UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to ______________
Commission File Number 000-30651
MINDESTA INC.
(Exact name of
small business issuer as specified in its charter)
Delaware
|
11-3763974
|
(State or other jurisdiction
|
(IRS Employer of incorporation or
|
organization)
|
Identification No.)
|
Suite 201, 290 Picton Ave., Ottawa, Ontario, Canada K1Z 8P8
(Address of principal executive offices)
(613) 241-9959
(Issuers telephone number)
Indicate by check mark whether the registrant has (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
[X]
No [_]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
Yes
[_]
No [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer [_]
|
Accelerated Filer [_]
|
Non-accelerated Filer [_]
|
Smaller reporting company
[X]
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes
[_]
No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes
[_]
No [_]
Indicate the number of shares outstanding of each of the
issuers classes of common equity as of the latest practicable date: May 10,
2012: 9,413,581 shares.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This document contains forward-looking statements which
reflect managements expectations regarding the Companys future growth, results
of operations, performance and business prospects and opportunities. Such
forward-looking statements may include, but are not limited to, statements with
respect to the future financial or operating performance of the Company and its
projects, the future price of graphite or other metal prices, the estimation of
Mineral Resources, the timing and amount of estimated future production, costs
of production, capital, operating and exploration expenditures, costs and timing
of the development of new deposits, costs and timing of future exploration,
requirements for additional capital, government regulation of mining operations,
environmental risks, reclamation expenses, title disputes or claims, limitations
of insurance coverage and the timing and possible outcome of regulatory matters.
Often, but not always, forward-looking statements can be identified by the use
of words such as plans, expects, is expected, budget, scheduled,
estimates, forecasts, intends, anticipates, or believes or variations
(including negative variations) of such words and phrases, or statements that
certain actions, events or results may, could, would, might or will be
taken, occur or be achieved. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among others:
general business, economic, competitive, political and social uncertainties; the
actual results of current exploration activities; conclusions of economic
evaluations; fluctuations in currency exchange rates; changes in project
parameters as plans continue to be refined; changes in labor costs or other
costs of production; future prices of graphite or other industrial mineral
prices; possible variations of mineral grade or recovery rates; failure of
plant, equipment or processes to operate as anticipated; accidents, labor
disputes and other risks of the mining industry, including but not limited to
environmental hazards, cave-ins, pit-wall failures, flooding, rock bursts and
other acts of God or unfavorable operating conditions and losses; delays in
obtaining governmental approvals or financing or in the completion of
development or construction activities; actual results of reclamation
activities, and other unspecified factors. Although the Company has attempted to
identify important factors that could cause actual actions, events or results to
differ materially from those described in forward-looking statements, there may
be other factors that cause actions, events or results to differ from those
anticipated, estimated or intended. Forward-looking statements contained herein
are made as of the date hereof and the Company disclaims any obligation to
update any forward-looking statements, whether as a result of new information,
future events or results or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements.
CAUTIONARY STATEMENT REGARDING MINERAL RESOURCES
This Quarterly Report on Form 10-Q and other information
released by the Company uses the terms resources, measured resources,
indicated resources and inferred resources. United States investors are
advised that, while such terms are recognized and required by Canadian
securities laws, the SEC does not recognize them. Under United States standards,
mineralization may not be classified as a reserve unless the determination has
been made that the mineralization could be economically and legally produced or
extracted at the time the reserve determination is made. Mineral resources that
are not mineral reserves do not have demonstrated economic viability. United
States investors are cautioned not to assume that all or any part of measured or
indicated resources will ever be converted into reserves. Inferred resources are
in addition to measured and indicated resources. Further, inferred resources
have a great amount of uncertainty as to their existence and as to whether they
can be mined legally or economically. It cannot be assumed that all or any part
of the inferred resources will ever be upgraded to a higher category. Therefore,
United States investors are also cautioned not to assume that all or any part of
the inferred resources exist, or that they can be mined legally or economically.
National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI
43-101) is a rule developed by the Canadian Securities Administrators, which
established standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. Unless otherwise
indicated, all resource estimates contained in this Form 10-Q and in press
releases by the Company in the past and in the future, have been or will be
prepared in accordance with NI 43-101 and the Canadian Institute of Mining,
Metallurgy and Petroleum Classification System. The requirements of NI 43-101
are not the same as those of the SEC.
PART I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
For financial information see the financial statements and the
notes thereto for the three month period ended March 31, 2012 (the Financial
Statements), attached hereto and incorporated by this reference. The Financial
Statements have been adjusted with all adjustments which, in the opinion of
management, are necessary in order to make the Financial Statements not
misleading. The Financial Statements have been prepared by Mindesta Inc. without
audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations,
and management believes that the disclosures are adequate to make the information presented not misleading. The Financial Statements include all the adjustments which, in the opinion of management, are necessary for a fair presentation of financial
position and results of operations. All such adjustments are of a normal and recurring nature. The Financial Statements should be read in conjunction with the audited financial statements as at December 31, 2011, included in the Companys Form 10-K.
Mindesta Inc.
(an exploration stage company)
Balance Sheets
|
|
As at
|
|
|
As at
|
|
|
|
March 31
|
|
|
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
|
|
( note 1
|
)
|
|
(note 1
|
)
|
Assets
|
|
(unaudited)
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
|
|
181,932
|
|
|
569,378
|
|
Marketable securities (note 3)
|
|
1,075,860
|
|
|
-
|
|
Receivables
|
|
24,915
|
|
|
151
|
|
Due from related parties (note
6)
|
|
16,147
|
|
|
145,113
|
|
Prepaid expenses and deposits
|
|
30,546
|
|
|
36,092
|
|
Total current assets
|
|
1,329,400
|
|
|
750,734
|
|
Investment in non-consolidated affiliate (note 3)
|
|
-
|
|
|
3,432,261
|
|
Total assets
|
|
1,329,400
|
|
|
4,182,995
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
363,332
|
|
|
452,473
|
|
Due to related
parties (note 6)
|
|
198,305
|
|
|
-
|
|
Dividend payable (note 7)
|
|
-
|
|
|
3,274,072
|
|
Total liabilities
|
|
561,637
|
|
|
3,726,545
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
Common stock 200,000,000 shares authorized,
$0.0001 par value; 9,413,581 shares issued and outstanding (note 5)
|
|
18,817
|
|
|
18,592
|
|
Additional paid-in capital
|
|
12,613,109
|
|
|
12,537,316
|
|
Accumulated other comprehensive income
|
|
851,289
|
|
|
(105,985
|
)
|
Deficit accumulated during exploration stage
|
|
(12,715,452
|
)
|
|
(11,993,473
|
)
|
Total stockholders equity
|
|
767,763
|
|
|
456,450
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
1,329,400
|
|
|
4,182,995
|
|
Going Concern (Note 1)
|
|
|
|
|
|
|
Commitments and
contingencies (Note 8)
|
|
|
|
|
|
|
See accompanying notes to unaudited interim financial
statements
Approved by Board:
|
(signed) Gregory Bowes
|
(signed) Cam Birge
|
|
Director
|
Director
|
F4
Mindesta Inc.
(an exploration stage company)
Statements of Operations and Retained Deficit
|
|
3 months
ended March 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
|
(unaudited
|
)
|
|
(unaudited
|
)
|
General and administrative
expenses
|
|
|
|
|
|
|
Professional fees
|
|
76,912
|
|
|
9,548
|
|
Management fees and salaries
(note 6)
|
|
32,514
|
|
|
7,634
|
|
Exploration expense
|
|
517,936
|
|
|
-
|
|
General and administration
|
|
55,456
|
|
|
9,676
|
|
|
|
682,818
|
|
|
26,858
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(682,818
|
)
|
|
(26,858
|
)
|
Foreign exchange gain (loss)
|
|
390
|
|
|
(2
|
)
|
Interest income
|
|
52
|
|
|
|
|
Gain on partial disposal of
subsidiary
|
|
-
|
|
|
6,035,839
|
|
Equity loss pick up
|
|
-
|
|
|
(259,915
|
)
|
Gain (loss) on revaluation of debt
|
|
-
|
|
|
(60,000
|
)
|
Net income (loss)
|
|
(682,376
|
)
|
|
5,689,064
|
|
Deficit, beginning of
period
|
|
(11,993,473
|
)
|
|
(12,457,916
|
)
|
Dividends
|
|
(39,603
|
)
|
|
-
|
|
Deficit, end of period
|
|
(12,715,452
|
)
|
|
(6,768,852
|
)
|
|
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities
|
|
957,274
|
|
|
-
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding basic
(note 5)
|
|
9,409,872
|
|
|
8,885,081
|
|
Net income (loss) per share basic
|
|
(0.07
|
)
|
|
0.64
|
|
Weighted average number of common shares outstanding fully
diluted (note 5)
|
|
9,482,194
|
|
|
9,238,652
|
|
Net income (loss) per share diluted
|
|
(0.07
|
)
|
|
0.62
|
|
See accompanying notes to unaudited interim financial
statements
F5
Mindesta Inc.
(an exploration stage company)
Statements of Cash Flows
|
|
3 months
ended March 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
|
(unaudited
|
)
|
|
(unaudited
|
)
|
Cash provided by (used
in)
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
Net income (loss)
attributable to the company
|
|
(682,376
|
)
|
|
5,689,064
|
|
Stock-based compensation
|
|
42,268
|
|
|
-
|
|
Gain on deconsolidation
|
|
-
|
|
|
(6,035,839
|
)
|
Equity loss pick-up
|
|
-
|
|
|
259,915
|
|
(Gain) loss on amounts due to
related party
|
|
-
|
|
|
60,000
|
|
Changes in non-cash operating working
capital:
|
|
|
|
|
|
|
Receivables
|
|
(24,764
|
)
|
|
-
|
|
Due from affiliate
|
|
128,966
|
|
|
-
|
|
Prepaid expenses and
deposits
|
|
5,545
|
|
|
6,163
|
|
Accounts payable and accrued liabilities
|
|
(89,140
|
)
|
|
9,177
|
|
|
|
(619,501
|
)
|
|
(11,520
|
)
|
Financing activities
|
|
|
|
|
|
|
Proceeds from the exercise of
stock options
|
|
33,750
|
|
|
-
|
|
Investing activities
|
|
|
|
|
|
|
Due from related party
|
|
198,305
|
|
|
(597,866
|
)
|
Proceeds from the sale of shares of subsidiary
|
|
-
|
|
|
1,005,400
|
|
|
|
198,305
|
|
|
407,534
|
|
Net increase (decrease) in cash
|
|
(387,446
|
)
|
|
396,014
|
|
Cash, beginning of period
|
|
569,378
|
|
|
-
|
|
Cash, end of period
|
|
181,932
|
|
|
396,014
|
|
Supplementary
information
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
-
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
See accompanying notes to unaudited interim financial
statements
F6
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim financial statements of Mindesta Inc.
(the Company and formerly Industrial Minerals, Inc.), for the three month
period ended March 31, 2012 and the notes thereto (the Financial Statements)
have been prepared in accordance with generally accepted accounting principles
for interim financial information with the instructions to Form 10-Q and Rule
8-03 of Regulation S-X. Accordingly, the Financial Statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Companys
management, all adjustments (consisting of only normal accruals) considered
necessary for a fair presentation have been included.
The Company is an Exploration Stage Company that incurred a net
loss of $682,376 for the period ended March 31, and has an accumulated deficit
of $12,715,452 since the inception of the Company. The Companys ability to
continue as a going concern is dependent upon its ability to raise additional
capital to pay expenses and further planned exploration activities.
The Companys management believes that it will continue to be
able to generate sufficient funds from public or private debt or equity
financing for the Company to continue to operate. The accompanying financial
statements do not include any adjustments that might result from negative
outcomes with respect to these uncertainties
For further information, refer to the financial statements and
notes thereto included in the Companys Annual Report on Form 10K for the year
ended December 31, 2011.
The Companys fiscal year-end is December 31.
NOTE 2 ORGANIZATION AND ACCOUNTING POLICIES
(a) Organization
Mindesta, Inc. was incorporated on November 6, 1996, as
Winchester Mining Corporation in the State of Delaware. On May 13, 2000, in
connection with its merger with Hi-Plains Energy Corp., the Company changed its
name from Winchester Mining Corporation to PNW Capital, Inc. On January 31,
2002, the Company acquired 91% of the outstanding shares of Industrial Minerals,
Inc. On May 2, 2002, the Company merged the remaining 9% of Industrial Minerals,
Inc. into PNW Capital, Inc. and changed its name to Industrial Minerals, Inc.
Operations have been historically carried out through the Companys former
subsidiary and principal asset, Northern Graphite Corporation (Northern),
formerly Industrial Minerals Canada Inc. Northern owns a 100% interest in the
Bissett Creek graphite property located in Renfrew County in the Province of
Ontario, Canada (the Bissett Creek Property). As a result of a number of
financings and other transactions completed in 2010, the Companys interest is
Northern was reduced from 100% to 51.2% as at December 31, 2010. On January
7
th
, 2011, the Company sold 2,000,000 shares of Northern and on April
18, 2011, Northern completed an initial public offering which, along with
warrants of Northern being exercised since the offering, reduced the Companys
ownership to 26.1% as at December 31, 2011. On December 12, 2011, the Board of
Directors declared a pro rata dividend-in-kind, payable January 25, 2012 to
shareholders whereby most of the shares of Northern Graphite owned by the
Company would be distributed to Mindesta shareholders. At the close of trading
on January 25, 2012, Mindesta completed the distribution to Company shareholders
of 9,413,581 shares of Northern Graphite owned by the Company on the basis of
one share of Northern Graphite for each share of Company common stock held. As
at March 31, 2012, the Companys interest in Northern Graphite had decreased to
less than 1%. Effective July 26, 2011, the Company changed its name to Mindesta
Inc. and consolidated its stock on a 20:1 basis. The Company trades on the
OTCBB under the symbol MDST.
(b) Recently Adopted Pronouncements
Fair Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
In May 2011, the FASB issued Accounting Standards Update (ASU)
2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRS. The Update amends fair value measurements
and disclosures to (1) clarify the boards intent in respect of existing
measurement guidance, (2) revise certain measurement guidance that changes or
modifies a principle, and (3) add disclosure requirements concerning the
measurement uncertainty of level 3 measurements. This guidance is effective for
the Company for the first interim or annual period beginning on or after
December 15, 2011. Adoption of this guidance did not have a material effect on
the financial condition, results of operation, or cash flows of the Company.
F7
Comprehensive Income (Topic 220): Presentation of Comprehensive
Income
In June 2011, the FASB issued Accounting Standards Update (ASU)
2011-02, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.
Under the amendments, an entity has the option to present the total of
comprehensive income, the components of net income, and the components of other
comprehensive income either in a single continuous statement of comprehensive
income or in two separate but consecutive statements. This guidance is effective
for the Company for the fiscal year beginning after December 15, 2011. Adoption
of this guidance did not have a material effect on its financial condition,
results of operation, or cash flows of the Company.
NOTE 3 MARKETABLE SECURITIES AND INVESTMENT IN
NON-CONSOLIDATED AFFILIATE
As at December 31, 2011, the Company recorded its investment in
Northern, a non-consolidated affiliate, at cost.
Investment
|
|
$
|
|
Balance at December 31, 2011
|
|
3,432,261
|
|
Stock dividend
paid on January 25, 2012
|
|
(3,313,675
|
)
|
Balance at carrying value as at January 25, 2012
|
|
118,586
|
|
Following the payment of the stock dividend on January 25,
2012, the Companys investment in Northern was reclassified as an
available-for-sale security and is reflected as marketable securities in the
current asset section of the Balance Sheet. The following table summarizes the
Companys available-for sale securities as of March 31, 2012:
Equity securities
|
|
Cost
|
|
|
Gross unrealized gains
|
|
|
Fair value
|
|
Outstanding
|
|
118,586
|
|
|
957,274
|
|
|
1,075,860
|
|
During the three month period ended March 31, 2012, the Company
recorded an unrealized gain on available-for-sale securities of $957,274. This
gain is recorded as other comprehensive income on the Balance Sheet.
NOTE 4 - PRESENTATION OF INTERIM INFORMATION
The accompanying interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and, in the opinion of management, include all normal
adjustments considered necessary to present fairly the financial position as of
March 31, 2012 and the results of operations and cash flows for the three month
periods ended March 31, 2012 and 2011. Interim results are not necessarily
indicative of results for a full year.
The financial statements and notes are presented as permitted
by Form 10-Q, and do not include information included in the Companys audited
financial statements and notes for the year ended December 31, 2011.
NOTE 5 STOCKHOLDERS EQUITY
A.
COMMON STOCK OPTIONS
The Company adopted ASC 718 (formerly SFAS 123) Stock-Based
Compensation, effective April 1, 2007. Compensation cost for the Companys
stock options have been determined in accordance with the fair value based
method prescribed as ASC 718. The fair value of option grants is estimated on
the date of grant utilizing the Black-Scholes option pricing model. The fair
value of each option is estimated on the date of the grant using the
Black-Scholes option-pricing model.
On July 26, 2011, the Company consolidated its common stock on
a 20:1 basis. All common stock numbers and stock option numbers have been
restated to reflect the consolidation.
On April 19, 2011, the Company granted stock options to
purchase 112,500 common shares at a price of $1.40 per share until April 19,
2016. All options vested immediately. The fair value of the option grant was
estimated using the Black-Scholes option-pricing model with the following
assumptions: expected volatility of 220%; risk-free interest rate of 2.09%; and
an expected term of 5 years.
On March 15, 2012, the Company granted stock options to
purchase 650,000 common shares at a price of $0.10 per share until March 15,
2017. All options vested immediately. The fair value of the option grant was
estimated using the Black-Scholes option-pricing model with the following
assumptions: expected volatility of 122%; risk-free interest rate of 1.11%; and
an expected term of 5 years.
F8
The following table summarizes stock option activity for the 3
months ended March 31, 2011:
|
|
Number of securities to
be
|
|
|
|
|
Equity compensation plans not approved
by security holders
|
|
issued upon exercise of
|
|
|
Weighted-average exercise
|
|
|
|
outstanding options
|
|
|
price of outstanding
options
|
|
Outstanding December 31, 2011
|
|
225,000
|
|
$
|
0.85
|
|
Issued
|
|
650,000
|
|
$
|
0.10
|
|
Exercised
|
|
112,500
|
|
$
|
0.30
|
|
Outstanding at March 31, 2012
|
|
762,500
|
|
$
|
0.29
|
|
Exercisable at March 31, 2012 762,500.
Using the Black-Scholes option pricing model, the Company had
stock compensation expense for the three months ending March 31, 2012 of
$42,268. The Company did not incur stock-based compensation expense in the three
month period ended March 31, 2011.
B.
COMMON STOCK
The number of common shares outstanding at March 31, 2012 and
December 31, 2011 was as follows:
|
|
Number
|
|
|
$
|
|
Outstanding December 31, 2011
|
|
9,301,081
|
|
|
18,592
|
|
Issued pursuant to
the exercise of stock options
|
|
112,500
|
|
|
225
|
|
Outstanding at March 31, 2012
|
|
9,413,581
|
|
|
18,817
|
|
The number of common shares outstanding for March 31, 2012 and
December 31, 2011, before and after giving effect to the 20:1 stock
consolidation on July 29, 2011 was as follows:
|
|
Before giving effect to
the
|
|
|
After giving effect to
the 20:1
|
|
As at:
|
|
20:1 consolidation
|
|
|
consolidation
|
|
March 31, 2012
|
|
n/a
|
|
|
9,413,581
|
|
December 31, 2011
|
|
n/a
|
|
|
9,301,081
|
|
The basic weighted average number of common shares outstanding
before and after giving effect to the 20:1 stock consolidation on July 29, 2011
was as follows:
|
|
Before giving effect to the
|
|
|
After giving effect to the 20:1
|
|
For the 3 months ended:
|
|
20:1 consolidation
|
|
|
consolidation
|
|
March 31, 2012
|
|
n/a
|
|
|
9,409,872
|
|
March 31, 2011
|
|
177,701,620
|
|
|
8,885,081
|
|
The fully-diluted weighted average number of common shares
outstanding before and after giving effect to the 20:1 stock consolidation on
July 29, 2011 was as follows:
|
|
Before giving effect to the
|
|
|
After giving effect to the 20:1
|
|
For the 3 months ended:
|
|
20:1 consolidation
|
|
|
consolidation
|
|
March 31, 2012
|
|
n/a
|
|
|
9,482,194
|
|
March 31, 2011
|
|
177,701,620
|
|
|
9,238,652
|
|
For the three months ended March 31, 2012, the inclusion of
common stock equivalents in the calculation of the weighted average number of
shares is anti-dilutive.
NOTE 6 RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2012:
F9
a) The Company granted 500,000 options to directors and
officers of the Company. Each option entitles the holder to purchase one common
share at an exercise price of $0.10 until March 15, 2017. Stock-compensation
expense of $32,514 was recognized during the period in connection with this
option grant.
b) On October 6, 2011, the Board of Directors approved a
revolving loan agreement between Mindesta Inc., as the lender, and Nubian Gold
Corporation (Nubian), as the borrower, to fund the ongoing exploration
activities of Nubian in anticipation of the companies negotiating and entering
into a property option agreement with respect to Nubians two exploration
licenses, Arapsyo and Qabri Bahar, located in the Republic of Somaliland. Nubian
is a corporation incorporated under the laws of Ontario, Canada and Gregory
Bowes, CEO, is its major shareholder. Mr. Bowes is also an officer and director
of Mindesta. Mr. Bowes declared his conflict of interest to the Board of
Directors and abstained from voting on the consent resolution approving the
revolving loan agreement. On December 2, 2011, this facility was amended to
increase the maximum of the revolving loan agreement credit facility. Under the
revolving loan agreement, all amounts due from Nubian to the Company were
provided under a $150,000 credit facility which was repayable upon the earlier
of one year from the date of the agreement or the signing of a property option
agreement. The terms stated that the revolving loan agreement becomes repayable
upon the signing of a property option agreement and that all obligations of
Nubian would be applied against the expenditure requirements of the Company
under the property option agreement. Upon the inception of property option
agreement, the obligations were considered paid in full, and the revolving loan
agreement was terminated and had no further force or effect. Advances under the
facility bore interest from October 6, 2011 at an annual rate of 7.5 per cent,
payable annually, or earlier at anytime that the advances are repaid in
full.
Mindesta entered an option agreement, effective January 2nd,
2012. As at January 2, 2012, Nubian had received advances of $127,994 under this
revolving loan agreement and the Company has accrued $1,025 of interest
receivable. As per the terms of the revolving loan agreement, Nubian applied
these advances as expenditures under the option agreement and Mindesta recorded
$127,944 of exploration expenses related to these expenses in the first three
months of 2012. In addition, Mindesta incurred an additional $383,490 of
exploration expenses during the first three months of 2012 which included
$100,000 payable, under the option agreement, to Nubian as compensation for
expenses incurred. Mindesta can earn a 50% interest in both permits by incurring
total exploration expenditures of $2 million within two years and can increase
its interest to 80 per cent by completing a bankable feasibility study. The
first $750,000 of exploration expenditures represents a firm commitment.
Mindesta also has the option to acquire all of Nubians remaining interest in
the permits at fair market value at any time after incurring the first $750,000
of exploration expenditures.
c) On February 10, 2012, Mindesta approved the reimbursement of
$47,686 in exploration expenses incurred by Nubian but paid by Bowes &
Company, Management Ltd. (Bowes & Company) to keep exploration activities
advancing in the Republic of Somaliland during the period that the revolving
loan agreement was being finalized. Bowes & Company is a corporation
incorporated under the laws of Ontario, Canada and Gregory Bowes, CEO, is its
major shareholder. Mr. Bowes declared his conflict of interest with respect to
authorizing these expenses and they were approved by the Audit Committee
chairman.
|
|
As at
|
|
|
As at
|
|
Due from related parties
|
|
March 31, 2012
|
|
|
December 31, 2011
|
|
|
|
$
|
|
|
$
|
|
Due from Northern
|
|
16,147
|
|
|
16,147
|
|
Due from Nubian
|
|
-
|
|
|
128,966
|
|
Total due from related parties
|
|
16,147
|
|
|
145,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
Due to related parties
|
|
March 31, 2012
|
|
|
December 31, 2011
|
|
|
|
|
|
|
$
|
|
Due to Nubian
|
|
150,619
|
|
|
-
|
|
Due to Bowes &
Company
|
|
47,686
|
|
|
-
|
|
Total due to related parties
|
|
198,305
|
|
|
-
|
|
As at March 31, 2012 and December 31, 2011, accounts payable
and accrued liabilities did not include any amounts due to directors and to
companies controlled by directors for professional management fees related to
the services of the directors and officers.
NOTE 7 DIVIDEND PAYABLE
On December 12, 2011, the Board of Directors declared a pro
rata dividend-in-kind, payable January 25, 2012 to shareholders of record as at
January 5, 2012, whereby most of the shares of Northern owned by the Company
would be distributed to Mindesta shareholders. At the close of trading on
January 25, 2012, Mindesta completed the distribution to Company shareholders of
9,413,581 shares of Northern owned by the Company (approximately 25% of
the Northern common shares outstanding) on the basis of one share of Northern
for each share of the Company held and the dividend payable of $3,313,675 was
paid in full. The dividend payable had increased by $39,603 from $3,274,072 as
at December 31, 2011 as a result of options exercised as at January 4, 2012. As
at the close of trading January 25, 2012, the Companys interest in Northern
Graphite decreased to 0.8% .
F10
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The property option agreement between the Company and Nubian
included a firm commitment on the first $750,000 of exploration expenditures
within a year of January 2, 2012. As at March 31, 2012, the Company has incurred
expenditures of $411,435 towards this commitment and has committed to $338,565
of additional expenditures before January 2, 2013.
The Company has been named in a lawsuit filed by Windale
Properties in the amount of $19,781Cdn. The claim is the result of termination
of leased premises in Oakville, Ontario prior to expiry of the lease.
Discussions regarding settlement are ongoing. No amount related to this
contingency has been accrued as the outcome at this time is indeterminable.
F11
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Unaudited
Overview
Mindesta Inc. (Mindesta or "the Company"), a Delaware
Corporation, was incorporated on November 6, 1996 under the name Winchester
Mining Corp. The name of the Company was changed to PNW Capital, Inc. on May 16,
2000. In 2002, PNW Capital, Inc. acquired Industrial Minerals Incorporated, a
private Nevada Corporation, and changed its name to Industrial Minerals, Inc.
Effective July 26, 2011, the Company adopted the new name of Mindesta Inc.. In
conjunction with this action, the Company consolidated its stock on a 20:1
basis.
The Company is an exploration stage company. The Companys sole
asset and primary focus has been its investment in Northern Graphite Corporation
(Northern). Northern holds a 100% interest in a number of mineral claims and a
mining lease covering a deposit of natural graphite located in Maria Township,
approximately 180 miles northeast of Toronto, Ontario and near the town of
Bissett Creek (the Bissett Creek Property). The Bissett Creek Property is
subject to a C$20 per ton royalty on graphite concentrate produced which
includes an annual advance royalty C$27,000. A 2.5% net smelter return royalty
is payable with respect to any other minerals produced from the Bissett Creek
Property.
The Bissett Creek Property was on care and maintenance from
2005 to 2010. In the latter part of 2009 and in the first quarter of 2010
Northern raised its own financing which had the effect of reducing the Companys
interest in Northern from 100% to approximately 51%. The Companys interest was
subsequently reduced to 26.2% as the result of it selling 2,000,000 Northern
shares and of Northern completing an initial public offering of shares, becoming
listed on the TSX Venture Exchange, and subsequent warrant exercises. The
Company currently owns less than 1% of Northern due to the distribution of its
Northern shares to Mindesta shareholders. The 2010 and 2011 financing
transactions enabled the Company and Northern to deal with the serious debt and
creditor issues that existed in 2009 and to move the Bissett Creek Property
forward. Northern initiated the environmental and mine permitting process,
metallurgical testing, infill and exploration drilling and a bankable
Feasibility Study, and completed exploration and infill drilling, with the
objective of being in a position to make a construction decision, subject to
financing and the receipt of all regulatory approvals, in the first part of
2012.
From 2004 until late 2009 the Company experienced serious
financial difficulties and went through many changes to the Board and
management. Chris Crupi, CA and Gregory Bowes, MBA, were appointed directors of
the Company and Mr. Robert Dinning, CA was appointed President and CEO on June
23, 2008. In May 2009, Gregory Bowes was appointed s CEO of Northern. Robert
Dinning resigned as a director and CFO of Northern effective April 1, 2010 and
resigned as a director, CEO and CFO of the Company effective May 10, 2010. Miles
Nagamatsu CA was appointed CFO of Northern on April 1, 2010 and Gregory Bowes
was appointed CEO and CFO of the Company effective May 10, 2010. Cam Birge was
appointed a director to replace Mr. Dinning, on June 3, 2010. Chris Crupi
resigned as a director effective August 18, 2010. On April 19, 2011, Douglas
Perkins joined the Board of Directors and was appointed Chairman of the Audit
Committee. On December 15, 2012, Albert Zapanta joined the Board of Directors
and was appointed to the Audit Committee, the Nominating Committee, and
Compensation Committee.
Under the mandate of the restructured Board of Directors, the
Company significantly reduced its monthly operating expenses and focused its
efforts on settling payables, reducing debt, raising financing and developing a
plan to move the Bissett Creek Property forward.
In late 2009 and the first part of 2010, Northern completed a
number of non-brokered private placement financings and issued 10,755,571 common
shares and 10,755,571 common share purchase warrants and realized gross proceeds
of C$2,431,750. In addition, Northern issued 431,354 common shares and 400,000
common share purchase warrants as part of debt settlement agreements with a
number of creditors.
On May 11, 2010, Northern entered into an agency agreement with
respect to a proposed initial public offering (IPO) of a minimum of 2,000,000
common shares and a maximum offering of 6,000,000 common shares at an issue
price of CDN$0.50 per common share for gross proceeds of CDN$1,000,000 and
CDN$3,000,000 respectively. On September 10, 2010 Northern filed a Preliminary
Prospectus with securities regulatory authorities in the provinces of Ontario,
Alberta and British Columbia with respect to the proposed IPO.
In January of 2011, the Company sold 2,000,000 common shares of
Northern for CDN $0.50 per share and realized gross proceeds of CDN $1,000,000
in order to finance both companies during the period that Northerns IPO was in
the process of being completed.
On April 18, 2011 Northern announced that it had closed its IPO
and issued the maximum of 8,000,000 common shares that were qualified for
distribution under its final prospectus dated April 7, 2011 at a price of
CDN$0.50 per share for gross proceeds of CDN $4,000,000. Northern began trading on the TSX Venture Exchange
as a Tier 2 Mining Issuer on April 20, 2011 under the trading symbol NGC.
F12
On December 12, 2011, the Board of Directors declared a pro
rata dividend-in-kind, payable January 25, 2012 to shareholders of record as at
January 5, 2012, whereby most of the shares of Northern owned by the Company
would be distributed to Mindesta shareholders. At the close of trading on
January 25, 2012, Mindesta completed this distribution to Company shareholders
of a majority of the shares of Northern Graphite Corporation (Northern) common
stock owned by the Company. The Distribution of 9,413,581 shares of Northern
owned by the Company (approximately 25% of the Northern common shares
outstanding) was made to Company shareholders on the basis of one share of
Northern for each share of the Company. The U.S. Financial Industry Regulatory
Authority (FINRA) established January 26, 2012 as the ex-dividend date (the
Ex-Dividend Date) for this distribution. The Companys interest in Northern
Graphite has decreased to 0.8% primarily as a result of the distribution of
Northern Shares.
Effective January 2
nd
, 2012, Mindesta entered into
an option agreement with Nubian Gold Corporation (Nubian), a privately owned
Ontario company, which holds title to two 2,000 km
2
mineral
exploration permits, Arapsyo and Qabri Bahar, which are the first two ever
issued by the Republic of Somaliland. Under the option agreement, Mindesta can
earn a 50% interest in both permits by incurring total exploration expenditures
of $2 million within two years and can increase its interest to 80 per cent by
completing a bankable feasibility study. Mindesta is required to make an upfront
cash payment of $100,000 to Nubian as compensation for expenses incurred, and
the first $750,000 of exploration expenditures represents a firm commitment.
Mindesta also has the option to acquire all of Nubians remaining interest in
the permits at fair market value at any time after incurring the first $750,000
of exploration expenditures. On October 6, 2011, the Board of Directors approved
a revolving loan agreement between Mindesta, as the lender, and Nubian, as the
borrower, to fund the ongoing exploration activities of Nubian in anticipation
of the companies negotiating and entering into the option agreement. Under the
revolving loan agreement, all amounts due from Nubian to the Company were
provided under a $100,000 credit facility which was repayable upon the earlier
of one year from the date of the agreement or the signing of a property option
agreement. The revolving loan agreement became repayable upon the signing of a
property option agreement and all obligations of Nubian were applied against the
expenditure requirements of the Company under the property option agreement. The
obligations under the revolving loan agreement are now considered paid in full,
and the revolving loan agreement has terminated and has no further force or
effect. Advances under the facility bore interest from October 6, 2011 at an
annual rate of 7.5 per cent, payable annually. On December 2, 2011, this
facility was amended to increase the maximum of the revolving loan agreement to
$150,000. In 2012, Mindesta plans on focusing its efforts on mineral exploration
in East Africa, and in particular the Republic of Somaliland and Ethiopia, as it
believes the region has very attractive geology and an improving political
environment.
Subsequent to the end of the first quarter, Nubian was awarded
a third permit, Abdul Qadir, which is approximately 2,000km
2
in size
and is located in the northeast part of Somaliland adjacent to the borders with
Djibouti and Ethiopia. Abdul Qadir is automatically included in the Option
Agreement pursuant to its terms with no change in expenditure requirements.
Nubian has agreed with the government of Somaliland to reduce the size of the
Arapsyo and Qabri Bahar permits by 50% following completion of the first phase
exploration program.
Mindesta has completed a stream and rock sampling program over
the Arapsyo and Qabri Bahar permits which involved taking over 2,000 samples and
has already initiated a similar program on the Abdul Qadir permit. The Company
has received some preliminary assay results but the majority are still at the
lab waiting to be processed. Once all results are received, the Company will
analyze and compile the data and plan a second stage exploration program to
follow up on the most promising targets. To date, Mindesta has incurred
expenditures of approximately $411,435 on the permits and anticipates that the
initial $750,000 threshold will be achieved when work on the new permit is
completed in a couple months. The Company will require additional financing to
execute the second stage program.
RESULTS OF OPERATIONS
For the three months ended March 31, 2012, the Company recorded
a net loss of $682,376, or $0.07 per share, compared to a gain of $5,689,064 for
the three months ended March 31, 2011, or $0.64 per share. This net gain during
the three months ending March 31, 2011 resulted as the Company recognized a gain
of $6,035,839 on the deconsolidation of its investment holdings. This gain was
due to the sale of 2,000,000 shares of Northern and the resultant decline in the
Companys interest below 50% which made it necessary for the Company to change
its accounting treatment for the investment. The Company had no revenues for the
period ended March 31 in both 2012 and 2011 as the Company is an exploration
stage company with no source of revenues.
For the three months ended March 31, 2012, expenses amounted to
$682,818 compared to $26,858 for the three months ended March 31, 2011. There
were higher expenses for the three months ended March 31, 2012 as a result of
exploration expenses incurred by Nubian Gold. Management fees and salaries
increased to $32,514 for the three months ended March 31, 2012 compared to
$7,634 for the three months ended March 31, 2011, as a result of stock options
granted to officers and directors of the Company. Professional fees increased to
$76,912 in the three months ended March 31, 2012 from $9,548 in 2011 as a result
of additional fees related to the Companys pro rata dividend-in-kind. Additional investor
communication expenses related to the Companys pro rata dividend-in-kind
contributed to the increase in General and administration expenses from $9,676
to $55,456.
F13
The Company currently has no full time employees and contracts
with consultants for administrative and financial services.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash as at March 31, 2012 of $181,932 versus
$569,378 as at December 31, 2011 due to exploration expenditures incurred under
the property option agreement with Nubian Gold and expenses related to the
payment of the share dividend.
The Company has access to additional financing through the
possible sale of marketable securities, which had a market value at March 31,
2012 of $1,075,860. Although the Company currently has no revenue sources, the
funding raised by the Company and through the sale of shares of Northern, is
sufficient to pay operating and administrative costs for the time being. In the
future, the Company will require additional funding to continue operations and
there is no assurance that such financing will be available or will be available
on terms acceptable to the Company.
Going Concern Consideration
The Companys auditors in their report for the year ended
December 31, 2011 have expressed a concern that the Company may not be able to
continue as a going concern. The Company had a net loss of $682,376 for the
three months ended March 31, 2012, and has had recurring losses and an
accumulated deficit of $12,715,452 since inception. The Companys ability to
continue as a going concern is dependent upon its ability to raise additional
capital for operating and administrative costs. However, there is a high degree
of risk and many inherent uncertainties in the natural resource development
industry and management cannot provide assurances that it will be successful.
As of January 25, 2012, the Company no longer had significant
ownership of Northern. The Company no longer raises capital for the support of
Northern and operates as a distinct entity. As at March 31, 2012, the Company
has $181,560 in cash and marketable securities with a fair value of $1,075,860.
The Company believes that it will continue to be able to raise additional funds
from public or private debt or equity sources to continue to operate. If the
Company cannot continue as a going concern the value of the Companys assets may
approach a level close to zero. Investors should be cautioned that should the
Company cease to operate the Company may only recover a small fraction of the
original costs of its assets should a liquidation of the Companys assets occur.
The accompanying financial statements do not include any adjustments that might
result if the going concern assumption is not valid.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
IMI is a smaller reporting company as defined by Rule 12b-2 of
the Securities Exchange Act of 1934 and is not required to provide information
under this item.
Item 4. CONTROLS AND PROCEDURES
At the end of the period covered by this report, an evaluation
was carried out under the supervision of and with the participation of the
Companys management, including the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), of the effectiveness of the design and operations of
the Companys disclosure controls and procedures (as defined in Rule 13(a)
15(e) and Rule 15(d) 15(e) under the Exchange Act). Based on that evaluation
and in light of the discussion of the material weakness discussed below in the
Managements Report on Internal Control over Financial Reporting, the CEO/CFO
has concluded that as of the end of the period covered by this report, the
Companys disclosure controls and procedures were effective in ensuring that:
(i) information required to be disclosed by the Company in reports that it files
or submits to the Securities and Exchange Commission under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in applicable rules and forms and (ii) material information required to be
disclosed in reports filed under the Exchange Act is accumulated and
communicated to management, including the CEO/CFO, as appropriate, to allow for
accurate and timely decisions regarding required disclosure.
Managements Annual Report on Internal Control over
Financial Reporting
Management is responsible for establishing and maintaining
adequate internal controls over financial reporting. Internal control over
financial reporting is a process designed by, or under the supervision of, the
CEO and implemented by the board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
The evaluation of internal controls over financial reporting
includes an analysis under the COSO framework, an integrated framework for the
evaluation of internal controls issued to identify the risks and control
objectives related to the evaluation of the control environment by the Committee
of Sponsoring Organizations of the Treadway Commission.
Based on the evaluation described above, management has
concluded that the Companys internal control over financial reporting was not effective during the quarter ended March 31, 2012.
Management has determined that (i) the ability of management to override
internal control systems, and (ii) the significant amount of manual intervention
required in the accounting and financial reporting process are material
weaknesses in the Companys internal control over financial reporting.
F14
This quarterly report does not include an attestation report of
the Companys registered public accounting firm regarding internal control over
financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in the Companys internal control over
financial reporting that occurred during the Companys most recent fiscal
quarter and the period covered by this quarterly report that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
PART II. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company has been named in a lawsuit filed by Windale
Properties in the amount of C$19,781. The claim is the result of termination of
leased premises in Oakville, Ontario prior to the expiry of the lease.
Discussions regarding settlement have taken place.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS: None.
Item 3. DEFAULTS UPON SENIOR SECURITIES: None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
Item 5. OTHER INFORMATION: None.
F15
Item 6. EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 10, 2012
|
MINDESTA INC.
|
|
|
|
By:
/s/ Gregory
Bowes
|
|
President and CEO
|
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Dated: May 10, 2012
|
MINDESTA INC.
|
|
|
|
By:
/s/ Gregory
Bowes
|
|
Gregory Bowes, Chief Financial Officer
|
F16
CTT Pharmaceutical (PK) (USOTC:CTTH)
Historical Stock Chart
From Jun 2024 to Jul 2024
CTT Pharmaceutical (PK) (USOTC:CTTH)
Historical Stock Chart
From Jul 2023 to Jul 2024