based on discounted cash flows or
internal and external appraisals, as applicable. Assets to be disposed of
are carried at the lower of carrying value or estimated net realizable
value. As at December 31, 2006 and 2005, the Company does not believe any
adjustment for impairment is required
Asset Retirement Obligations
The Company has adopted SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred.
SFAS No. 143 requires a liability to be recorded for the present value of
the estimated site restoration costs with corresponding increase to the
carrying amount of the related long-lived asset. The liability will be
accreted and the asset will be depreciated over the life of the related
assets. Adjustments for changes resulting from the passage of time and
changes to either the timing or amount of the original present value
estimate underlying the obligation will be made. The Company has not
recorded any asset retirement obligation to date as the amounts, if any,
are not significant at this time.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, FASB issued Statement of Financial Accounting Standards
No. 123 (revised 2004) ("SFAS 123"), "Share-Based Payment". The Statement
establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all entities to apply a
fair-value-based measurement in accounting for share-based payment
transactions with employees. The Company adopted SFAS 123 effective April
1, 2004.
14
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
2. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In March 2005, the Securities and Exchange Commission, (SEC issued Staff
Accounting Bulletin No.107 (SAB 107) which provides guidance regarding the
interaction of SFAS 123(R) and certain SEC rules and regulations. The new
guidance includes the SEC's view on the valuation of share-based payment
arrangements for public companies and may simplify some of SFAS 123(R)'s
implementation challenges for registrants and enhance the information
investors receive.
In September 2006 the FASB issued FASB Statement No. 157, FAIR VALUE
MEASUREMENTS (SFAS 157). SFAS 157 provides enhanced guidance for using fair
value to measure assets and liabilities. The standard also responds to
investors' requests for expanded information about the extent to which
companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. The standard applies whenever other standards require (or permit)
assets or liabilities to be measured at fair value. The standard does not
expand the use of fair value in any new circumstances. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15. 2007, and interim periods within those fiscal years. Early
adoption is permitted. The Company is currently evaluating the effect that
the adoption of SFAS 157 will have on its financial position and results of
operations.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation 48 (FIN 48). Accounting for Uncertainty in Income Taxes. FIN
48 clarifies the accounting for uncertainty in income taxes recognized in
an enterprise's financial statements in accordance with Statement of
Financial Accounting Standard (SFAS 109). Accounting for Income Taxes. This
Interpretation defines the minimum recognition threshold a tax position is
required to meet before being recognized in the financial statements. FIN
48 is effective for fiscal years beginning after December 15, 2006. The
Company is currently evaluating the effect that the adoption of FIN 48 will
have on its financial position and results of operations.
15
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
3. MINERAL PROPERTY INTERESTS
a) Zambia
On January 17, 2005, the Company entered into an agreement with two
Zambian private companies under which Mayfair Mining & Minerals
(Zambia) Limited ("Mayfair Zambia"), a private company, was formed.
(`The Agreement')
Under the Agreement, the Company agreed to provide a loan of $150,000
to Mayfair Zambia as the first year's budget to incorporate Mayfair
Zambia and set up the infrastructure necessary to perform three years
of work programs, and to fund plant requirements to reopen an amethyst
mine. As consideration for making the loan, the Company received a 70%
equity interest in Mayfair Zambia. The Company will be repaid the loan
from proceeds from mining operations, if any.
The Company is required to advance $12,500 of loan proceeds per month
but has the right to withdraw further funding obligations at any time
if it determines that the project is no longer feasible. As at December
31, 2006, the Company had advanced $425,579 (December 31, 2005 -
$143,725).
The two Zambian private companies transferred all their rights and
interests to mining licenses in three prospective mining projects to
Mayfair Zambia in return for a 30% equity interest. The mineral
properties acquired under the Arrangement have been recorded at an
estimated fair value of $64,286.
Under the terms of the Agreement, two principals of the non-controlling
interest holders are employed under contract to direct the day to day
working operations of Mayfair Zambia at a monthly salary of $2,500 each
from 1 April 2006. The employment contract is for one year and is
automatically renewable each year unless either party provides one
month's termination notice. For the nine months ended December 31,
2006, the Company paid $45,000 (December 31, 2005 - $27,000)
The Agreement is for a ten year term, and shall continue for successive
ten year terms unless otherwise terminated.
16
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
3. MINERAL PROPERTY INTERESTS (Continued)
Mayfair Zambia's summarized financial information is as follows:
2006 2005
Current Assets $ 169 $ 9,877
Non-current assets 125,094 127,603
--------- ---------
125,263 127,480
Inter-company assets -- 6,275
--------- ---------
Total Assets $ 125,263 $ 133,755
========= =========
Current Liabilities $ 20,743 $ --
Non-current liabilities -- 32,815
--------- ---------
20,743 32,815
Inter-company liabilities 425,579 3,000
--------- ---------
Total Liabilities $ 446,322 $ 35,815
========= =========
Net revenue $ -- $ --
Net income (loss) $ ( 155,568) $ (41,212)
b) Madagascar
On April 18, 2006, the Company entered into an agreement to acquire a
51% interest in a Madagascan private company, Union Prospection Miniere
which controls 16 sapphire licenses covering an area of 1,487 square
kilometres for a consideration of (pound)640,000 plus legal expenses.
This was financed from existing cash reserves. On May 26, 2006, the
Company completed the agreement.
17
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
3. MINERAL PROPERTY INTERESTS (Continued)
On June 29, 2006, the Company entered into an agreement to acquire the
remaining 49% interest in the Madagascan private company which controls
16 sapphire licenses for a consideration of 490,000 restricted common
shares in the company. The Company now owns 100% of the Madagascan
private company. The licences consist of 15 research permits, valid for
10 years and renewable for a further 5 years and 1 exploitation permit,
valid for 40 years and renewable for 20 year periods without limit. The
Company has no contractual obligations in place with the Madagascan
company.
The determination of the purchase price and its allocation to the fair
values of the assets acquired and liabilities acquired as reflected in
the consolidated financial statements have been based on the
management's estimate (see Note 1). The estimated fair value of the
assets and liabilities assumed in the in the acquisition of Union
Prospection Miniere are as follows:
Mineral Property Licences 652,090
Accounts receivable 60,003
Property, plant, other assets and equipment 393,860
Intangible assets 9
Accounts payable and accrued expenses (98,462)
--------------
Net assets acquired 1,007,500
--------------
The purchase price allocation is subject to adjustment, as the Company
is awaiting additional information related to the fair value of the
licences acquired. The Company expected to receive this information no
later than twelve months following the date of the acquisition.
However, difficulties in identifying a qualified valuation specialist
has delayed this process. The Company recently retained a valuation
specialist and expects to complete the evaluation by August 2007. (see
Note 1)
Summarized below are the pro forma unaudited results of operations for
the nine months ended December 31, 2006 as if the results of Union
Prospection Miniere were included for the entire period presented. The
pro forma results may not be indicative of the results that would have
occurred if the acquisition had been completed at the beginning of the
period presented or which may be obtained in the future:
For the nine
months ended
December 31, 2006
Revenue $ 100,082
Net Loss $ (455,316)
18
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
4. ACQUISITIONS
a) Mayfair Mining and Minerals (UK) Limited
On November 17, 2004, the Company acquired all of the issued and
outstanding shares of an inactive corporation owned by its principal
shareholder by assuming $10 of debt.
b) Mayfair Gemstones Limited.
On February 11, 2005, the Company incorporated Mayfair Gemstones
Limited.
c) Union Prospection Miniere.
On April 18, 2006, the Company acquired 51% of Union Prospection
Miniere. On June 29, 2006, the Company acquired the remaining 49% and
now owns 100% of Union Prospection Miniere.
5. RELATED PARTY TRANSACTIONS
During the nine months ended December 31, 2006, the Company paid management
fees amounting to $130,000 (December 31, 2005 - $95,000) to two directors.
Of this amount, $25,000 (December 31,2005 - $5,000) was outstanding and
included in accounts payable and accrued liabilities at December 31, 2006.
During the nine months ended December 31, 2006, the Company paid management
fees amounting to $108,000 (December 31, 2005 - $23,000) to two members of
its advisory board. Of this amount $23,000 (December 31, 2005 - $2,000) was
outstanding and included in accounts payable and accrued liabilities at
December 31, 2006.
6. CAPITAL STOCK
Common Shares
As of December 31, 2006 there were 110 registered holders of common stock.
There were 16,365,000 shares issued of which 13,772,550 are restricted.
19
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
7. STOCK OPTIONS
Stock Option transactions are summarized as follows:
WEIGHTED
NUMBER AVERAGE WEIGHTED
CONTRACTUAL OF EXERCISE REMAINING
SHARES PRICE LIFE
PER SHARE IN YEARS
--------------------------------------------
Outstanding and exercisable as at April1, 2006 1,800,000 $ 0.15 2.45
Granted 200,000 0.15 2.67
Granted 2,000,000 0.50 2.67
Exercised 825,000 0.15
--------------------------------------------
Balance as at December 31, 2006 3,175,000 $ 0.32
============================================
No stock options were granted during the three months ended December
31, 2006.
The following weighted average assumptions were used for the
Black-Scholes valuations of stock options granted:
Dividend yield 0
Expected volatility 175%
Risk free interest rate 3.25%
Expected life from the date of grant 3 years
Changes in the subjective input assumptions can materially affect the
fair value estimate and, therefore, the existing models do not
necessarily provide a reliable measure of the fair value of the
Company's stock options.
20
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
8. INCOME TAXES
The Company is subject to United States income taxes, and United Kingdom
and Zambia income taxes (to the extent of its operations in the United
Kingdom, Zambia and Madagascar). The Company had no income tax expense
during the reported periods due to net operating losses.
a) A reconciliation of income tax expense to the amount computed at the
statutory rates is as follows:
9 MONTHS TO Year to
DECEMBER 30 March 31
2006 2006
-------------------------------
Loss for the period $(2,740,570) $(1,026,243)
Average statutory tax rate 35% 35%
Expected income tax provision (965,000) (359,000)
Non-deductible stock based compensation 480,000 131,000
Increase in valuation allowance 485,000 228,000
-------------------------------
Income tax expense $ -- $ --
===============================
b) Significant components of the Company's deferred income tax assets are
as follows:
DECEMBER 31 March 31
2006 2006
-----------------------------
Total income tax operating loss carry forward $ 2,224,000 $ 830,000
Statutory tax rate 35% 35%
Deferred income tax asset 778,000 290,000
Valuation allowance (778,000) (290,000)
-----------------------------
$ -- $ --
=============================
21
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(STATED IN U.S. DOLLARS)
9. INCOME TAXES (Continued)
c) The Company has incurred operating losses for tax purposes of
approximately $830,000 which, if unutilized, may expire depending on
the jurisdiction. Future tax benefits, which may arise as a result of
these losses and which are subject to the fiscal laws in the
jurisdictions concerned at the time of claiming relief, have not been
recognized in these consolidated financial statements, and have been
offset by a valuation allowance. The following table lists the fiscal
year in which the loss was incurred and the expiration date of the
operating loss carry forwards if applicable by jurisdiction:
EXPIRATION
DATE OF
INCOME TAX
OPERATING
NET LOSS CARRY
LOSS FORWARDS
-------------- ------------
United States
-------------
2003 $ 3,000 2023
2004 32,000 2024
2005 136,000 2025
2006 434,000 2026
2007 991,000 2027
Zambia
------
2005 9,000 2010
2006 175,000 2011
2007 202,000 2012
United Kingdom
--------------
2006 41,000 *
2007 62,000 *
Total income tax operating loss carry forward $ 2,085,000
-------------
* Tax losses incurred in the United Kingdom can be carried forward indefinitely
and offset against future profits of the same trade.
22
MAYFAIR MINING & MINERALS, INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(UNAUDITED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The related method of determining fair value and carrying value of the
Corporation's financial instruments were as follows: the fair value of current
assets and current liabilities approximates their carrying amounts due to the
short-term maturity of these instruments. The Corporation is exposed to market,
credit and currency risks arises in the normal course of the Corporation's
business. Derivative financial instruments are not used to reduce exposure to
the above risks.
CONCENTRATION OF CREDIT RISK - Financial instruments that potentially expose the
Corporation to concentrations of credit risk consist primarily of cash and cash
equivalent. Management of the Corporation believes the likelihood of incurring
material losses due to concentration of credit risk is remote.
INTEREST RATE RISK - The Corporations potential interest rate risk is minimal
and management considers the risk insignificant.
FOREIGN CURRENCY RISK - The Corporation undertakes transactions denominated in
foreign currencies. Accordingly, these activities may result in foreign currency
exposure. The Corporation does not hedge its foreign currency risk.
10. SEGMENT INFORMATION
The Company operates in one reportable segment, being the exploration of mineral
properties, in Zambia and Madagascar.
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS.
Some discussions in this report include 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, plan, 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 report. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results or our predictions, especially since we are
engaged in the mining industry, one fraught with uncertainties and risks of
operations.
We are an exploration-stage Company, and have not yet generated or realized any
revenues from our business operations. As of December 31, 2006, we had cash
resources of $12,032. We will seek to raise additional capital through equity
private placements, convertible debenture offerings or bank loan facilities
which are currently under discussion with various investors.
In October of 2002, we acquired the rights to explore the mineral property in
British Columbia containing six one-unit claims. The property was located in an
area where exploration dates from 1891. According to MINDEP Computer Files at
the University of British Columbia, silver, lead and zinc were found in the
claims adjacent to the property.
On May 10, 2004, the Company commissioned an independent geologist to commence
Phase 1 of the Company's exploration program. This program commenced in
September, 2004 and in late January, 2005 the Company received the consulting
geologist's report on the soil geochemistry and geology of the Silver Stone 1-6
Mineral Claims. The report states, in summary, that a program of soil
geochemical sampling with geological observations on a 10.0 km grid was carried
out at the Silver Stone claim group. No anomalous values were detected and only
several threshold soil values of up 4.0 ppm silver and 69 ppm lead were found.
The consulting geologist recommended, in his report dated January 25, 2005 that
no additional exploration should be planned for the property. This first phase
of the program and report were completed at minimal cost to the Company. The
Company relinquished all its rights and interests in this property in 2005.
On January 17, 2005 the Company signed a joint venture agreement with the
Nyendwa Family and their associated corporations. Pursuant to the Agreement, the
Company incorporated a new Zambian joint venture Company - Mayfair Mining and
Minerals (Zambia) Limited. The new Zambian joint venture Company is owned 70% by
Mayfair Mining and Minerals (UK) Ltd. and 30% by the Nyendwa Family of Kafue,
Zambia. Mayfair Mining and Minerals (UK) Ltd. is a wholly owned subsidiary of
Mayfair Mining and Minerals, Inc. In return for their 30% shareholdings, the
Nyendwa family has transferred into the Zambian joint venture Company three
prospective mining projects.
24
The Company allocated US $ 150,000.00 during fiscal 2005 for the purposes of
sampling and testing of the bedrock, elluvial and alluvial gold and platinum
group metals in Funswe River and Nansenga Stream and also for the
re-establishment of production and processing of amethyst in the Mapatizya
mining concessions. This work has now been substantially completed and
production of gold and amethyst has commenced during calendar 2006. The budget
for further work on the properties has been increased to $750,000 for the
calendar year 2007, and the Company is seeking to raise capital for this
project. The Company has established the headquarters of its Zambian subsidiary
in Kafue, a town 30 kilometers from Lusaka.
THE YEAR 2006 IN REVIEW
The Company wishes to review, for the benefit of the shareholders, the events
and corporate progress the Company has made during the last calendar year.
With two of its properties in production and an excellent exploration project in
Southern Zambia, as well as the acquisition of a portion of the multi-colored
sapphire fields in Southern Madagascar, the Company believes it is well
positioned to make corporate progress over the coming year, given adequate
funding. Of course, there is no assurance that such funding will be available as
and when required, or on terms or conditions acceptable to the Company.
Zambia
In Zambia, the Company holds three mining projects. The most advanced project is
the Mapatizya Amethyst mining operation, which encompasses over 600 hectares
located in the Kalomo District of Zambia, approximately 415 kilometres from
Kafue. Mapatizya is the principal Amethyst mining area in Zambia. Mayfair
Mining's concessions surround the property of Kariba Minerals, which hosts the
largest Amethyst producing mine in Zambia. During the last year, the Company
purchased most of the equipment necessary to commence mining activities and this
work is proceeding smoothly. Our local partners have also commenced tunnelling
operations on one of the Company's four licenses in a potentially high grade,
gem quality Amethyst area, as they have already received interest from buyers in
China for these and other grades of Amethyst stones. Although we are optimistic
that our operations will generate net revenues in the near future, we have not
realized any to date.
Our second project, the Funzwe River license, covers an area of approximately 70
square kilometres located approximately 30 kilometres to the northwest of Kafue.
Substantially all of the equipment required to commence our planned sampling and
processing of materials containing various quantities and qualities of the
alluvial gold in the Funzwe River Basin is now in place. The season has been
spent in trial mining and bulk sampling of the alluvial gold using a 2 ton per
hour Goldfields Engineering Jig. This work has demonstrated the auriferous
nature of the basal gravels on the Funzwe River alluvial material and a stock
pile in excess of 25 tons of gold-bearing concentrate has been accumulated. The
25
grade of the concentrate, as assayed by the University of Zambia geo-chemical
analytical laboratory, in the existing stock pile is between 20 and 340 grams
per ton gold and 60 to 177 grams per ton palladium. The Company believes that
the alluvial gold deposit can be worked economically. The Company now intends to
sell the stockpiled gold concentrate to the Rand Refinery in South Africa and
elsewhere. The Company recently purchased a shaker table for use at the Kafue
Depot during the rainy season and the plan is to use it to extract the gold into
a product more acceptable to the Refineries.
Our third project in Zambia is the Nansenga Stream license, which covers an area
of approximately 20 square kilometres adjacent to the Great North Road,
approximately 30 kilometres south of Kafue. This project, which is completely
surrounded by major mining companies, is highly prospective for gold with
visible gold and a number of nuggets identified in the river gravels. We have
not yet commenced any work on this property.
MADAGASCAR
During the past year, the Company also announced that it had acquired 100% of
the outstanding shares of Union Prospection Miniere (UPM), a Madagascan private
limited Company, in a cash and share transaction. A comprehensive business plan
was drafted outlining the corporate direction and development of the Company's
goals in Madagascar. These proposed activities included the acquisition of
additional precious metal and mineral mining claims for exploration and
development, further development and funding to implement production at the
Company's Benahy-Imaloto or Ampasimamitaka sapphire mine, further exploration of
the Company's other properties and the establishment of gold and gemstone buying
offices in the main towns around the coast of Madagascar. However, the Company's
operations in Madagascar are currently on hold pending additional funding and
the addition of the required management and geological expertise to effectively
and efficiently run the Company's proposed mining operations.
ADMINISTRATION
Due to the fact that the Company's operations in Africa grew so rapidly during
the last year and the fact that the Company's administrative offices are based
in the UK, it was felt that a move to a UK-based SEC-qualified auditor was
necessary and appropriate. The Company was fortunate to appoint Chantrey
Vellacott DFK as the Company's UK auditors. Accounting infrastructure, both in
Zambia and in the UK, has now been augmented in an attempt to ensure that all
necessary controls and procedures are in place. However, further delays to the
Company's subsequent filings with the SEC were experienced due to financial
reporting difficulties and delays encountered in Zambia and Madagascar,
resulting in an inability to reconcile the accounts in time to meet the
necessary filing deadlines. Unfortunately, this resulted in the delisting of the
Company's shares from the OTCBB and relegation to the Pink Sheets market for a
period of one year or until the Company's filings are current, commencing
November 30, 2006.
26
PUBLICITY
During the year, the Company was approached, completely unsolicited, by Sonja
Still, a German TV Producer and Director who wished to film a documentary
focused on the Company's amethyst mining operations in Zambia.
The documentary was produced by ARTE in cooperation with Bayerischer Rundfunk, a
broadcasting Company, a member of the ARD, which encompasses all of the
broadcasting stations in Germany. ARTE is one of Germany's most popular TV
channels. The program was aired in German and French, and aired in France.
The documentary is focused on Mayfair's Amethyst mining operations in the
Mapatizya district near Lake Kariba and features the actual mining of the stones
as well as the sorting, sawing, knocking and grading of the final product and
packaging for shipment to foreign markets at the Company's depot in Kafue, south
of Lusaka. The principals of Mayfair Mining & Minerals, Zambia were interviewed
and the Company and its depot were featured in the program, which was aired on
May 31, 2007 and again on June 7, 2007.
The Company continues to pursue its goal of social responsibility and hopes to
add social benefits to the areas of our operations in Zambia and Madagascar.
These planned benefits to the local populations, in terms of employment and
infrastructure, could be considerable and we intend to continue to contribute,
as, when and where the Company can do so, to local social programs, and to
continue to build our government relationships within these resource rich
countries.
RESULTS OF OPERATIONS
On August 13, 2004 the Company was given clearance to trade on the OTC Bulletin
Board regulated by the NASD, under the trading symbol "MFMM".
During November 2004 the Company completed a private placement equity funding
with a number of accredited investors and European institutions for gross
proceeds to the Company of US $525,000 by the sale of 3,500,000 shares at a
price of $0.15 cents. This funding was utilized for working capital requirements
for our mining projects in Zambia.
The Company issued an additional 149,000 units during the fiscal year 2006. The
units were issued at a price of $0.50 unit for gross proceeds of $74,500 in a
private placement. Each unit consists of one share of restricted common stock
and one warrant to purchase one share of restricted common stock at an exercise
price of $0.60 per share at any time within the next two years.
On April 10, 2006 the Company closed a private placement financing for gross
proceeds of $1,385,500. The offering consisted of 2,771,000 units at $0.50
cents, comprised of one restricted share of common stock and one warrant to
purchase one restricted share of common stock, exercisable at US $0.60 at any
time within 2 years of the offering.
27
Net cash provided by financing activities from inception to December 31, 2006,
was $2,263,334 as a result of proceeds received from private placement share
subscriptions and loans from the Company's Director.
The future of the Company is dependent upon its ability to obtain financing and
upon future profitable operations from the development of its mineral
properties, of which there can be no assurance.
EVENTS PRIOR TO THIS QUARTER
On April 11, 2006, the Company announced the appointment of Mr. Klaus Fey as the
Marketing Manager of the Company's Zambian subsidiary. Mr. Fey was responsible
for the sales and marketing of product for the Company's amethyst mining
operations. Sadly, on May 24, 2006 Mr. Fey passed away due to an attack of
malaria. His duties have been assumed by his assistant and the local management
of the Zambian subsidiary.
On April 18, 2006, the Company announced that it had acquired 51% of the
outstanding shares of Union Prospection Miniere (UPM), a Madagascan private
limited Company in a cash transaction with Sapphire Fields Limited, a
corporation existing under the laws of the British Virgin Islands. The total
consideration for this acquisition was US $640,000, plus legal expenses. This
included an independent geological report of the sapphire properties by ACA Howe
International Limited, an internationally recognised, independent geological and
mining consultancy. As a result of this transaction, Mayfair Mining acquired
control of 16 sapphire licenses covering an area of 1,487 square kilometres in
the Ilakaka sapphire mining district in Southern Madagascar. On May 26, 2006,
the Company announced that it had closed and completed the acquisition of
control of Union Prospection Miniere, Madagascar.
On May 8, 2006, the Company announced that it had retained The Vine Group, a
boutique Investment Banking and Corporate Advisory firm with international
affiliations. The Vine Group's mandate is to increase the Company's shareholder
base and raise investor awareness and goodwill within the Chinese investor
community in North America and China.
On June 2, 2006, the Company awarded the following Employee Stock Options,
reserved as of February 7, 2005. The options were granted at an option exercise
price of US$0.15 per share and must be exercised within three (3) years from
date of grant or the options are null, void and worthless:
Islee Oliva Salinas, Consultant, UK - 50,000
Evelyn YK Lee, Consultant, North America - 50,000
Karen McHugh, Consultant, UK - 50,000
Peter Mills, Head of Accounting - 50,000
28
On June 2, 2006, the Company awarded the following Employee Stock Options,
reserved as of February 8, 2006, to the following individuals. The options were
granted at an option exercise price of US $0.50 per share and must be exercised
within three (3) years from date of grant or the options are null, void and
worthless.
Clive de Larrabeiti, President- 500,000 shares
Michael Smith, Vice President- 100,000 shares
Michael Morrison, Legal Counsel- 150,000 shares
Claudio Morandi, Corporate Finance Consultant- 100,000 shares
Dany Goreeba, Managing Director, UK - 100,000
Ali Abood, Advisory Board Member - 50,000
Christopher Davie, Director - 50,000
Earl Young, Advisory Board Member - 500,000
Midgaard Capital, Inc. - Consultants, North America - 350,000
Vine Group, Corporate Finance Consultants - 50,000
Peter Mills, Head of Accounting - 50,000
On July 3, 2006, the Company announced that it had acquired the remaining 49% of
the outstanding shares of Union Prospection Miniere in a share transaction with
the remaining shareholders, who are residents of Madagascar. The Company now
owns 100% of UPM.
On July 11, 2006, the Company filed an 8-K with the SEC, dated July 11, 2006
reporting the change of auditors from Morgan & Company, Chartered Accountants of
Vancouver, Canada to Chantrey Vellacott DFK of London, England.
On July 20, 2006, Christopher Davie resigned as a Director of the Company,
citing increasing responsibilities in his other ventures. There was no
disagreement between the Company and Mr. Davie on any issue.
EVENTS DURING THE QUARTER
On October 5, 2006, the following persons exercised their $0.15 cent employee
incentive stock options in the following amounts.
Clive de Larrabeiti - 500,000
Dany Goreeba - 125,000
Peter Mills - 50,000
Paul Chung - 50,000
Claudio Morandi - 100,000
29
There are now 1,175,000 employee incentive stock options remaining to be
exercised at $0.15.
On October 16, 2006, Clive de Larrabeiti, the CEO and President of the issuer,
lent the Company $100,000. On November 8, 2006 Clive de Larrabeiti lent the
Company a further $39,500.
On November 2, 2006 the Company gave notice to The Vine Group that it was
terminating the contract between them and the Company, effective November 3,
2006, culminating on November 30, 2006.
On November 6, 2006 the Company announced that Mayfair Mining & Minerals, Inc.,
is to be featured in a German TV documentary focused on the Company's amethyst
mining operations in Zambia. Neither Mayfair Mining & Minerals, Inc., nor any of
its directors, shareholders or any associated parties paid any consideration for
the production or airing of this program.
During November, 2006 the Company decided to restructure management of the
Madagascan subsidiary and to put in place a comprehensive financing structure
and an updated business plan for its sapphire mining operations. This is in
furtherance of the Company's proposed efforts to resume mining operations during
calendar 2007. To date, no further activities have been initiated in Madagascar.
On November 21, 2006 the Company was notified by the NASD that, pursuant to Rule
6530(e), that it was delinquent in its reporting obligations three times in the
previous 24 month period and was thus ineligible for quotation on the OTCBB for
a period of one year or until current in its filings. Accordingly, the Company's
securities were removed from the OTCBB, effective at the opening November 30,
2006, and subsequently trade on the Pink Sheets under the symbol "MFMM".
On December 14, 2006 the Company arranged an overdraft facility via its
privately owned UK subsidiary, with its Corporate Bankers, Lloyds TSB Bank of
London, England, with a limit of (pound)50,000 or approximately US $100,000.
This facility is available to the subsidiary Company until December 31, 2007.
On December 31, 2006, Mr. Charles Lutyens resigned his position as an Advisory
Board member to pursue other career opportunities.
EVENTS SUBSEQUENT TO THE QUARTER
On January 25, 2007, the Company produced a review of the events and corporate
development that the Company made during the last calendar year.
30
On February 5, 2007, the Company filed a Form 8-K, reporting the Company's
notification from the NASD of its delisting from the OTCBB and transfer to the
Pink Sheets.
On March 27, 2007, Clive de Larrabeiti, the CEO and President of the issuer lent
the Company an additional $50,000.
On April 25, 2007, Clive de Larrabeiti visited the Company's mining projects in
Zambia to arrange an updated geological report on the existing Joint Venture
projects there and to meet additional parties wishing to partner with the
Company on their license holdings.
On May 15, 2007, Mr Earl Young resigned his position as an Advisory Board member
to pursue other career opportunities.
On June 11, 2007, the Company appointed Peter Davy to the Advisory Board of the
Company. Mr. Davy will advise the Company on the marketing of its metals,
minerals and gemstone production.
On June 21, 2007 Clive de Larrabeiti, the CEO and President of the issuer, lent
the Company an additional $40,000.
On June 27, 2007, Mr. Michael Smith resigned as a Director of Mayfair. There was
no disagreement between the Company and Mr. Smith on any issue.
The Company is in discussions with a number of candidates with extensive
geological backgrounds and experience to serve as a Director.
LIQUIDITY AND CAPITAL RESOURCES
We issued 7,000,000 founders shares on August 14, 2002, for the amount of
$7,000. We further issued 1,500,000 shares during November, 2003, upon the
completion of our public offering for the amount of $150,000. We issued
3,500,000 shares during November, 2004, in a private placement for the amount of
$525,000 and issued an additional 149,000 shares during May, 2005, for the
amount of $74,500. On April 10, 2006, the Company closed a private placement
financing for gross proceeds of $1,385,500. The offering consisted of 2,771,000
units at $0.50 per unit, comprised of one restricted share of common stock and
one warrant to purchase one restricted share of common stock, exercisable at US
$0.60 at any time with 2 years of the offering.
On October 16, 2006, Clive de Larrabeiti, the CEO and President of the issuer
lent the Company $100,000. On November 8, 2006 Clive de Larrabeiti lent the
Company a further $39,500. On December 14, 2006, the Company arranged an
overdraft facility for its UK subsidiary with its Corporate Bankers, Lloyds TSB
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Bank of London, England with a limit of (pound)50,000 or approximately US
$100,000. This facility is available to the Company until December 31, 2007. On
March 27, 2007, Clive de Larrabeiti, lent the Company an additional $50,000. On
June 21, 2007, Clive de Larrabeiti lent the Company an additional $40,000.
Negotiations with a number of investment institutions are ongoing and the
Company expects further investment funding forthcoming, although there can be no
assurance of this.
As of December 31, 2006, our total assets were $1,067,092 and our total
liabilities were $529,824.
GOING CONCERN
The Company's financial statements have been prepared assuming the Company will
continue as a going concern.
As shown in the Company's financial statements, the Company has accumulated a
deficit of $4,550,566 and a working capital deficiency of $371,364 at December
31, 2006, and has had continuous net losses since inception, including a net
loss of $369,433 and $2,740,570 during the three and nine months ended December
31, 2006, respectively. The future of the Company is dependent upon its ability
to obtain financing and upon future profitable operations from the development
of its mineral properties. Management has plans to seek additional capital
through a private placement of its common stock. Accordingly, there is
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the date of this Quarterly Report on Form 10-QSB
(the "Evaluation Date"), the Company carried out an evaluation, under the
supervision and with the participation of its management, including its Chief
Executive Officer and Chief Financial Officer (who are the same person), of the
effectiveness and design and operation of the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act).
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were not
effective. The deficiencies in our disclosure controls and procedures are a
result of our lack of accounting personnel, due to our limited financial
resources. These circumstances prevented the Company from filing its periodic
reports timely with the SEC on a number of occasions.
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Our management is in the process of taking measures to improve our disclosure
controls and procedures in an effort to ensure that the information required to
be disclosed is internally communicated and publicly reported within the time
periods specified in the SEC's rules and forms. In particular, we intend to
engage outside consultants to assist us in the preparation of our accounting
records and financial statements and will attempt to increase internal
accountability and to clearly define internal communication channels in an
effort to remedy the deficiencies identified by our principal executive officer
and principal financial officer.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during
the last fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibit No. Description
3.1* Articles of Incorporation
3.2* Bylaws
4.1* Specimen Stock Certificate
10.1* Bill of Sale Absolute
10.2* Statement of Trustee
10.3* Deed
10.4* Agreement between Clive de Larrabeiti and the Company
10.5* Agreement between Locke Goldsmith and Clive de Larrabeiti
10.6* Escrow Agreement
31.1 Sarbanes-Oxley Section 302 Certification
32.1 Sarbanes-Oxley Section 906 Certification
*Filed as an Exhibit to the Company's Registration Statement on Form SB-2, dated
December 25, 2002, and incorporated herein by this reference.
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REPORTS ON FORM 8-K
A Form 8-K was filed on January 18, 2005.
A Form 8- K was filed on May 31, 2005.
A Form 8-K was filed on June 3, 2005.
A Form 8-K was filed on April13, 2006.
A Form 8-K was filed on June 30, 2006.
A Form 8-K was filed on July 11, 2006.
A Form 8-K was filed on July 21, 2006.
A Form 8-K was filed on September 14, 2006.
A Form 8-K was filed on October 4, 2006.
A Form 8-K was filed on February 5, 2007.
A Form 8-K was filed on July 2, 2007.
SIGNATURES
- ----------
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MAYFAIR MINING & MINERALS, INC.
By: /s/ Clive de Larrabeiti
---------------------------------
Clive de Larrabeiti
President and Director
(who also performs the
function of chief financial
officer and principal
accounting officer)
July 30, 2007
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