As filed with the U.S. Securities and Exchange Commission on April 17, 2006.
Registration No._________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under the Securities Act of 1934
MISTRAL VENTURES INC.
--------------------------------------------
(Name of Small Business Issuer in Its Charter)
NEVADA 1000 20-2745790
---------------------------- ------------------ ----------------
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Classification Identification No.)
organization) Number)
711- South Carson Street, Suite #4,
Carson City NV, 89701
Telephone: 775-881-3478
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
The Law Office of Michael M. Kessler Esq.
3436 American River Drive, Suite 11
Sacramento, CA 95864
Phone: (916) 239-4000 Fax: (916) 239-4008
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(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
andlist the Securities Act registration statement number of the earlier
effective registration statement for the same offering.( )
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. ( )
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CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------
Title of Number Proposed Proposed
each Class of Offering Maximum Amount of
of Securities Shares Price Aggregate Registration
to be to be per Unit Offering Fee (1)
Registered Registered(2) (3) Amount(4)
- -------------------------------------------------------------------------
Units 2,000,000 $ .05 $100,000 $ --
Common Stock 2,000,000 $ .05 $100,000 $11.77
Common Stock
Underlying
Purchase
Warrants 4,000,000 $ .10 $400,000 $47.08
- -------------------------------------------------------------------------
Total 6,000,000 $500,000 $58.85
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(1) Registration Fee has been paid via Fedwire for this registration.
(2) We intend to offer, on a best efforts basis, 2,000,000 Units of our
common stock. One Unit consists of one share of common stock and two warrants.
In the event we do not sell all of the Units before the expiration date of
the offering, all funds raised will be returned promptly to the subscribers
without deductions or interest.
(3) This is an initial offering and no current trading market exists
for our common stock.
(4) Each Unit consists of one share of Common Stock and two Common Stock
Purchase Warrants. Each Common Stock Purchase Warrant will entitle the
holder to purchase one additional share of Common Stock at a price of $.10
per Share for a period of two years from the effective date of this offering.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
2
PROSPECTUS
MISTRAL VENTURES INC.
2,000,000 Units at $.05 per Unit
consisting of 2,000,000 shares of Common Stock at $.05 per share and
4,000,000 warrants to purchase shares of Common Stock at $.10 per share
------------------------------------------------------------------------
This is the initial offering of Common Stock of Mistral Ventures Inc. and no
public market currently exists for the securities being offered. Mistral
Ventures Inc. is offering for sale a total of 2,000,000 Units of Common
Stock on a "self-underwritten" basis, which means that our officer and sole
director will attempt to sell the shares. Our officer and sole director,
John Xinos, will receive no proceeds or commissions from the sale of these
shares. Each Unit consists of one share of Common Stock and two Common
Stock Purchase Warrants. Each Common Stock Purchase Warrant will entitle
the holder to purchase one additional share of Common Stock at a price of
$.10 per Share for a period of two years from the date of this offering.
There is no required minimum number of shares to be purchased by any
individual purchaser. The offering is being made on a "best efforts," "
all-or-none" basis which means that we have to sell all of the shares
before we can use any of the proceeds.
We will place all funds from the offering in a standard, non-interest
bearing, bank checking account to be used only for the deposit of funds
received from the sale of the Units in this offering. If all Units are not
sold and the total offering amount is not deposited by the expiration date
of the offering, all monies will be returned promptly to investors, without
interest or deduction. The Units will be offered at a price of $.05 per
share for a period of one hundred and eighty (180) days from the effective
date of this prospectus.
Mistral Ventures Inc. is an exploration stage company and currently has no
operations. Any investment in the shares offered herein involves a high
degree of risk. You should only purchase Units if you can afford a complete
loss of your investment. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS
PROSPECTUS AND, PARTICULARLY, THE RISK FACTORS SECTION BEGINNING ON PAGE 8.
Neither the U.S. Securities and Exchange Commission nor any state securities
division has approved or disapproved of these securities, or determined if
this prospectus is current or complete. Any representation to the contrary
is a criminal offense.
- ----------------------------------------------------------------------
Public Underwriting Proceeds
Offering or Sales to Us (1)
Price Commissions
Per Unit
- ----------------------------------------------------------------------
Common Stock $.05 $ 0 $100,000
Common Stock
Underlying Warrants $.10 $ 0 $400,000 (2)
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3
1. The proceeds to us are shown before deduction for legal, accounting,
printing and other expenses, estimated at $6,500.
2. Assumes exercise of all warrants within a two-year period; however,
there is no guarantee that any or all of the warrants will ever be exercised.
As of the date of this prospectus, there is no public trading market for our
common stock and no assurance that a trading market for our securities will
ever develop. The information in this prospectus is not complete and may be
changed. We will not sell these securities until the registration statement
filed with the U.S. Securities and Exchange Commission for review has been
cleared of comments and is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer of sale is not permitted.
Subject to Completion, Dated April 12, 2006
4
TABLE OF CONTENTS
=================
Page No.
SUMMARY OF PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . 4
General Information . . . . . . . . . . . . . . . . . . . 4
Offering . . . . . . . . . . . . . . . . . . . . . . . . .4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Risks Associated with our Company . . . . . . . . . . . . 8
Risks Associated with this Offering . . . . . . . . . . .10
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . 12
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . .12
DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . . . .13
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 14
Offering will be Sold by Our Officer and Director . . . .14
Terms of the Offering . . . . . . . . . . . . . . . . . .15
Deposit of Offering Proceeds . . . . . . . . . . . . . . 15
Procedures for and Requirements for Subscribing . . . . .16
Exercise of Warrants . . . . . . . . . . . . . . . . . . 16
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 16
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS . .16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .17
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . .18
INTEREST OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . .19
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES . . . . . . . . . 19
ORGANIZATION WITHIN LAST FIVE YEARS . . . . . . . . . . . . . . .19
DESCRIPTION OF OUR BUSINESS . . . . . . . . . . . . . . . . . . .20
Glossary . . . . . . . . . . . . . . . . . . . . . . . . 20
General Information . . . . . . . . . . . . . . . . . . .24
Competition . . . . . . . . . . . . . . . . . . . . . . .33
Compliance with Government Regulation . . . . . . . . . .33
Patents and Trademarks . . . . . . . . . . . . . . . . . 34
Need for Any Government Approval of Principal Products . 35
Research and Development . . . . . . . . . . . . . . . . 35
Employees . . . . . . . . . . . . . . . . . . . . . . . .35
Reports to Security Holders . . . . . . . . . . . . . . .35
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . .35
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . .42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . 42
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . .43
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . 45
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 46
CHANGES IN & DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . . . . .46
DEALER PROSPECTUS DELIVERY OBLIGATION . . . . . . . . . . . . . .47
5
MISTRAL VENTURES INC.
711 CARSON STREET S., SUITE 4
CARSON CITY, NV, 89701
SUMMARY OF PROSPECTUS
=====================
To obtain full and complete information about our company, it is important
to read the following summary, together with the more detailed business
information and the financial statements and related notes that appear
elsewhere in this prospectus. In this prospectus, unless the context
otherwise denotes, references to "we," "us," "our," "the Company," and
"Mistral Ventures" are to Mistral Ventures Inc.
General Information about Our Company
- -------------------------------------
Mistral Ventures Inc. (the "Company") was incorporated in the State of
Nevada on May 13, 2005 to engage in the acquisition, exploration and
development of natural resource properties. We intend to use the net
proceeds from this Offering to develop our business operations. (See
"Business of the Company" and "Use of Proceeds".) We are an exploration
stage company with no revenues and limited operating history. By
"exploration stage" we mean that we are engaged in the search for mineral
deposits or reserves and not in either development or production. Our mining
property, the Gold Bug Project, is located in south central British Columbia,
Canada, centered approximately 3 miles (5km) southwest of Beaverdell " a
community that was involved in silver mining for over 90 years.
Our principal executive offices are located in Nevada at 711 S. Carson
Street, Suite 4., Carson City, Nevada and our sole officer and director,
Mr. John Xinos, is a Canadian citizen who resides in Vancouver, British
Columbia, Canada.
Our only asset is our cash in the bank in the approximate amount of $5,837.
Since the Gold Bug Project is located in British Columbia, the Canadian
Crown owns the property and our only right to the property consists of
mining claims that are owned in the name of our sole director, Mr. John
Xinos. Mr. Xinos holds a Free Miner's Certificate and has registered for a
BCeID (British Columbia electronic Identification).
Our registered statutory office is located at 711 S. Carson Street, Suite
4, Carson City, Nevada 89701. We believe an office would be an unnecessary
expense for the first two phases of exploratory work on our property and
therefore our sole officer and director will use his home or office
equipment to complete all preparation work and to hire the expert
contractors to do the actual claim work for this first year of operations.
For convenience for our sole director, Mr. Xinos, will also receive mail
when required at Suite 809 4438 West 10th Ave. in Vancouver BC, Canada.
Our fiscal year end is December 31.
6
We received our initial funding of $9,000 through the sale of common stock
to our sole officer and director who purchased 900,000 shares of our common
stock at $0.01 per share on October 27, 2005. In addition, on February 9,
2006, an additional 900,000 common shares of our stock with a deemed value
of $.01 per share, or an aggregate amount of $9,000, were issued to our
officer and director for the acquisition of his rights and interests in and
to the Gold Bug Project mining claims.
From inception until the date of this filing, we have had limited operating
activities, have generated no revenues and have incurred a net loss of
$19,483. Our independent auditors, James Stafford Chartered Accountants,
have rendered an opinion in their audit report expressing substantial doubt
as to our ability to continue as a going concern.
We have not engaged the services of a professional geologist or mining
engineer to examine our mineral claims and have not yet commenced any
exploration activities on the claims. Our mining claims are without known
reserves and there is the possibility that they will not contain any
reserves, which means that any funds we expend on exploration could be lost.
Even if we complete our current exploration program and are successful in
identifying a mineral deposit on our claims, we will be required to spend
substantial funds on further drilling and engineering studies before we will
know if we have a commercially viable mineral deposit or reserve.
There is no current public market for our securities. We have no current
public offering and no proposed public offering of our equity. As our stock
is not publicly traded, investors should be aware they probably will be
unable to sell their shares and their investment in our securities is not
liquid.
The Offering
- ------------
Securities Being Offered 2,000,000 Units of Common Stock for $.05 per
Unit. Each Unit consists of one share of
common stock and two Common Stock Purchase
Warrants (the Warrants). Each Warrant entitled
the holder to purchase one additional share of
common stock at a price of $.l0 per share for
a period of two (2) years from the effective
date of this offering.
Offering Period The Units are being offered for a period of six
months or 180 days from the effective date.
Offering Proceeds This is an "all-or-none" offering, which
means if we do not sell all of the Units
before the expiration date of the offering,
all funds raised will be returned promptly to
the subscribers without deductions or
interest. The proceeds received will not
be held in an escrow or trust account, but
rather, will be held in a separate bank account
until all Units are sold and all funds are
received.
7
Net Proceeds to Us Approximately $100,000 (before deduction of
the expenses of this offering estimated at
approximately $6,500) and an additional
$400,000 assuming exercise of all Warrants;
however, there can be no guarantee that any
or all of the Warrants will be exercised.
Use of Proceeds We intend to use the proceeds to pay for
offering expenses and for implementing our
business operations.
Securities Issued and
Outstanding Before
the Offering 1,800,000 shares of common stock were issued
and outstanding as of the date of this
prospectus.
Shares of Common Stock 3,800,000
Outstanding After 5,800,000 (assuming exercise of all Warrants)
RISK FACTORS
============
An investment in these securities involves an exceptionally high degree of
risk and is extremely speculative in nature. In addition to the other
information regarding our company contained in this prospectus, you should
consider many important factors in determining whether to purchase the
Units. Following are what we believe are all of the material risks
involved if you decide to purchase Units in this offering.
RISKS ASSOCIATED WITH OUR COMPANY:
- ----------------------------------
1. We are an exploration stage company; have not commenced exploration
activities on our mining claim; have generated no revenues; lack an
operating history; and expect to incur losses for the foreseeable future.
Therefore, an investment in the Units offered herein is highly risky and
could result in a complete loss of your investment if we are unsuccessful
in our business plans.
- ------------------------------------------------------------------------
Our company was incorporated on May 13, 2005 and to date, we have been
involved primarily in organizational activities and the acquisition of the
mineral claims. We have not yet commenced exploration on the Gold Bug
Project claims, nor fully commenced our proposed business operations and,
accordingly, we have no way to evaluate the likelihood of the success of
our future prospects. Such prospects must be considered in light of the
substantial risks, expenses, difficulties and low success rate encountered
by new entrants into our industry. We have not earned any revenues as of
the date of this prospectus. Potential investors should be aware of the
difficulties normally encountered by new mineral exploration companies and
the high rate of failure of such enterprises. The likelihood of success
must be considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the exploration of
mineral properties. These potential problems include, but are not limited
to, unanticipated problems relating to exploration and additional costs and
expenses that may exceed current estimates. Prior to completion of our
exploration stage, we anticipate that we will incur increased operating
expenses without realizing any revenues. We therefore expect to incur
significant losses into the foreseeable future. We recognize that if we are
unable to generate significant revenues from development of the Gold Bug
Project claims and the production of minerals from the claims, we will not
be able to earn profits or continue operations. There is no history upon
which to base any assumption as to the likelihood that we will prove
successful, and it is doubtful that we will generate any operating revenues
or ever achieve profitable operations. If we are unsuccessful in addressing
these risks, our business will most likely fail and you could lose any
investment you make in our securities.
2. Because management has no technical experience in mineral exploration,
our business has a high risk of failure.
- ----------------------------------------------------------------------------
Our sole director has no professional training or credentials in the field
of geology nor in the areas of exploring, developing and operating a mine.
As a result, we may not be able to recognize and take advantage of potential
acquisition and exploration opportunities in the sector without the aid of
qualified geological consultants. Also, with no direct training or
experience, our current management may not be fully aware of the specific
requirements related to working in this industry. His decisions and choices
may not take into account standard engineering or managerial approaches
commonly used by mineral exploration companies. Consequently, our
operations, earnings and ultimate financial success may suffer irreparable
harm and you could lose any investment you make in our securities.
3. Our independent auditors have issued the opinion that in our current
state, there is substantial doubt whether we will be able to continue as a
going concern.
- ----------------------------------------------------------------------------
Our limited exploration stage and lack of any guaranteed sources of future
capital and/or revenues raises substantial doubt as to our ability to
continue as a going concern. If our business plan does not work, we could
remain a start-up company with limited or no material operations, revenues,
or profits. In such event, you could risk a total loss of any investment
you make in our securities.
4. We will require additional funding to sustain and expand our operations
once exploration is complete.
- ----------------------------------------------------------------------------
Even if we complete our initial exploration program and are successful in
identifying a mineral deposit, we will still be required to expend
substantial funds on further drilling and engineering studies before we will
know if we have a commercially viable mineral deposit or reserve. We will
require additional financing to perform our additional development
activities. We do not currently have any arrangements for financing and may
not be able to find such financing if and when required. Obtaining
additional financing would be subject to a number of factors, including the
market price for the minerals, investor acceptance of our claims and general
market conditions. These factors may make the timing, amount, terms or
9
conditions of additional financing unavailable to us. The most likely source
of future funds presently available to us is through the sale of equity
capital. Any sale of share capital will result in dilution to existing
shareholders. Without additional funding, we may be only partially
successful in implementing our business plan, and our shareholders could
suffer a loss of their investment.
5. We have not yet had our property examined in the field by a professional
geologist or mining engineer, there is the risk that our property does not
contain any known bodies of ore.
- ----------------------------------------------------------------------------
There is the likelihood of our mineral claims containing little or no
economic mineralization or reserves of gold, silver and other minerals.
While we have geological reports detailing previous exploration within the
current property boundaries completed by professional geologists between
1981 and 1998, we have not yet engaged the services of a professional
geologist or mining engineer to examine our mineral claims in the field.
There is the possibility that the previous work was not carried out
properly and the Gold Bug Project claims do not contain any reserves,
resulting in any funds spent by us on exploration being lost. Also, problems
such as unusual or unexpected formations and other conditions involved in
mineral exploration often result in unsuccessful exploration efforts. In
such case, we would be unable to complete our business plans and you could
risk a total loss of any investment you make in our securities.
6. Because we have not surveyed the Gold Bug Project claims, we may discover
mineralization on the claims that is not within our claim boundaries.
- ---------------------------------------------------------------------------
While we have conducted a mineral claims title search to confirm that Madman
Mining Company (an unrelated third party) had the right to sell the claims
to our president, John Xinos, who now holds the claims in trust, this should
not be construed as a guarantee of claim boundaries. Until the claims are
surveyed, the precise location of the boundaries of the claims may be in
doubt. If we discover mineralization that is close to the estimated claim
boundaries, it is possible that some or all of the mineralization may occur
outside our boundaries and we may not be able to extract them, which could
result in a total loss of any investment you make in our securities.
7. If we discover commercial reserves of precious metals on our mineral
property, we can provide no assurance that we will be able to successfully
advance the mineral claims into commercial production.
- ----------------------------------------------------------------------------
Our mineral property does not contain any known commercially viable bodies
of ore, although mineral concentrations of gold and silver have been found
in at least 10 trenches or open cuts and one caved adit on the claim site.
(An adit is an opening driven horizontally into the side of a mountain or
hill to provide access to proven or potential mineral deposits.) If our
exploration program is successful in establishing ore of commercial tonnage
and grade, we will require additional funds in order to advance the mineral
claims into commercial production. In such event, we may be unable to obtain
any such funds, or to obtain such funds on terms that we consider
economically feasible and you may lose your investment in this offering.
10
8. Because of the accessibility and previous work on the property, there is
a risk that we may incur liabilities or damages as we conduct our business.
- ----------------------------------------------------------------------------
Our mineral property has tunnels and trenches from previous mining work.
As a result, we may become subject to liability for hazards, including
pollution, cave-ins and other hazards against which we cannot insure, or
against which we may elect not to insure. In addition, sections of the
southern part of our claim are only accessible by all-terrain-vehicles and
as such, access may be difficult or even dangerous and could result in
accidents or other hazards. Because of the uncertain nature of the possible
difficulties/damages we may be unable or unwilling to insure against them.
The payment of such liabilities may have a material adverse effect on our
financial position, which could result in a loss of any investment you make
in our securities.
9. Because access to our mineral claims is often restricted by inclement
weather, we may be delayed in our exploration and any future mining efforts.
- ----------------------------------------------------------------------------
It is possible that snow or rain could cause roads leading to our claims to
be impassable. We anticipate being able to access our mineral claims
between the months of May and November during which time we intend to
conduct our field exploration. However if the roads are impassable we
would be delayed in our exploration timetable, which could delay any
possible revenues we may gain at any time in the future.
10. Government regulation or other legal uncertainties may increase costs,
which would negatively impact our business operations.
- ----------------------------------------------------------------------------
There are several governmental regulations that materially restrict mineral
claims exploration and development. Under Canadian mining law, to engage in
certain types of exploration requires work permits, posting of bonds, as
well as the performance of remediation work for any physical disturbance to
the land. While these current laws will not affect our initial exploration
phase, if we identify exploitable minerals and proceed to our Phase Two
operations, which include drilling operations, we will incur regulatory
compliance costs based upon the size and scope of our operations. In
addition, the legal and regulatory environment that pertains to the
exploration of ore is uncertain and may change. Uncertainty and new
regulations could increase our costs of doing business and prevent us from
exploring and extracting ore deposits on our claims. In addition to new laws
and regulations being adopted, existing laws may be applied to the mining
industry that have not as yet been applied. These new laws may increase our
cost of doing business with the result that our financial condition and
operating results may be harmed, thereby causing a total loss of any
investment you make in our securities.
11. Our continued existence and future profitability is highly dependent
upon the price of precious metals and ores.
- --------------------------------------------------------------------------
Recently, the price of gold has reached all-time highs. The economic
viability of our minerals exploration program will be highly dependent on,
among many other factors, political issues and general economic conditions.
During periods of economic downturn or slow economic growth, coupled with
11
eroding consumer confidence or rising inflation, the price and/or sale of
precious metals could be severely impacted. Such factors would likely have
an immediate effect on our business operations and/or profitability, which
could severely impact your ability to ever resell any of our securities you
purchase in this offering at a profit, or at all.
RISKS ASSOCIATED WITH THIS OFFERING:
- ------------------------------------
12. The trading in our securities will be regulated by Securities and
Exchange Commission Rule 15g-9 which established the definition of a "penny
stock." Buying low-priced penny stocks is very risky and speculative.
- ---------------------------------------------------------------------------
The shares being offered are defined as a penny stock under the Securities
and Exchange Act of 1934, and rules of the Commission. The Exchange Act and
penny stock rules generally impose additional sales practice and disclosure
requirements on broker-dealers who sell our securities to persons other than
certain accredited investors who are, generally, institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000
or annual income exceeding $200,000 ($300,000 jointly with spouse), or in
transactions not recommended by the broker-dealer. For transactions covered
by the penny stock rules, a broker-dealer must make a suitability
determination for each purchaser and receive the purchaser's written
agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the
actual sale or purchase price and actual bid and offer quotations, the
compensation to be received by the broker-dealer and certain associated
persons, and deliver certain disclosures required by the Commission.
Consequently, the penny stock rules may affect the ability of broker-dealers
to make a market in or trade our common stock and may also affect your
ability to resell any shares underlying the Units you may purchase in this
offering in the public markets.
13. The offering price of the Units has been determined arbitrarily by us
and does not bear any relationship to our assets, book value, earnings or
other established criteria for valuing a privately held company.
- -------------------------------------------------------------------------
We have arbitrarily determined the offering price of the Units. In
determining the number of Units to be offered and the offering price, we
took into consideration the amount of money we would need to implement our
business plans and the number of Units we wanted to offer to the public.
Accordingly, the offering price should not be considered an indication of
the actual value of our securities which could be considerably lower and
may never achieve the value you pay for them. As a result, you may lose
part or all of the money you invest.
14. We are selling this offering without an underwriter and may be unable
to sell any Units.
- -------------------------------------------------------------------------
This offering is self-underwritten, that is, we are not going to engage the
services of an underwriter to sell the shares; we intend to sell them
through our sole officer and director, who will receive no commissions.
12
Mr. Xinos will offer the shares to his friends, relatives, acquaintances and
business associates, however, there is no guarantee that he will be able to
sell any of the Units. In the event we are unable to sell all of the Units
in this offering, we will be forced to reduce or abandon our proposed
business operations until such time as additional monies can be obtained,
either through loans or financings.
15. Our common stock currently has no trading market and there is no
guarantee a trading market will ever develop for our securities. Therefore,
you may have difficulty selling any shares you purchase in this offering.
- --------------------------------------------------------------------------
We are not registered on any public stock exchange. There is presently no
demand for our common stock and no public market exists for the shares being
offered in this prospectus. While we do intend to engage the services of a
market make to file an application on our behalf for quotation in the
Over-the-Counter Bulletin Board following completion of this offering and
implementation of our business plans, we cannot guarantee that our
application will be approved and our stock listed and quoted for sale on
any public market. If no market is ever developed for our common stock, it
will be difficult for you to sell any shares you purchase in this offering.
In such a case, you may find that you are unable to achieve any benefit from
your investment or be able to liquidate your shares without considerable
delay, if at all. In addition, if we fail to have our common stock quoted
on a public trading market, your common stock will not have a quantifiable
value and it may be difficult, if not impossible, to ever resell your shares
in our company, resulting in an inability to realize any value from your
investment and, possibly, a total loss of your investment.
16. You will incur immediate and substantial dilution of the price you pay
for your shares.
- --------------------------------------------------------------------------
Our sole officer and director, who is our only existing stockholder,
acquired his shares at a cost of $.01 per share for 900,000 shares (plus
the Gold Bug Project which he vended into the company at the same value for
an additional 900,000 shares), which cost per share is substantially less
than that which you will pay for any securities you purchase in this
offering. Upon completion of this offering, the net tangible book value of
the shares held by our existing stockholder (1,800,000 shares) will be
increased by approximately $.0232 (103%) per share without any additional
investment on his part. The purchasers of Units in this offering will incur
immediate dilution (a reduction in the net tangible book value per share
from the offering price of $.05 per Share) of $.026 (52%) per share. As a
result, after completion of the offering, the net tangible book value of
the shares held by purchasers in this offering would be $.024 per share,
reflecting an immediate reduction in the price paid.
13
17. We will be holding all proceeds from the offering in a standard bank
checking account until all Units are sold. Because the funds will not be
held in an escrow or trust account, there is a risk your monies will not be
returned if all the Units are not sold.
- ----------------------------------------------------------------------------
All funds received from the sale of Units in this offering will be deposited
into a separate standard bank checking account until all Units are sold and
the offering is closed, after which time, the proceeds will be transferred
to our business operating account. In the event all Units in the offering
are not sold, we will promptly return all monies deposited to the original
purchasers, without interest or penalty. However, since the funds will not
be placed into an escrow, trust or other similar account, there can be no
guarantee that any third party creditor who may obtain a judgment or lien
against us would not satisfy the judgment or lien by executing on the bank
account where the offering proceeds are being held, resulting in a loss of
any investment you make in our securities.
18. Our sole director/officer beneficially owns 100% of the outstanding
shares of our common stock. After the completion of this offering he will
beneficially own 47% of the outstanding shares. If he chooses to sell his
shares in the future, it might have an adverse effect on the price of our
stock.
- ----------------------------------------------------------------------------
Due to the controlling amount of his share ownership in our company, if our
sole director/officer decides to sell his shares in the public market, the
market price of our stock could decrease and all shareholders suffer a
dilution to the value of their stock. If our director/officer decides to
sell any of his common stock, he will be subject to Rule 144 under the 1933
Securities Act. Rule 144 restricts the ability of our director or officer
(affiliate) to sell shares by limiting the sales of securities made under
Rule 144 during any three-month period to the greater of: (1) 1% of the
outstanding common stock of the issuer; or (2) the average weekly reported
trading volume in the outstanding common stock reported on all securities
exchanges during the four calendar weeks preceding the filing of the
required notice of the sale under Rule 144 with the SEC.
19. There is no guarantee or assurance that the offering proceeds will not
be prematurely used before satisfaction of the "all-or-none" condition of
our offering.
- -----------------------------------------------------------------------------
Because the proceeds received from investors in this offering will not be
held in an escrow or trust account, there can be no assurance that we will be
in a position to return funds to investors in this offering in the event we
are unable to sell all of the Units, as required by the "all-or-none"
provisions. In the event we prematurely use any of the offering proceeds, we
may be unable to return all of the offering proceeds to investors. There can
be no guarantee without the use of an escrow agent or trust account that
the funds will be available for refund if and when needed. In any such event,
you could risk a total loss of any investment you make in our securities.
14
FORWARD LOOKING STATEMENTS
==========================
This prospectus contains forward-looking statements that involve risk and
uncertainties. We use words such as "anticipate", "believe", "plan",
"expect", "future", "intend", and similar expressions to identify such
forward-looking statements. Investors should be aware that all
forward-looking statements contained within this filing are the good faith
estimates of management as of the date of this filing. Our actual results
could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us as described
in the "Risk Factors" section and elsewhere in this prospectus.
USE OF PROCEEDS
===============
We have estimated the net proceeds from this offering to be $100,000,
assuming all Units are sold, which we can't guarantee. During the offering
period, we will be placing all monies received from the sale of Units into
a separate bank account, where it will remain until the offering is
completed. Since this is an "all-or-none" offering, if we are not successful
in completing the offering, we will promptly return all monies collected to
the subscribers without interest or deduction. Assuming sale of all of the
Shares offered herein, of which there is no assurance, the Company estimates
that the net proceeds from this Offering will be approximately $93,500 after
deducting $6,500 for estimated offering expenses, which include legal,
accounting and all filing fees.
If we are successful in completing this offering, we expect to disburse the
proceeds in the priority set forth below, during the first 12 months of
operation:
Total Proceeds to the Company $ 100,000 (1)
Less: Offering Expenses 6,500
-------
Net Proceeds to the Company $ 93,500
Phase I Exploration Program 25,000
Phase II Exploration Program 63,000
Administration, Rental and Supplies 1,500
Legal & Accounting 3,000
Working Capital (2) 1,000
--------
Total Use of Net Proceeds $ 93,500
=========
(1) If any or all of the Warrants are exercised during the 2-year period
following completion of this offering, of which there can be no guarantee,
the proceeds from such exercise will be used for our mining exploration
and development activities, thereby reducing the additional funding we
will need.
15
DETERMINATION OF OFFERING PRICE
===============================
The offering price of the Units has been determined arbitrarily by us. The
price does not bear any relationship to our assets, book value, earnings,
or other established criteria for valuing a privately held company. In
determining the number of shares to be offered underlying the Units and
Warrants, and the offering prices, we took into consideration our cash
assets and the amount of money we would need to implement our business
plans. Accordingly, the offering price should not be considered an
indication of the actual value of the securities.
The exercise price of the warrants was arbitrarily determined by us and
does not bear any relationship to our assets, book value, earnings,
projected revenues or other established criteria. Given the fact that the
exercise price of $.10 per share is 2 times the $.05 offering price of the
Units in this Offering and 10 times the $.01 price per share paid by our
current shareholder for his shares, there is no guarantee that any or all
of the Warrants will ever be exercised.
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
==============================================
Dilution represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering.
Net tangible book value is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly
as a result of our arbitrary determination of the offering price of the
Units being offered. Dilution of the value of the shares within the Units
you purchase is also a result of the lower book value of the shares held by
our existing stockholders.
As of February 28, 2006, the net tangible book value of our shares of
common stock issued and outstanding was ($1,483), a negative value per
share of approximately ($.0008), based upon 1,800,000 shares issued and
outstanding.
Upon completion of this offering, but without taking into account any
change in the net tangible book value after completion of this offering
other than that resulting from the sale of the Units and receipt of the
total proceeds of $100,000, less offering expenses of $6,500, for a total
net proceeds to us of $93,500, the net tangible book value of the 3,800,000
shares to be outstanding will be $92,017, or approximately $.024 per share.
Accordingly, the net tangible book value of the shares held by our existing
stockholder (1,800,000 shares) will be increased by $.0232 (or approximately
103%) per share without any additional investment on his part. The purchasers
of Units in this offering will incur immediate dilution (a reduction in the
net tangible book value per share from the offering price of $.05 per Share)
of $.026 (52%) per share. As a result, after completion of the offering, the
net tangible book value of the shares held by purchasers in this offering
would be approximately $.024, reflecting an immediate reduction in the price
they paid for their shares.
16
After completion of the offering, and prior to the exercise of any Warrants,
the existing shareholder will own 47% of the total number of shares
(1,800,000 shares) then outstanding, for which he will have made an
investment of $9,000 (plus a mining property which he exchanged for 900,000
Company shares), or $.01 per Share. Upon completion of the offering, the
purchasers of the Units offered hereby will own 53% of the total number of
shares then outstanding, for which they will have made a cash investment of
$100,000, or $.05 per Share.
The following table illustrates the per share dilution to the new investors:
Public Offering Price per Share $ .05
Net Tangible Book Value Prior to this Offering $ (.0008)
Net Tangible Book Value After Offering $ .024
Immediate Dilution per Share to New Investors $ .026
Immediate Increase per Share to Current Stockholder $ .0232
The following table summarizes the number and percentage of shares
purchased, the amount and percentage of consideration paid and the average
price per Share paid by our existing stockholder and by new investors in
this offering:
If this offering is successful:
Price Number of Percent of Consideration
Per Share Shares Held Ownership Paid
--------- ----------- ---------- -------------
Existing
Stockholder $ .01 1,800,000 47% $ 9,000
Investors in
This Offering $ .05 2,000,000 53% $100,000
Assuming exercise of all Warrants within two years of completion of this
offering, of which there can be no guarantee, the investors would receive
financial benefit from the sale of their shares (Warrants), but the
percentage of shares held by them in this offering would be further reduced
by the number of warrants exercised by the issuance of up to 4,000,000
additional shares of common stock. If all Warrants are exercised, investors
in this offering would hold approximately 77% of the total issued and
outstanding shares of common stock. There can be no guarantee, however,
that any or all of the Warrants will ever be exercised.
17
PLAN OF DISTRIBUTION
====================
Offering Will Be Sold By Our Sole Officer and Director
- ------------------------------------------------------
This is a self-underwritten offering. This Prospectus is part of a
registration statement filed with the U.S. Securities and Exchange
Commission that permits our sole officer and director to sell the Units
directly to the public, with no commission or other remuneration payable to
him for any Units he may sell. There are no plans or arrangements to enter
into any contracts or agreements to sell the Units with a broker or dealer.
John Xinos, our officer and director, will sell the Units and intends to
offer them to friends, family members and business acquaintances. In
offering the securities on our behalf, our officer and director will rely
on the safe harbor from broker dealer registration set out in Rule 3a4-1
under the Securities Exchange Act of 1934.
The officer and director will not register as a broker-dealer pursuant to
Section 15 of the Securities Exchange Act of 1934, in reliance upon Rule
3a4-1, which sets forth those conditions under which a person associated
with an Issuer may participate in the offering of the Issuer's securities
and not be deemed to be a broker-dealer.
a. Our officer and director is not subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of the
Act, at the time of his participation; and,
b. Our officer and director will not be compensated in connection with
his participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities;
and
c. Our officer and director is not, nor will be at the time of his
participation in the offering, an associated person of a broker-
dealer; and
d. Our officer and director meets the conditions of paragraph (a)(4)(ii)
of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs,
or is intended primarily to perform at the end of the offering,
substantial duties for or on behalf of our company, other than in
connection with transactions in securities; and (B) is not a broker
or dealer, or been associated person of a broker or dealer, within
the preceding twelve months; and (C) has not participated in selling
and offering securities for any Issuer more than once every twelve
months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Our officer, director, control person and affiliates do not intend to
purchase any Units in this offering.
Terms of the Offering
- ---------------------
The Units will be sold at the fixed price of $.05 per Unit until the
completion of this offering. There is no minimum amount of subscription
required per investor, and subscriptions, once received, are irrevocable.
18
This offering will commence on the date of this prospectus and continue for
a period of 180 days (the "Expiration Date"). If we are not successful in
completing our offering, we will promptly return all money to the investors
without interest or deductions.
Deposit of Offering Proceeds
- ----------------------------
This is a "best efforts", "all or none" offering and, as such, we will not
be able to spend any of the proceeds unless and until all Units are sold and
all proceeds are received. We intend to hold all monies collected for
subscriptions in a separate bank account until the total amount of $100,000
has been received. At that time, the funds will be transferred to our
business account for use in the implementation of our business plans. In
the event the offering is not sold out prior to the Expiration Date, all
monies will be returned to investors, without interest or deduction. We
feel the use of an escrow agent is an expense the company cannot bear at
this time. We determined the use of the standard bank account was the most
efficient use of our available funds. We strongly urge you to read the
risks factor section of this prospectus relating to the risk to you as a
purchaser of any Units and possible resulting loss of any investment you may
make in our securities.
Procedures and Requirements for Subscription
- --------------------------------------------
If you decide to subscribe for any Units in this offering, you will be
required to execute a Subscription Agreement and tender it, together with a
check or certified funds to us. Subscriptions, once received by the company,
are irrevocable. All checks for subscriptions should be made payable to
Mistral Ventures Inc.
Exercise of Warrants
- --------------------
Each Unit consists of one share of Common Stock and two Common Stock
Purchase Warrants. Each Common Stock Purchase Warrant will entitle the
holder to purchase one additional share of Common Stock at the price of
$.10 per Share for a period of two years from the date of this offering.
We intend to complete and enter into a Warrant Agreement with Signature
Stock Transfer, our registered stock transfer agent, to allow them to
handle the issuance of the Common Stock underlying the warrants upon
surrender and payment of the exercise price to us by any holders. Upon
completion of this offering, the Warrants will become immediately detachable
and may be individually sold in any public market which may develop.
LEGAL PROCEEDINGS
=================
We are not currently involved in any legal proceedings and we are not aware
of any pending or potential legal actions.
19
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
============================================================
The name, address, age and position of our present sole officer and
director is set forth below:
Name & Address Age Position Date First Elected Term Expires
- -------------- --- ---------- ------------------ ------------
John Xinos 39 President, 05/13/05 05/13/06
Suite 809 Secretary,
4438 West 10th Avenue Treasurer,
Vancouver BC, Canada, CFO, CEO &
V6J 1M7 Director
The foregoing person is a promoter of Mistral Ventures Inc., as that term
is defined in the rules and regulations promulgated under the Securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and qualified. Officers are
appointed to serve until the meeting of the board of directors following
the next annual meeting of stockholders and until their successors have
been elected and qualified.
The director and officer currently devotes approximately 5 to 7 hours per
week to manage the business affairs of our company. After receiving funding
per our business plan, Mr. Xinos intends to devote as much time as the board
of directors deems necessary to manage the affairs of the company.
The sole officer or director of the corporation has not been the subject of
any order, judgment, or decree of any court of competent jurisdiction, or
any regulatory agency permanently or temporarily enjoining, barring,
suspending or otherwise limiting him or her from acting as an investment
advisor, underwriter, broker or dealer in the securities industry, or as an
affiliated person, director or employee of an investment company, bank,
savings and loan association, or insurance company or from engaging in or
continuing any conduct or practice in connection with any such activity or
in connection with the purchase or sale of any securities.
The sole executive officer and director of the corporation has not been
convicted in any criminal proceeding (excluding traffic violations) nor is
the subject of a criminal proceeding which is currently pending.
The sole officer and director of the corporation is not the subject of any
pending legal proceedings.
20
Background of Officer and Director
- ----------------------------------
John Xinos has been the President, CEO, Treasurer, CFO, Secretary, and
Director of Mistral Ventures Inc. since inception. For the past 7 years,
Mr. Xinos has been the owner and president of two private companies - Pine
Street Investments and Fir Street Investments - which are solely involved
in the purchase and/or rental or sale of real estate within British
Columbia. Mr. Xinos has studied business management at the University of
British Columbia although has not registered for the final year required to
complete a degree. Mr. Xinos currently devotes approximately 5-7 hours per
week to our business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
==============================================================
The following table sets forth information on the ownership of the voting
securities held by officers, directors and 5% shareholders as of the date
of this prospectus:
No. of No. of Percentage
Name and Shares Shares of Ownership:
Address of Before After Before After
Beneficial Owner(1) Offering Offering Offering Offering
- ------------------- ----------- --------- -------- --------
John Xinos 1,800,000 1,800,000 100% 47%
809-4438 W. 10th Ave.
Vancouver BC
Canada, V6R 4R8
- --------------------
All Officers and
Directors as a Group 1,800,000 1,800,000 100% 47%
(1) The person named above may be deemed to be a "parent" and "promoter" of
the Company, within the meaning of such terms under the Securities Act of
1933, as amended, by virtue of his direct holdings in the Company.
DESCRIPTION OF SECURITIES
=========================
Common Stock
- ------------
The authorized capital stock of our company consists of 75,000,000 shares
of Common Stock, par value $.001. The holders of Common Stock currently (i)
have equal ratable rights to dividends from funds legally available
therefore, when, as and if declared by the Board of Directors of the
Company; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii)
do not have preemptive, subscription or conversion rights and there are no
21
redemption or sinking fund provisions or rights applicable thereto; and (iv)
are entitled to one non-cumulative vote per share on all matters on which
stockholders may vote. All shares of Common Stock now outstanding are fully
paid for and non-assessable and all shares of Common Stock which are the
subject of this Offering, when issued, will be fully paid for and
non-assessable. Reference is made to the Company's Articles of
Incorporation, By-Laws and the applicable statutes of the State of Nevada
for a more complete description of the rights and liabilities of holders of
the Company's securities.
Non-cumulative Voting
- ---------------------
The holders of our Common Stock do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares, voting
for the election of directors, can elect all of the directors to be elected,
if they so choose, and, in such event, the holders of the remaining shares
will not be able to elect any of the Company's directors. After this
Offering is completed, the present stockholder will own 47% of the
outstanding shares. If all Warrants were to be exercised within two years,
the current owner would own 23% of the outstanding shares and all other
investors would own 77% of the outstanding shares.
Cash Dividends
- ---------------
As of the date of this prospectus, we have not declared or paid any cash
dividends to stockholders. The declaration or payment of any future cash
dividend will be at the discretion of the Board of Directors and will depend
upon our earnings, if any, capital requirements and financial position,
general economic conditions, and other pertinent conditions. It is our
present intention not to declare or pay any cash dividends in the
foreseeable future, but rather to reinvest earnings, if any, in our future
business operations.
INTEREST OF NAMED EXPERTS AND COUNSEL
=====================================
None of the below described experts or counsel have been hired on a
contingent basis and none of them will receive a direct or indirect
interest in our company.
Our financial statements for the period from inception to the year ended
December 31, 2005, plus the two-month period ended February 28, 2006,
included in this prospectus have been audited and reviewed, respectively,
by James Stafford Chartered Accountants, Suite 350 , 1111 Melville Street,
Vancouver BC, V6E 3V6, telephone number (604) 669-0711. We include the
financial statements in reliance on their reports, given upon their
authority as experts in accounting and auditing.
The Law Office of Michael M. Kessler Esq., 3436 American River Drive, Suite
11, Sacramento, California 95864, Telephone (916) 239-4000, has acted as
our legal counsel.
22
Mr. Lloyd Brewer, of Madman Mining Co. Ltd., Suite 314, 800 Pender Street,
Vancouver BC, Canada V6C 2V6, an unrelated third party, has provided us with
the geology report entitled "Summary Report On the Gold Bug Project".
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
========================================================
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the By-Laws of the company,
or otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act, and is, therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment of expenses incurred or paid by a director, officer
or controlling person in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or other control person
in connection with the securities being registered, we will, unless in the
opinion of our legal counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
ORGANIZATION WITHIN LAST FIVE YEARS
===================================
Mistral Ventures Inc. is a new company incorporated in Nevada on May 13,
2005 to engage in the business of acquisition, exploration and development
of natural resource properties. At that time, Mr. John Xinos was named
director and sole officer of the company and as such, voted to seek capital
and begin development of our business plans. We received our initial funding
of $9,000 through the sale of common stock to Mr. Xinos who purchased 900,000
shares of our Common Stock at $0.01 per share on October 27, 2005. On
February 9, 2006, an additional 900,000 shares of Common Stock were issued
to Mr. Xinos in exchange for mining claims valued in the amount of $9,000
or $0.01 per share. Mr. Xinos, therefore owns a total of 1,800,000 shares
of our Common Stock. There are no other stockholders.
DESCRIPTION OF BUSINESS
=======================
We are an exploration stage company with no revenues and limited operating
history. We are involved in the search for mineral deposits or reserves
that are not yet in either the development or production stage. Our
independent auditors have issued an audit opinion that includes a statement
expressing substantial doubt as to our ability to continue as a going
concern in our current state. The source of information contained in this
discussion is our geology report that has been included as Exhibit 99.3 to
this prospectus.
23
There has been only preliminary work done on our mining claim site, the
Gold Bug Project, and as with any prospective mining claim, there is the
possibility, or even likelihood, of our mineral claims containing little or
no economically viable mineralization or reserves of gold, silver and other
minerals. We have not engaged the services of a professional geologist or
mining engineer to examine our mineral claims in the field. Because of the
possibility that the Gold Bug Project claims do not contain any reserves,
funds that we spend on exploration could be lost. Even if we complete our
current exploration program and are successful in identifying a mineral
deposit, we will be required to spend substantial funds on further drilling
and engineering studies before we will know if we have a commercially viable
mineral deposit or reserve. There are no plans to combine with any other
business or to change the company's business activities. In the event that
commercially viable minerals are not found on the company's current
property, we may seek other mineral properties to explore or other possible
business opportunities.
In this Prospectus a combination of Imperial and metric measures are used
with respect to mineral properties located in Canada. Conversion rates from
Imperial measure to metric and from metric to Imperial are provided below:
- -----------------------------------------------------------------------------
Imperial Measure = Metric Unit Metric Measure = Imperial Unit
- -----------------------------------------------------------------------------
<c> <c> <c>
2.47 acres 1 hectare 0.4047 hectares 1 acre
3.28 feet 1 metre 0.3048 metres 1 foot
0.62 miles 1 kilometre 1.609 kilometres 1 mile
0.032 ounces (troy) 1 gram 31.1 grams 1 ounce (troy)
1.102 tons (short) 1 tonne 0.907 tonnes 1 ton
0.029 ounces (troy)/
ton 1 gram/tonne 34.28 grams/tonne 1 ounce (troy) ton
- -----------------------------------------------------------------------------
Below is a listing of mining terminology for convenience. We have also
included an explanation of each term as it appears in the body of this
prospectus to allow for easier reading.
Glossary of Mining Terms
- ------------------------
Adit - An opening driven horizontally into the side of a mountain or hill for
providing access to a mineral deposit.
Altered - Physically or chemically changed rock or mineral subsequent to its
formation.
Amphibole - An important group of dark-colored rock-forming, silicate minerals
that generally containing ions of iron
Andesite- Volcanic rock characteristically medium dark in color and containing
54 to 62% silica
24
Anomalous - A departure from the norm which may indicate the presence of
mineralization
Basalt- An extrusive volcanic rock
Batholith- A plutonic rock mass which increases in size downward, has no
determinable floor, and shows an area of surface exposure exceeding 100
km2.BeddingThe arrangement of sedimentary rocks in layers
Breccia - Rock consisting of fragments, more or less angular, in a matrix of
finer-grained material or of cementing material.
Cadmium or Cd - A soft, bluish-white metal and is easily cut with a knife.
Physically similar to zinc. Cadmium is used in silver solder and is highly
toxic
Carboniferous Age - An Epoch in Earth history about 354-290 million years ago
Chalcopyrite - A sulphide mineral of copper and iron; the most important ore
mineral in copper
Channel sample - A sample composed of pieces of vein or mineralized rock that
have been taken from a small trench or channel, usually about 3 inches wide
and 1 inch deep
Chlorite - A dark green, soft, flaky mineral similar to mica; it is common
as an alteration or metamorphic mineral
Copper or Cu - A reddish or salmon-pink isometric mineral, the native metallic
element of copper. It is ductile and malleable, a good conductor of heat and
electricity, usually dull and tarnished
Cretaceous - Epoch in Earth history from about 63 million to 135 million years
ago. Also refers to the rocks and sediment deposited in that epoch
Dacite - Volcanic rock that characteristically is light in color and
contains 62% to 69% silica and moderate amounts of sodium and potassium
Diamond drill - A rotary type of rock drill that cuts a core of rock
that is recovered in long cylindrical sections
Down drill
Dyke - A long and relatively thin body of igneous rock that, while in the
molten state, intruded older rocks
Eocene age - Epoch in earths history about 34-55 million years ago
Equigranular - Grains within a rock are very similar in size/shape
Erosional remnants - Literally remnants of a rock unit that has not completely
eroded away
25
Fault - A fracture dividing a rock into two sections that have visibly moved
relative to each other
Feldspars - silicate minerals which occur in igneous rocks - plagioclase
contains calcium and sodium
Felsic - Light-colored rocks containing feldspar and silica
Foliated - the arrangement of a set of minerals in parallel, sheet-like
layers that lie perpendicular to the flattened plane of a rock. Occurs in
metamorphic rocks
Galena - A lead sulphide - the most common ore mineral of lead
Gangue - Worthless minerals in an ore deposit
Geological mapping - The process of observing and measuring geological
features in a given area and plotting these features, to scale, onto a
map
Geophysical survey - A method of exploration that measures the physical
properties of rock formations including magnetism, specific gravity,
electrical conductivity and resistance
Gold or Au - A heavy, soft, yellow, ductile, malleable, metallic element.
Gold is a critical element in computer and communications technologies
Granite - A coarse-grained intrusive igneous rock consisting of quartz,
feldspar and mica
Granodiorite - IgnEous rock, less felsic than granite, typically light in
color; rough plutonic equivalent of dacite
Greenstone - Metamorphosed basalt
Hornblende - An igneous rock that contains magnesium, iron, silica and
aluminum - is black, brown and green in color. It occurs in crystals of many
igneous rocks
Hornfels - A fine-grained contact metamorphic rock
Igneous Rocks - Rocks that crystallize from magma
Interbeds - Several layers of sedimentary rock located side by side
Isolated Rafts - Literally small bodies of a rock unit that "sit" on top
of a different rock
Jurassic - Epoch in Earth history from about 135 million to 190 million years
ago. Also refers to the rocks and sediment deposited in that epoch
Lead or Pb - Heavy, easily fusible soft malleable base metal of dull
pale bluish-grey colour
26
Limestones - A sedimentary rock composed primarily of calcium carbonate
Lithologies - the character of a rock described in terms of structure, color,
mineral composition, grain size, and arrangement of its component parts
Mafic - class of rock which crystallizes from silicate minerals at relatively
high temperatures. It is also sometimes called basalt
Metamorphic -A rock that has undergone chemical or structural changes
(heat, pressure, or a chemical reaction) that causes changes to its original
state - High-grade metamorphic is a large amount of change
Meta-wacke - A soft, earthy, dark-colored rock or clay derived from the
alteration of basaltMineral claimA portion of land held either by a prospector
or a mining company, in British Columbia each claim is 500m x 500m (1,640 ft2)
MMI (Mobile Metal Ion) - A highly sensitive analytical technique that measures
the Ions of various metals that are moving upwards from depth
Monzonite - A felsic igneous rock usually light colored with > 20% quartz
contentOreA mixture of mineralized rock from which at least one of the metals
can be extracted at a profit
Outcrop - A surface exposure of bedrockPlagioclaseAny of a group of
feldspars containing a mixture of sodium and calcium feldspars
Plugs - A roughly cylindrical body of igneous rock that, while in the
molten state, intruded older rocksPotassicRock that contains potassium
PortalThe entrance to an adit
Precious metal- Any of several metals, including gold and platinum, that
have high economic value " metals that are often used to make coins or
jewelry
Pyrite- A yellow iron sulphide mineral " sometimes referred to as
"fools gold"
Quartz- Common rock forming mineral consisting of silicon and
oxygen
Quartz diorite - quartz diorite is a medium to dark grey, medium to
coarse-grained intrusive rock. It consists mainly of plagioclase feldspar,
some quartz, and abundant dark minerals (roughly a third)
Schists -A coarse-grained, strongly foliated metamorphic rock that develops
from phyllite and splits easily into flat, parallel slabs
Sedimentary - Secondary rocks formedfrom material derived from other rocks
and laid down underwater.
Shale - A sedimentary rock composed of fine sediment particles - tend to
be red, brown, black, or gray, and usually originate in relatively still
waters
27
Shear zone - A zone in which shearing has occurred on a large scale
Silver or Ag - A white metallic element that is ductile, very malleable and
capable of a high polish. This precious metal has major industrial
applications in photography, x-rays, electronics and electrical contacts,
batteries, brazing alloys, catalysts, mirrors, jewelry and sterling ware
Strike - The direction or bearing from true north, of a vein or rock
formation measured on a horizontal surface
Soil sampling - The collecting of samples of soil, usually 2 pounds per
sample, from soil thought to be covering mineralized rock. The samples are
submitted to a laboratory that will analyze them for mineral content
Sphalerite - A zinc sulphide mineral; the most common ore mineral of zinc
Syenite - Usually light in colour - rock contains 90% feldspar in large
crystals
Trachytes -light-colored, very fine-grained extrusive igneous rock that is
composed chiefly of feldspar with minor amounts other minerals
Trenching - The digging of long, narrow excavation through soil, or
rock, to expose mineralization
TRIM map - BC Gov"t - Terrain Resource Information Management Program that
produces highly accurate topographical base maps
Tuff - Rock composed of fine volcanic ash
Vein - A crack in the rock that has been filled by minerals that have
traveled upwards from a deeper source
Volcanic rock - Igneous rocks formed from magma that has flowed out or
has been violently ejected from a volcano
Winze - A secondary vertical or near-vertical opening sunk from a point
inside a mine for the purpose of connecting with a lower level or of
exploring the ground for a limited depth below a level
Zinc or Zn - A white metallic element
The Gold Bug Mining Claim
- -------------------------
Currently, our only property, on which the net proceeds of the offering
will be spent, is the Gold Bug Project claim, consisting of a six (6)
mineral cell claims having a total surface area of approximately 315 acres.
The claim is in Beaverdell, British Columbia, Canada (the "Property") and is
within the Greenwood Mining Division. The official report lists the Gold Bug
claim as being located at 49o24"N latitude and 119o08"W longitude on
National Topographic Sheet 82E/06E and alternatively on BC TRIM map sheets
082E035 & 082E045. As a reference point, the site is approximately 170 miles
28
due north of the Grand Coulee Dam in Washington State. The town of
Beaverdell is located 3 miles to the northeast of the Property. There is
good gravel road access to most, but not all parts of the Property. Further,
secondary roads and ATV trails provide access to other parts of the
property.
At the current time, the Property is without known exploitable reserves(1)
and the proposed program is exploratory in nature. We have not carried out
any exploration work on the claim and have incurred no exploration costs.
The future cost of exploration work on the property is disclosed in detail
in the Plan of Operation section of this prospectus.
(1) Reserves: For the purposes of this registration statement: that part of
a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. Reserves consist of:
(a) Proven (Measured) Reserves. Reserves for which: (i) quantity is computed
from dimensions revealed in outcrops, trenches, workings or drill holes;
grade and/or quality are computed from the results of detailed sampling;
and (ii) the sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape,
depth and mineral content of reserves are well-established.
(b) Probable (Indicated) Reserves. Reserves for which quantity and grade
and/or quality are computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling and measurement
are farther apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for proven (measured) reserves, is high
enough to assume continuity between points of observation.
There is not a plant or any equipment currently located on the Property. As
noted in the History of Previous Work subsection below, prior to 1971,
previous work on the property was done in at least 10 trenches. This work
intersected a quartz vein containing some mineralization of gold and silver;
however, it must be concluded that it was not at that time, considered to be
commercially viable. Further activity was done in 1971, by Husky Oil; in 1981
, by Midland Energy Corporation; and in 1983, by Belinda Mines, but no
further development was undertaken, so again, it may be that results were
not significant enough to move forward with development. Limited rock
sampling, geological sampling and a single survey line across the property
were conducted by St. Elias Mines Ltd. without known results. There has been
no known activity on the claim site since 1998.
The Geological Survey Branch of the British Columbia Ministry of Energy and
Mines has classified the mineralization within the project as a shear(2a)(2b)
hosted polymetallic vein(3) (Silver-"Ag", Lead-"Pb", Zinc-"Zn", and Gold-"Au").
The word shear is used in mining with different meanings:
(2a)Shear: a deformation of rocks formed by rock surfaces sliding
laterally against each other, usually occurring under pressure
caused by earthquakes, volcanos or glacial movement and
sometimes containing a variety of mineral resources.
(2b)Shear: can also refer to the face of a vertical cut or groove
in the land as sometimes made in open pit mining " a process
called "shearing".
29
(3)Shear-hosted polymetallic vein: a vein of ores contained
within a fault or shear that has been recognized to contain a
variety of minerals which may or may not be commercially
viable.
Shear-hosted polymetallic veins are frequently the source of both proven
mineral resources and further exploration to try to discover commercial
value. In the case of the Gold Bug Project, there are some showings
considered to be worth further exploration, specifically in what is known as
the Gold Bug Zone, where trenches and open cuts have exposed a mineralized
vein, but it must be understood that substantial potential value is still
unproven.
Samples from the zone include 5.8 oz/ton of silver, 1.52% lead and 0.54%
zinc from an unspecified interval of diamond drilling and 0.14 oz/ton gold
from a grab sample collected from the dump of the caved adit. A single line
of soil geochemical sampling identified a silver, lead and gold anomaly
located along the projected strike (extension) of the Gold Bug Vein. The
down-dip and strike extensions (both north and south) of the known gold,
silver, lead and zinc mineralization presents a good target.
Hydro electrical power lines that supply power to the town of Beverdeall
are located near the claim boundary. It is however expected that the
initial exploration will not be heavily dependent on electrical power, but
will be supported by generators.
Location and Access
- --------------------
The Gold Bug Project is located approximately 170 miles due north of the
Grand Coulee Dam in Washington State, within south-central British Columbia,
Canada approximately 180 miles (290km) east of Vancouver, near Beaverdell "
an area which has been mined since the early 1900s. Locally it is on the
southern end of Cranberry Ridge within the Eugene Creek Valley. The Property
is in the Greenwood Mining Division, and is centered at approximately
49O24"N latitude and 119o08"W longitude on NTS map sheet 82 E/6E and
alternatively on BC TRIM (BC Gov?t. Terrain Resource Information Management)
map sheets 082E035 and 082E045. Beaverdell lies 3 miles (5km) to the
northeast, on Highway 33; Kelowna and the junction with Highway 97 lies
some 50 miles (80km) to the north, while Rock Creek and the junction of
Highways 3 and 33 is 27 miles (45km) to the south. The Eugene Creek logging
road leaves Highway 33 approximately 4.3 miles (7km) south of Beaverdell and
affords excellent access to the southern area of the claim. Further secondary
roads and all terrain vehicle trails provide access to the eastern and
central portions of the claim.
Physiography
- -------------
The Property is situated within the Monashee Mountains of the BC Southern
Interior Physiographic Region, and elevations within the claims ranges from
4,100 feet (1,260m), near the northeastern corner of the Claim to 2,800 feet
(850m) within the Eugene Creek valley at the southeastern corner of the
Claim. Slopes within the Claim area are gentle except for the local fairly
steep slopes in the area where the land climbs out of the Eugene Creek
30
valley. Vegetation consists mainly of fir; larch and pine, much of it
mature second growth. Some of the area has been recently logged. There is
relatively little underbrush, and open grassy areas are common. Outcrop of
the underlying rock units is poor throughout the Project. It is estimated
that less than 5% of the Project contains good rock outcrop exposure.
(Outcrop: a protrusion of rock through the soil?s surface.)
The climate features warm summers and mild winters. The West Kettle Valley
is fairly dry in the summers with an average yearly precipitation of 20
inches (50cm). A snow pack of 2-3 feet (0.6-0.9m) begins to accumulate in
December and lingers in places into May. The recommended field season for
initial phases of exploration is from early May to late November. Drilling
and underground development can be carried out on a year-round basis with
the aid of a bulldozer to keep access roads snow-free.
Ample water is available from Eugene Creek and Tuzo Creek to support all
phases of exploration and development.
Proposed Exploration and Development Programs
- ---------------------------------------------
PHASE I: The Phase I exploration program will be funded from the proceeds
of this offering and will take approximately three weeks to complete with
an additional three weeks required for analysis. The estimated cost of the
Phase I program is $51,000 U.S. ($60,000CDN). This phase will consist of
(1) grid emplacement, that is putting into place a grid for the exploratory
work to be done so that the site is methodically, rather than randomly
examined for possible reserves; and (2) soil sampling, as well as testing
the effectiveness of Mobile Metal Ion and Biogeochemical methods. The
additional 3 weeks will include: complete analysis of samples, data
compilation and interpretation, drafting and report writing. Results
gained from the program will lead to a better understanding of, the
location of and controls of, mineralization at known showings as at any new
showings and/or anomalous areas discovered as a result of the Phase I
program. (In this case, anomalous areas refers to a departure from the rock
or soil around it which may indicate the presence of mineralization.) We
plan to commence Phase 1 of the exploration program on the claims in late
spring or early summer of 2006, as soon as weather conditions in the area
permit, or when we have completed this offering and have sufficient funds
to do so.
31
The following exploration estimates were provided by the Canadian geologist
as part of his report and the dollars are stated in Canadian dollars.
Personnel:
- ----------
Senior Geologist 5 days @ $400.00 $ 2,000.00
Project Geologist 22 days @ $300.00 6,600.00
Prospector/Field Assistant 20 days @ $225.00 4,500.00
Prospector/Field Assistant 20 days @ $200.00 4,000.00
Field Costs:
- -----------
Field Camp and Supplies 60 man/days @ $60.00/m/d
(including camp rental,
GPS rental, food, prospecting
and sampling equipment, first
aid and chain saw) 3,600.00
Field Communications Long Distance charges
Motorola 2 way field radios 500.00
Auger Rentals 2,000.00
Survey Consumables Sample bags, survey flagging,
pickets etc. 3,200.00
Transportation:
- --------------
Truck Rental 20 days @ $100.00/day 2,000.00
ATV/Trailer Rental 20 days @ $75.00/day 1,500.00
Mob/de-mob Vancouver-Beaverdell return
(fuel/meals/motel & truck
mileage charges) 500.00
Analytical:
- ----------
Soil Samples 500 samples @ $23.50/sample
(Au + 32 element ICP) 11,750.00
MMI/Bio Geochemical 10 samples 350.00
Rock Samples 30 samples @ $25.00/sample 750.00
Office & Engineering:
- --------------------
Report Writing Based on results of
Phase I exploration program 5,000.00
Drafting/Cartography (including field base map and
all final maps detailing
geological mapping, sample
locations and results,
location of old workings and
compilation of results from
previous work on property) 4,000.00
Overhead & Contingency 7,750.00
----------
Total estimate cost of the Phase I exploration program $60,000.00
==========
32
PHASE II: The Phase II exploration program is contingent upon the success of
the Phase I program and will be partially funded from the proceeds of this
offering. Mechanical trenching and diamond drilling are foreseen to be the
logical next step. The minimum estimated cost of the Phase II program is
$86,000 U.S. ($100,000CDN) and will take approximately three (3) months to
complete, including the collection and interpretation of all exploration
data. Although the funds from this offering will not allow us to complete
all of the analysis of the data received in the exploratory work in Phase
II, we do believe we will have enough information to know whether it will
likely be viable to proceed or whether we should consider other alternatives
including obtaining a different property. In general, we would like to have
indications that the mineralization within the veins is worth at least $100
U.S. per ton (gross metal value) to further explore/develop the claims. If
a large mineralized vein system is present, the project could be developed
on a large scale and, conversely, if a smaller mineralization vein system is
present, then the property could be developed on a smaller scale.
The discussions contained herein are management's estimates only, based on
the information we have obtained from Madman Mining Co. Ltd., former owner
of the Property. Because we have not yet commenced our exploration program,
we cannot provide a more detailed discussion of what our plans will be if we
find a viable store of minerals on our Property. As there is no guarantee
that exploitable mineralization will be found, the quantity or type of
minerals if they are found and the extraction process that will be required
is unknown at this time. We are also unable to guarantee that we will be
able to raise the additional funding that will be needed to proceed with any
subsequent work on the claims if mineralization is found in Phases I and II
either from the exercise of the Warrants in this offering or from other
sources, including bank loans or additional sales of our equity securities.
Based on previous work in the area, recent (limited scale) exploration work
and the Summary Report on the Gold Bug Project by Lloyd C. Brewer attached
to this prospectus as Exhibit 99.3, indications are that the vein in which
the showing is located shows that "the high-grade silver with gold, lead and
zinc mineralization occurring within the Project is consistent of the
overall grades obtained from the past producing Inyo-Ackworth mine (located
to the north of the project), as well as the main mines on Wallace Mountain.
It is highly probable that further mineralization will be discovered below
and along strike from the known mineralization workings at this area." The
information from analytical results of samples collected during the previous
work are helpful, as they provide some indication as to the grades and
location of minerals present on the claims, although there is no guarantee
that previous or future work will result in any exploitable mineral deposits.
Acquisition and Retention of and Title to our Mining Property
- -------------------------------------------------------------
The claims are currently held in trust for us in the name of our sole
officer and director, John Xinos, whom we acquired them from on February 9,
2006 for 900,000 shares of our common stock with a deemed value of $.01 per
share, or an aggregate amount of $9,000. The claim was purchased by John
Xinos from Madman Mining Co. Ltd., an unrelated third party mining company,
on February 3, 2006 for $10,000 CDN (approximately $8,000 USD).
33
In order to retain title to the property, exploration work in the amount
$1,800 CDN must be completed and filed with the British Columbia Department
of Energy Mines and Petroleum Resources ("BCDM"). If work is completed, in
any one year (using a year based on the staking date of the claim " in this
case March 28), in an amount greater than $1,800, then the excess work can
be applied towards future years" exploration requirements. The BCDM charges
a filing fee, equal to 10% of the value of the work done to record the work.
Alternatively the company can pay "cash in lieu" of, which is also $1,800
per year with a 10% filing fee. We have paid this money in advance to allow
us time to complete this offering and raise the proceeds necessary to
commence exploratory work on the claim.
Competition
- ------------
The mining industry is highly competitive and fragmented. We do not
compete directly with anyone for the exploration or removal of minerals
from our Property, as we currently hold all interest and rights to the
claims. Readily available commodities markets exist in Canada and around
the world for the sale of gold, silver and other minerals. Therefore, we
will likely be able to sell any gold, silver or other minerals that we are
able to recover if and when we find any mineralization on our claims and
are able to extract and bring them to market.
We will, however, be subject to competition and unforeseen limited sources
of supplies in the industry in the event spot shortages arise for supplies
such as dynamite, and certain equipment such as bulldozers and excavators
that we will need to conduct exploration. Mining is a large industry in
Western Canada, which could result in such material and equipment shortages
when we are ready to acquire them. We have not yet attempted to locate or
negotiate with any suppliers of products, equipment or services and will not
do so until funds are received from this offering. If we are unsuccessful
in securing the products, equipment and services we need, we may have to
suspend our exploration plans until we are able to obtain them.
Bankruptcy or Similar Proceedings
- ----------------------------------
We have been involved in no bankruptcy, receivership or similar proceedings.
Reorganizations, Purchase or Sale of Assets
- -------------------------------------------
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of our assets not in the ordinary
course of business, nor are any expected in the near future.
Compliance with Government Regulation
- ------------------------------------
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of
minerals in Canada, generally, and in British Columbia, specifically.
34
The initial steps of exploration can be carried out without permits or
notification to any governmental body, as such work is deemed to be
"low-disturbance/low-impact" by the British Columbia Department of Energy
Mines and Petroleum Resources (BCDM).
With respect to the mechanized trenching or diamond drilling " a plan of
operation will need to be filed with the BCDM. This plan will detail the
extent, location and amount of surface disturbance for the trenching and/or
drilling. As the amount of trenching and drilling (initially) will be
limited, we expect that a permit should be issued within 30 days of the
filing of our plan of operations. We will be required to obtain a
refundable bond in the amount of $2,000-$5,000 (depending on the
anticipated amount of disturbance). The bond is to ensure that we reclaim
or repair the disturbance caused by our trenching and drilling program.
Usually this reclaiming work entails filling in and smoothing the surface
at trenching sites, clean up and removal of any work material, and seeding
native grass/plants at the sites of disturbance.
Although there has recently been some logging in the area, in the event that
trees larger than 6 inches in diameter need to be cut down, a permit will
need to be obtained from the BC Ministry of Forests. This usually takes
less than 30 days to obtain. We will try to adjust the areas we work and
trench to work around larger trees (initially) to avoid any disturbance to
the trees; however, if the disturbance to larger trees is unavoidable, then
a permit to cut will be obtained.
There are nominal costs involved in obtaining the BCDM or Forestry permits
(less than $100 each). The bond required by the BCDM is returned (with
interest) upon proper cleanup of the site. There will be costs for the
crew and equipment required to fill in the trenches, but as heavy equipment
is available locally, and the amount of disturbance is expected to be
minimal, our estimate for these costs will be most likely be less than
$2,000 (1 day " equipment/crew).
Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor
Contracts
- --------------------------------------------------------------------------
We have no current plans for any registrations such as patents, trademarks,
copyrights, franchises, concessions, royalty agreements or labor contracts.
We will assess the need for any of these on an ongoing basis; however, we
don't expect to enter into any such agreements in the near term.
Research and Development Costs During the Last Two Years
- ---------------------------------------------------------
We have not expended funds for research and development costs since
inception. The geology report and history of the claims were included in
the $9,000 payment for the claims and not itemized as a separate cost.
35
Number of Employees
- --------------------
We do not currently have any paid employees. Our only employee is our sole
officer and director who currently spends 5-7 hours per week on our
business matters. Upon completion of this offering and receipt of the
proceeds therefrom, of which there is no assurance, Mr. Xinos plans to
devote as much time as the board of directors determines is necessary
to manage the affairs of the company.
Reports to Security Holders
- ---------------------------
We will provide an annual report that includes audited financial information
to our shareholders. We will make our financial information equally
available to any interested parties or investors through compliance with
the disclosure rules of Regulation S-B for a small business issuer under
the Securities Exchange Act of 1934. We will become subject to disclosure
filing requirements once our registration statement becomes effective,
including filing Form 10-KSB annually and Form 10-QSB quarterly. In
addition, we will file Form 8K and other proxy and information statements
from time to time as required. We do not intend to voluntarily file the
above reports in the event that our obligation to file such reports is
suspended under the Exchange Act. The public may read and copy any
materials that we file with the Securities and Exchange Commission, ("SEC"),
at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
===============================================================
General
- -------
We are a start-up company and have not yet generated or realized any
revenues from our business operations. Our financial statements from
inception (May 13, 2005) through February 28, 2006 report no revenues and a
net book value loss of $19,483. Furthermore, as we are still in the
development stage and expect to continue to operate at a loss for most or
all of the first year of our operations as we develop our business.
The following table provides selected financial data about our company
for the period from the date of inception on May 13, 2005 to December 31,
2005 and for the 2-month period ended February 28, 2006. For more detailed
financial information, please see our financial statements included in
this prospectus.
Balance Sheet Data: 12/31/05 2/28/06
--------------------------------------------
<s> <c> <c>
Cash in bank $ 8,677 $ 5,837
Total assets $ 8,927 $ 5,987
Total liabilities $ 5,700 $ 7,470
Stockholders' equity $ 3,227 $(1,483)
36
We have incurred total expenses of $19,483 since inception, $9,000 of which
was spent for the acquisition of our mineral property interests, $8,900 in
legal and accounting fees incurred in connection with the preparation and
filing of a registration statement on Form SB-2 with the U.S. Securities and
Exchange Commission, of which this prospectus is a part. We are relying
solely on the proceeds of this offering to commence our exploration and
development programs; however, there is no guarantee we will be successful
in completing this offering or completing our proposed business plans. Other
than the Units offered by this prospectus, no other source of capital has
been identified or sought.
We have never had any discussions with any possible acquisition candidate,
nor have we any intention of doing so.
We do not expect to purchase any real estate and do not own any to sell.
We do not expect to hire full time employees until our business operations
are established and we have constructed and placed our first kiosk.
We have no off-sheet balance arrangements or obligations or other interests
that could affect finances or operations. Other than the shares offered by
this prospectus, no other source of capital has been has been identified or
sought.
Plan of Operation
- -----------------
Our plan of operation for the twelve months following the date of this
prospectus is to complete the first phase of exploration programs on the
Gold Bug Project claims consisting of re-sampling of old workings, geologic
mapping, analytical and test surveys. In addition to the $51,000
($60,000CDN) we anticipate spending for Phase I of the exploration program
as outlined below, we anticipate spending an additional 40,000 (approx.
$46,500CDN) on the early stages of Phase II and approximately $12,000 in
professional fees, including fees payable in connection with the filing of
this registration statement and complying with our subsequent public company
reporting obligations, as well as general administrative costs. Total
expenditures over the next 12 months are therefore expected to be
approximately $103,000, which includes the $100,000 to be raised in this
offering and our existing cash assets. We are relying solely on the funds
from this offering to proceed with our business plans.
PHASE I: The Phase I exploration program will be funded from the proceeds of
this offering and will take approximately three weeks to complete with an
additional three weeks required for analysis. This phase will consist of (1)
grid emplacement, that is putting into place a grid for the exploratory work
to be done so that the site is methodically, rather than randomly examined
for possible reserves; and (2) soil sampling, as well as testing the
effectiveness of Mobile Metal Ion and Biogeochemical methods. The
additional 3 weeks will include: complete analysis of samples, data
compilation and interpretation, drafting and report writing. Results
gained from the program will lead to a better understanding of, the
37
location of and controls of, mineralization at known showings as at any new
showings and/or anomalous areas discovered as a result of the Phase I
program. (In this case, anomalous areas refers to a departure from the rock
or soil around it which may indicate the presence of mineralization.) We
plan to commence Phase 1 of the exploration program on the claims in late
spring or early summer of 2006, as soon as weather conditions in the area
permit, or when we have completed this offering and have sufficient funds
to do so. The estimated cost of the Phase I program is $51,000 U.S.
($60,000CDN).
PHASE II: The Phase II exploration program is contingent upon the success
of the Phase I program and will be partially funded from the proceeds of
this offering. Mechanical trenching and diamond drilling are foreseen to
be the logical next step. We estimate this phase will take approximately
three (3) months to complete, including the collection and interpretation
of all exploration data. Although the funds from this offering will not
allow us to complete all of the analysis of the data received in the
exploratory work in Phase II, we do believe we will have enough information
to know whether it will likely be viable to proceed or whether we should
consider other alternatives including obtaining a different property. In
general, we would like to have indications that the mineralization within
the veins is worth at least $100 U.S. per ton (gross metal value) to
further explore/develop the claims. If a large mineralized vein system is
present, the project could be developed on a large scale and, conversely,
if a smaller mineralization vein system is present, then the property could
be developed on a smaller scale. The minimum estimated cost of the Phase II
program is $86,000 U.S. ($100,000CDN).
Liquidity and Capital Resources
- -------------------------------
Our current cash in the bank is $5,837. We believe this small cash balance
will be sufficient to fund limited levels of our operations until such time
as we are able to sell the Units and raise the funds in this offering. If
we experience a shortage of funds prior to funding, our sole officer and
director has informally agreed to advance funds to allow us to pay for
offering costs, filing fees and miscellaneous expenses; however, we have no
formal commitment, arrangement or legal obligation with him to advance or
loan funds to us if and when needed. In order to achieve our business plan
goals, we are relying solely on receipt of the proceeds from this offering.
We are an exploration stage company and have generated no revenue to date.
We have sold $9,000 in equity securities to our sole officer and director
to implement our minimum level of operations and prepare this prospectus to
raise additional funds needed for the exploration and development of our
Property.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as a going business for the next
twelve months unless we obtain additional capital to pay our bills. This
is because we have not generated revenues and no revenues are anticipated
until we begin removing and selling minerals from our Property, of which
there can be no assurance.
38
Our exploration target is to find exploitable minerals on our property.
Our success depends on achieving that target. There is the likelihood that
our mineral claims will contain little or no economic mineralization or
reserves of gold and other minerals. We have not yet engaged the services
of a professional geologist or mining engineer to examine our mineral
claims in the field, and we will not do so until this offering is completed
and we have the funds to do so, of which there is no guarantee. There is
the possibility that the Gold Bug claims do not contain any reserves and
funds that we spend on exploration will be lost. Even if we complete our
current exploration program and are successful in identifying any mineral
deposits, we will be required to expend substantial funds on further
drilling and engineering studies before we will know if we have a
commercially viable mineral deposit or reserve. We are unable to assure
you we will be able to raise the additional funds necessary through the
exercise of the Warrants to implement any future exploration or extraction
program even if mineralization is found.
Critical Accounting Policies
- ----------------------------
Use of estimates - The preparation of consolidated 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 revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Income taxes - We account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires recognition of
deferred tax assets and liabilities for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in operations in the period that includes the enactment date.
Management feels the company will have a net operating loss carryover to be
used for future years. We have not established a valuation allowance for
the full tax benefit of the operating loss carryovers due to the uncertainty
regarding realization.
Net loss per common share - We compute net loss per common share in
accordance with SFAS No. 128, Earnings per Share (SFAS 128) and SEC Staff
Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and
SAB 98, basic net loss per share is computed by dividing the net loss
available to common stockholders for the period by the weighted average
number of shares of common stock outstanding during the period. The
calculation of diluted net loss per share gives effect to common stock
equivalents; however, potential common shares are excluded if their effect
is anti-dilutive. For the period from May 13, 2005 (Date of Inception)
through February 2006, no options and warrants were excluded from the
computation of diluted earnings per share because their effect would be
anti-dilutive.
39
Revenue recognition " We have had no revenues to date from operations; as
a result, a revenue recognition policy has not yet been formulated by our
board of directors.
Stock-based compensation " We will apply Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and Related
Interpretations, in accounting for stock options issued to employees.
Under APB No. 25, employee compensation cost is recognized when estimated
fair value of the underlying stock on date of the grant exceeds exercise
price of the stock option. For stock options and warrants issued to non-
employees, we will apply SFAS No. 123, Accounting for Stock-Based
Compensation, which requires the recognition of compensation cost based upon
the fair value of stock options at the grant date using the Black-Scholes
option pricing model.
There were no stock options granted for the period from inception to
February 28, 2006. There are additionally no written or verbal agreements
related to the sale of any stock, option or warrants of our common stock as
of February 28, 2006.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends the transition
and disclosure provisions of SFAS No. 123. We are currently evaluating SFAS
No. 148 to determine if it will adopt SFAS No. 123 to account for employee
stock options using the fair value method and, if so, when to begin
transition to that method.
DESCRIPTION OF PROPERTY
-----------------------
We are currently using the office premises of our sole officer and director
on a rent-free basis at 809-4438 West 10th Avenue, Vancouver BC, Canada,
V6R 4R8. The premises include a telephone, answering machine, fax machine
and a computer system, which is adequate for our current business
operations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The principal executive office and telephone number are provided by our
sole officer and director at no cost to us. The costs associated with the
use of the telephone and mailing address were deemed to be immaterial as
the telephone and mailing address were almost exclusively used by him for
other business purposes.
As of June 9, 2005, we owed our sole officer and director $500 for a cash
loan advanced to us for incorporation expenses. The loan is unsecured and
interest free with no specified terms of repayment.
40
On October 27, 2005, a total of 900,000 shares of Common Stock were issued
in exchange for cash in the amount of $9,000 U.S., or $.01 per share. On
February 9, 2005, a total of 900,000 shares of Common Stock were issued in
exchange for mining claims valued in the amount of $9,000 U.S., or $.01
per share. The terms of these stock issuances were as fair to the company,
in Mr. Xinos's opinion as the sole officer and director, as could have been
made with an unaffiliated third party. In making this determination, he
relied upon the fact that the 900,000 shares were valued and purchased for
approximately $9,000 in cash and the 900,000 shares issued for the $9,000
valuation of the mineral claim interest which was the amount he had paid
for the mining claims.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Following completion of this offering, of which there is no guarantee, we
plan to contact a market maker to file an application on our behalf to have
our shares quoted on the OTC Electronic Bulletin Board (OTCBB). The OTCBB
is a regulated quotation service that displays real-time quotes, last sale
prices and volume information in over-the-counter (OTC) securities. The
OTCBB is not an issuer listing service, market or exchange. Although the
OTCBB does not have any listing requirements per se, to be eligible for
quotation on the OTCBB, issuers must remain current in their filings with
the SEC or applicable regulatory authority. Market Makers are not permitted
to begin quotation of a security whose issuer does not meet this filing
requirement. Securities already quoted on the OTCBB that become delinquent
in their required filings will be removed following a 30 or 60 day grace
period if they do not make their required filing during that time. We cannot
guarantee that our application will be accepted or approved and our stock
listed and quoted for sale. As of the date of this filing, there have been
no discussions or understandings between our company nor anyone acting on
our behalf with any market maker regarding participation in a future trading
market for our securities.
As of the date of this filing, there is no public market for our securities.
There has been no public trading of our securities, and, therefore, no high
and low bid pricing. As of the date of this prospectus, we had one
shareholder of record. We have paid no cash dividends and have no
outstanding options.
Penny Stock Rules
- ------------------
The Securities and Exchange Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks.
Penny stocks are generally equity securities with a price of less than
$5.00 (other than securities registered on certain national securities
exchanges or quoted on the Nasdaq system, provided that current price and
volume information with respect to transactions in such securities is
provided by the exchange or system).
41
A purchaser is purchasing penny stock which limits the ability to sell the
stock. The shares offered by this prospectus constitute penny stock under
the Securities and Exchange Act. The shares will remain penny stocks for
the foreseeable future. The classification of penny stock makes it more
difficult for a broker-dealer to sell the stock into a secondary market,
which makes it more difficult for a purchaser to liquidate his/her
investment. Any broker-dealer engaged by the purchaser for the purpose of
selling his or her shares in us will be subject to Rules 15g-1 through
15g-10 of the Securities and Exchange Act. Rather than creating a need to
comply with those rules, some broker-dealers will refuse to attempt to sell
penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from those rules, to deliver a standardized
risk disclosure document, which:
- - contains a description of the nature and level of risk in the market
for penny stock in both public offerings and secondary trading;
- - contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to a violation of such duties or other requirements of the
Securities Act of 1934, as amended;
- - contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" price for the penny stock and the
significance of the spread between the bid and ask price;
- - contains a toll-free telephone number for inquiries on disciplinary
actions;
- - defines significant terms in the disclosure document or in the
conduct of trading penny stocks; and
- - contains such other information and is in such form (including
language, type, size and format) as the Securities and Exchange
Commission shall require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in
a penny stock, to the customer:
- - the bid and offer quotations for the penny stock;
- - the compensation of the broker-dealer and its salesperson in the
transaction;
- - the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
- - monthly account statements showing the market value of each penny
stock held in the customer's account.
42
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written
acknowledgment of the receipt of a risk disclosure statement, a written
agreement to transactions involving penny stocks, and a signed and dated
copy of a written suitability statement. These disclosure requirements
will have the effect of reducing the trading activity in the secondary
market for our stock because it will be subject to these penny stock rules.
Therefore, stockholders may have difficulty selling their securities.
Regulation M
- ------------
Our officer and director, who will offer and sell the Shares, is aware that
he is required to comply with the provisions of Regulation M promulgated
under the Securities Exchange Act of 1934, as amended. With certain
exceptions, Regulation M precludes the officer and director, sales agent,
any broker-dealer or other person who participates in the distribution of
shares in this offering from bidding for or purchasing, or attempting to
induce any person to bid for or purchase any security which is the subject
of the distribution until the entire distribution is complete.
Transfer Agent
- --------------
The stock transfer agent for our securities is Signature Stock Transfer,
2301 Ohio Drive " Suite 100, Plano, Texas 75093 telephone (972)612-4120.
EXECUTIVE COMPENSATION
----------------------
Our current sole officer and director receives no compensation.
- ----------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------
Annual Compensation Long-Term Comp.
Awards Payouts
Name and Consulting Other Annual
Position(s) Year Fees Bonus Compensation
- ----------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c>
John Xinos, 2005 0 0 0 0 0
President 2006 0 0 0 0 0
- ----------------------------------------------------------------------------
There are no current employment agreements with our sole officer and
director.
43
The officer currently devotes an immaterial amount of time to manage the
affairs of the company, approximately 5-7 hours per week. The director and
principal officer has agreed to work with no remuneration until such time
as the company receives sufficient revenues necessary to provide management
salaries. At this time, management cannot accurately estimate when
sufficient revenues will occur to implement this compensation, nor what the
amount of the compensation will be.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees in the event of retirement at normal
retirement date pursuant to any presently existing plan provided or
contributed to by the company or any of its subsidiaries, if any.
FINANCIAL STATEMENTS
--------------------
Our financial statements for the period from the date of inception on May 13,
2005 to December 31, 2005 (audited) and for the 2-month period ended February
28 2006 (unaudited), immediately follow.
44
Mistral Ventures, Inc.
(An Exploration Stage Company)
Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
45
James Stafford
Chartered Accountants*
Suite 350 - 1111 Melville Street
Vancouver, British Columbia
Canada V6E 3V6
Telephone +1 604 669 0711
Facsimile +1 604 669 0754
* Incorporated professional
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Mistral Ventures, Inc.
(An Exploration Stage Company)
We have audited the balance sheet of Mistral Ventures, Inc. as of 31
December 2005 and the related statements of operations, cash flows and
changes in stockholders' equity for the period from the date of inception
on 13 May 2005 to 31 December 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of 31
December 2005 and the results of its operations, its cash flows and its
changes in stockholders' equity for the period from the date of inception
on 13 May 2005 to 31 December 2005 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, conditions exist which raise substantial doubt about
the Company's ability to continue as a going concern unless it is able to
generate sufficient cash flows to meet its obligations and sustain its
operations. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ James Stafford
Chartered Accountants
Vancouver, Canada
23 March 2005
46
<CAPTION
Mistral Ventures, Inc.
(An Exploration Stage Company)
Balance Sheet
(Expressed in U.S. Dollars)
As at 31 December 2005
$
Assets
- ------
Current
- -------
Cash and cash equivalents 8,677
Prepaid expenses 250
--------
8,927
========
Liabilities
- ----------
Current
- -------
Accounts payable and accrued liabilities (Note 3) 5,200
Due to related party (Note 4) 500
--------
5,700
--------
Stockholders' equity
- --------------------
Capital stock (Note 5)
Authorized
75,000,000 of common shares, par value $0.001
Issued and outstanding
2005 - 900,000 common shares, par value $0.001 900
Additional paid in capital 8,100
Deficit, accumulated during the exploration stage (5,773)
--------
3,227
--------
8,927
========
Nature and Continuance of Operations (Note 1)
Subsequent Event (Note 8)
On behalf of the Board:
/s/ John Xinos, Director
By: John Xinos
The accompanying notes are an integral part of these financial statements.
47
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statement of Operations
(Expressed in U.S. Dollars)
For the period from the date of inception on 13 May 2005 to 31 December 2005
$
Expenses
- --------
Legal and accounting 5,200
Office and miscellaneous 18
Transfer agent fees 555
-------
Net loss for the period (5,773)
=======
Basic and diluted earnings per common share (0.01)
=======
Weighted average number of common shares used
in per share calculations 900,000
=======
The accompanying notes are an integral part of these financial statements.
48
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statement of Cash Flows
(Expressed in U.S. Dollars)
For the period from the date of inception on 13 May 2005 to 31 December 2005
$
Cash flows from operating activities
- ------------------------------------
Net loss for the period (5,773)
Changes in operating assets and liabilities
Increase in prepaid expenses (250)
Increase in accounts payable and accrued liabilities 5,200
Increase in due to related party 500
------
(323)
Cash flows from financing activities
- ------------------------------------
Common shares issued for cash 9,000
------
Increase in cash and cash equivalents,
being cash and cash equivalents, end of period 8,677
======
Supplemental Disclosures with Respect to Cash Flows (Note 7)
The accompanying notes are an integral part of these financial statements.
49
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity
(Expressed in U.S. Dollars)
Additional
Number of Share Paid-In Stockholders'
Shares Capital Capital Deficit Equity
--------- ------- -------- ---------- ------------
Balance at May 13,
2005 (Inception) - $ - $ - $ - $ -
Common shares
issued - cash
($0.01 per share)
(Note 5) 900,000 900 8,100 - 9,000
Net loss for the
period - - - (5,773) (5,773)
------------------------------------------------------
Balance at 31
December 2005 900,000 $ 900 $ 8,100 $ (5,773) $ (3,227)
========================================================
The accompanying notes are an integral part of these financial statements.
50
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
1. Nature and Continuance of Operations
Mistral Ventures, Inc. was incorporated in the State of Nevada on 13 May
2005 to engage in the acquisition, exploration and development of natural
resources properties.
The Company is an exploration stage company as defined by Statement of
Financial Accounting Standard ('SFAS") No. 7. The Company had not acquired
any mineral properties interest at 31 December 2005 but did acquire one
property interest subsequent to 31 December 2005 (Note 8). The Company has
not yet determined whether this property contains reserves that are
economically recoverable. The recoverability of property expenditures will
be dependent upon the discovery of economically recoverable reserves,
confirmation of the Company's interest in the underlying property, the
ability of the Company to obtain necessary financing to satisfy the
expenditure requirements under the property agreement and upon future
profitable production or proceeds for the sale thereof.
The Company's financial statements as at 31 December 2005 and for the
period from the date of inception on 13 May 2005 to 31 December 2005 have
been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal
course of business. The Company has a loss of $5,773 for the period from
the date of inception on 13 May 2005 to 31 December 2005 and has working
capital of $3,227 at 31 December 2005.
Management cannot provide assurance that the Company will ultimately
achieve profitable operations or become cash flow positive, or raise
additional debt and/or equity capital. However, based on its prior
demonstrated ability to raise capital, management believes that the
Company's capital resources should be adequate to continue operating and to
maintain its business strategy during fiscal 2006. However, if the Company
is unable to raise additional capital in the near future, due to the
Company's liquidity problems, management expects that the Company will need
to curtail operations, liquidate assets, seek additional capital on less
favourable terms and/or pursue other remedial measures. These financial
statements do not include any adjustments related to the recoverability and
classification of assets or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
2. Significant Accounting Policies
The following is a summary of significant accounting policies used in the
preparation of these financial statements.
51
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
Basis of presentation
The financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in the United States of
America applicable to exploration stage companies, and are expressed in
U.S. dollars. The Company's fiscal year end is 31 December.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Mineral property costs
The Company has been in the exploration stage since its formation on 13 May
2005 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition and exploration of mining
properties. Mineral property acquisition and exploration costs are charged
to operations as incurred. When it has been determined that a mineral
property can be economically developed as a result of establishing proven
and probable reserves, the costs incurred to develop such property, are
capitalized. Such costs will be amortized using the units-of-production
method over the estimated life of the probable reserve.
Although the Company will take steps to verify title to mineral properties
in which it has an interest, according to the usual industry standards for
the stage of exploration of such properties, these procedures do not
guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Reclamation costs
The Company's policy for recording reclamation costs is to record a
liability for the estimated costs to reclaim mined land by recording
charges to production costs for each tonne of ore mined over the life of
the mine. The amount charged is based on management's estimation of
reclamation costs to be incurred. The accrued liability is reduced as
reclamation expenditures are made. Certain reclamation work is performed
concurrently with mining and these expenditures are charged to operations
at that time.
Financial instruments
The carrying value of cash, accounts payable and accrued liabilities, and
due to related party approximates their fair value because of the short
maturity of these instruments. The Company's operations are in Canada and
virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates. The
52
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
Company's financial risk is the risk that arises from fluctuations in
foreign exchange rates and the degree of volatility of these rates.
Currently, the Company does not use derivative instruments to reduce its
exposure to foreign currency risk.
Derivative financial instruments
The Company has not, to the date of these financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
Environmental expenditures
The operations of the Company have been, and may in the future be, affected
from time to time, in varying degrees, by changes in environmental
regulations, including those for future reclamation 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's
policy is to meet or, if possible, surpass standards set by relevant
legislation, by application of technically proven and economically feasible
measures.
Environmental expenditures that relate to ongoing environmental and
reclamation programs are charged against earnings as incurred or
capitalized and amortized depending on their future economic benefits.
Estimated future reclamation and site restoration costs, when the ultimate
liability is reasonably determinable, are charged against earnings over the
estimated remaining life of the related business operation, net of expected
recoveries.
Income taxes
Deferred income taxes are reported for timing differences between items of
income or expense reported in the financial statements and those reported
for income tax purposes in accordance with SFAS No. 109, Accounting for
Income Taxes, which requires the use of the asset/liability method of
accounting for income taxes. Deferred income taxes and tax benefits are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax losses and credit
carry-forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated future
tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
53
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
Basic and diluted net loss per share
The Company computes net loss per share in accordance with SFAS No. 128,
Earnings per Share. SFAS No. 128 requires presentation of both basic and
diluted earnings per share ("EPS") on the face of the income statement.
Basic EPS is computed by dividing net loss available to common shareholders
(numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all
potentially dilutive common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all potentially
dilutive shares if their effect is anti-dilutive.
Comprehensive loss
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive loss and its components in the
financial statements. As at 31 December 2005, the Company has no items
that represent a comprehensive loss and, therefore, has not included a
schedule of comprehensive loss in the financial statements.
Segments of an enterprise and related information
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the way that
public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. The Company has evaluated this SFAS and does not
believe it is applicable at this time.
Start-up expenses
The Company has adopted Statement of Position No. 98-5, Reporting the Costs
of Start-up Activities, which requires that costs associated with start-up
activities be expensed as incurred. Accordingly, start-up costs associated
with the Company's formation have been included in the Company's general and
administrative expenses for the period from the date of inception on 13 May
2003 to 31 December 2005.
54
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
Foreign currency translation
The Company's functional and reporting currency is in U.S. dollars. The
financial statements of the Company are translated to U.S. dollars in
accordance with SFAS No. 52, Foreign Currency Translation. Monetary assets
and liabilities denominated in foreign currencies are translated using the
exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. The
Company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenditures during the reporting period. Actual results could differ
from these estimates.
Recent accounting pronouncements
In May 2005, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 154, Accounting Changes and Error Corrections " A Replacement of
APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 changes the requirements
for the accounting for and the reporting of a change in accounting principle
and applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition
provisions. SFAS No. 154 requires retrospective application to prior
periods' financial statements of changes in accounting principle, unless it
is impracticable to determine either the period-specific effects or the
cumulative effect of the change. The provisions of SFAS No. 154 are
effective for accounting changes and correction of errors made in fiscal
years beginning after 15 December 2005. The adoption of this standard is
not expected to have a material effect on the Company's results of
operations or financial position.
In March 2005, the Securities and Exchange Commission ("SEC") staff issued
Staff Accounting Bulletin ("SAB") No. 107 to give guidance on the
implementation of SFAS No. 123R. The Company will consider SAB No. 107
during implementation of SFAS No. 123R.
55
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets " An Amendment of APB Opinion No. 29. The guidance in APB Opinion
No. 29, Accounting for Nonmonetary Transactions, is based on the principle
that exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged. The guidance in that Opinion, however,
included certain exceptions to that principle. SFAS No. 153 amends Opinion
No. 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the exchange. The
provisions of SFAS No. 153 are effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after 15 June 2005. Early application
is permitted and companies must apply the standard prospectively. The
adoption of this standard is not expected to have a material effect on the
Company's results of operations or its financial position.
In December 2004, the FASB issued SFAS No. 123R, Share Based Payment. SFAS
No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees and its related implementation guidance. SFAS No. 123R
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entity's equity instruments
or that may be settled by the issuance of those equity instruments. SFAS
No. 123R focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS
No. 123R requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-
date fair value of the award (with limited exceptions). That cost will be
recognized over the period during which an employee is required to provide
service in exchange for the award " the requisite service period (usually
the vesting period). SFAS No. 123R requires that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. Public entities that file as small
business issuers will be required to apply SFAS No. 123R in the first
interim or annual reporting period that begins after 15 December 2005. The
adoption of this standard is not expected to have a material effect on the
Company's results of operations or its financial position.
56
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
The FASB has also issued SFAS No. 151 and 152, but they will not have an
effect of the financial reporting of the Company.
3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are non-interest bearing, unsecured
and have settlement dates within one year.
4. Due to Related Party
As at 31 December 2005, the amount due to related party consists of $500
payable to a director and shareholder of the Company. This balance is non-
interest bearing, unsecured and has no fixed terms of repayment.
5. Capital Stock
Authorized
The total authorized capital is 75,000,000 common shares with a par value
of $0.001 per common share.
Issued and outstanding
The total issued and outstanding capital stock is 900,000 common shares
with a par value of $0.001 per common share.
On 27 October 2005, 900,000 common shares of the Company was issued for cash
proceeds of $9,000.
6. Income Taxes
The Company has losses carried forward for income tax purposes to 31
December 2005. There are no current or deferred tax expenses for the year
ended 31 December 2005 due to the Company"s loss position. The Company has
fully reserved for any benefits of these losses. The deferred tax
consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes.
57
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 2005
The provision for refundable federal income tax consists of the following:
For the period
from the date of
inception on
13 May 2005 to
31 December 2005
$
Deferred tax asset attributable to:
Current operations 1,963
Less: Change in valuation allowance (1,963)
---------
Net refundable amount -
=========
The composition of the Company's deferred tax assets as at 31 December 2005
is as follows:
31 December 2005
$
Net income tax operating loss carryforward (5,773)
=========
Statutory federal income tax rate 34%
Effective income tax rate 0%
Gross deferred tax assets 1,963
Less: Valuation allowance (1,963)
---------
Net deferred tax asset -
=========
The potential income tax benefit of these losses has been offset by a full
valuation allowance.
As at 31 December 2005, the Company has an unused net operating loss carry-
forward balance of approximately $5,773 that is available to offset future
taxable income. This unused net operating loss carry-forward balance
expires in 2025.
58
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Audited)
31 December 2005
7. Supplemental Disclosures with Respect to Cash Flows
For the period
from the date of
inception on
13 May 2005 to
31 December 2005
$
Cash paid during the year for interest -
Cash paid during the year for income taxes -
8. Subsequent Event
Subsequent to 31 December 2005, the Company acquired a 100% interest in a
mineral property located in Greenwood Mining Division, British Columbia,
Canada (the "Gold Bug Property") from a director and shareholder of the
Company for proceeds of 900,000 common shares of the Company valued at
$9,000. The Gold Bug Property is currently held in trust for the Company
by the director and shareholder.
59
Mistral Ventures, Inc.
(An Exploration Stage Company)
Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
60
Mistral Ventures, Inc.
(An Exploration Stage Company)
Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited)
28 February 31 December
2006 2005
$ $
<s> <c> <c>
Assets
- ------
Current
- -------
Cash and cash equivalents 5,837 8,677
Prepaid expenses 150 250
-------- --------
5,987 8,927
======== ========
Liabilities
- -----------
Current
- -------
Accounts payable and accrued liabilities (Note 4) 6,970 5,200
Due to related party (Note 5) 500 500
-------- --------
7,470 5,700
-------- --------
Stockholders' equity
- --------------------
Capital stock (Note 7)
Authorized
75,000,000 of common shares, par value $0.001
Issued and outstanding
28 February 2006 - 1,800,000 common shares, par
value $0.001
31 December 2005 - 900,000 common shares, par
value $0.001 1,800 900
Additional paid in capital 16,200 8,100
Deficit, accumulated during the
exploration stage (19,483) (5,773)
-------- -------
(1,483) 3,227
-------- -------
5,987 8,927
======== =======
Nature and Continuance of Operations (Note 1)
On behalf of the Board:
/s/ John Xinos, Director
By: John Xinos
61
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
For the
period from
the date of For the two
inception month
on 13 May period
2005 to 28 ended 28
February February
2006 2006
$ $
<s> <c> <c>
Expenses
- --------
Acquisition of mineral property interest
(Notes 3 and 6) 9,000 9,000
Bank charges and interest 15 15
Legal and accounting 8,900 3,700
Office and miscellaneous 843 825
Transfer agent fees 725 170
-------- --------
Net loss for the period (19,483) (13,710)
======== ========
Basic and diluted earnings per common share (0.01)
========
Weighted average number of common shares used
in per share calculations (Note 2) 1,189,831
=========
62
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
For the
period from
the date of For the two
inception month
on 13 May period
2005 to 28 ended 28
February February
2006 2006
$ $
<s> <c> <c>
Cash flows from operating activities
- ------------------------------------
Net loss for the period (19,483) (13,710)
Adjustments to reconcile loss to net
cash used by operating activities
Mineral property acquisition costs for
common shares (Notes 3 and 6) 9,000 9,000
Changes in operating assets and liabilities
Decrease (increase) in prepaid expenses (150) 100
Increase in accounts payable and
accrued liabilities 6,970 1,770
Increase due to related party 500 -
--------- --------
(3,163) (2,840)
Cash flows from financing activities
- ------------------------------------
Common shares issued for cash 9,000 -
Increase (decrease) in cash and cash
equivalents 5,837 (2,840)
Cash and cash equivalents, beginning of
period - 8,677
--------- --------
Cash and cash equivalents, end of period 5,837 5,837
========= ========
Supplemental Disclosures with Respect to Cash Flows (Note 9)
63
Mistral Ventures, Inc.
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity
(Expressed in U.S. Dollars)
(Unaudited)
Additional
Number of Share Paid-In Stockholders'
Shares Capital Capital Deficit Equity
--------- ------- -------- ---------- ------------
Balance at May 13,
2005 (Inception) - $ - $ - $ - $ -
Common shares
issued - cash
($0.01 per share) 900,000 900 8,100 - 9,000
Net loss for the
period - - - (5,773) (5,773)
------------------------------------------------------
Balance at 31
December 2005 900,000 $ 900 $ 8,100 $ (5,773) $ (3,227)
Common shares
issued - mineral
property ($0.01 per
share)(Notes 3 and 6) 900,000 900 8,100 - 9,000
Net loss for the
period - - - (13,710) (13,710)
------------------------------------------------------
Balance at
28 February 2006 1,800,000 $1,800 $ 16,200 $(19,483) $ (1,483)
======================================================
6
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
1. Nature and Continuance of Operations
Mistral Ventures, Inc. was incorporated in the State of Nevada on 13 May
2005 to engage in the acquisition, exploration and development of natural
resources properties.
The Company is an exploration stage company as defined by Statement of
Financial Accounting Standard ('SFAS") No. 7. The Company has acquired a
mineral property interest located in the Province of British Columbia,
Canada and has not yet determined whether this property contains reserves
that are economically recoverable. The recoverability of property
expenditures will be dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in the
underlying property, the ability of the Company to obtain necessary
financing to satisfy the expenditure requirements under the property
agreement and upon future profitable production or proceeds for the sale
thereof.
The Company's financial statements as at 28 February 2006 and for the two
month then ended have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company has a loss
of $13,710 for the two month period ended 28 February 2006 and working
capital deficit of $1,483 at 28 February 2006 (31 December 2005 ' working
capital of $3,227).
Management cannot provide assurance that the Company will ultimately achieve
profitable operations or become cash flow positive, or raise additional debt
and/or equity capital. However, based on its prior demonstrated ability to
raise capital, management believes that the Company's capital resources
should be adequate to continue operating and to maintain its business
strategy during fiscal 2006. However, if the Company is unable to raise
additional capital in the near future, due to the Company's liquidity
problems, management expects that the Company will need to curtail
operations, liquidate assets, seek additional capital on less favourable
terms and/or pursue other remedial measures. These financial statements do
not include any adjustments related to the recoverability and classification
of assets or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
2. Significant Accounting Policies
The following is a summary of significant accounting policies used in the
preparation of these financial statements.
65
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
Basis of presentation
These unaudited interim financial statements have been prepared in
accordance with accounting policies as set out in the Company's audited
financial statements for the period ended 31 December 2005, except as
described in this note.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America ("U.S. GAAP")
applicable for exploration stage company for interim financial information
and are expressed in U.S. dollars. Accordingly, they do not include all of
the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the two month period ended 28 February 2006
are not necessarily indicative of the results that may be expected for the
year ended 31 December 2006. For further information, refer to the audited
financial statements of the Company for the period ended 31 December 2005.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Mineral property costs
The Company has been in the exploration stage since its formation on 13 May
2005 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition and exploration of mining properties.
Mineral property acquisition and exploration costs are charged to operations
as incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable
reserves, the costs incurred to develop such property, are capitalized.
Such costs will be amortized using the units-of-production method over the
estimated life of the probable reserve.
Although the Company will take steps to verify title to mineral properties
in which it has an interest, according to the usual industry standards for
the stage of exploration of such properties, these procedures do not
guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
66
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
Reclamation costs
The Company's policy for recording reclamation costs is to record a
liability for the estimated costs to reclaim mined land by recording
charges to production costs for each tonne of ore mined over the life of
the mine. The amount charged is based on management's estimation of
reclamation costs to be incurred. The accrued liability is reduced as
reclamation expenditures are made. Certain reclamation work is performed
concurrently with mining and these expenditures are charged to operations
at that time.
Financial instruments
The carrying value of cash, accounts payable and accrued liabilities, and
due to related party approximates their fair value because of the short
maturity of these instruments. The Company's operations are in Canada and
virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates. The
Company's financial risk is the risk that arises from fluctuations in
foreign exchange rates and the degree of volatility of these rates.
Currently, the Company does not use derivative instruments to reduce its
exposure to foreign currency risk.
Derivative financial instruments
The Company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency fluctuations.
Environmental expenditures
The operations of the Company have been, and may in the future be, affected
from time to time, in varying degrees, by changes in environmental
regulations, including those for future reclamation 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's
policy is to meet or, if possible, surpass standards set by relevant
legislation, by application of technically proven and economically feasible
measures.
Environmental expenditures that relate to ongoing environmental and
reclamation programs are charged against earnings as incurred or
capitalized and amortized depending on their future economic benefits.
Estimated future reclamation and site restoration costs, when the ultimate
liability is reasonably determinable, are charged against earnings over the
estimated remaining life of the related business operation, net of expected
recoveries.
67
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
Income taxes
Deferred income taxes are reported for timing differences between items of
income or expense reported in the financial statements and those reported
for income tax purposes in accordance with SFAS No. 109, Accounting for
Income Taxes, which requires the use of the asset/liability method of
accounting for income taxes. Deferred income taxes and tax benefits are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax losses and credit
carry-forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
Company provides for deferred taxes for the estimated future tax effects
attributable to temporary differences and carry-forwards when realization
is more likely than not.
Basic and diluted net loss per share
The Company computes net loss per share in accordance with SFAS No. 128,
Earnings per Share. SFAS No. 128 requires presentation of both basic and
diluted earnings per share ("EPS") on the face of the income statement.
Basic EPS is computed by dividing net loss available to common shareholders
(numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all
potentially dilutive common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all potentially
dilutive shares if their effect is anti-dilutive.
Comprehensive loss
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive loss and its components in the
financial statements. As at 28 February 2006, the Company has no items
that represent a comprehensive loss and, therefore, has not included a
schedule of comprehensive loss in the financial statements.
Segments of an enterprise and related information
68
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the way that
public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has evaluated this SFAS and does not believe it
is applicable at this time.
Start-up expenses
The Company has adopted Statement of Position No. 98-5, Reporting the Costs
of Start-up Activities, which requires that costs associated with start-up
activities be expensed as incurred. Accordingly, start-up costs associated
with the Company's formation have been included in the Company's general
and administrative expenses for the period from the date of inception on 13
May 2003 to 28 February 2006.
Foreign currency translation
The Company's functional and reporting currency is in U.S. dollars. The
financial statements of the Company are translated to U.S. dollars in
accordance with SFAS No. 52, Foreign Currency Translation. Monetary assets
and liabilities denominated in foreign currencies are translated using the
exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. The
Company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency fluctuations.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenditures during the reporting period. Actual results
could differ from these estimates.
69
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
Concentrations of credit risk
The Company's financial instruments that are exposed to concentrations of
credit risk primarily consist of its cash and related party payables. The
Company places its cash and cash equivalents with financial institutions of
high credit worthiness. At times, its cash and cash equivalents with a
particular financial institution may exceed any applicable government
insurance limits. The Company's management also routinely assesses the
financial strength and credit worthiness of any parties to which it extends
funds and as such, it believes that any associated credit risk exposures
are limited.
Risks and uncertainties
The Company operates in the resource exploration industry that is subject
to significant risks and uncertainties, including financial, operational,
technological, and other risks associated with operating a resource
exploration business, including the potential risk of business failure.
Recent accounting pronouncements
In May 2005, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 154, Accounting Changes and Error Corrections " A Replacement of
APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 changes the requirements
for the accounting for and the reporting of a change in accounting principle
and applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition
provisions. SFAS No. 154 requires retrospective application to prior
periods' financial statements of changes in accounting principle, unless
it is impracticable to determine either the period-specific effects or
the cumulative effect of the change. The provisions of SFAS No. 154 are
effective for accounting changes and correction of errors made in fiscal
years beginning after 15 December 2005. The adoption of this standard is
not expected to have a material effect on the Company's results of
operations or financial position.
In March 2005, the Securities and Exchange Commission ("SEC") staff issued
Staff Accounting Bulletin ("SAB") No. 107 to give guidance on the
implementation of SFAS No. 123R. The Company will consider SAB No. 107
during implementation of SFAS No. 123R.
70
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets " An Amendment of APB Opinion No. 29. The guidance in APB Opinion
No. 29, Accounting for Nonmonetary Transactions, is based on the principle
that exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged. The guidance in that Opinion, however,
included certain exceptions to that principle. SFAS No. 153 amends Opinion
No. 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the exchange. The
provisions of SFAS No. 153 are effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after 15 June 2005. Early application
is permitted and companies must apply the standard prospectively. The
adoption of this standard is not expected to have a material effect on the
Company's results of operations or its financial position.
In December 2004, the FASB issued SFAS No. 123R, Share Based Payment. SFAS
No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees and its related implementation guidance. SFAS No. 123R
establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services. It also
addresses transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the entity's
equity instruments or that may be settled by the issuance of those equity
instruments. SFAS No. 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based
payment transactions. SFAS No. 123R requires a public entity to measure
the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award (with limited
exceptions). That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award " the
requisite service period (usually the vesting period). SFAS No. 123R
requires that the compensation cost relating to share-based payment
transactions be recognized in the financial statements. That cost will be
measured based on the fair value of the equity or liability instruments
issued. Public entities that file as small business issuers will be
required to apply SFAS No. 123R in the first interim or annual reporting
period that begins after 15 December 2005. The adoption of this standard
is not expected to have a material effect on the Company's results of
operations or its financial position.
The FASB has also issued SFAS No. 151 and 152, but they will not have an
effect of the financial reporting of the Company.
71
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
3. Mineral Property
During the two month period ended 28 February 2006, the Company acquired a
100% interest in a mineral property located in Greenwood Mining Division,
British Columbia, Canada (the "Gold Bug Property") from a director and
shareholder of the Company for proceeds of 900,000 common shares of the
Company valued at $9,000. The Gold Bug Property is currently held in trust
for the Company by the director and shareholder (Notes 6, 7 and 9).
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are non-interest bearing, unsecured
and have settlement dates within one year.
5. Due to Related Party
As at 28 February 2006, the amount due to related party consists of $500
payable to a director and shareholder of the Company (31 December 2005 -
$500). This balance is non-interest bearing, unsecured and has no fixed
terms of repayment.
6. Related Parties Transactions
During the two month period ended 28 February 2006, the Company acquired an
interest in the Gold Bug Property from a director and shareholder of the
Company (Notes 3, 7 and 9).
7. Capital Stock
Authorized
The total authorized capital is 75,000,000 common shares with a par value
of $0.001 per common share.
Issued and outstanding
The total issued and outstanding capital stock is 1,800,000 common shares
with a par value of $0.001 per common share.
On 9 February 2006, the Company issued 900,000 common shares valued at
$0.01 per share for the acquisition of mineral property interests
(Note 3s 3, 6 and 9).
72
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
8. Income Taxes
The Company has losses carried forward for income tax purposes to 28
February 2006. There are no current or deferred tax expenses for the
period ended 28 February 2006 due to the Company's loss position. The
Company has fully reserved for any benefits of these losses. The deferred
tax consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes.
The provision for refundable federal income tax consists of the following:
For the period
from the date of For the two
inception on month period
13 May 2005 to ended 28
31 December 2005 February 2006
$ $
Deferred tax asset attributable to:
Current operations 6,624 4,661
Less: Change in valuation allowance (6,624) (4,661)
--------- --------
Net refundable amount - -
========= ========
The composition of the Company's deferred tax assets as at 28 February 2006
and 31 December 2005 are as follows:
28 February 31 December
2006 2005
$ $
Net income tax operating loss carryforward (19,483) (5,773)
========== ==========
Statutory federal income tax rate 34% 34%
Effective income tax rate 0% 0%
Gross deferred tax assets 6,624 1,963
Less: Valuation allowance (6,624) (1,963)
---------- ----------
Net deferred tax asset - -
========== ==========
73
Mistral Ventures, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
28 February 2006
The potential income tax benefit of these losses has been offset by a full
valuation allowance.
As at 28 February 2006, the Company has an unused net operating loss carry-
forward balance of approximately $19,483 that is available to offset future
taxable income. This unused net operating loss carry-forward balance
expires in 2025.
9. Supplemental Disclosures with Respect to Cash Flows
For the
period from
the date of For the two
inception month
on 13 May period
2005 to 28 ended 28
February February
2006 2006
$ $
Cash paid during the year for interest - -
Cash paid during the year for income taxes - -
During the two month period ended 28 February 2006, the Company issued
900,000 common shares valued at $9,000 for the acquisition of the mineral
property interests (Notes 3, 6 and 7).
74
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
================================================
Item 24 - Indemnification of Directors and Officers
- ---------------------------------------------------
Pursuant to certain provisions in our Articles of Incorporation and By-Laws
we may indemnify an officer or director who is made a party to any
proceeding, including a lawsuit, because of his position, if he acted in
good faith and in a manner he reasonably believed to be in our best
interest. In certain cases, we may advance expenses incurred in defending
any such proceeding. To the extent that the officer or director is
successful on the merits in any such proceeding as to which such person is
to be indemnified, we must indemnify him against all expenses incurred,
including attorney's fees. With respect to a derivative action, indemnity
may be made only for expenses actually and reasonably incurred in defending
the proceeding, and if the officer or director is judged liable, only by a
court order. The indemnification is intended to be to the fullest extent
permitted by the laws of the State of Nevada.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant
to the provisions above, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities,
other than the payment by us of expenses incurred or paid by one of our
directors, officers, or controlling persons in the successful defense of
any action, suit or proceeding, is asserted by one of our directors,
officers, or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public
policy as expressed in the Securities Act, and we will be governed by the
final adjudication of such issue.
Item 25 - Other Expenses of Issuance and Distribution
- -----------------------------------------------------
Expenses incurred or (expected) relating to this Registration Statement and
distribution are as follows:
SEC Filing Fees $ 70
Legal Fees $ 2,000
Accounting/Auditing $ 3,000
Transfer Agent Fees $ 500
Printing of Prospectus $ 300
Misc./Contingency $ 630
--------
TOTAL $ 6,500
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Item 26 - Recent Sales of Unregistered Securities
- -------------------------------------------------
Following is the issuance of securities without registration since inception.
No issuance involved the use of an underwriter; no advertising or public
solicitation were involved; the securities bear a restrictive legend and no
commissions were paid in connection with the issuance of these securities.
On October 27, 2005, 900,000 shares were issued to John Xinos, our founder,
President, Secretary, Treasurer, Chief Financial Officer and sole director,
as founder's shares, in exchange for services rendered to date to registrant,
which include: the original company incorporation and office setup, the
business plan, basic office supplies, a home office and computer and basic
office equipment usage. The total value of these securities is $9,000,
which is 900,000 shares at $.01 per share. These securities were issued in
reliance upon the exemption contained in Section 4(2) of the Securities Act
of 1933. The securities bear a restrictive legend and were issued to a non-
US resident.
Item 27 - Exhibits
- ------------------
Exhibit Index:
- --------------
The following exhibits are filed as part of this Registration Statement:
Number Description
------- ------------
3.1 Articles of Incorporation
3.2 Bylaws
5 Opinion re: Legality
10 Trust Agreement between Mistral Ventures and John Xinos
23.1 Consent of Counsel (see Exhibit 5)
23.2 Consent of Independent Auditor
23.3 Consent of Geologist
99.1 Proposed Form of Subscription Agreement
99.2 Proposed Form of Warrant Agreement
99.3 Geology Report
Item 28 - Undertakings
- ----------------------
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act;
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(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low and high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) Include any additional or changed material information on the plan
of distribution.
2. That, for the purpose of determining any liability under the Securities
Act, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Each prospectus filed pursuant to Rule 424(b) (ss.230.424(b) of this
chapter) as part of a registration statement relating to an offering, other
than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on 439A (ss.230.430A of this chapter), shall be deemed to
be part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such first use, supercede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of
first use.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the end of
the offering.
4. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the By-Laws of
the company, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or other
control person in connection with the securities being registered, we will,
unless in the opinion of our legal counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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5. For determining any liability under the Securities Act, we shall treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by us under Rule 424(b)(1), or (4), or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
6. For determining any liability under the Securities Act, we shall treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that the offering of the securities at that time as the
initial bona fide offering of those securities.
SIGNATURES
==========
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe it meets all
of the requirements for filing Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Vancouver BC, country of Canada.
April 12, 2006 Mistral Ventures, Inc.
/s/ John Xinos
By: John Xinos, President, CEO and
Principal Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the
capacities and dates stated.
April 12, 2006 Mistral Ventures, Inc.
/s/ John Xinos
By: John Xinos, President, CEO,
Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer
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