As filed with the Commission on May 26, 2006 Commission File No. 333-133232
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1 to
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KINGSTON MINES LTD.
(Name of small business issuer in its charter)
Nevada 1000 98-0471111
(State of Jurisdiction) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
106-1990 S.E. Kent Ave.
Vancouver, British Columbia V5P 4X5
604-642-9561
(Address and telephone number of principal executive offices)
Laughlin International
2533 Carson Street
Carson City, Nevada 89706
775-883-8484
(Name, address and telephone number of agent for service)
APPROXIMATE DATE 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, please 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, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================
Title of Each Proposed Proposed Proposed
Class of Maximum Maximum Maximum Amount of
Securities to Number of Shares Offering Price Aggregate Registration
be Registered to be Registered per Share (1) Offering Price Fee (2)
Common Stock 2,500,000 $ 0.10 $ 250,000 $ 26.75
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act and based upon 2,500,000
shares of common stock to be sold in this offering.
(2) Fee paid
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
DATED MAY 26, 2006
KINGSTON MINES LTD.
1,250,000 TO 2,500,000 SHARES OF COMMON STOCK
PRICE: $0.10 PER SHARE
This is an initial public offering of shares of common stock of Kingston Mines
Ltd. We will be selling a minimum of 1,250,000 and a maximum of 2,500,000
shares of our common stock in this offering at $0.10 per share. Our President
will offer and sell the shares on our behalf on a best efforts basis. Until we
have sold at least 1,250,000 shares, we will not disburse the funds.
We will deposit all proceeds of this offering into a non-interest bearing escrow
account held by Transfer Online, in Portland, Oregon. If we are unable to sell
at least 1,250,000 shares within 90 days, we will promptly return all funds,
without interest or deductions to subscribers. This offering will remain open
until the earlier of the date that all shares offered are sold and six months
after the date of this prospectus, except that we will have only 90 days to sell
at least the first 1,250,000 shares. We may decide to cease selling efforts
prior to such date.
No broker-dealer is participating in this offering and no sales commission will
be paid to any person in connection with this offering. There is no market for
our securities. Our common stock is not listed on any national exchange or the
NASDAQ Stock Market. The offering price for our common stock was arbitrarily
determined and may not reflect the market price of our shares after the
offering.
AN INVESTMENT IN OUR STOCK IS EXTREMELY SPECULATIVE AND INVOLVES SEVERAL
SIGNIFICANT RISKS. PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO INVEST UNLESS
THEY CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. WE URGE ALL PROSPECTIVE
INVESTORS TO READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING ON
PAGE 5 AND THE REST OF THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
- ----------------------------------------------------------------------------------
PRICE TO PUBLIC UNDERWRITING DISCOUNTS PROCEEDS TO THE
PER SHARE AND COMMISSIONS COMPANY (1)
- ----------------------------------------------------------------------------------
Per Share $ 0.10 Nil $ 0.10
Maximum 2,500,000 shares $ 250,000 Nil $ 250,000
Minimum 1,250,000 shares $ 125,000 Nil $ 125,000
==================================================================================
<FN>
(1) Proceeds to Kingston Mines Ltd. are shown before deducting offering expenses
estimated at $25,000 (including legal and accounting fees).
This offering is not available to residents of British Columbia.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ____________________, 2006.
1
TABLE OF CONTENTS
Page
Summary........................................................................3
Risk Factors...................................................................5
Forward-Looking Statements.....................................................9
Use of Proceeds................................................................9
Determination of Offering Price...............................................10
Dilution......................................................................10
Market For Common Equity and Related Stockholder Matters......................11
Description of Business.......................................................11
Description of Property.......................................................19
Plan of Operation.............................................................19
Legal Proceedings.............................................................21
Directors, Executive Officers, Promoters and Control Persons..................21
Executive Compensation........................................................22
Certain Relationships and Related Transactions................................23
Security Ownership of Certain Beneficial Owners and Management................23
Plan of Distribution..........................................................24
Description of Securities.....................................................26
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities...................................................................27
Legal Matters.................................................................27
Experts.......................................................................27
Changes in and Disagreements With Accountants On Accounting and Financial
Disclosure....................................................................27
Available Information.........................................................28
Index To Financial Statements................................................F-1
2
SUMMARY
THE FOLLOWING SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT MAY BE IMPORTANT TO PROSPECTIVE INVESTORS. EACH PROSPECTIVE
INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY BEFORE MAKING AN
INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK.
As used in this prospectus, unless the context otherwise requires, "we",
"us", "our" or "Kingston Mines" refers to Kingston Mines Ltd. "SEC" refers to
the Securities Exchange Commission. "Securities Act" refers to the Securities
Act of 1933, as amended. "Exchange Act" refers to the Securities Exchange Act
of 1934, as amended.
KINGSTON MINES LTD.
We were incorporated on June 16, 2005, under the law of the State of
Nevada. From inception through February 28, 2006, our operations have been
primarily limited to organizing our company and acquiring our mineral claims.
Our principal office is located at 106-1990 Kent Ave., Vancouver, British
Columbia V5P 4X5. Telephone: (604) 642-9561. Facsimile: (604) 648-8902.
We are an exploration stage company that recently acquired our sole mineral
property, the Sugarloaf Property. The Sugarloaf Property comprises five mineral
claims covering 1,865.43 hectares located on the south and southwest flanks of
Sugarloaf Mountain in the Nicola Mining Division in British Columbia, Canada.
We own a 100% undivided mineral interest in the Sugarloaf Property claims, which
gives us the exclusive right to any of the mineral deposits situated on the
claims. Our business plan is to explore the Sugarloaf Property for commercially
exploitable reserves of valuable minerals. The Sugarloaf Property has no proven
or probable mineral reserves, and there is no assurance that it contains
commercially exploitable reserves of valuable minerals.
Exploration for minerals is a speculative venture necessarily involving
substantial risk. The expenditures to be made by us on our exploration program
may not result in the discovery of commercially exploitable reserves of valuable
minerals. The probability of a mineral claim ever having commercially
exploitable reserves is extremely remote, and in all probability our mineral
claims do not contain any reserves. Any funds spent on the exploration of these
claims will probably be lost. If we are unable to find reserves of valuable
minerals or we cannot remove the minerals because we either do not have the
capital to do so, or because it is not economically feasible to do so, then we
will cease operations and you will lose your investment.
Under British Columbia law, we will forfeit our mineral claims unless we
annually perform exploration and development work on the claim having a value of
not less than C$4 per hectare, or we pay the cash equivalent in lieu of work
performed. The total annual cost of maintaining our claims is C$7462. Our
claims are in good standing until 2007.
We intend to explore the Sugarloaf Property in two phases. The first phase
is estimated to cost $72,500 and will consist initially of prospecting and
mapping to locate all past showings, including a GPS survey. Additional work
will include rock geochemistry, some soil lines (auger sampling), trenching by
backhoe, and induced polarization (IP) surveys. The second phase will consist
of core sampling, at an estimated cost of $127,500. Actual project costs may
exceed estimates. Proceeds from this offering will be sufficient to complete
the first exploration phase, but unless we are able to sell all of the offered
shares, we may not have sufficient capital to fund the completion of the second
phase. To the extent that we are unable to sell all of the offered shares, we
may be required to seek additional financing in order to complete Phase II.
There can be no assurance that we will be successful in securing additional
financing. We do not presently have any arrangements in place for any future
financing. If we are unable to secure additional financing, we will cease or
suspend operations. We have no plans, arrangements or contingencies in place in
the event that we cease operations.
If, on the advice of our consulting geologist, we discontinue our
exploration of the Sugarloaf Property, we may seek to acquire other natural
resource exploration properties. Any such acquisition will involve due
diligence costs in addition to the acquisition cost. We will also have an
ongoing obligation to maintain our periodic filings with the appropriate
regulatory authorities, which will involve legal and accounting costs. In the
event that our available capital is insufficient to acquire an alternative
resource property and sustain minimum operations, we will need to secure
additional funding or else we will be compelled to discontinue our business.
We acquired the Sugarloaf Property from our Vice-President for C$5000,
which is the amount he paid to acquire it from an independent third party.
Prior to acquiring the Sugarloaf Property, Mr. Mills approached several
consulting geologists and prospectors located in British Columbia to get their
opinion on the availability of prospective mineral properties in the area based
on their knowledge of information made public through the British Columbia
Ministry of Energy, Mines and Petroleum Resources. We will reimburse our
Vice-President from the proceeds of this offering for the cost to him of
acquiring and transferring the Sugarloaf Property.
We have earned no revenue since inception. From inception through February
28, 2006, we incurred a net loss of $(14,149) and an accumulated shareholder
deficit of $(13,511). Further losses are anticipated in the development of our
business. We have limited financial resources and require additional financing
to fund our operations. These factors raise substantial doubt
3
about our ability to continue as a going concern. Our ability to achieve and
maintain profitability and positive cash flow is dependent upon our ability to
locate commercially exploitable reserves of valuable minerals.
Our officers and directors have only recently become interested in natural
resource exploration. Neither of them has any professional training or
technical credentials in the exploration, development, or operation of mines.
We therefore intend to retain qualified persons on a contract basis to perform
the surveying, exploration, and excavating of the property as needed. We have
consulted with an independent geologist with respect to undertaking the
exploration of the Sugarloaf Property, and he has indicated that if he is
available, he is prepared to provide his services. We do not, however, have any
verbal or written agreement with a consulting geologist.
We currently have no employees other than our two officers and directors,
each of whom will only be devoting six hours per week, to our operations. We do
not intend to hire any employees for the next twelve months.
We are controlled by Thomas Mills and Lou Hilford, our founders, sole
officers and directors, and majority shareholders. If we are able to sell all
of the offered shares, they will still own 76% of our voting stock.
THE OFFERING
Securities Offered: A minimum of 1,250,000 and a maximum of 2,500,000 shares of
common stock, par value $0.0001
Offering price: $0.10 per share
Offering period: The offering will remain open until the earlier of the date that all shares
offered are sold and six months after the date of this prospectus, except
that we will have only 90 days to sell at least the first 1,250,000 shares.
Net proceeds to us: Minimum: Approximately $100,000, after estimated expenses of
$25,000 assuming sale of 1,250,000 shares
Maximum: Approximately $225,000, after estimated expenses of
$25,000 assuming sale of 2,500,000 shares
Use of proceeds: We will use the proceeds to pay for offering expenses, debt repayment,
consulting fees, mineral exploration, professional services, claim
maintenance and office expenses.
Number of shares outstanding before the offering: 8,000,000
Number of shares outstanding after the offering: Minimum: 9,250,000 assuming sale of 1,250,000 shares
Maximum: 10,500,000 assuming sale of 2,500,000 shares
SUMMARY OF SELECTED FINANCIAL DATA
We are an exploration stage company. From the date of our inception on June 16,
2005, to February 28, 2006, we have not generated any revenue or earnings from
operations. As of February 28, 2006, our financial data is as follows:
As at or for the period from
June 16, 2005 (inception)
to February 28, 2006
OPERATIONS DATA
Revenue: $ 0
Net Loss: 14,149
BALANCE SHEET DATA
Total Assets: 12,458
Total Liabilities: 25,969
Shareholder Equity (Deficiency): (13,511)
Negative Net Tangible Book Value: (13,511)
Negative Net Tangible Book Value Per Share: (0.00)
4
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK. IF ANY OF
THE FOLLOWING RISKS OCCUR, OUR BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION COULD BE SERIOUSLY HARMED. INVESTORS MAY LOSE ALL OR PART OF THEIR
INVESTMENT IN THIS OFFERING.
IF WE ARE UNABLE TO CONTINUE AS A GOING CONCERN, THEN INVESTORS MAY LOSE ALL OF
THEIR INVESTMENT.
In our most recent audited financial statements as at August 31, 2005, our
auditors issued a report with an explanatory paragraph on going concern issue
due to our losses, accumulated deficit and the lack of revenue. Since our
inception on June 16, 2005, to February 28, 2006, we incurred a net loss of
$(14,149) against no revenue. Further, in order to explore our mineral
interests, we will be required to raise additional cash through debt or equity
financing, and thus are in need of additional capital. Our ability to continue
as a going concern is dependent upon obtaining the additional financing. If we
go out of business, investors will likely lose all of their investment.
WE HAVE A LIMITED OPERATING HISTORY AND AS A RESULT THERE IS NO ASSURANCE WE CAN
OPERATE ON A PROFITABLE BASIS.
We have a limited operating history and must be considered in the
exploration stage. We were incorporated on June 16, 2005, and thus far have been
involved primarily in our activities have been limited to organizational
matters, acquiring the Sugarloaf Property, obtaining a geology report and the
preparation and filing of the registration statement of which this prospectus is
a part. We have not earned any revenue.
DUE TO THE SPECULATIVE NATURE OF THE EXPLORATION OF NATURAL RESOURCE PROPERTIES,
THERE IS SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
There is no assurance that any of the claims we explore will contain
commercially exploitable reserves of minerals. Exploration for natural
resources is a speculative venture involving substantial risk. Hazards such as
unusual or unexpected geological formations and other conditions often result in
unsuccessful exploration efforts. We may also become subject to significant
liability for pollution, cave-ins or hazards, which we cannot insure or which we
may elect not to insure.
DUE TO THE DIFFICULTIES NORMALLY ENCOUNTERED BY NEW MINERAL EXPLORATION
COMPANIES, COMPANIES SUCH AS OURS HAVE A HIGH RISK OF BUSINESS FAILURE.
Potential investors should be aware of the difficulties normally
encountered by new mineral exploration companies and the high rate of failure of
such enterprises. Exploration for minerals is a speculative venture necessarily
involving substantial risk. The expenditures to be made by us on our
exploration program may not result in the discovery of commercially exploitable
reserves of valuable minerals. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that we
plan to undertake. The probability of a mineral claim ever having commercially
exploitable reserves is extremely remote, and in all probability our mineral
claims do not contain any reserves. Any funds spent on the exploration of these
claims will probably be lost. Problems such as unusual or unexpected formations
and other conditions are involved in mineral exploration and often result in
unsuccessful exploration efforts. In such a case, we would be unable to complete
our business plan and our investors may lose their entire investment.
IF WE CANNOT COMPETE SUCCESSFULLY FOR FINANCING AND FOR QUALIFIED MANAGERIAL AND
TECHNICAL EMPLOYEES, OUR EXPLORATION PROGRAM MAY SUFFER.
Our competition in the mining industry includes large established mining
companies with substantial capabilities and with greater financial and technical
resources than we have. As a result of this competition, we may be unable to
acquire additional financing on terms we consider acceptable because investors
may choose to invest in our competitors instead of investing in us. We also
compete with other mining companies in the recruitment and retention of
qualified managerial and technical employees. Our success will be largely
dependent on our ability to hire and retain highly qualified personnel. These
individuals are in high demand and we may not be able to attract the personnel
we need. We may not be able to afford the high salaries and fees demanded by
qualified personnel, or may lose such employees after they are hired. If we are
unable to successfully compete for financing or for qualified employees, our
exploration program may be slowed down or suspended.
SINCE MARKET FACTORS IN THE MINING BUSINESS ARE OUT OF OUR CONTROL, WE MAY NOT
BE ABLE TO PROFITABLY SELL ANY MINERALS THAT WE FIND.
If we are successful in locating commercially exploitable reserves of
valuable minerals, we can provide no assurance that we will be able to sell it.
Numerous factors beyond our control may affect the marketability of any minerals
discovered. These factors include market fluctuations, the proximity and
capacity of natural resource markets and processing equipment,
5
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. The precise effect of these factors cannot be
accurately predicted, but the combination of these factors may result in us not
receiving an adequate return on invested capital so that our investors may lose
their entire investment.
EVEN IF WE DISCOVER COMMERCIAL RESERVES OF PRECIOUS METALS ON OUR MINERAL CLAIM,
WE MAY NOT BE ABLE TO SUCCESSFULLY OBTAIN COMMERCIAL PRODUCTION
Our mineral claims do not contain any known reserves of valuable minerals.
If our exploration programs are successful in discovering commercially
exploitable reserves of valuable minerals, we will require additional funds in
order to place the mineral claim into commercial production. While we do not
presently have sufficient information about the claims to estimate the amount
required to place the mineral claims into commercial production, there is a risk
that we may not be able to obtain whatever financing is required.
SINCE THE PROBABILITY OF AN INDIVIDUAL PROSPECT EVER HAVING RESERVES IS
EXTREMELY REMOTE, ANY FUNDS SPENT ON EXPLORATION WILL PROBABLY BE LOST.
The probability of an individual prospect ever having reserves is extremely
remote. In all probability the property does not contain any reserves. As such,
any funds spent on exploration will probably be lost which result in a loss of
your investment.
IF OUR OPERATING EXPENSES INCREASE PRIOR TO EARNING REVENUE WE MAY NEVER ACHIEVE
PROFITABILITY
Prior to completion of our exploration stage, we anticipate that we will
incur increased operating expenses without generating any revenue. We therefore
expect to incur significant losses into the foreseeable future. We recognize
that if we are unable to generate significant revenue from the exploration of
our mineral claims, we will require additional financing. Obtaining additional
financing would be subject to a number of factors, including market prices for
minerals, investor acceptance of our properties, and investor sentiment. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us. If we are unsuccessful in obtaining additional financing when
we need it, our business may fail before we ever become profitable and investors
will lose their entire investment.
DUE TO THE DANGERS INHERENT IN MINERAL EXPLORATION, THERE IS A RISK THAT IN
CONDUCTING OUR BUSINESS WE MAY INCUR SUCH LIABILITY OR DAMAGES THAT WE ARE
UNABLE TO CONTINUE OPERATIONS.
The search for valuable minerals involves numerous hazards. As a result, we
may become subject to liability for such hazards, including pollution, cave-ins
and other hazards against which we cannot insure or against which we may elect
not to insure. We currently have no such insurance nor do we expect to get such
insurance for the foreseeable future. If a hazard were to occur, the costs of
rectifying the hazard may exceed our asset value and cause us to liquidate all
our assets resulting in the loss of our shareholders' entire investment.
COMPLIANCE WITH GOVERNMENT REGULATIONS IN THE COURSE OF EXPLORING OUR MINERAL
PROPERTY MAY INCREASE THE ANTICIPATED TIME AND COST OF OUR EXPLORATION PROGRAM
SO THAT WE ARE UNABLE TO COMPLETE THE PROGRAM OR ACHIEVE PROFITABILITY.
Exploration and exploitation activities are subject to federal, provincial,
and local laws, regulations and policies, including laws regulating the removal
of natural resources from the ground and the discharge of materials into the
environment. Exploration and exploitation activities are also subject to
federal, provincial, and local laws and regulations which seek to maintain
health and safety standards by regulating the design and use of drilling methods
and equipment.
We will be subject to the Mining Act of British Columbia as we carry out
our exploration program. We may be required to obtain work permits, post bonds,
and perform remediation work for any physical disturbance to the land in order
to comply with these regulations. While our planned exploration program budgets
for regulatory compliance, there is a risk that new regulations could increase
our time and costs of doing business and prevent us from carrying out our
exploration program. If we are unable to complete our exploration program or
achieve profitability, our investors may lose their entire investment.
Legal standards imposed by federal, provincial, or local authorities may be
changed applied or interpreted in a manner which will alter and negatively
affect our ability to carry on our business.
EVEN IF ALL THE OFFERED SHARES ARE SOLD, OUR OFFICERS AND DIRECTORS WILL OWN A
CONTROLLING PERCENTAGE OF VOTING STOCK, WHICH WILL ALLOW THEM TO MAKE KEY
DECISIONS AND EFFECT TRANSACTIONS WITHOUT FURTHER SHAREHOLDER APPROVAL.
Upon selling the minimum number of offered shares our directors and
executive officers will collectively own 87% of our outstanding voting stock
(76% if the maximum number of offered shares are sold). Accordingly, these
stockholders, as a group, will be able to control the outcome of stockholder
votes, including votes concerning the election of directors, the adoption or
amendment of provisions in our Articles of Incorporation and our Bylaws, and the
approval of mergers and other significant
6
corporate transactions. These factors may also have the effect of delaying or
preventing a change in our management or our voting control. Our Articles of
Incorporation do not provide for cumulative voting.
SINCE OUR EXECUTIVE OFFICERS HAVE NO EXPERIENCE IN MINERAL EXPLORATION AND DO
NOT HAVE FORMAL TRAINING SPECIFIC TO OF MINERAL EXPLORATION, THERE IS A HIGHER
RISK OUR BUSINESS WILL FAIL.
Our executive officers have no experience in mineral exploration and do not
have formal training as geologists or in the technical aspects of management of
a mineral exploration company. This inexperience presents a higher risk that we
will be unable to complete our business plan for the exploration of our mineral
claims. In addition, we will have to rely on the technical services of others
with expertise in geological exploration in order for us to carry our planned
exploration program. If we are unable to contract for the services of such
individuals, it will make it difficult and may be impossible to pursue our
business plan. There is thus a higher risk that our operations, earnings and
ultimate financial success could suffer irreparable harm and that our business
will likely fail, resulting in our investors losing their entire investment.
SINCE OUR OFFICERS HAVE OTHER BUSINESS INTERESTS, THEY WILL ONLY BE DEVOTING SIX
HOURS PER WEEK TO OUR OPERATIONS, WHICH MAY RESULT IN PERIODIC INTERRUPTIONS OR
SUSPENSIONS OF EXPLORATION.
Our officers have other outside business activities and will only be
devoting 15% of their time, or six hours per week, to our operations. As a
result, our operations may be sporadic and occur at times that are convenient to
our officers. Consequently, our business activities may be periodically
interrupted or suspended.
SINCE SUBSTANTIALLY ALL OF OUR ASSETS, DIRECTORS AND OFFICERS ARE NOT LOCATED IN
THE UNITED STATES, IT MAY BE DIFFICULT FOR INVESTORS TO ENFORCE WITHIN THE
UNITED STATES ANY JUDGMENTS OBTAINED AGAINST US OR ANY OF OUR DIRECTORS OR
OFFICERS.
Substantially all of our assets are located outside the United States and
we do not currently maintain a permanent place of business within the United
States. We were incorporated in the State of Nevada and have an agent for
service in Carson City, Nevada. Our agent for service will accept on our behalf
the service of any legal process and any demand or notice authorized by law to
be served upon a corporation. Our agent for service will not, however, accept
service on behalf of any of our officers or directors. All of our directors and
officers are residents of Canada and neither of them have an agent for service
in the United States. Therefore, it may be difficult for investors to enforce
within the United States any judgments obtained against us or our officers or
directors, including judgments predicated upon the civil liability provisions of
the securities laws of the United States or any state thereof.
SINCE OUR BOARD OF DIRECTORS DOES NOT INTEND TO PAY DIVIDENDS ON OUR COMMON
STOCK IN THE FORESEEABLE FUTURE, IT IS LIKELY THAT INVESTORS WILL ONLY BE ABLE
TO REALIZE A RETURN ON THEIR INVESTMENT BY RESELLING ANY SHARES PURCHASED
THROUGH THIS OFFERING.
We have not paid any cash dividends on our common stock since our inception
and we do not anticipate paying cash dividends in the foreseeable future. We
intend to retain our earnings, if any, to provide funds for reinvestment in our
acquisition and exploration activities. Therefore, we do not anticipate
declaring or paying dividends in the foreseeable future. Furthermore, payment
of dividends, if any, in the future is within the discretion of the Board of
Directors and will depend on our earnings, if any, our capital requirements and
financial condition and other relevant factors.
WE ANTICIPATE ISSUING ADDITIONAL SHARES OF COMMON STOCK THAT COULD SUBSTANTIALLY
DILUTE YOUR INVESTMENT.
We anticipate that all or at least some of our additional funding will be in the
form of equity financing from the sale of our common stock. In the future, if
we do sell more common stock, your investment may be subject to dilution.
Dilution is the difference between what you pay for your stock and the net
tangible book value per share immediately after the additional shares are sold
by us. If this happens, then your investment could seriously decline in value.
WE MAY ISSUE SHARES OF PREFERRED STOCK WITH GREATER RIGHTS THAN OUR COMMON
STOCK, WHICH MAY ENTRENCH MANAGEMENT AND RESULT IN DILUTION OF OUR SHAREHOLDERS'
INVESTMENT.
Our Articles of Incorporation authorize the issuance of up to 50,000,000
shares of preferred stock, par value $.0001 per share. The authorized but
unissued preferred stock may be issued by the Board of Directors from time to
time on any number of occasions, without stockholder approval, as one or more
separate series of shares comprised of any number of the authorized but unissued
shares of preferred stock, designated by resolution of the Board of Directors
stating the name and number of shares of each series and setting forth
separately for such series the relative rights, privileges and preferences
thereof, including, if any, the: (i) rate of dividends payable thereon; (ii)
price, terms and conditions of redemption; (iii) voluntary and involuntary
liquidation preferences; (iv) provisions of a sinking fund for redemption or
repurchase; (v) terms of conversion to common stock, including conversion price,
and (vi) voting rights. Such preferred stock may enable our Board of Directors
to hinder or discourage any attempt to gain control of us by a merger, tender
offer at a control premium price, proxy contest or otherwise. Consequently, the
preferred stock could entrench our management. The market price of our common
stock could be depressed to some extent by the existence of the preferred stock.
As of the date of this prospectus, no shares of preferred stock have been
issued.
7
SINCE THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, INVESTORS MAY NOT
BE ABLE TO RESELL ANY SHARES THEY PURCHASE THROUGH THIS OFFERING.
Currently, our common stock is not listed or quoted upon any established
trading system. Most of our common stock will be held by a small number of
investors that will further reduce the liquidity of our common stock.
Furthermore, the offering price of our common stock was arbitrarily determined
by us, without considering assets, earnings, book value, net worth or other
economic or recognized criteria or future value of our common stock. Market
fluctuations and volatility, as well as general economic, market and political
conditions, could reduce our market price. Consequently, it may difficult or
impossible for investors to sell our common stock or for them to sell our common
stock for more than the offering price even if our operating results are
positive.
THE SALE OF SHARES BY OUR OFFICERS AND DIRECTORS COULD HAVE A DEPRESSIVE EFFECT
ON THE MARKET PRICE FOR OUR COMMON STOCK.
As of the date of this prospectus, there are 8,000,000 shares of our common
stock issued and outstanding, all of which are owned by our directors and
officers. All of the currently issued and outstanding shares will have been
held for a period in excess of one year as of July 5, 2005, and will then be
available for public resale pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144"). The resale of our shares of common stock owned by
our officers and directors is subject to the volume limitations of Rule 144. In
general, Rule 144 permits our shareholders who have beneficially owned
restricted shares of common stock for at least one year to sell without
registration, within a three-month period, a number of shares not exceeding one
percent of the then outstanding shares of common stock. Furthermore, if such
shares are held for at least two years by a person not affiliated with us
(generally, a person who is not one of our executive officers, directors or
principal shareholders during the three month period prior to resale), such
restricted shares can be sold without any volume limitation. If our officers
and directors sell their shares under Rule 144 or pursuant to a registration
statement, it may have a depressive effect on the market price for our common
stock. If this occurs, investors in our shares of common stock may be forced to
sell such shares at prices below the price they paid for their shares, In
addition, a decreased market price may result in potential future investors
losing confidence in us and failing to provide needed funding. This will have a
negative effect on our ability to raise equity capital in the future.
IN THE FUTURE, WE WILL INCUR SIGNIFICANT INCREASED COSTS AS A RESULT OF
OPERATING AS A PUBLIC COMPANY, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE
SUBSTANTIAL TIME TO NEW COMPLIANCE INITIATIVES.
Upon the effectiveness of the registration statement of which this
prospectus forms a part, we will incur significant legal, accounting and other
expenses as a fully-reporting public company. Moreover, the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act"), as well as new rules subsequently
implemented by the SEC, have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. Our
management will need to devote a substantial amount of time to these new
compliance initiatives. Moreover, these rules and regulations will increase our
legal and financial compliance costs and will make some activities more
time-consuming and costly.
The Sarbanes-Oxley Act also requires, among other things, that we maintain
effective internal controls for financial reporting and disclosure controls and
procedures. In particular, commencing in fiscal 2007, we must perform system
and process evaluation and testing of our internal controls over financial
reporting to allow management and our independent registered public accounting
firm to report on the effectiveness of our internal controls over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing,
or the subsequent testing by our independent registered public accounting firm,
may reveal deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses. Our compliance with Section 404 will
require that we incur substantial accounting expense and expend significant
management efforts. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, the
market price of our stock could decline, and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require
additional financial and management resources.
APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMIT THE LIQUIDITY
OF OUR COMMON STOCK, WHICH COULD MAKE IT DIFFICULT FOR OUR SHAREHOLDERS TO SELL
THEIR SHARES.
As the shares of our common stock are penny stock, many brokers are
unwilling to effect transactions in that common stock which can make it
difficult for our shareholders to sell their shares of our common stock if a
market develops for that common stock.
Our common stock is defined as a penny stock pursuant to Rule 3a51-1
pursuant to the Securities Exchange Act of 1934. Penny stock is subject to Rules
15g-1 through 15g-10 of the Securities Exchange Act of 1934. Those rules require
broker-dealers, before effecting transactions in any penny stock, to:
- - Deliver to the customer, and obtain a written receipt for, a disclosure
document;
- - Disclose certain price information about the penny stock;
8
- - Disclose the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
- - Send monthly statements to customers with market and price information about
the penny stock; and
- - In some circumstances, approve the purchasers account pursuant to certain
standards and deliver written statements to the customer with information
specified in those rules.
Rather than comply with those rules, many broker-dealers refuse to enter
into penny stock transactions which may make it more difficult for investors to
sell their shares of our common stock and thereby liquidate their investments.
FORWARD-LOOKING STATEMENTS
INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD LOOKING STATEMENTS" WHICH CAN
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES",
"ESTIMATES", "COULD", "POSSIBLY", "PROBABLY", "ANTICIPATES", "ESTIMATES",
"PROJECTS", "EXPECTS", "MAY", OR "SHOULD" OR OTHER VARIATIONS OR SIMILAR WORDS.
NO ASSURANCES CAN BE GIVEN THAT THE FUTURE RESULTS ANTICIPATED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THESE STATEMENTS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY
THOSE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE ONLY PREDICTIONS AND
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, INCLUDING THE
RISKS IN THE SECTION TITLED "RISK FACTORS". AMONG THE KEY FACTORS THAT HAVE A
DIRECT BEARING ON OUR RESULTS OF OPERATIONS ARE THE EFFECTS OF VARIOUS
GOVERNMENTAL REGULATIONS, THE FLUCTUATION OF OUR DIRECT COSTS AND THE COSTS AND
EFFECTIVENESS OF OUR OPERATING STRATEGY. OTHER FACTORS COULD ALSO CAUSE ACTUAL
RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY THOSE
FORWARD-LOOKING STATEMENTS.
THE FORWARD-LOOKING STATEMENTS ARE BASED UPON MANAGEMENT'S CURRENT VIEWS AND
ASSUMPTIONS REGARDING FUTURE EVENTS AND OPERATING PERFORMANCE, AND ARE
APPLICABLE ONLY AS OF THE DATES OF SUCH STATEMENTS. WE DO NOT HAVE ANY
INTENTION OR OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, CHANGES IN ASSUMPTIONS,
OR OTHERWISE.
USE OF PROCEEDS
Our offering is being made on a $125,000 minimum and $250,000 maximum, best
efforts, self-underwritten basis. The table below sets forth the use of
proceeds if 50% (minimum), 75% and 100% (maximum) of the offering is sold.
- -------------------------------------------------------------------
MINIMUM 75% MAXIMUM
1,250,000 1,875,000 2,500,000
Shares Shares Shares
- -------------------------------------------------------------------
Gross Proceeds $ 125,000 $ 187,500 $ 250,000
offering Expenses 25,000 25,000 25,000
- -------------------------------------------------------------------
Net Proceeds $ 100,000 $ 162,500 $ 225,000
Debt Repayment 6,323 6,323 6,323
Consulting Fees 5,000 5,000 5,000
Prospecting 13,000 13,000 13,000
Backhoe Trenching 17,000 17,000 17,000
IP Survey 34,000 34,000 34,000
Core Drilling - 62,500 127,500
Professional services 10,000 10,000 10,000
Claim maintenance 7,500 7,500 7,500
Office, stationary, telephone 2,177 2,177 2,177
Working Capital 5,000 5,000 2,500
- -------------------------------------------------------------------
Total Use of Proceeds $ 100,000 $ 162,500 $ 225,000
===================================================================
"Debt Repayment" refers to the reimbursement of costs in the amount of
$6,323 incurred by our Vice-President, Thomas Mills, for incorporation,
registration fees, and claim acquisition.
"Consulting Fees" refer to the fees charged by a qualified independent
consultant to advise our officers and assist in the supervision and
implementation of our exploration operations through independent contractors.
We have not implemented our exploration program. We intend to retain Barry J.
Price, P. Geo., to undertake the proposed exploration of the Sugarloaf Property
given his familiarity with the area. We do not have any verbal or written
agreement regarding the retention of Mr. Price for this exploration program,
though he has indicated that if he is available, he is prepared to provide his
services.
9
"IP Survey" means induced polarization surveying, the process of injecting
electrical current into the ground, using a generator and transmitter, and
measuring the decay of the induced currents when the current is turned off. IP
surveying is the tool of choice for locating copper deposits.
"Core Drilling" refers to the process of drilling holes to a depth of up to
1,000 meters in order to extract a sample of earth. We estimate the cost of
drilling will be $127.50 per meter drilled. The amount of drilling will be
predicated upon the amount of money raised in this offering. If we sell all the
offered shares, we will drill a total of 1,000 meters, or up to five holes to a
depth of 200 meters each. We estimate that it will take up to three months to
drill the five holes. If we sell only the minimum number of shares, we will not
complete any core drilling until we have secured additional financing.
"Professional Services" include legal and accounting services, resident
agent costs and EDGAR filing agent fees.
"Claim Maintenance" refers to the amount required by the government of
British Columbia to keep our mineral claims in good standing until 2007. Of
this amount, our Vice-President has already paid $2000 on our behalf, and we
will be reimbursing him from the proceeds of this offering. The remainder of
this amount will be paid by November 21, 2006, if we have not performed
exploration work on the property having equivalent value. Any remainder that is
not required for Claim Maintenance by November 21, 2006, will be added to
Working Capital.
Except for the repayment of $8,823 to our Vice-President as described
above, no proceeds from this offering will be paid to our officers or directors.
DETERMINATION OF OFFERING PRICE
There is no established public market for the shares of common stock being
registered. As a result, the offering price and other terms and conditions
relative to the shares of common stock offered hereby have been arbitrarily
determined by us and do not necessarily bear any relationship to assets,
earnings, book value or any other objective criteria of value. In addition, no
investment banker, appraiser or other independent, third party has been
consulted concerning the offering price for the shares or the fairness of the
price used for the shares.
DILUTION
On February 28, 2006, we had a negative tangible book value of $(13,511) or
$(0.00) per share. Negative tangible book value per share is determined by
dividing our total negative tangible book value at February 28, 2006, by the
number of shares of common stock outstanding. The offering price of $0.10 per
share substantially exceeds the value of our assets after subtracting our
liabilities. Therefore, all current shareholders will realize an immediate
increase of $0.01 per share in the net tangible book value of their shares held
prior to the offering if the minimum is sold, and an increase of $0.02 per share
if the maximum is sold. Purchasers of the shares in the offering will realize
an immediate dilution of $0.09 per share in the net tangible book value of their
shares if the minimum is sold, and an immediate dilution of $0.08 per share if
the maximum is sold.
The following table illustrates the increase to existing shareholders and
the dilution to purchasers of the offered shares in their net tangible book
value per share, before deducting estimated offering expenses. This table does
not take into account any other changes in the net tangible book value of our
shares occurring after February 28, 2006.
- -----------------------------------------------------------------------------------------------------
MINIMUM MAXIMUM
- -----------------------------------------------------------------------------------------------------
Number of shares sold 1,250,000 2,500,000
Gross proceeds $ 125,000 $ 250,000
- -----------------------------------------------------------------------------------------------------
Offering price per share $ 0.10 $ 0.10
Net tangible book value per share at February 28, 2006 $ (0.00) $ (0.00)
Increase in net tangible book value per share attributable to the sale of
1,250,000 (minimum) and 2,500,000 (maximum) shares $ 0.01 $ 0.02
Net tangible book value per share at February 28, 2006,
as adjusted for the sale of shares $ 0.01 $ 0.02
Dilution per share to new investors in this offering $ 0.09 $ 0.08
=====================================================================================================
We may seek additional equity financing in the future, which may cause
additional dilution to investors in this offering, and a reduction in their
equity interest. The holders of the shares purchased in this offering will have
no preemptive rights to purchase any shares we issue in the future in connection
with any additional equity financing.
10
The table below sets forth as of February 28, 2006, the difference between
the number of shares purchased and total consideration paid for those shares by
existing shareholders, compared to shares purchased by new investors in this
offering without taking into account any offering expenses. If the minimum
number of shares are sold in this offering, purchasers will contribute 99.7% of
our share capital but will collectively own only 13.5% of our issued and
outstanding shares. If the maximum number of shares are sold in this offering,
purchasers will contribute 99.8% of our share capital but will collectively own
only 23.8% of our issued and outstanding shares.
- ------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES PURCHASED TOTAL CONSIDERATION AND AVERAGE PER SHARE PRICE
MINIMUM MAXIMUM MINIMUM MAXIMUM
PERCENT PERCENT AMOUNT PERCENT AVERAGE AMOUNT PERCENT AVERAGE
NUMBER (%) NUMBER (%) ($) (%) ($) ($) (%) ($)
- ------------------------------------------------------------------------------------------------------------------
Existing
shareholders 8,000,000 86.5 8,000,000 76.2 400 0.3 0.00005 400 0.2 0.00005
New shareholders 1,250,000 13.5 2,500,000 23.8 125,000 99.7 0.10 250,000 99.8 0.10
- ------------------------------------------------------------------------------------------------------------------
Total 9,250,000 100.0 10,500,000 100.0 125,400 100.0 0.01 250,400 100.0 0.02
==================================================================================================================
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NO PUBLIC MARKET FOR COMMON STOCK
There is presently no public market for our common stock. We anticipate
making an application for quotation of our common stock on the NASD OTC bulletin
board upon the effectiveness of the registration statement of which this
prospectus forms a part. We will not be able to obtain a quotation of our
securities on the OTC Bulletin Board without a sponsoring market maker and we
have not made any such arrangement. If we are unable to find a sponsoring
market maker then a trading market for our common stock will not develop. Even
if we are able to locate a market maker, there is no assurance that our common
stock will be accepted for quotation on the OTC Bulletin Board, or if quoted,
that a public market will materialize.
The OTC Bulletin Board securities are not listed and traded on the floor of
an organized national or regional stock exchange. Instead, OTC Bulletin Board
securities transactions are conducted through a telephone and computer network
connecting dealers in stocks. OTC Bulletin Board stocks are traditionally
smaller companies that do not meet the financial and other listing requirements
of a regional or national stock exchange.
HOLDERS
There are presently two shareholders of record for the common shares.
DESCRIPTION OF BUSINESS
GENERAL
We were incorporated in the State of Nevada on June 16, 2005. Our office
is located at 1990 S.E. Kent Ave., Suite 106, Vancouver, British Columbia,
Canada V5P 4X5. We have no subsidiaries. Our telephone number is (604)
642-9561. Our facsimile number is (604) 648-8207. Our President, Mr. Hilford,
provides this office space on a rent-free basis.
We are an exploration stage company in that we are engaged in the search
for mineral deposits that are not in either the development or production stage,
with a view to exploiting any mineral deposits we discover that demonstrate
economic feasibility. Since we are an exploration stage company, there is no
assurance that commercially exploitable reserves of valuable minerals exist on
our property. We need to do further exploration before a final evaluation of
the economic and legal feasibility of our future exploration is determined.
We have no plans, arrangements, commitments, or understandings to engage in
a merger or acquisition with another company.
We have not commenced business operations. To date, our activities have
been limited to organizational matters, acquiring the Sugarloaf Property,
obtaining a geology report and the preparation and filing of the registration
statement of which
11
this prospectus is a part. Our assets are limited to our mineral claims, the
acquisition of which has been recorded as an expense in our financial statements
in accordance with our accounting policy.
By a Transfer of Mineral Disposition dated August 30, 2005, from our
Vice-President, Thomas Mills, we acquired a 100% interest in a mineral claim
located near the southern boundary of the Town of Merritt in British Columbia,
Canada, having a total area of 497.436 hectares (the "Sugarloaf Property"). The
initial claim underlying the Sugarloaf Property is registered with the Province
of British Columbia under mineral tenure no. 514065 and is presently in good
standing. Mr. Mills acquired the Sugarloaf Property from Guy Delorme (an
independent third party) for a cash payment of C$5,000, and subsequently
transferred the property to us. We will be reimbursing Mr. Mills from the
proceeds of this offering for the cost to him of acquiring and transferring the
Sugarloaf Property.
MAP OF THE LOCATION OF THE ORIGINAL SUGARLOAF PROPERTY
IN BRITISH COLUMBIA, CANADA.
[GRAPHIC OMITED]
Mineral property exploration is typically conducted in phases. Each
subsequent phase of exploration work is recommended by a geologist based on the
results from the most recent phase of exploration. We have not yet commenced
the initial phase of exploration on the Sugarloaf Property. Once we have
completed each phase of exploration, we will make a decision as to whether or
not we will proceed with each successive phase based upon the analysis of the
results of that program. Our directors will make this decision based upon the
recommendations of the independent geologist who oversees the program and
records the results.
If our directors decide not to proceed with the exploration of the
Sugarloaf Property, we may seek other business opportunities in the natural
resource sector. We do not have any specific alternative business opportunities
in mind and we have not planned for any such contingency. Any resource property
being considered for acquisition will require due diligence by our management.
Due diligence would likely include purchase investigation costs such as
professional fees charged by consulting geologists, preparation of geological
reports on properties, title searches and travel costs associated with on-site
inspections. During this period, we will also need to maintain our periodic
filings with the appropriate regulatory authorities and will incur legal and
accounting costs. In the event that our available capital is insufficient to
acquire an alternative resource property and sustain minimum operations, we will
need to secure additional funding.
12
We presently have no known reserves of any type of mineral. We plan to
conduct appropriate exploration work on the Sugarloaf Property in order to
ascertain whether it possesses commercially exploitable reserves of valuable
minerals. There can be no assurance that commercially exploitable reserves of
valuable minerals exist on the Sugarloaf Property or that we will discover them,
if they exist. If we are unable to find reserves of valuable minerals or we
cannot remove the minerals because we either do not have the capital to do so,
or because it is not economically feasible to do so, then we will cease
operations and you will lose your investment.
Even if we complete our proposed exploration program on the Sugarloaf
Property and we are successful in identifying an economic mineral deposit, we
will need to raise additional funding to finance further drilling and
engineering studies before we will know if we have commercially exploitable
reserves of valuable minerals.
We anticipate that any additional funding that we require will be in the
form of equity financing from the sale of our common stock. There is no
assurance, however, that we will be able to raise sufficient funding from the
sale of our common stock. The risky nature of this enterprise and lack of
tangible assets places debt financing beyond the credit-worthiness required by
most banks or typical investors of corporate debt until such time as an
economically viable mine can be demonstrated. We do not have any arrangements
in place for any future equity financing. If we are unable to secure additional
funding, we will cease or suspend operations. We have no plans, arrangements or
contingencies in place in the event that we cease operations.
MINERAL CLAIMS
The Sugarloaf Property initially consisted of a single claim comprising
497.436 hectares (British Columbia Mineral Tenure No. 514065), wholly owned by
us. At the suggestion of our consulting geologist, we expanded the Sugarloaf
Property by staking an additional 1,367.994 hectares contiguous with the initial
claim. We hold all of our mineral titles free and clear of any encumbrances or
liens.
The following table sets out all the claims currently composing the
Sugarloaf Property.
- ------------------------------------------------------------------------------------------------
TENURE MINING
NUMBER CLAIM NAME OWNER MAPSHEET DATE OF RECORD DIVISION AREA HA.
- ------------------------------------------------------------------------------------------------
514065 Kingston Mines Ltd. (100%) 092I June 7, 2005 Nicola 497.436
522482 SUGARLOAF 1 Kingston Mines Ltd. (100%) 092I November 21, 2005 Nicola 331.591
522483 SUGARLOAF 3 Kingston Mines Ltd. (100%) 092I November 21, 2005 Nicola 414.39
522484 SUGARLOAF 4 Kingston Mines Ltd. (100%) 092I November 21, 2005 Nicola 414.671
522485 SUGARLOAF 5 Kingston Mines Ltd. (100%) 092I November 21, 2005 Nicola 207.337
- ------------------------------------------------------------------------------------------------
TOTALS 5 TITLES Hectares 1865.43
Acres 4607.6
================================================================================================
Our mineral titles allow us to explore the claims composing the Sugarloaf
Property subject to the laws and regulations of the Province of British
Columbia. Title to mineral claims are issued and administered by the Mineral
Titles Branch, Ministry of Energy, Mines and Petroleum Resources, and title must
comply with all provisions under the Mineral Tenure Act (British Columbia). A
mineral claim acquires the right to the minerals that were available at the time
of location and as defined in the Mineral Tenure Act (British Columbia). There
are no surface rights included, but the title holder has the right to use the
surface of the claim for mining proposes only. All work carried out on a claim
that disturbs the surface by mechanical means requires a Notice of Work and must
receive written approval from the District Inspector of Mines prior to
commencement.
Under British Columbia law, our mineral claims may be held for one year
after the Date of Record, and thereafter from year to year if, on or before the
anniversary date, we either perform exploration and development work on the
claim since the last anniversary date having a value of not less than C$4 per
hectare, or we pay the cash equivalent in lieu of work performed plus a 10%
submission fee. If we do not comply with these maintenance requirements, then
we will forfeit our claims at the end of the anniversary date for each
respective claim. Our Vice-President has paid $2000 on our behalf to keep the
original Sugarloaf claim in good standing until June 7, 2007, and we will be
reimbursing him from the proceeds of this offering. The remaining claims that
compose the Sugarloaf Property require work having a total value of $5000 to be
performed by November 21, 2006, or the cash equivalent in lieu of work, in order
to be kept in good standing until November 21, 2007. If we are unable to
perform the necessary work by November 21, 2006, we intend to pay the cash
equivalent (plus a $500 submission fee) from the proceeds of this offering.
13
MAP OF THE EXPANDED SUGARLOAF PROPERTY SHOWING CLAIMS NUMBERS
[GRAPHIC OMITED]
HISTORY OF THE CLAIMS
According to the geological summary report prepared by Barry J. Price,
P.Geo., numerous exploration work programs expending a total of at least
$200,000 to $300,000 have overlapped the Sugarloaf Property over the past 20
years. These programs were undertaken to search for copper deposits comparable
to those that had been found by other companies nearby. As yet the work
programs have been small and repetitive, generally including prospecting, small
magnetometer surveys and little else. Most recently, part of the area was held
as the Cube claims, by Guy Delorme for the beneficial owner, Nustar Resources
Inc. of Delta, British Columbia. The present claim was sold outright to our
Vice-President, Thomas Mills by Guy Delorme. Thomas Mills then sold the claims
to us on August 30, 2005. Neither Guy Delorme nor Nustar Resources Inc. have
any relationship with Kingston Mines Ltd., its officers or directors.
Mr. Price's report indicates that the best showing on the property is
perhaps the Jan showing on the south side of Hamilton Creek, where a 1980
drillhole intercepted 20 feet averaging 1.13% copper in a mineralized and
trenched area. Geochemical and geophysical surveys over parts of the property
have investigated other copper and magnetite skarn showings.
In 1980, a 50 lb. barite boulder was found in Hamilton Creek, which, Mr.
Price believes demonstrates potential for volcanogenic massive sulphide showings
in the area.
LOCATION AND ACCESS
The Sugarloaf Property is located on the south and southwest flanks of
Sugarloaf Mountain in the Nicola Mining Division in British Columbia, Canada.
It is more particularly located five miles south of the Village of Nicola and
four miles east of the Town of Merritt. Access to the area is gained by
traveling three miles east of Merritt on Highway 97C and then north on a
property access road for 0.6 miles. Ranch roads offer limited property access
in several places.
LOCAL RESOURCES
The Sugarloaf Property is adjacent to a major BC Highway and within 7
kilometers of the large town of Merritt, which has most supplies and services,
including motels, restaurants, grocery stores, lumber yards etc. A large labour
pool exists in the area, some of which has mining exploration training or
familiarity. In the past, one or more diamond drill operators have had equipment
in Merritt. Power lines are present within one or two kilometers of the
property.
14
PHYSIOGRAPHY AND VEGETATION
The Sugarloaf Property is situated within the Interior Plateau of
south-central British Columbia, with topography typical of the high rolling
uplands of the region. Elevations on the property range from 2000 feet in the
southern part of the property adjacent to Hamilton Creek, to 3000 feet. Climate
consists of relatively dry and warm summers with cold winters. Snowfall is not
excessive, and work could continue from March through November, and possibly
later.
The property lies on the eastern flank of the Cascade Mountains which are a
part of the Coast Mountain System, within the Dry Belt of the Interior Plateau.
This area is characterized by low to moderate, rounded mountainous terrain. The
property covers open and wooded rangeland in low to moderate mountainous terrain
about Sugarloaf Mountain whose elevation reaches 1,364 metres (4,474 feet). The
property exhibits open rangeland with patches of coniferous and deciduous trees
covering plateau or terraced benches. There are also concentrations of tree and
shrub cover near creeks or streams.
REGIONAL GEOLOGY
The area of the Sugarloaf Property lies within the Intermontane Belt and is
part of the Quesnel Terrane. It is primarily underlain by Late Triassic,
alkaline to calc-alkaline, predominantly mafic to intermediate but locally
felsic, submarine and subaerial volcanic rocks and volcanic-derived sedimentary
rocks of the Nicola Group. This arc-volcanic package is intruded by large
diorite to granite plutons ranging in age from Triassic-Jurassic to early
Tertiary. The largest of these is the Late Triassic to Early Jurassic
multi-phase Guichon Creek batholith located in the western part of the area.
Clastic and volcanic rocks of Jurassic to Tertiary age unconformably overlie the
Nicola Group in local areas.
The eastern part of the area is dominated by the Nicola horst, a fault
bounded uplift which comprises metamorphosed Nicola rocks and highly deformed,
sedimentary rocks intruded by Triassic, Jurassic and Paleocene plutons.
Structurally, there are two predominant fault sets in the area; a northwest
striking set of probable Mesozoic age, and a north to northeast striking set of
mainly extensional faults of Tertiary age.
The most economically important mineral deposits in the region are the
large, calc-alkaline type, porphyry copper-molybdenum-gold-silver deposits
hosted by the Guichon Creek Batholith. The area also includes the past producing
Craigmont mine, a large copper skarn in Nicola rocks, and coal mines in Tertiary
rocks of the Merritt basin. Throughout its length, the Triassic-Jurassic
volcanic and intrusive rocks of the Quesnel terrane host important
alkaline-porphyry copper-gold deposits such as Afton mine near Kamloops, and
numerous small skarn, vein and stockwork-type base and precious metal
occurrences. The recent discovery of the Fox zinc-coppergold-silver-barite
prospect north of Merritt has prompted prospecting for stratiform volcanogenic
deposits, particularly in the western volcanic facies of the Nicola Group.
PROPERTY GEOLOGY
The Sugarloaf Mountain area is underlain by Nicola Group Volcanics of the
"Western Facies" which includes some limy beds and some rhyolitic units, among
more basic varieties. There may be dioritic intrusions of small size on
Sugarloaf Mountain, but none are known within the Sugarloaf Property area.
MINERALIZATION
The area of Merritt, British Columbia, contains numerous mineral
occurrences and is in the Intermontane tectonic belt dominated by Quesnellia
terrane rocks and numerous faults. The Highland Valley porphyry copper district
occupies the western portion of the area (North of Iron Mountain) where copper
deposits lie within the Late Triassic Guichon Creek batholith. The batholith
intrudes sedimentary and volcanic strata of the Mississippian to Triassic Cache
Creek and Upper Triassic Nicola groups and is unconformably overlain by
sedimentary and volcanic strata ranging in age from Lower Jurassic to Middle
Tertiary.
The remainder of the Merritt area is predominantly underlain by Nicola
Group volcanic, sedimentary and intrusive rocks overlain by extensive Quaternary
cover. Numerous copper occurrences are predominant in the Nicola Group.
The Swakum Mountain area is noted for polymetallic skarn-type
mineralization, lead-zinc-silver bearing quartz veins and replacements, and
polymetallic-precious metal quartz veins in Nicola Group rocks, with limited
past production being recorded. In the Stump Lake area, Nicola Group rocks host
numerous polymetallic-precious metal quartz veins which have also received
limited past production.
In the Merritt area, the Merritt Coalfield occurs in Eocene Coldwater
Formation sediments. The area is a past producer and hosts an estimated 18
million tonnes of high volatile bituminous B rank coal.
Skarn-type mineralization is also prevalent where Craigmont Mines milled 34
million tones of copper-iron ore before closing in 1982. Recent exploration is
focused on epithermal-style mineralization in Nicola Group volcanics.
Industrial mineral occurrences of bentonite, gypsum, and limestone have
also been identified.
15
GEOLOGY REPORT
We retained Mr. Barry J. Price, P.Geo., to complete an initial evaluation
of the Sugarloaf Property and to prepare a geological summary report on it. Mr.
Price did not visit the property prior to preparing his report, but has worked
on numerous similar properties within a radius of six miles of Merritt, British
Columbia.
Mr. Price is an independent Consulting Geologist and Professional
Geoscientist, currently registered as a Professional Geoscientist (P. Geo.) in
the Province of British Columbia with the Association of Professional Engineers
and Geoscientists, the B.C. Yukon Chamber of Mines and the Canadian Institute of
Mining and Metallurgy. He graduated from the University of British Columbia in
1965 with a Bachelors Degree in Science (Honors), in the field of Geology, and
received a further Degree of Master of Science in Economic Geology from the same
university in 1972. Mr. Price has practiced as a Geologist for the past 40
years in the fields of Mining Exploration, Oil and Gas Exploration, and
Geological Consulting.
RECOMMENDED EXPLORATION PROGRAM
Based on his review of data relating to the Sugarloaf Property, Mr. Price
concluded that the Sugarloaf Property warrants further exploration, given past
showings of copper and magnetite skarn. He recommended a two-phase exploration
program to further evaluate the property.
Phase I would consist initially of prospecting and mapping to locate all
past showings, including a GPS survey. Following this, additional work will
include rock geochemistry, some soil lines (auger sampling), trenching by
backhoe, and induced polarization (IP) surveys. As part of Phase I, Mr. Price
also recommended expanding the Sugarloaf Property. On November 21, 2005, we
secured four additional claims adjacent to the Sugarloaf Property, increasing
the total area of the Sugarloaf Property from 497.436 hectares (1228.7 acres) to
1865 hectares (4607.6 acres).
Phase II will consist of core sampling by diamond drilling up to five holes
to a depth of 200 meters.
An estimated budget for our exploration program is set out in the following
table:
- -----------------------------------------------------
PHASE ONE
- -----------------------------------------------------
Prospecting, GPS Mapping, data compilation $ 13,000
Claim staking (completed) $ 2,500
Backhoe Trenching (all inclusive) $ 17,000
IP Survey (all inclusive) $ 34,000
Contingency: $ 6,000
- -----------------------------------------------------
TOTAL PHASE I COSTS: $ 72,500
- -----------------------------------------------------
PHASE TWO
- -----------------------------------------------------
Diamond Drilling and Core Sampling:
Estimated: 1000 meters
(up to 5 holes x 200 meters each)
(supervision and all costs inclusive) $127,500
- -----------------------------------------------------
TOTAL PHASE II COSTS: $127,500
- -----------------------------------------------------
TOTAL PROGRAM COSTS: $200,000
=====================================================
The above budget was provided to us by Mr. Price and is contained in his
geological report respecting the Sugarloaf Property. Actual project costs may
exceed Mr. Price's estimates.
We have completed the additional claim staking recommended by Mr. Price
from cash on hand. Proceeds from the sale of the minimum number of offered
shares will be sufficient to complete Phase I of the proposed exploration
program, but not Phase II. If we are able to sell all of the offered shares, we
will have sufficient capital to fund the completion of Phase II. To the extent
that we are unable to sell all of the offered shares, we may be required to seek
additional funding in order to complete Phase II.
We anticipate that any additional funding that we require will be in the
form of equity financing from the sale of our common stock. There is no
assurance, however, that we will be able to raise sufficient funding from the
sale of our common
16
stock. The risky nature of this enterprise and lack of tangible assets places
debt financing beyond the credit-worthiness required by most banks or typical
investors of corporate debt until such time as an economically viable mine can
be demonstrated. We do not have any arrangements in place for any future equity
financing. If we are unable to secure additional funding, we will cease or
suspend operations. We have no plans, arrangements or contingencies in place in
the event that we cease operations.
MANAGEMENT EXPERIENCE
Our management has no professional training or technical credentials in the
exploration, development, and operation of mines. Consequently, we may not be
able to recognize or take advantage of potential acquisition and exploration
opportunities in the sector without the aid of qualified geological consultants.
Moreover, with no direct training or experience, our management may not be fully
aware of the specific requirements related to working in this industry. They
may make mistakes in their decisions and choices that could cause our operations
and ultimate financial success to suffer irreparable harm.
Messrs. Hilford and Mills have both been officers and directors of a shell
company. In July 2002, they became officers and directors of a publicly held
Colorado company by the name of iRV Inc. through a merger with a privately held
Nevada corporation by the name of Scarab Systems Inc., of which they were also
officers and directors. Upon completion of the merger, iRV Inc. changed its
business to the provision of services to the e-commerce industry, which included
marketing services, e-commerce development services and the sale and
distribution of transaction processing and payment services, including
rechargeable stored value payment and money transfer systems that could be used
for both electronic commerce and point of sale purchases. In March 2003, iRV
Inc. changed its name to Scarab Systems Inc. Due to disappointing results,
Scarab Systems Inc. ceased business operations in 2004 and became a shell
company. In May 2004, Scarab Systems Inc. changed its business to oil and gas
exploration. In June 2004, Mr. Hilford resigned as an officer and director of
Scarab Systems, Inc. In July 2004, Scarab Systems Inc. changed its name to
Torrent Energy Corp. In September 2004, Mr. Mills resigned as an officer and
director of Torrent Energy Corp. Our management does not have any other
experience with shell companies.
In the course of their involvement with Torrent Energy Corp., our
management became interested in natural resource exploration. They approached
several consulting geologists and prospectors located in British Columbia to get
their opinion on the availability of prospective mineral properties in the area
based on their knowledge of information made public through the British Columbia
Ministry of Energy, Mines and Petroleum Resources. Mr. Mills acquired the
original Sugarloaf claim in his name on our behalf and then transferred his
interest to us at his acquisition cost. Upon the recommendation of Mr. Price,
we significantly expanded the area of our mineral claim. While our management
does not have any experience in mineral exploration, we believe that there are
many qualified geoscientists available in British Columbia who we can retain to
oversee the exploration of the Sugarloaf Property and any development
activities.
GEOLOGICAL AND TECHNICAL CONSULTANTS
Since our officers and directors are inexperienced with exploration, we
intend to retain qualified persons on a contract basis to perform the surveying,
exploration, and excavating of the Sugarloaf Property as needed. We intend to
retain Barry J. Price to undertake the exploration of the Sugarloaf Property
given his familiarity with the area. We do not have any verbal or written
agreement regarding the retention of Mr. Price for the exploration program,
though he has indicated that if he is available, he is prepared to provide his
services.
Mr. Price has been providing consulting geological services for major and
junior exploration companies since 1979. His experience includes the
preparation of qualifying reports and property evaluations, the development of
exploration programs, and the supervision of major drill programs. He has
conducted property inspections in Canada, US, Mexico, Cuba, Panama, Nicaragua,
Peoples Republic of China, Republic of South Africa, Ecuador, Argentina and
Indonesia. He has also prepared geological research compilations for areas of
Ecuador, China, Panama, Argentina, Australia. He is familiar with volcanogenic
massive sulphides and volcanic/sediment-hosted red-bed copper deposits. Mr.
Price has been named as a professional geologist in registration statements
filed by Corumel Minerals Corp. (Commission File No. 333-106298), and Darwin
Resources Corp. (Commission File No. 333-123081).
COMPETITIVE FACTORS
The mining industry is highly fragmented and we will be competing with many
other exploration companies looking for minerals. We are one of the smallest
exploration companies and are an infinitely small participant in the mineral
exploration business. While we generally compete with other exploration
companies, there is no competition for the exploration of minerals from our
claims.
We are a junior mineral exploration company. We compete with other junior
mineral exploration companies for financing from a limited number of investors
that are prepared to make investments in junior mineral exploration companies.
The presence of competing junior mineral exploration companies may impact on our
ability to raise additional capital in order to fund our exploration programs if
investors are of the view that investments in competitors are more attractive
based on the merit of the mineral properties under investigation and the price
of the investment offered to investors.
17
We will also be competing with other junior and senior mineral companies
for available resources, including, but not limited to, professional geologists,
camp staff, mineral exploration supplies and drill rigs.
LOCATION CHALLENGES
We do not expect any major challenges in accessing the Sugarloaf Property
during the initial exploration stages.
REGULATIONS
Our mineral exploration program will comply with the British Columbia
Mineral Tenure Act. This act sets forth rules for the location, posting and
working of claims, along with the reporting of work performed.
We must also comply with the British Columbia Mineral Exploration Code,
which tells us how and where we can explore for minerals. We must comply with
these laws to operate our business. Compliance with these rules and regulations
will not adversely affect our operations.
In order to explore for minerals on our mineral claim we must submit our
exploration plan for review. We believe that the plan will be accepted and an
exploration permit will be issued to us. The exploration permit is the only
permit or license we will need to explore for base minerals on the Sugarloaf
Property.
We will be required to obtain work permits from the British Columbia
Ministry of Energy and Mines for any exploration work that results in a physical
disturbance to the land. Due to the backhoe trenching contemplated by Phase I
of our exploration program and the drilling involved in Phase II, we will be
required to obtain a work permit before commencing these activities. The time
required to obtain a work permit is approximately four weeks. We will incur the
expense of our consultants to prepare the required submissions to the Ministry
of Energy and Mines. The budget for our exploration program includes all
associated regulatory compliance costs.
We will also be required by the Mines Act to bear the cost of reclamation
and environmental remediation for all work undertaken that causes sufficient
surface disturbance to require reclamation work. Both reclamation and
environmental remediation refer to putting disturbed ground back as close to its
original state as possible. Other potential pollution or damage must be
cleaned-up and renewed along standard guidelines outlined in the usual permits.
Reclamation is the process of bringing the land back to a natural state after
completion of exploration activities. Environmental remediation refers to the
physical activity of taking steps to remediate, or remedy, any environmental
damage caused, i.e. refilling trenches after sampling or cleaning up fuel
spills.
Phases I and II of our exploration program will involve reclamation and
remediation work. Under Phase, we will be required to refill backhoe trenches
and restore the land to its pre-exploration state. Under Phase II, we will be
required to plug our core holes. All anticipated costs for reclamation and
remediation are included in the budget of our exploration program. No other
reclamation or remediation work resulting from Phases I or II of the exploration
program is anticipated.
Any exploration or development work that is undertaken beyond completion of
Phases I and II of the exploration program will likely entail further
reclamation and environmental remediation costs. The total amount of these
costs cannot be predicted at this time because we do not know the size, tenor,
or quality of any minerals underlying the Sugarloaf Property and cannot predict
the extent of any future exploration or development work. If we enter into
substantial exploration of the Sugarloaf Property, the cost of complying with
permit and regulatory environment laws will be greater than for Phases I and II
of our exploration program because the impact on the project area will be
greater. Permits and regulations will control all aspects of any program if the
project continues to that stage because of the potential impact on the
environment. We may be required to conduct an environmental review process under
the British Columbia Environmental Assessment Act if we decide to proceed with a
substantial project. An environmental review is not required under the
Environmental Assessment Act to proceed with the Phases I or II of the
exploration program.
EMPLOYEES
We currently have no employees other than our two officers and directors,
who have not been paid for their services and will not receive compensation from
the proceeds of this offering. We do not have any employment agreements with
our directors and officers. We do not presently have pension, health, annuity,
insurance, stock options, profit sharing or similar benefit plans; however, we
may adopt plans in the future. There are presently no personal benefits
available to our officers and directors.
18
Description of Property
We have a 100% interest in five mineral claims comprising the Sugarloaf
Property. This interest only relates to the right to explore for and extract
minerals from the claims. We do not own any real property interest in the
claims. We do not own or lease any property other than the Sugarloaf Property.
PLAN OF OPERATION
The following discussion and analysis of our plan of operation should be
read in conjunction with the financial statements and the related notes. This
discussion contains forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Our actual results and the timing of certain events
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors," "Description of Business" and elsewhere in this prospectus. See "Risk
Factors" and "Description of Business".
Our business plan is to proceed with the exploration of the Sugarloaf
Property to determine whether there are commercially exploitable reserves of
valuable minerals. We intend to proceed with the exploration program
recommended by Barry J. Price, P. Geo. Phase I of our exploration program will
consist of prospecting and mapping, analyzing rock geochemistry, auger sampling,
trenching by backhoe, and induced polarization surveys. Phase II will consist
of core sampling by diamond drilling up to five holes to a depth of 200 meters.
We anticipate that Phase I will cost approximately $72,500 while Phase II will
cost approximately $127,500. To date, we have not commenced exploration on the
Sugarloaf Property.
We expect that Phase I of our exploration program will be concluded by
September 30, 2006. During Phase I we will retain a consulting geologist to
review all past exploration data relating to the Sugarloaf Property and plot
relevant information on a map. This is known as geological mapping. Based on
this mapping, the geologist will choose property areas that are most likely to
host economic mineralization. He will then conduct a sampling program focusing
on these property areas by gathering rock and soil samples from the identified
areas that appear to contain mineralization. The samples will be sent to a
laboratory for mineral analysis. By the middle of October, 2006 we should
receive the results of the sample analysis and be able to determine which
property areas, if any, contain significant mineralization.
As part of Phase I, our consulting geologist will also conduct an induced
polarization (IP) survey of the property areas from which the mineralized
samples were taken. This involves injecting electrical current into the ground,
using a generator and transmitter, and measuring the decay of the induced
currents when the current is turned off. IP surveying is the tool of choice for
locating copper deposits.
We plan to commence Phase II of the exploration program in April, 2007.
Phase II will take approximately three months to complete and will consist of
using heavy equipment to drill up to five holes to a depth of 200 meters.
Drilling locations will be determined by analyzing the results of the Phase I
sampling program and IP surveys. Cylinders of rock will be removed from the
drill holes and sent to a laboratory for mineral analysis. Results will
indicate the presence of any minerals below the property surface.
Should a follow-up exploration program be undertaken, it would likely
commence in July, 2007 after reviewing the results of Phase II.
We do not have any verbal or written agreement regarding the retention of
any qualified engineer or geologist for our exploration program. Mr. Barry J.
Price, the author of the geology report on the Sugarloaf Property, has indicated
that he would be prepared to oversee the exploration program, but we have not
discussed any terms of such an arrangement.
Over the next 12 months, we anticipate spending an additional $20,000 on
professional fees, including fees payable in connection with the filing of this
registration statement and complying with reporting obligations, and general
administrative costs. We also expect to pay $7,500 to keep our claims in good
standing with the government of British Columbia. Of this amount, our
Vice-President has already paid $2000 on our behalf to keep the original
Sugarloaf claim in good standing until June 7, 2007, and we will be reimbursing
him from the proceeds of this offering. The remaining claims that compose the
Sugarloaf Property require work having a total value of $5000 to be performed by
November 21, 2006, or payment of the cash equivalent (plus a 10% submission
fee), in order to be kept in good standing until November 21, 2007. If we are
unable to perform the necessary work by November 21, 2006, we intend to pay the
cash equivalent from the proceeds of this offering.
We have budgeted $2,500 to $5,000 for working capital and contingencies
over the next 12 months, and $2,177 to cover our office, stationary and
telephone expenses.
The minimum proceeds from the sale of the securities being offering in this
prospectus will be sufficient for us to complete Phase I of our exploration
program as well as anticipated consulting fees, professional fees and
administrative expenses
19
for the next 12 months. To the extent that we are unable to sell all of the
offered shares, additional funding will be required to complete Phase II. We
will also require additional financing to complete any follow-up exploration
work.
We anticipate that any additional funding that we require will be in the
form of equity financing from the sale of our common stock. There is no
assurance, however, that we will be able to raise sufficient funding from the
sale of our common stock. The risky nature of this enterprise and lack of
tangible assets places debt financing beyond the credit-worthiness required by
most banks or typical investors of corporate debt until such time as an
economically viable mine can be demonstrated. We do not have any arrangements
in place for any future equity financing. If we are unable to secure additional
funding, we will cease or suspend operations. We have no plans, arrangements or
contingencies in place in the event that we cease operations.
Our officers will only be devoting approximately six hours per week of
their time to our business. We do not foresee this limited involvement as
negatively impacting our company over the next 12 months because all exploratory
work is being performed by an outside consultant. If, however, the demands of
our business require more time of our officers, such as raising additional
capital or addressing unforeseen issues with regard to our exploration efforts,
they are prepared to adjust their timetables to devote more time to our
business. They may, however, not be able to devote sufficient time to the
management of our business, as and when needed.
We believe that the only equipment we will need to start exploration on the
Sugarloaf Property will be a backhoe. We will lease the backhoe from an
equipment rental company or hire an independent contractor who owns a backhoe to
the dig the trenches we refer to in this prospectus. We do not have plans to
purchase any significant equipment or to hire any employees during the next 12
months.
RESULTS OF OPERATIONS
We did not earn any revenue from inception on June 16, 2005, to February
28, 2006. We do not anticipate earning revenue until such time as we have
entered into commercial production of the Sugarloaf Property. We are presently
in the exploration stage of our business and we can provide no assurance that we
will discover commercially exploitable reserves of valuable minerals on the
Sugarloaf Property, or that if such resources are discovered that we will
commercially produce them.
We incurred operating expenses in the amount of $14,149 for the period from
inception on June 16, 2005 to February 28, 2006. These operating expenses
included: (a) mineral property acquisition costs of $4,760; (b) consulting fees
of $2,803, (c) audit fees of $4,000, and (d) costs of $1,997 in connection with
our corporate organization. We anticipate that our operating expenses will
increase significantly once we undertake our exploration program.
LIQUIDITY AND CAPITAL RESOURCES
Our business is in the early stages of development. We have not earned any
revenue and we have not identified any commercially exploitable reserves of
valuable minerals on our property. As of February 28, 2006 we had total assets
of $12,458 comprised of $ 9.958 in cash and $2,500 in pre-paid expenses.
Since inception on June 16, 2005, our activities have been financed from
the proceeds of share subscriptions and a convertible debenture in the amount
$15,000 issued to our Vice-President on August 22, 2005. The convertible
debenture does not accrue interest and is due and payable on December 31, 2007.
The convertible debenture may be converted at any time by the holder into our
common stock at the holder's option any time up to maturity at a conversion
price equal to $0.25 per share. Proceeds from this debenture will be used to pay
for the geology report prepared by Mr. Price, professional fees, offering costs
and working capital. We will not repay the loan by Mr. Mills from the proceeds
of this offering.
We have sufficient working capital to maintain our present level of
operations for the next twelve months. The net proceeds from the sale of the
minimum number of shares being offered, together with existing cash, will be
sufficient to meet the anticipated cash requirements of our business plan for at
least the next 12 months, and will enable us to complete Phase I of our proposed
exploration program but not Phase II. To the extent that we are unable to sell
all of the offered shares, we may be required to seek additional funding in
order to complete Phase II.
We anticipate that any additional funding that we require will be in the
form of equity financing from the sale of our common stock. There is no
assurance, however, that we will be able to raise sufficient funding from the
sale of our common stock. The risky nature of this enterprise and lack of
tangible assets places debt financing beyond the credit-worthiness required by
most banks or typical investors of corporate debt until such time as an
economically viable mine can be demonstrated. We do not have any arrangements
in place for any future equity financing. If we are unable to secure additional
funding, we will cease or suspend operations. We have no plans, arrangements or
contingencies in place in the event that we cease operations.
20
LEGAL PROCEEDINGS
Neither Kingston Mines Ltd., nor any of its officers or directors is a
party to any material legal proceeding or litigation and such persons know of no
material legal proceeding or contemplated or threatened litigation. There are
no judgments against Kingston Mines Ltd. or its officers or directors. None of
our officers or directors have been convicted of a felony or misdemeanor
relating to securities or performance in corporate office.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth our directors, executive officers, promoters and
control persons, their ages, and all offices and positions held. Directors are
elected for a period of one year and thereafter serve until their successor is
duly elected by the shareholders. Officers and other employees serve at the
will of the Board of Directors.
- ------------------------------------------------------------------------
TERM PERIOD SERVED AS
NAME POSITION AGE DIRECTOR/OFFICER
- ------------------------------------------------------------------------
Lou Hilford CEO, President and a director 61 2005 to present
Thomas Mills Vice-President, CFO, Secretary 38 2005 to present
and a director
========================================================================
Lou Hilford has served as our President, Chief Executive Officer and a
director since June 2005. Since July 2005, he has been Vice-President,
Secretary and a director of Thrust Energy Corp., a Nevada corporation in the
business of oil and gas exploration in Texas. From 2002 until 2004, Mr. Hilford
was a director of Torrent Energy Corp., a Nevada company engaged in the
exploration of coalbed methane in the Coos Bay region of Oregon. Since 2000,
Hilford has been the President of Loudon Consultants Incorporated, a privately
held consulting firm, specializing in government lobbies and community studies
on behalf of the entertainment industry.
Thomas E. Mills is a lawyer, practicing in British Columbia since 1997. He
has served as our Vice-President, Treasurer, Secretary and a Director since June
2005. Since July 2005, he has been President, Chief Executive Officer,
Treasurer and a director of Thrust Energy Corp., a Nevada corporation in the
business of oil and gas exploration in Texas. Since 2003, Mr. Mills has been
the President and a director of AMP Productions, Ltd., a Nevada corporation
engaged in the production of motion pictures in Vancouver, British Columbia.
From 2002 to 2004, Mr. Mills was President and a director of Torrent Energy
Corp., a Nevada company engaged in the exploration of coalbed methane in the
Coos Bay region of Oregon. Since 2000, Mr. Mills has been President of Moneris
Corporate Services Ltd., a privately held British Columbia personal corporation
through which Mr. Mills provides legal and consulting services. Mr. Mills
received a Bachelor of Arts degree from the University of Waterloo in 1992, and
a Bachelor of Laws degree from the University of British Columbia in 1996.
Messrs. Hilford and Mills are the only "promoters" of our company, as
defined by the Rule 405 of the Securities Act.
We do not anticipate that any conflicts of interest will arise with respect
to our directors' concurrent employment with Thrust Energy Corp. or their other
business activities. Our directors do not have and will not accept any
employment with any enterprise that may conflict with their duties to Kingston
Mines Ltd.
The address for all our officers and directors is 106-1990 S.E. Kent
Avenue, Vancouver, British Columbia V5P 4X5.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years none of our directors, executive officers, promoters
or control persons have:
(1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) been convicted in a criminal proceeding or subject to a pending criminal
proceeding;
(3) been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) been found by a court of competent jurisdiction in a civil action, the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
21
COMMITTEES OF THE BOARD
All proceedings of the board of directors for the year ended August 31,
2005 were conducted by resolutions consented to in writing by our board of
directors and filed with the minutes of the proceedings of our board of
directors. Our company currently does not have nominating, compensation or
audit committees or committees performing similar functions nor does our company
have a written nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such committees because
it believes that the functions of such committees can be adequately performed by
the board of directors.
Our company does not have any defined policy or procedure requirements for
shareholders to submit recommendations or nominations for directors. The board
of directors believes that, given the stage of our development, a specific
nominating policy would be premature and of little assistance until our business
operations develop to a more advanced level. Our company does not currently have
any specific or minimum criteria for the election of nominees to the board of
directors and we do not have any specific process or procedure for evaluating
such nominees. The board of directors will assess all candidates, whether
submitted by management or shareholders, and make recommendations for election
or appointment.
A shareholder who wishes to communicate with our board of directors may do
so by directing a written request addressed to our President, Lou Hilford, at
the address appearing on the first page of this prospectus.
AUDIT COMMITTEE FINANCIAL EXPERT
We do not have a standing audit committee. Our directors perform the
functions usually designated to an audit committee. Our board of directors has
determined that we do not have a board member that qualifies as an "audit
committee financial expert. " as defined in Item 401(e) of Regulation S-B, nor
do we have a board member that qualifies as "independent" as the term is used in
Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934,
as amended, and as defined by Rule 4200(a)(14) of the NASD Rules.
We believe that our board of directors is capable of analyzing and
evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have an audit committee because management
believes that the functions of an audit committees can be adequately performed
by the board of directors. In addition, we believe that retaining an independent
director who would qualify as an "audit committee financial expert" would be
overly costly and burdensome and is not warranted in our circumstances given the
stage of our development and the fact that we have not generated any positive
cash flows from operations to date.
As we generate revenue in the future, we intend to form a standing audit
committee and identify and appoint a financial expert to serve on our audit
committee.
EXECUTIVE COMPENSATION
To date we have no employees other than our officers. No compensation has
been awarded, earned or paid to our officers. We have no employment agreements
with any of our officers. We do not contemplate entering into any employment
agreements until such time as we earn revenue.
There is no arrangement pursuant to which any of our directors has been or
is compensated for services provided as one of our directors.
There are no stock option plans, retirement, pension, or profit sharing
plans for the benefit of our officers or directors. We do not have any
long-term incentive plans that provide compensation intended to serve as
incentive for performance.
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have issued common stock to the following officers, directors, promoters
and beneficial owners of more than 5% of our outstanding securities.
- ------------------------------------------------------------------------------
NAME POSITION WITH COMPANY SHARES CONSIDERATION DATE
- ------------------------------------------------------------------------------
Lou Hilford CEO, President, director 3,000,000 $ 150 July 5, 2005
Thomas Mills Vice-President, CFO 5,000,000 $ 250 July 5, 2005
Secretary, director
==============================================================================
On August 22, 2005, we issued an unsecured convertible debenture in the
amount of $15,000 to Thomas Mills, our Vice-President. The convertible
debenture does not accrue interest and is due and payable on December 31, 2007.
The convertible debenture may be converted at any time by the holder into our
common stock at the holder's option at a conversion price equal to $0.25 per
share. Proceeds from this debenture will be used for professional fees and
working capital.
On August 30, 2005, we purchased our current mineral claims (British
Columbia mineral tenure number 514065) from Thomas Mills, our Vice-President.
As consideration for this acquisition, we issued to Mr. Mills an unsecured
promissory note in the amount of $5,000 in lawful money of Canada, which is
equal to the amount that he paid for it. The promissory note does not accrue
interest and is due on demand. We have made no payments in satisfaction of the
promissory note. We intend to repay the amount owing under the promissory note
from the proceeds of this offering. This transaction was evaluated as being
fair by our directors reviewing the transaction without third party advice or
consultation. No independent third party has evaluated the fairness of this
transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 13, 2006 by (i) each person known by
us to be a beneficial owner of more than five percent (5%) of our issued and
outstanding common stock; (ii) each of our Directors and executive officers; and
(iii) all our directors and executive officers as a group.
- ------------------------------------------------------------------------
NAME NUMBER OF SHARES %
- ------------------------------------------------------------------------
Lou Hilford 3,000,000 37
106-1990 S.E. Kent Ave.
Vancouver, BC V5P 4X5
Thomas Mills 5,060,000(1) 63
500-666 Burrard Street
Vancouver, BC V6C 2X8
- ------------------------------------------------------------------------
Directors and officers as a group (two persons) 8,060,000 100
========================================================================
(1) Includes 60,000 shares issuable upon exercise of a conversion privilege
that can be exercised within 60 days.
Unless otherwise noted, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of common stock
beneficially owned by them. For purposes hereof, a person is considered to be
the beneficial owner of securities that can be acquired by such person within 60
days from the date hereof, upon the exercise of warrants or options or the
conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any such warrants, options or
convertible securities that are held by such person (but not those held by any
other person) and which can be exercised within 60 days from the date hereof,
have been exercised.
FUTURE SALES BY EXISTING STOCKHOLDERS
A total of 8,000,000 shares of common stock were issued to Lou Hilford and
Thomas Mills, our officers and directors in July 2005. The 8,000,000 shares are
restricted securities, as defined in Rule 144 of the Rules and Regulations of
the SEC promulgated under the Securities Act. Under Rule 144, the shares can be
publicly sold, subject to volume restrictions and restrictions on the manner of
sale, commencing one year after their acquisition. Rule 144 provides that a
person may not sell more than 1% of the total outstanding shares in any three
month period and the sales must be sold either in a brokers' transaction or in a
transaction directly with a market maker.
23
Shares purchased in this offering, which will be immediately resalable, and
sales of all of our other shares after applicable restrictions expire, could
have a depressive effect on the market price, if any, of our common stock and
the shares we are offering.
A total of 8,000,000 shares of our stock are currently owned by our
officers and directors. They will likely sell a portion of their stock if a
trading market for our common stock develops. If they do sell their stock into
the market, the sales may cause the market price of the stock to drop.
Because our officers and directors will control us after this offering,
regardless of the number of shares sold, our shareholders' will be unable to
cause a change in the course of our operations. As such, the value attributable
to the right to vote is gone, which could result in a reduction in share value.
PLAN OF DISTRIBUTION
We offer the right to subscribe for up to 2,500,000 shares at the offering
price of $0.10 per share. We are offering the shares directly on a best efforts,
1,250,000 share minimum basis. No compensation is to be paid to any person for
the offer and sale of the shares.
Our President, Lou Hilford, plans to distribute prospectuses related to
this offering. We estimate up to 500 prospectuses will be distributed in such a
manner to acquaintances, friends and business associates. Mr. Hilford will not
register as a broker/dealer under Section 15 of the Securities Exchange Act of
1934 (the "Exchange Act") in reliance upon Rule 3a4-1. Rule 3a4-1 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. These conditions are as follows:
1. The person is not subject to a statutory disqualification, as that term
is defined in Section 3(a)(39) of the Exchange Act, at the time of his
participation;
2. The person is not compensated in connection with his participation by the
payment of commissions or other remuneration based either directly or indirectly
on transactions in securities;
3. The person is not, at the time of their participation, an associated
person of a broker-dealer; and
4. The person 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 to primarily
perform at the end of the offering, substantial duties for or on behalf of the
Issuer otherwise than in connection with transactions in securities; and (b) is
not a broker-dealer, or an associated person of a broker-dealer, within the
preceding twelve (12) months; and (c) does not participate in selling and
offering of securities for any Issuer more than once every twelve (12) months
other than in reliance on paragraphs (a)(4)(i) or (a) (4) (iii) of the Exchange
Act.
Mr. Hilford is not subject to disqualification, is not being compensated,
and is not associated with a broker-dealer. Mr. Hilford is and will continue to
be one of our officers and directors at the end of the offering and, during the
last twelve months, he has not been and is not currently a broker-dealer nor
associated with a broker-dealer. Mr. Hilford has not, during the last twelve
months, and will not, during the next twelve months, offer or sell securities
for another corporation other than in reliance on paragraphs (a)(4)(i) or (a)
(4) (iii) of the Exchange Act.
Neither of our directors will purchase any of the offered common stock.
Neither Mr. Mills nor Mr. Hilford will participate in the offering to satisfy
the minimum.
This offering is not available to residents of the province of British
Columbia.
PENNY STOCK REGULATION
The Securities 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).
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 prepared by the Commission, that:
- - contains a description of the nature and level of risk in the market for
penny stocks 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;
24
- - contains a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks 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 Commission shall require by rule or regulation.
The broker-dealer also must provide the customer with the following, prior to
proceeding with any transaction in a penny stock:
- - bid and offer quotations for the penny stock;
- - details of 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.
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
those securities.
TERMS OF SALE OF THE SHARES
We will be selling our shares on a best efforts 1,250,000 share minimum
2,500,000 share maximum basis. Until we have sold at least 1,250,000 shares, we
will not accept subscriptions for any shares. Once a subscription is accepted,
it is irrevocable and cannot be withdrawn by the subscriber. All proceeds of
this offering will be deposited in a non-interest bearing escrow account
operated by our escrow agent, Transfer Online, Inc.
If we are unable to sell at least 1,250,000 shares within 90 days, we will
promptly return all funds without interest or deductions to subscribers. We have
the right to completely or partially accept or reject any subscription for
shares offered in this offering, for any reason or for no reason. This offering
will remain open until the earlier of the date that all shares offered in this
offering are sold and six months after the date of this prospectus, except that
we will have only 90 days to sell at least 1,250,000 shares. We may cease our
selling efforts at any time for any reason whatsoever.
Any change in the material terms of this offering after the effective date
of this Prospectus will terminate the original offer and will entitle any
subscribers to a refund of their investment. Material changes include the
following: an extension of the offering period beyond the six months currently
contemplated; a change in the offering price; a change in the minimum purchase
amount; a change to allow sales to affiliates in order to meet the minimum sales
requirement; a change in the minimum amount of proceeds required to release
funds from escrow; and, a change in the application of proceeds. If there is a
change in the material terms of this offering, any new offering may be made by
means of a post-effective amendment.
METHOD OF SUBSCRIBING
Persons may subscribe by filling in and signing the subscription agreement,
and delivering it, prior to the expiration date, to us. The subscription price
of $0.10 per share must be paid in cash or by check, bank draft or postal
express money order payable in United States dollars to our order.
EXPIRATION DATE
The offering will expire on the earlier of the date that all offered shares
are sold and six months after the date of this prospectus. We shall terminate
the offering 90 days from the date of this prospectus if we are unable to sell
1,250,000 of the offered shares during that period.
25
KEY TERMS OF ESCROW AGREEMENT
We will deposit all proceeds of this offering into a non-interest bearing
escrow account operated by our escrow agent, Transfer Online, Inc., in Portland,
Oregon. If we are unable to sell at least 1,250,000 shares within 90 days, we
will promptly return all funds, without interest or deductions to subscribers.
This offering will remain open until the earlier of the date that all shares
offered are sold and six months after the date of this prospectus, except that
we will have only 90 days to sell at least the first 1,250,000 shares.
Under the terms of our escrow agreement with Transfer Online, Inc.,
proceeds from the sale of shares will be deposited into a non-interest bearing
account until the minimum offering amount is sold. If the proceeds are
insufficient to meet the 1,250,000 share minimum requirement, proceeds will be
promptly returned directly to investors by the escrow agent, without interest
and without any deduction for expenses including escrow agent fees.
The escrowed proceeds will not be subject to claims by our creditors,
affiliates, or associates until the proceeds have been released to us under the
terms of the escrow agreement.
The regulatory administrator of any jurisdiction in which the offering is
registered has the right to inspect and make copies of the records of the escrow
agent relating to the escrowed funds in the manner described in the escrow
agreement.
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 100,000,000 shares of common stock
at a par value of $0.0001 per share and 50,000,000 shares of preferred stock at
a par value of $0.0001 per share.
COMMON STOCK
As of the date of this prospectus, there were 8,000,000 shares of our
common stock issued and outstanding that are held by two stockholders of record.
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. At all meetings of shareholders, except where otherwise provided by
statute or by the Articles of Incorporation, or by these Bylaws, the presence,
in person or by proxy duly authorized, of the holder or holders of not less than
twenty percent (20%) of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. A vote by the holders of a
majority of our outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or an amendment to our articles of
incorporation.
Holders of our common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available funds.
In the event of liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock.
Holders of our common stock have no pre-emptive rights, no conversion
rights and there are no redemption provisions applicable to our common stock.
PREFERRED STOCK
We have authorized 50,000,000 shares of preferred stock at a par value of
$0.0001 per share. We have no shares of preferred stock outstanding as of the
date of this prospectus.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
SHARE PURCHASE WARRANTS
We have not issued and do not have outstanding any warrants to purchase
shares of our common stock.
26
OPTIONS
We have not issued and do not have outstanding any options to purchase
shares of our common stock.
CONVERTIBLE SECURITIES
We have not issued and do not have outstanding any securities convertible
into shares of our common stock or any rights convertible or exchangeable into
shares of our common stock, except as follows:
On August 22, 2005, we issued an unsecured convertible debenture in the amount
of $15,000 to Thomas Mills, our Vice-President. The convertible debenture does
not accrue interest and is due and payable on December 31, 2007. The convertible
debenture may be converted at any time by the holder into our common stock at
the holder's option at a conversion price equal to $0.25 per share.
NEVADA ANTI-TAKEOVER LAWS
The Nevada Revised Statutes Sections 78.378 through 78.3793, under certain
circumstances, place restrictions upon the acquisition of a controlling interest
in a Nevada corporation, including the potential requirements of shareholder
approval and the granting of dissenters' rights in connection with such an
acquisition. These provisions could have the effect of delaying or preventing a
change in control of our company.
TRANSFER AGENT
Our transfer agent and registrar is Transfer Online, Inc., located at 317
SW Alder Street, 2nd Floor, Portland, Oregon 97204. Telephone: (503)227-2950.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Nevada
Revised Statutes, our Articles of Incorporation and our Bylaws. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons pursuant to our
Articles of Incorporation or provisions of the Nevada Business Corporations Act,
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
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question, whether or not such indemnification by us is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
LEGAL MATTERS
The validity of the shares of common stock offered by us was passed upon by the
law firm of Clark, Wilson, LLP in Vancouver, British Columbia, Canada.
EXPERTS
Our financial statements as of August 31, 2005 appearing in this Prospectus
and Registration Statement have been audited by Vellmer & Chang, Chartered
Accountants, an independent registered public accounting firm and are included
in reliance upon the report therein included, given on the authority of such
firm as experts in auditing and accounting.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
In September 2005, we engaged the services of Vellmer & Chang, Chartered
Accountants, of Vancouver, British Columbia, to provide an audit of our
financial statements for the period from June 16, 2005 (inception) to August 31,
2005. This is our first auditor. We have no disagreements with our auditor
through the date of this prospectus.
27
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we file periodic reports, proxy statements, and other
information with the SEC. Anyone may inspect or copy these materials at the
Public Reference Room at the SEC at Room 1580, 100 F Street, N.E., Washington,
D.C. 20549. For a fee, copies of these materials can be obtained by writing to
the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the SEC public reference room. Our filings are also available to
the public on the SEC's website on the Internet at http://www.sec.gov.
We have filed with the SEC a registration statement on Form SB-2 (together
with all amendments and exhibits thereto, the "Registration Statement") with
respect to the shares of common stock offered by this prospectus. This
prospectus does not contain all of the information included in the Registration
Statement. For further information about us and the shares of common stock
offered by this prospectus, please refer to the Registration Statement and its
exhibits. Anyone may obtain a copy of the Registration Statement through the
public reference facilities of the SEC described above. A copy of the
Registration Statement can also be accessed by means of the SEC's website at
http://www.sec.gov.
28
INDEX TO FINANCIAL STATEMENTS
KINGSTON MINES LTD.
(AN EXPLORATION STAGE COMPANY)
Pages
FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD
ENDED FEBRUARY 28, 2006 (UNAUDITED)
Balance Sheets F-2
Statements of Stockholders' Equity (Deficiency) F-3
Statements of Operations F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 thru F-10
FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2005
Report of Independent Registered Public Accounting Firm F-11
Balance Sheet F-12
Statement of Stockholders' Equity (Deficiency) F-13
Statement of Operations F-14
Statement of Cash Flows F-15
Notes to Financial Statements F-16 thru F-20
F-1
KINGSTON MINES LTD.
(An exploration stage company)
Balance Sheets
February 28, 2006
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------------------
February 28 August 31
2006 2005
(Audited)
- --------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 9,958 $ 15,394
Pre-paid expenses 2,500 -
- --------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS $ 12,458 $ 15,394
- --------------------------------------------------------------------------------------------
TOTAL ASSETS $ 12,458 $ 15,394
============================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Promissory note - Related Party 4,297 4,297
Accounts payable and accrued liabilities 6,672 1,997
- --------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 10,969 6,294
CONVERTIBLE DEBENTURE - RELATED PARTY 15,000 15,000
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES 25,969 21,294
- --------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 8,000,000 common shares 400 400
ADDITIONAL PAID-IN CAPITAL 238 13
(DEFICIT) ACCUMULATED DURING THE EXPLORATION STAGE (14,149) (6,313)
- --------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (13,511) (5,900)
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 12,458 $ 15,394
============================================================================================
The accompanying notes are an integral part of these financial statements
F-2
KINGSTON MINES LTD.
(An exploration stage company)
Statements of Stockholders' Equity (Deficiency)
For the period from June 16, 2005 (inception) to February 28, 2006
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
- -----------------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during stockholders'
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
- -----------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
July 5, 2005 ($0.00005 per share) - $ - 8,000,000 $ 400 $ - $ - $ 400
Imputed interest from a shareholder - - - - 13 - 13
Loss and comprehensive loss for the period - - - - - (6,313) (6,313)
- -----------------------------------------------------------------------------------------------------------------------
Balance, August 31, 2005 - - 8,000,000 $ 400 $ 13 $ (6,313) $ (5,900)
- -----------------------------------------------------------------------------------------------------------------------
Imputed interest from a shareholder - - - - 225 - 225
Loss and comprehensive loss for the period - - - - - (7,836) (7,836)
- -----------------------------------------------------------------------------------------------------------------------
Balance, February 28, 2006 - $ - 8,000,000 $ 400 $ 238 $ (14,149) $ (13,511)
=======================================================================================================================
The accompanying notes are an integral part of these financial statements
F-3
KINGSTON MINES LTD.
(A exploration stage company)
Statements of Operations
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
Cumulative from
June 16, 2005
(inception) to Three months ended Six months ended
February 28, 2006 February 28, 2006 February 28, 2006
- -----------------------------------------------------------------------------------------------------------------
EXPENSES
Accounting and audit $ 4,000 $ - $ 4,000
Bank charges 34 6 28
Filing fees 1,997 - -
Interest 238 113 225
Consulting fees 2,803 - 2,803
Office expenses 212 - 212
Foreign exchange (gain) loss 105 105 105
Resource property acquisition costs 4,760 - 463
- -----------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (14,149) (224) (7,836)
- -----------------------------------------------------------------------------------------------------------------
NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD $ (14,149) $ (224) $ (7,836)
- -----------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00)
=================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- - basic and diluted 8,000,000 8,000,000
=================================================================================================================
The accompanying notes are an integral part of these financial statements
F-4
KINGSTON MINES LTD.
(An exploration stage company)
Statements of Cash Flows
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
- ----------------------------------------------------------------------------------------------------
Cumulative from
June 16, 2005
(inception) to Six months ended
February 28, 2006 February 28, 2006
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net (Loss) for the period $ (14,149) $ (7,836)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
- - imputed interest 238 225
Changes in operating assets and liabilities
- - (increase) in pre-paid expenses (2,500) (2,500)
- - accounts payable and accrued liabilities - Related Party 6,672 4,675
- ----------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (9,739) (5,436)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Increase in promissory note - Related Party 4,297 -
Proceeds from convertible debenture - Related Party 15,000 -
Proceeds from issuance of common stock 400 -
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,697 -
- ----------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 9,958 (5,436)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 15,394
- ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,958 $ 9,958
====================================================================================================
The accompanying notes are an integral part of these financial statements
F-5
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Kingston Mines Ltd. (hereinafter "the Company") was incorporated in the
State of Nevada, U.S.A., on June 16, 2005. The Company's fiscal year end is
August 31.
The Company has been in the exploration stage since its formation and has
not yet realized any revenue from its operations. It is primarily engaged in
the acquisition and exploration of mining properties. Upon location of a
commercially minable reserve, the Company expects to actively prepare the site
for its extraction and enter a development stage. In 2005, the Company acquired
a mineral interest in a property located near the southern boundary of the Town
of Merritt in British Columbia, Canada, and has not yet determined whether this
property contains reserves that are economically recoverable.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $14,149 since inception and has no source of
revenue. The future of the Company is dependent upon its ability to obtain
financing and upon future acquisition, exploration and development of profitable
operations from its mineral properties. These factors create doubt as to the
ability of the Company to continue as a going concern. Realization values may
be substantially different from the carrying values as shown in these financial
statements should the Company be unable to continue as a going concern.
Management is in the process of identifying sources for additional financing to
fund the ongoing development of the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with the generally accepted accounting principles in the United States of
America. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates that have been made using
careful judgment. The financial statements have, in management's opinion been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments and short-term debt instruments with original
maturities of three months or less to be cash equivalents. As at February 28,
2006, there were no cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses for the reporting
period. Actual results could differ from these estimates.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit, quality
financial institutions. As of February 28, 2006, the Company had no balance in
a bank beyond insured limits.
F-6
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Transactions
The Company is located and operating outside of the United States of
America. It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect at that
date. At the period end, monetary assets and liabilities are remeasured by
using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents, accounts payable and accrued
liabilities, promissory note and convertible debenture. Fair values were
assumed to approximate carrying value for these financial instruments, except
where noted. Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The Company is operating outside the United States of America and has
significant exposure to foreign currency risk due to the fluctuation of currency
in which the Company operates and U.S. dollars.
Mineral Property Payments and Exploration Costs
The Company expenses all costs related to the acquisition, maintenance and
exploration of mineral claims in which it has secured exploration rights prior
to establishment of proven and probable reserves. 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. To
date, the Company has not established the commercial feasibility of its
exploration prospects; therefore, all costs are being expensed.
Long-lived assets impairment
Long-term assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without
interest charges). If impairment is deemed to exist, the assets will be written
down to fair value. Fair value is generally determined using a discounted cash
flow analysis.
Assets retirement obligations
The Company has adopted SFAS No 143, Accounting for Assets Retirement
Obligations which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. SFAS
No. 143 requires the Company to record a liability for the present value of the
estimated site restoration costs with corresponding increase to the carrying
amount of the related long-lived assets. The liability will be accreted and the
asset will be depreciated over the life of the related assets. Adjustments for
changes resulting from the passage of time and changes to either the timing or
amount of the original present value estimate underlying the obligation will be
made. As at February 28, 2006, the Company does not have any asset retirement
obligations.
Costs associated with environmental remediation obligations will be accrued when
it is probable that such costs will be incurred and they can be reasonably
estimated.
F-7
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company adopted SFAS No. 123(revised), "Share-Based Payment", to
account for its stock options and similar equity instruments issued.
Accordingly, compensation costs attributable to stock options or similar equity
instruments granted are measured at the fair value at the grant date, and
expensed over the expected vesting period. SFAS No. 123(revised) requires
excess tax benefits be reported as a financing cash inflow rather than as a
reduction of taxes paid.
The Company did not grant any stock options during the period ended
February 28, 2006.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), Reporting Comprehensive Income, which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. The Company is disclosing this information on its Statement of
Stockholders' Equity (Deficiency). Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the period ended
February 28, 2006.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes, which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns using the liability method. Under this method, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
Basic and Diluted Loss Per Share
In accordance with SFAS No. 128 - "Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding. Diluted loss per
common share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive.
New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 153. This statement addresses the
measurement of exchanges of non-monetary assets. The guidance in APB Opinion
No. 29, "Accounting for Non-monetary Transactions," is based on the principle
that exchanges of non-monetary 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. This statement amends Opinion 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. This statement is effective for
financial statements for fiscal years beginning after June 15, 2005. Earlier
application is permitted for non-monetary asset exchanges incurred during fiscal
years beginning after the date of this statement is issued. Management believes
the adoption will have no impact on the financial statements of the Company.
F-8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In May 2005, the FASB issued SFAS No. 154, entitled Accounting Changes and
Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3.
This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement 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. Opinion 20 previously required that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. This Statement 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. This Statement defines retrospective
application as the application of a different accounting principle to prior
accounting periods as if that principle had always been used or as the
adjustment of previously issued financial statements to reflect a change in the
reporting entity. This Statement also redefines restatement as the revising of
previously issued financial statements to reflect the correction of an error.
The adoption of SFAS 154 did not impact the financial statements.
NOTE 3 - MINERAL PROPERTY INTEREST
On August 30, 2005, the Company acquired a 100% interest in a mineral claim
from its principal shareholder and a director of the Company, known as the
"Sugarloaf Property" located near the southern boundary of the Town of Merritt
in British Columbia, Canada, for consideration of $4,297 being the cost to the
principal shareholder, by issuance of a promissory note. The Company expensed
the entire amount.
On November 21, 2005, the Company acquired a 100% interest in four mineral
claims that are contiguous with the Company's other mineral claim and are
located near the southern boundary of the Town of Merritt in British Columbia,
Canada. The total cost of acquisition of these claims was $463, and was paid by
a principal shareholder on behalf of the Company, which amount remains owing by
the Company to the principal shareholder. The Company expensed the entire
amount.
NOTE 4 - PROMISSORY NOTE
On August 30, 2005, the Company issued a promissory note to its principal
shareholder and a director in the amount of $4,297 for the purchase of the
mineral property (See Note 3). The promissory note is unsecured, non-interest
bearing and due on demand.
NOTE 5 - CONVERTIBLE DEBENTURE
On August 22, 2005, the Company issued a convertible debenture to its
principal shareholder and a director in the amount of $15,000. The convertible
debenture is unsecured, non-interest bearing, due December 31, 2007 and
convertible at the option of the holder at a price of $0.25 per share at any
time. The Company charged imputed interest at 3.0% per annum and recorded a
total of $113 and $225 to the additional paid-in capital for the three and six
month periods, respectively, ended February 28, 2006.
The Company did not incur beneficial conversion charges because the
conversion price is greater than the fair value of the equity of the Company.
F-9
NOTE 6 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none
issued.
The Company has 100,000,000 shares of common stock authorized, of which
8,000,000 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
On November 30, 2005, the Company effected a 2 for 1 forward split of its
issued and outstanding shares of common stock. The financial statements of the
Company have been restated to reflect the 2 for 1 forward split.
NOTE 7 - RELATED PARTY TRANSACTIONS
(a) Accounts payable of $2,672 is due to a company controlled by a director
of the Company for the expenses paid on behalf of the Company.
(b) See Note 3, 4 and 5.
NOTE 8 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada
F-10
VELLMER & CHANG
CHARTERED ACCOUNTANTS
505-815 Hornby Street
Vancouver, B.C., V6Z 2E6
Tel: 604-687-3773
Fax: 604-687-3778
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
KINGSTON MINES LTD.
(An exploration stage company)
We have audited the accompanying balance sheet of Kingston Mines Ltd. (an
exploration stage company) as at August 31, 2005 and the related statements of
stockholders' deficiency, operations and cash flows for the period from June 16,
2005 (date of inception) to August 31, 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). Those standards require that we
plan and perform an audit to obtain reasonable assurance 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 at August 31,
2005 and the results of its operations and its cash flows for the period from
June 16, 2005 (date of inception) to August 31, 2005, in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company incurred losses from operations since inception, has not
attained profitable operations and is dependent upon obtaining adequate
financing to fulfill its exploration activities. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
VANCOUVER, CANADA "VELLMER & CHANG"
MARCH 20, 2006 CHARTERED ACCOUNTANTS
F-11
KINGSTON MINES LTD.
(An Exploration Stage Company)
BALANCE SHEET
AUGUST 31, 2005
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $15,394
- --------------------------------------------------------------------------
TOTAL CURRENT ASSETS 15,394
- --------------------------------------------------------------------------
TOTAL ASSETS $15,394
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities - Related Party $ 1,997
Promissory note - Related Party 4,297
- --------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 6,294
CONVERTIBLE DEBENTURE - Related Party 15,000
- --------------------------------------------------------------------------
TOTAL LIABILITIES 21,294
- --------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 8,000,000 common shares 400
ADDITIONAL PAID-IN CAPITAL 13
(DEFICIT) ACCUMULATED DURING THE EXPLORATION STAGE (6,313)
- --------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (5,900)
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $15,394
==========================================================================
The accompanying notes are an integral part of these financial statements
F-12
KINGSTON MINES LTD.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JUNE 16, 2005 (INCEPTION) TO AUGUST 31, 2005
(EXPRESSED IN U.S. DOLLARS)
- ----------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during stockholders'
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
- ----------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
July 5, 2005, $0.00005 per share - $ - 8,000,000 $ 400 $ - $ - $ 400
Imputed interest from a shareholder - - - - 13 - 13
Net loss for the period - - - - - (6,313) (6,313)
- ----------------------------------------------------------------------------------------------------------------
Balance, August 31, 2005 - $ - 8,000,000 $ 400 $ 13 $ (6,313) $ (5,900)
================================================================================================================
The accompanying notes are an integral part of these financial statements
F-13
KINGSTON MINES LTD.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
- ---------------------------------------------------------------------
June 16, 2005
(inception) to
August 31, 2005
- ---------------------------------------------------------------------
EXPENSES
Bank charges $ 6
Interest 13
Filing fees 1,997
Resource property costs 4,297
- ---------------------------------------------------------------------
OPERATING LOSS (6,313)
- ---------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (6,313)
=====================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.00)
=====================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- - basic and diluted 6,000,000
=====================================================================
The accompanying notes are an integral part of these financial statements
F-14
KINGSTON MINES LTD.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
- ------------------------------------------------------------------------------------------------------------
June 16, 2005
(inception) to
August 31, 2005
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net (Loss) for the period $ (6,313)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
- - imputed interest 13
Changes in current liabilities:
- - accounts payable and accrued liabilities - Related Party 1,997
- ------------------------------------------------------------------------------------------------------------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (4,303)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Increase in promissory note - Related Party 4,297
Proceeds from convertible debenture - Related Party 15,000
Proceeds from issuance of common stock 400
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,697
- ------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 15,394
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,394
============================================================================================================
The accompanying notes are an integral part of these financial statements
F-15
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Kingston Mines Ltd. (hereinafter "the Company") was incorporated in the
State of Nevada, U.S.A., on June 16, 2005. The Company's fiscal year end is
August 31.
The Company has been in the exploration stage since its formation and has
not yet realized any revenues from its operations. It is primarily engaged in
the acquisition and exploration of mining properties. Upon location of a
commercially minable reserve, the Company expects to actively prepare the site
for its extraction and enter a development stage. In 2005, the Company acquired
a mineral interest in a property located near the southern boundary of the Town
of Merritt in British Columbia, Canada and has not yet determined whether this
property contains reserves that are economically recoverable.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $6,313 since inception and has no source of
revenue. The future of the Company is dependent upon its ability to obtain
financing and upon future acquisition, exploration and development of profitable
operations from its mineral properties. These factors create doubt as to the
ability of the Company to continue as a going concern. Realization values may
be substantially different from the carrying values as shown in these financial
statements should the Company be unable to continue as a going concern.
Management is in the process of identifying sources for additional financing to
fund the ongoing development of the Company's business.
On November 30, 2005, the board of directors approved a 2 for 1 forward
stock split of our issued and outstanding shares of common stock. These
Financial Statements of Kingston Mines Ltd. have been restated to reflect the 2
for 1 forward stock split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with the generally accepted accounting principles in the United States of
America. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates that have been made using
careful judgment. The financial statements have, in management's opinion been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments and short-term debt instruments with original
maturities of three months or less to be cash equivalents. As at August 31,
2005, there were no cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses for the reporting
period. Actual results could differ from these estimates.
F-16
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions. As of August 31, 2005, the Company had no balance in a
bank beyond insured limits.
Foreign Currency Transactions
The Company is located and operating outside of the United States of
America. It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect at that
date. At the period end, monetary assets and liabilities are remeasured by
using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents, accounts payable and accrued
liabilities, promissory note and convertible debenture. Fair values were
assumed to approximate carrying value for these financial instruments, except
where noted. Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The Company is operating outside the United States of America and has
significant exposure to foreign currency risk due to the fluctuation of currency
in which the Company operates and U.S. dollars.
Mineral Property Payments and Exploration Costs
The Company expenses all costs related to the acquisition, maintenance and
exploration of mineral claims in which it has secured exploration rights prior
to establishment of proven and probable reserves. 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. To
date, the Company has not established the commercial feasibility of its
exploration prospects; therefore, all costs are being expensed.
Long-lived assets impairment
Long-term assets of the Company are reviewed for impairment whenever events
or circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds
the future projected cash flows from related operations (undiscounted and
without interest charges). If impairment is deemed to exist, the assets will be
written down to fair value. Fair value is generally determined using a
discounted cash flow analysis.
F-17
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Assets retirement obligations
The Company has adopted SFAS No 143, Accounting for Assets Retirement
Obligations which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. SFAS
No. 143 requires the Company to record a liability for the present value of the
estimated site restoration costs with corresponding increase to the carrying
amount of the related long-lived assets. The liability will be accreted and the
asset will be depreciated over the life of the related assets. Adjustments for
changes resulting from the passage of time and changes to either the timing or
amount of the original present value estimate underlying the obligation will be
made. As at August 31, 2005, the Company does not have any asset retirement
obligations.
Costs associated with environmental remediation obligations will be accrued
when it is probable that such costs will be incurred and they can be reasonably
estimated.
Stock-Based Compensation
The Company adopted SFAS No. 123(revised), "Share-Based Payment", to
account for its stock options and similar equity instruments issued.
Accordingly, compensation costs attributable to stock options or similar equity
instruments granted are measured at the fair value at the grant date, and
expensed over the expected vesting period. SFAS No. 123(revised) requires
excess tax benefits be reported as a financing cash inflow rather than as a
reduction of taxes paid.
The Company did not grant any stock options during the period ended August
31, 2005.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), Reporting Comprehensive Income, which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. The Company is disclosing this information on its Statement of
Stockholders' Equity (Deficiency). Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the period ended
August 31, 2005.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes, which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns using the liability method. Under this method, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
Basic and Diluted Loss Per Share
In accordance with SFAS No. 128 - "Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding. Diluted loss per
common share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive.
F-18
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 153. This statement addresses the
measurement of exchanges of non-monetary assets. The guidance in APB Opinion
No. 29, "Accounting for Non-monetary Transactions," is based on the principle
that exchanges of non-monetary 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. This statement amends Opinion 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. A non-monetrary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. This statement is effective for
financial statements for fiscal years beginning after June 15, 2005. Earlier
application is permitted for non-monetary asset exchanges incurred during fiscal
years beginning after the date of this statement is issued. Management believes
the adoption will have no impact on the financial statements of the Company.
In December 2004, the Financial Accounting Standards Board issued a
revision to Statement of Financial Accounting Standards No. 123R, "Accounting
for Stock Based Compensations." This statement supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. This statement 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. This statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. This statement does not change the accounting guidance for share
based payment transactions with parties other than employees provided in
Statement of Financial Accounting Standards No. 123. This statement does not
address the accounting for employee share ownership plans, which are subject to
AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans." During the period ended August 31, 2005, the Company adopted
Standard No. 123R.
In May 2005, the FASB issued SFAS No. 154, entitled Accounting Changes and
Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3.
This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement 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. Opinion 20 previously required that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. This Statement 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. This Statement defines retrospective
application as the application of a different accounting principle to prior
accounting periods as if that principle had always been used or as the
adjustment of previously issued financial statements to reflect a change in the
reporting entity. This Statement also redefines restatement as the revising of
previously issued financial statements to reflect the correction of an error.
The adoption of SFAS 154 did not impact the financial statements.
NOTE 3 - MINERAL PROPERTY INTEREST
On August 30, 2005 the Company acquired a 100% interest in a mineral claim
from its principal shareholder and a director of the Company, known as the
"Sugarloaf Property" located near the southern boundary of the Town of Merritt
in British Columbia, Canada, for consideration of $4,297 being the cost to the
principal shareholder, by issuance of a promissory note. The Company expensed
the entire amount.
F-19
NOTE 4 - PROMISSORY NOTE
On August 30, 2005, the Company issued a promissory note to its principal
shareholder and a director in the amount of $4,297 for the purchase of the
mineral property (See Note 3). The promissory note is unsecured, non-interest
bearing and due on demand.
NOTE 5 - CONVERTIBLE DEBENTURE
On August 22, 2005, the Company issued a convertible debenture to its
principal shareholder and a director in the amount of $15,000. The convertible
debenture is unsecured, non-interest bearing, due December 31, 2007 and
convertible at the option of the holder at a price of $0.25 per share at any
time. The Company charged imputed interest at 3.0% per annum and recorded a
total of $13 to the additional paid-in capital for the period ended August 31,
2005.
The Company did not incur beneficial conversion charges because the
conversion price is greater than the fair value of the equity of the Company.
NOTE 6 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none
issued.
The Company has 100,000,000 shares of common stock authorized, of which
8,000,000 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
During the period ended August 31, 2005, the Company issued 4,000,000
shares of common stock for cash of $400.
NOTE 7 INCOME TAXES
At August 31, 2005, the Company had deferred tax assets of approximately
$2,200 principally arising from net operating loss carryforwards for income tax
purposes. As management of the Company cannot determine that it is more likely
than not that the Company will realize the benefit of the deferred tax asset, a
valuation allowance equal to the deferred tax asset has been established at
August 31, 2005. The significant components of the deferred tax asset at August
31, 2005 were as follows:
- ---------------------------------------------------
AUGUST 31, 2005
- ---------------------------------------------------
Net operating loss carryforwards $ 2,200
Valuation allowance (2,200)
- ---------------------------------------------------
Net deferred tax assets $ -
===================================================
At August 31, 2005, the Company has net operating loss carryforwards of
approximately $6,000, which expire in the year 2025.
NOTE 8 - RELATED PARTY TRANSACTIONS
(a) Accounts payable of $1,997 is due to a company controlled by a director
of the Company for the expenses paid on behalf of the Company.
(b) See Note 3, 4 and 5.
F-20
NOTE 9 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada
NOTE 10 - SUBSEQUENT EVENTS
On November 21, 2005, the Company staked four mineral claims that are
contiguous with its other mineral claim and are located near the southern
boundary of the Town of Merritt in British Columbia, Canada for a total cost of
$463.
On November 30, 2005, the Company effected a 2 for 1 forward split of our
issued and outstanding shares of common stock.
F-21
2,500,000 SHARES
KINGSTON MINES LTD.
COMMON STOCK
PROSPECTUS
We have not authorized any dealer, salesperson or other person to give anyone
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. Prospective investors must not rely on
unauthorized information. This prospectus is not an offer to sell these
securities or a solicitation of an offer to buy the securities in any
jurisdiction where that would not be permitted or legal. Neither the delivery
of this prospectus nor any sales made hereunder after the date of this
prospectus shall create an implication that either the information contained
herein or the affairs of Kingston Mines Ltd. have not changed since the date
hereof.
Until _________, 2006, a period of 90 days after the date of this prospectus,
all dealers that buy, sell or trade in our securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as an underwriter with respect to its unsold allotment or
subscription.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Nevada law provides for discretionary indemnification for each person who
serves as one of our directors or officers. We may indemnify such individuals
against all costs, expenses and liabilities incurred in a threatened, pending or
completed action, suit or proceeding brought because such individual is one of
our officers or directors. Such individual must have conducted himself in good
faith and reasonably believed that his conduct was in, or not opposed to, our
best interests. In a criminal action, he must not have had a reasonable cause
to believe his conduct was unlawful.
Article Twelfth of our Articles of Incorporation states that no director or
officer of the Corporation shall be personally liable to the Corporation or any
of its stockholders for damages for breach of fiduciary duty as a director or
officer involving any act or omission of any such director or officer; provided,
however, that the foregoing provision shall not eliminate or limit the liability
of a director or officer (i) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
Under Article IX, our bylaws provide the following indemnification:
01. INDEMNIFICATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a Director,
Trustee, Officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, Trustee, Officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgment, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action proceeding, had reasonable cause to believe that such person's
conduct was unlawful.
02. DERIVATIVE ACTION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in the
Corporation's favor by reason of the fact that such person is or was a Director,
Trustee, Officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, Trustee, Officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) and amount paid in
settlement actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to amounts paid in
settlement, the settlement of the suit or action was in the best interests of
the Corporation; provided, however, that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for gross negligence or willful misconduct in the
performance of such person's duty to the Corporation unless and only to the
extent that, the court in which such action or suit was brought shall determine
upon application that, despite circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as such court shall deem
proper. The termination of any action or suit by judgment or settlement shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not opposed to
the best interests of the Corporation.
03. SUCCESSFUL DEFENSE
To the extent that a Director, Trustee, Officer, employee or Agent of the
Corporation has been successful on the merits or otherwise, in whole or in part
in defense of any action, suit or proceeding referred to in Paragraphs .01 and
..02 above, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
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04. AUTHORIZATION
Any indemnification under Paragraphs .01 and .02 above (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director, Trustee, Officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Paragraphs .01 and .02 above. Such
determination shall be made (a) by the Board of Directors of the Corporation by
a majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (b) is such a quorum is not obtainable, by a
majority vote of the Directors who were not parties to such action, suit or
proceeding, or (c) by independent legal counsel (selected by one or more of the
Directors, whether or not a quorum and whether or not disinterested) in a
written opinion, or (d) by the Shareholders. Anyone making such a determination
under this Paragraph .04 may determine that a person has met the standards
therein set forth as to some claims, issues or matters but not as to others, and
may reasonably prorate amounts to be paid as indemnification.
05. ADVANCES
Expenses incurred in defending civil or criminal action, suit or proceeding
shall be paid by the Corporation, at any time or from time to time in advance of
the final disposition of such action, suit or proceeding as authorized in the
manner provided in Paragraph .04 above upon receipt of an undertaking by or on
behalf of the Director, Trustee, Officer, employee or agent to repay such amount
unless it shall ultimately be by the Corporation is authorized in this Section.
06. NONEXCLUSIVITY
The indemnification provided in this Section shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any law,
bylaw, agreement, vote of shareholders or disinterested Directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a Director, Trustee, Officer, employee or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
07. INSURANCE
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a Director, Trustee, Officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, Trustee, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
assessed against such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability.
08. "CORPORATION" DEFINED
For purposes of this Section, references to the "Corporation" shall include, in
addition to the Corporation, an constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had the power and authority to
indemnify its Directors, Trustees, Officers, employees or agents, so that any
person who is or was a Director, Trustee, Officer, employee or agent of such
constituent corporation or of any entity a majority of the voting Shares of
which is owned by such constituent corporation or is or was serving at the
request of such constituent corporation as a Director, Trustee, Officer,
employee or agent of the corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving Corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
09. FURTHER BYLAWS
The Board of Directors may from time to time adopt further Bylaws with specific
respect to indemnification and may amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
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ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses we will pay
in connection with the offering described in this registration statement:
- --------------------------------------------
Amount
- --------------------------------------------
SEC Registration Fee $ 21
Accounting fees and expenses 10,000
Legal fees and expenses 10,000
Escrow agent 2,500
Transfer and miscellaneous expenses 2,479
- --------------------------------------------
Total $25,000
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All expenses other than the SEC registration fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 5, 2005, we issued 3,000,000 restricted common shares to our
President, Lou Hilford, in exchange for cash of $150. The shares were issued
without registration under the Securities Act of 1933 in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act. The
number of shares has been adjusted to reflect the 2 for 1 forward split that
occurred on November 30, 2005. No general solicitation was made in connection
with the offer or sale of these securities.
On July 5, 2005, we issued 5,000,000 restricted common shares to our
Vice-President, Thomas Mills, in exchange for cash of $250. The shares were
issued without registration under the Securities Act of 1933 in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act. The
number of shares has been adjusted to reflect the 2 for 1 forward split that
occurred on November 30, 2005. No general solicitation was made in connection
with the offer or sale of these securities.
On August 22, 2005, we issued an unsecured convertible debenture in the
amount of $15,000 to our Vice-President, Thomas Mills. It does not accrue
interest and is due and payable on December 31, 2007. Mr. Mills may convert the
debenture into shares of our common stock at any time, at his option, at a price
equal to $0.25 per share, for a total of 60,000 common shares. The convertible
debenture was issued without registration under the Securities Act of 1933 in
reliance on an exemption from registration provided by Section 4(2) of the
Securities Act.
ITEM 27. EXHIBITS
- -------------------------------------------------------------------------------
EXHIBIT NO. DOCUMENT
- -------------------------------------------------------------------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
5.1 Legal opinion (1)
10.1 Transfer of Mineral Disposition (1)
10.2 Convertible Debenture (1)
10.3 Escrow Agreement (1)
23.1 Consent of Accountant (1)
23.2 Consent of Counsel (contained in Exhibit 5.1)
23.3 Consent of professional geologist
99.1 Specimen Subscription Agreement
99.2 Map of Original Sugarloaf Property in British Columbia, Canada (1)
99.3 Map of Expanded Sugarloaf Property Showing Claim Numbers (1)
===============================================================================
(1) Previously filed with our initial registration statement on Form SB-2 on
April 12, 2006.
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ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(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 or 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% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For determining liability of the undersigned small business issuer under
the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that in a primary
offering of securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned small
business issuer relating to the offering required to be filed pursuant to Rule
424 (Sec. 230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned small business issuer or used or referred to by the
undersigned small business issuer;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned small business
issuer or its securities provided by or on behalf of the undersigned small
business issuer; and
(iv) Any other communication that is an offer in the offering made by the
undersigned small business issuer to the purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
(c) In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer, or controlling person of the small business issuer
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person connected with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on
430B or other than prospectuses filed in reliance on Rule 430A 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
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made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the 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, supersede 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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 Registration Statement and authorized
this registration to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Vancouver, British Columbia, Canada, on May 26, 2006.
KINGSTON MINES LTD.
/s/ Lou Hilford
By: Lou Hilford
President, Chief Executive Officer and a director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Date: May 26, 2006 /s/ Lou Hilford
By: Lou Hilford
President, Chief Executive Officer and a director
Date: May 26, 2006 /s/ Thomas Mills
By: Thomas Mills
Vice-President, Chief Financial Officer,
Principal Accounting Officer, Secretary,
and a director