Item 1 - FINANCIAL STATEMENTS
For financial information see the financial statements and the
notes thereto for the three month period ended June 30, 2014 (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, 2013, included in the Company's Form
10-K.
Mindesta Inc.
|
(an exploration stage company)
|
Condensed Interim Balance Sheets
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30
|
|
|
December 31
|
|
|
|
2014
|
|
|
2013
|
|
|
|
$
|
|
|
$
|
|
|
|
( note 1
|
)
|
|
(note 1
|
)
|
Assets
|
|
(unaudited)
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
|
|
222,114
|
|
|
823
|
|
Receivables
|
|
5,429
|
|
|
5,429
|
|
Total
assets
|
|
227,543
|
|
|
6,252
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
21,987
|
|
|
35,205
|
|
Due to related parties (note 6)
|
|
120,000
|
|
|
214,173
|
|
Total
liabilities
|
|
141,987
|
|
|
249,378
|
|
|
|
|
|
|
|
|
Stockholders deficiency
|
|
|
|
|
|
|
Common stock 200,000,000 shares authorized,
$0.0001 par value; 35,184,737 shares issued and outstanding (note 5)
|
|
21,395
|
|
|
18,817
|
|
Additional paid-in capital
|
|
12,944,924
|
|
|
12,663,857
|
|
Warrants
|
|
118,370
|
|
|
-
|
|
Deficit
accumulated during exploration stage
|
|
(12,999,133
|
)
|
|
(12,925,800
|
)
|
Total stockholders' deficiency
|
|
85,556
|
|
|
(243,126
|
)
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficiency
|
|
227,543
|
|
|
6,252
|
|
Going Concern (Note 1)
|
|
|
|
|
|
|
Commitments and contingencies (Note
8)
|
|
|
|
|
|
|
See accompanying notes to unaudited interim condensed
financial statements
Approved by Board:
|
(signed) Gregory Bowes
|
|
Director
|
F4
Mindesta Inc.
|
(an exploration stage company)
|
Condensed Interim Statements of Operations and
Deficit
|
|
|
3 months ended June 30
|
|
|
6 months ended June 30
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
8,127
|
|
|
27,956
|
|
|
19,240
|
|
|
38,868
|
|
Management fees and salaries (note 6)
|
|
2,083
|
|
|
6,250
|
|
|
5,208
|
|
|
6,250
|
|
Exploration expense
|
|
-
|
|
|
220
|
|
|
-
|
|
|
13,454
|
|
General and administration
|
|
12,112
|
|
|
28,109
|
|
|
25,077
|
|
|
64,282
|
|
|
|
22,322
|
|
|
62,535
|
|
|
49,525
|
|
|
122,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(22,322
|
)
|
|
(62,535
|
)
|
|
(49,525
|
)
|
|
(122,854
|
)
|
Foreign exchange gain (loss)
|
|
2,846
|
|
|
(1,174
|
)
|
|
1,014
|
|
|
(7,267
|
)
|
Interest income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,645
|
|
Gain on sale of marketable securities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
24,318
|
|
Loss on debt settlement
|
|
(25,004
|
)
|
|
|
|
|
(25,004
|
)
|
|
|
|
Gain on shares returned to treasury
|
|
182
|
|
|
|
|
|
182
|
|
|
|
|
Net income (loss)
|
|
(44,298
|
)
|
|
(63,709
|
)
|
|
(73,333
|
)
|
|
(104,158
|
)
|
Deficit, beginning of period
|
|
(12,954,835
|
)
|
|
(13,076,713
|
)
|
|
(12,925,800
|
)
|
|
(13,036,264
|
)
|
Deficit, end of
period
|
|
(12,999,133
|
)
|
|
(13,140,422
|
)
|
|
(12,999,133
|
)
|
|
(13,140,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,984
|
)
|
Comprehensive
income (loss)
|
|
(44,298
|
)
|
|
(63,709
|
)
|
|
(73,333
|
)
|
|
(109,142
|
)
|
Weighted average number of common shares
outstanding basic (note 5)
|
|
22,346,611
|
|
|
9,413,581
|
|
|
15,915,826
|
|
|
9,413,581
|
|
Net income
(loss) per share basic
|
|
0.00
|
|
|
(0.01
|
)
|
|
0.00
|
|
|
(0.01
|
)
|
Weighted average number of common shares
outstanding fully diluted (note 5)
|
|
22,346,611
|
|
|
9,413,581
|
|
|
15,915,826
|
|
|
9,413,581
|
|
Net income
(loss) per share diluted
|
|
0.00
|
|
|
(0.01
|
)
|
|
0.00
|
|
|
(0.01
|
)
|
See accompanying notes to unaudited condensed interim
financial statements
F5
Mindesta Inc.
|
(an exploration stage company)
|
Condensed Interim Statements of Cash Flows
|
|
|
3 months ended June 30
|
|
|
6 months ended June 30
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
(note 1
|
)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the
company
|
|
(44,298
|
)
|
|
(63,709
|
)
|
|
(73,333
|
)
|
|
(104,158
|
)
|
Gain on sale of marketable securities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(24,318
|
)
|
Gain on debt settlement
|
|
25,004
|
|
|
|
|
|
25,004
|
|
|
|
|
Gain on shares returned to treasury
|
|
(182
|
)
|
|
|
|
|
(182
|
)
|
|
|
|
Imputed interest on amounts due to related
party
|
|
3,852
|
|
|
5,308
|
|
|
10,239
|
|
|
13,120
|
|
Value of services contributed by officer of the Company
|
|
2,083
|
|
|
6,250
|
|
|
5,208
|
|
|
6,250
|
|
Changes in non-cash operating working
capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
-
|
|
|
3,218
|
|
|
-
|
|
|
3,218
|
|
Prepaid expenses and deposits
|
|
-
|
|
|
10,470
|
|
|
-
|
|
|
16,939
|
|
Accounts payable and accrued liabilities
|
|
(15,196
|
)
|
|
4,592
|
|
|
(13,218
|
)
|
|
(18,591
|
)
|
|
|
(28,737
|
)
|
|
(33,871
|
)
|
|
(46,282
|
)
|
|
(107,540
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of capital stock in debt
settlement
|
|
150,000
|
|
|
-
|
|
|
150,000
|
|
|
-
|
|
Issuance of
capital stock in private placement
|
|
236,750
|
|
|
-
|
|
|
236,750
|
|
|
-
|
|
|
|
386,750
|
|
|
-
|
|
|
386,750
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (payment to) related party
|
|
(147,689
|
)
|
|
22,787
|
|
|
(119,177
|
)
|
|
(80,302
|
)
|
Proceeds from the sale of marketable
securities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
183,667
|
|
|
|
(147,689
|
)
|
|
22,787
|
|
|
(119,177
|
)
|
|
103,365
|
|
Net increase in cash
|
|
210,324
|
|
|
(11,084
|
)
|
|
221,291
|
|
|
(4,175
|
)
|
Cash, beginning
of period
|
|
11,790
|
|
|
19,000
|
|
|
823
|
|
|
12,091
|
|
Cash, end of period
|
|
222,114
|
|
|
7,916
|
|
|
222,114
|
|
|
7,916
|
|
Supplementary information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
See accompanying notes to unaudited interim condensed
financial statements
F6
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim condensed financial statements of
Mindesta Inc. (the Company and formerly Industrial Minerals, Inc.), for the
three and six month periods ended June 30, 2014 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 Company's 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 $73,333 for the six months ended June 30, and has an accumulated deficit
of $12,999,133 since the inception of the Company. Current assets exceed current
liabilities by $85,556. The Companys ability to continue as a going concern is
dependent upon its ability to raise additional capital to pay expenses and carry
out any further exploration activities. The Company will require significant
financing to continue its operations and fund any further activities. There is a
high degree of risk and many inherent uncertainties in mining operations and
exploration activities and management cannot provide assurances that it will be
successful in any future endeavors.
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. 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 Company's Annual Report on Form 10K for the year
ended December 31, 2013.
The Company's 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, 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, including an initial public offering by Northern, the Companys
interest in Northern was reduced from 100% 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
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 on the basis
of one share of Northern for each share of Company common stock held. The
Company no longer holds any shares in Northern. 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
There were no recent accounting pronouncements issued by the
FASB (including its Emerging Issues Task Force) and the SEC that have or
believed to have a material impact on the Company's present or future financial
statements.
NOTE 3 MARKETABLE SECURITIES AND INVESTMENT IN
NON-CONSOLIDATED AFFILIATE
As at June 30, 2014, the Company no longer held any shares of
Northern. As at December 31, 2012, the Company recorded its investment in
Northern, a non-consolidated affiliate, at cost.
Investment
|
|
$
|
|
Balance at carrying value as at December
31, 2012
|
|
53,363
|
|
Sale of marketable securities
|
|
(53,363
|
)
|
Balance at carrying value as at December 31,
2013 and June 30, 2014
|
|
-
|
|
F7
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 was 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 December 31, 2012:
Equity securities
|
|
Cost
|
|
|
Gross unrealized gains
|
|
|
Fair value
|
|
Outstanding
|
|
53,363
|
|
|
110,969
|
|
|
164,332
|
|
During the three month period ended March 31, 2013, the Company
recorded a gain on sale of marketable securities of $24,318.
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
June 30, 2014 and the results of operations and cash flows for the three and six
month periods ended June 30, 2014 and 2013. Interim results are not necessarily
indicative of results for a full year.
The Financial Statements are presented as permitted by Form
10-Q, and do not include information included in the Company's audited financial
statements and notes for the year ended December 31, 2013.
NOTE 5 STOCKHOLDERS EQUITY
A.
COMMON STOCK
The number of common shares outstanding at June 30, 2014 and
December 31, 2013 were as follows:
|
|
Number
|
|
|
$
|
|
Outstanding at December 31, 2013
|
|
9,413,581
|
|
|
18,817
|
|
Shares returned to treasury
|
|
(12,176
|
)
|
|
(1
|
)
|
Issued in settlement of debt
|
|
10,000,000
|
|
|
1,000
|
|
Issued in private
placement
|
|
15,783,332
|
|
|
1,578
|
|
Outstanding at June 30, 2014
|
|
35,184,737
|
|
|
21,394
|
|
On May 20, 2014, the Company completed a non brokered private
placement consisting of the sale of 15,783,332 units at a price of US$0.015 per
unit for total proceeds of US$236,750. Each unit consists of one common share
and one half of a share purchase warrant. Each whole warrant entitles the holder
to purchase one common share at a price of $0.0175 until December 31, 2016.
B.
DIVIDENDS
On December 12, 2011, the Board of Directors declared a pro
rata dividend-in-kind on the basis of one share of Northern for each share of
Company held, payable January 25, 2012 to shareholders of record as at January
5, 2012. The Company recorded $3,274,072 of dividends and dividends payable in
the year ending December 31, 2011 related to the declared dividend-in-kind.
C. WARRANTS
A summary of the Companys warrants is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
Number of
|
|
|
price
|
|
|
|
Warrants
|
|
|
$
|
|
Balance, December 31, 2013
|
|
0
|
|
|
0
|
|
Issued
|
|
7,891,666
|
|
|
0.0175
|
|
Balance, June 30, 2014
|
|
7,891,666
|
|
|
0.0175
|
|
F8
D. 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.
The following table summarizes stock option activity for the
three months ended June 30, 2014:
|
|
Number of securities to
|
|
|
|
|
|
|
be issued upon exercise
|
|
|
Weighted-average exercise
|
|
Equity compensation plans not approved by security holders
|
|
of outstanding options
|
|
|
price of outstanding options
|
|
Outstanding at June 30, 2014 and December 31, 2013
|
|
762,500
|
|
$
|
0.29
|
|
Exercisable at June 30, 2014 762,500.
The Company had no stock compensation expense for the three
months ending June 30, 2014 and 2013.
E. EARNINGS PER SHARE
The basic and fully-diluted weighted average number of common
shares outstanding was as follows:
For the three months ended:
|
|
|
|
June 30, 2014
|
|
22,346,611
|
|
June 30, 2013
|
|
9,413,581
|
|
For the six months ended:
|
|
|
|
June 30, 2014
|
|
15,915,826
|
|
June 30, 2013
|
|
9,413,581
|
|
For the three and six months ended June 30, 2014 and 2013, the
inclusion of common stock equivalents in the calculation of the weighted average
number of shares is anti-dilutive.
NOTE 6 RELATED PARTY TRANSACTIONS
a)
|
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 initial 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.
|
F9
|
|
|
Mindesta entered into the option agreement with Nubian,
effective January 2, 2012. As at January 2, 2012, Nubian had received
advances of $127,994 under the revolving loan agreement and the Company
had 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 during 2012. In addition, Mindesta
incurred $630,750 of exploration expenses during 2012 and accrued a
payable of $100,000 for mineral properties under the option agreement, to
Nubian. Mindesta can earn a 50% interest in the initial two permits and
any other permits obtained in Somaliland during the option agreement by
incurring total exploration expenditures of $2 million within two years
and can increase its interest to 80 percent by completing a bankable
feasibility study. The mineral property was written off during the year
ended December 31, 2012 (Note 8).
|
|
|
b)
|
Effective August 1, 2012, the Board of Directors approved
a loan agreement between Nubian and Bowes & Company, as the lenders,
and Mindesta Inc., as the borrower, to fund the ongoing exploration
activities of Mindesta Inc. Nubian and Bowes & Company are
corporations incorporated under the laws of Ontario, Canada and Gregory
Bowes is the CEO and major shareholder of both companies. 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. Under this loan
agreement, all amounts due from Mindesta to Nubian and Bowes & Company
are provided under a $250,000 credit facility which is repayable upon the
termination date of December 31, 2012. Any obligation outstanding after
the Termination Date shall accrue interest at a rate of 7.5% per annum.
Under the terms of the loan agreement, Mindesta was required to sell its
remaining shares of Northern as they were released from escrow and remit
all proceeds to Bowes & Company, until all obligations to Bowes &
Company were satisfied, and then shall remit any further proceeds to
Nubian until all obligations to Nubian are satisfied. All advances under
this facility bear interest from August 1, 2012 at an annual rate of 7.5
percent, payable annually, or earlier at anytime that the advances are
repaid in full. At any time, before or after the termination date, Bowes
& Company and Nubian shall have the right to convert any part of, or
all of, the obligations into common shares of Mindesta Inc. at a price of
$0.075 per share. During the six months ending June 30, 2013, $87,602 in
payments were made under this facility. In the period leading up to May
20, 2014 during 2014, no payments were made under the facility. On May 20,
2014, the Company reached agreement with Nubian to convert the US$100,000
that was owed to Nubian by the Company, and in turn by Nubian to its major
shareholder Gregory Bowes, into 10,000,000 common shares of the Company at
a price of $0.01 per share. Mr. Bowes and related companies have also
agreed to restructure the balance of funds owing to them by the Company.
All interest on these amounts was forgiven, $50,000 was repayable
immediately and the balance, $70,000, will be repayable on May 20, 2015.
As at May 20, 2014 $244,996, (December 31, 2013, $214,173) of principal
and accrued interest was outstanding related to this credit facility. At
May 20, 2014, $24,475 (December 31, 2013, $21,483) of interest was accrued
in respect of this obligation. Additional interest of $10,238 (December
31, 2013 - $25,228) was imputed on this loan to approximate a market
interest rate. This interest has been recognized in general and
administration expense and additional paid-in capital, as the imputed
interest is not payable.
|
|
|
As at
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|
|
As at
|
|
Due to related parties
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
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Due to Nubian
|
|
-
|
|
|
108,742
|
|
Due to Bowes & Company
|
|
-
|
|
|
105,431
|
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Due to Greg Bowes
|
|
120,000
|
|
|
|
|
Total due to
related parties
|
|
120,000
|
|
|
214,173
|
|
As at June 30, 2014, an amount of $5,208 (December 31, 2013 -
$12,500) was recorded as management fees and additional paid in capital to
reflect the value of services contributed to the Company by an officer and
shareholder of the Company. As at June 30, 2014 and December 31, 2013, 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 MINERAL PROPERTIES
Although the Company has taken steps to verify title to mineral
properties in which it has an interest in accordance with industry standards for
the current stage of exploration of such properties, these procedures do not
guarantee the title of the mineral properties in which it has an interest.
Property title may be subject to unregistered prior agreements and
non-compliance with regulatory requirements.
Mining Option Agreement Nubian
F10
Effective January 2, 2012, Mindesta entered into an option
agreement with Nubian, a privately owned Ontario company, which initially held
title to two mineral exploration permits, in the Republic of Somaliland (note
6). During 2012, Nubian obtained a third exploration permit in Somaliland. Under
the option agreement, Mindesta can earn a 50% interest in the permits by
incurring total exploration expenditures of $2 million within two years and can
increase its interest to 80 percent by completing a bankable feasibility study.
Mindesta has incurred the first $750,000 of exploration expenditures on this
project which represented a firm commitment. Mindesta also has the option to
acquire all of Nubians remaining interest in the permits at fair market value
as determined by an independent valuator at any time after incurring the first
$750,000 of exploration expenditures. As of the two year anniversary of the
option agreement with Nubian on January 2, 2014, the Company had not incurred
the required total exploration expenditures of $2 million and thereby,
relinquished all rights under the option agreement.
The Company recorded acquisition costs of $100,000 related to
the option agreement with Nubian. During the year ended December 31, 2012 the
Company recorded an impairment of acquisition costs of $100,000 due to
uncertainty with respect to the Companys ability to expend the required $2
million within two years to earn its interest. During the first three months of
2014, the Company did not incur additional exploration expenses related to the
option agreement (December 31, 2013 - $14,954).
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company has been named in a lawsuit filed by Windale
Properties in the amount of CDN$19,781. The claim is the result of termination
of leased premises in Oakville, Ontario prior to expiry of the lease. In 2009 a
judgment of CDN$24,908 with annual interest of 3% was issued against the
Company. No amount has been accrued as no action has been undertaken since 2009
to enforce the judgment.
F11
Item 2. MANAGEMENT'S 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. Prior to 2012, the
Companys sole asset and primary focus was 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 (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 no longer holds any shares of Northern.
From 2004 until the present, the Company experienced serious
financial difficulties and went through many changes to the Board and
management. Chris Crupi, CA and Gregory Bowes 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 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, 2011, Albert Zapanta joined the Board of Directors
and was appointed to the Audit Committee, the Nominating Committee, and
Compensation Committee. Effective July 5, 2013, W. Campbell Birge, Douglas
Perkins, and Albert Zapanta resigned as Directors of Mindesta Inc. due to the
Companys poor financial condition and lack of prospects. Gregory Bowes is now
the sole Director and Officer.
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 of 9,413,581 shares of
Northern (approximately 25% of the Northern common shares outstanding) 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.
Effective January 2, 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 were the first two ever issued by 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. Under the option agreement, Mindesta
could earn a 50% interest in both permits by incurring total exploration
expenditures of $2 million within two years and could increase its interest to
80 per cent by completing a bankable feasibility study. Mindesta was required to
make an upfront cash payment of $100,000 to Nubian as compensation for expenses
incurred, which it has not done, and the first $750,000 of exploration
expenditures represented a firm commitment. Mindesta also had the option to
acquire all of Nubians remaining interest in the permits at fair market value
as determined by an independent valuator 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 focussed 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.
F12
In 2012, Nubian was awarded a third permit, Abdul Qadir, which
is approximately 2,000 km
2
in size and is located in the northeast
part of Somaliland adjacent to the borders with Djibouti and Ethiopia. Abdul
Qadir was 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 completed a stream and rock sampling program over the
Arapsyo, Qabri Bahar and Abdul Qadir permits which involved taking over 3,000
samples. To date, Mindesta has incurred expenditures of approximately $758,694
on work on these permits which exceeded the initial $750,000 requirement.
Due to weak equity markets and the inability of Mindesta to
raise additional capital, especially for an early stage exploration program in
Somaliland, Nubian and Bowes & Company agreed to advance funds to the
Company to fund ongoing exploration activities. Effective August 1, 2012, the
Board of Directors approved a loan agreement between Nubian and Bowes &
Company. Nubian and Bowes & Company are corporations incorporated under the
laws of Ontario, Canada and Gregory Bowes is the CEO and major shareholder of
both companies. 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. Under
the loan agreement, all amounts due from Mindesta to Nubian and Bowes &
Company are provided under a $250,000 credit facility which is repayable upon
the termination date of December 31, 2012. Any obligation outstanding after the
Termination Date shall accrue interest at a rate of 7.5% per annum. Under the
terms of the loan agreement, Mindesta was required to sell its remaining shares
of Northern as they were released from escrow and remit all proceeds to Bowes
& Company, until all obligations to Bowes & Company are satisfied, and
then remit any further proceeds to Nubian until all obligations to Nubian are
satisfied. All advances under this facility bear interest from August 1, 2012 at
an annual rate of 7.5 per cent, payable annually, or earlier at anytime that the
advances are repaid in full. At any time, before or after the termination date,
Bowes & Company and Nubian shall have the right to convert any part of, or
all of, the obligations into common shares of Mindesta Inc. at a price of $0.075
per share. On May 20, 2014, the Company reached agreement with Nubian to convert
the US$100,000 that is owed to Nubian by the Company, and in turn by Nubian to
its major shareholder Gregory Bowes, into 10,000,000 common shares of the
Company at a price of $0.01 per share. Mr. Bowes and related companies have also
agreed to restructure the balance of funds owing to them by the Company. All
interest on these amounts was forgiven, $50,000 was repayable immediately and
the balance, $70,000, will be repayable on May 20, 2015.
On November 27, 2012, Mindesta announced that it received assay
results from its first stage stream sediment and rock sampling program on the
Arapsyo, Qabri Bahar and Abdul Qadir exploration permits. Over the September,
2011 to April, 2012 period, 2,500km
2
of the Arapsyio and Qabri Bahar
permits were sampled at a density of one sample every 1-2 km
2
. A
total of 1,659 stream sediment and 58 rock samples were submitted to the assay
laboratory. Encouraging regional anomalies were identified, particularly for
gold,. However, substantial additional work is required to follow up on these
anomalies.
Mindesta did not make the first $100,000 payment required under
the agreement and made the $750,000 of exploration expenditures as required as a
firm commitment but it accumulated substantial payables to Bowes & Company
and Nubian in doing so. The Company does not have the resources to repay these
amounts or make ongoing commitments with respect to the permits. Under the
option agreement, Mindesta was to earn a 50% interest in both permits by
incurring total exploration expenditures of $2 million within two years and
could increase its interest to 80 per cent by completing a bankable feasibility
study. As at January 2, 2014, the two year anniversary of the option agreement,
the Company had not incurred the required total exploration expenditures of $2
million and thereby, relinquished all rights under the option agreement.
Mindesta is looking for other opportunities.
On May 20, 2014, the Company reached agreement with Nubian to
convert the US$100,000 that was owed to Nubian by the Company, and in turn by
Nubian to its major shareholder Gregory Bowes, into 10,000,000 common shares of
the Company at a price of $0.01 per share. Mr. Bowes and related companies have
also agreed to restructure the balance of funds owing to them by the Company.
All interest on these amounts was forgiven, $50,000 was repayable immediately
and the balance, $70,000, will be repayable on May 20, 2015.
On May 20, 2014, the Company completed a non brokered private
placement consisting of the sale of 15,783,332 units at a price of US$0.015 per
unit for total proceeds of US$236,750. Each unit consists of one common share
and one half of a share purchase warrant. Each whole warrant entitles the holder
to purchase one common share at a price of $0.0175 until December 31, 2016.
RESULTS OF OPERATIONS
For the six months ended June 30, 2014, the Company recorded a
net loss of $73,333 or ($0.00) per share, compared to a loss of $104,158 for the
six months ended June 30, 2013, or ($0.01) per share. The Company had no
revenues for the period ended June 30 in both 2014 and 2013 as the Company is an
exploration stage company with no source of revenues.
F13
For the six months ended June 30, 2014, expenses amounted to
$49,525 compared to $122,854 for the six months ended June 30, 2013. There were
lower expenses for the six months ended June 30, 2014 as the Company scaled back
on all activities. The Company expensed $5,208 in management fees and salaries
in the six months ended June 30, 2014, compared to $6,250 for the six months
ended June 30, 2013. Professional fees decreased to $19,240 in the six months
ended June 30, 2014 compared to $38,868 in 2013. General and administration
expenses decreased from $64,282 in the first six months of 2013 to $25,077 in
the first six months of 2014 as the result of lower activity.
The Company currently has no full time employees or contracts
with consultants for administrative and financial services.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash as at June 30, 2014 of $222,114 versus
$823 as at December 31, 2013 due to the private placement and advances made by
an officer of the Company, offset by operating expenses incurred during the six
months ended June 30, 2014.
On May 20, 2014, the Company completed a non brokered private
placement consisting of the sale of 15,783,332 units at a price of US$0.015 per
unit for total proceeds of US$236,750. Each unit consists of one common share
and one half of a share purchase warrant. Each whole warrant entitles the holder
to purchase one common share at a price of $0.0175 until December 31, 2016.
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 Company's auditors in their report for the year ended
December 31, 2013 have expressed a concern that the Company may not be able to
continue as a going concern. The Company had a net loss from operations of
$73,333 for the six months ended June 30, 2014 and it has had recurring losses
and an accumulated deficit of $12,999,133 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.
The Company no longer has ownership in Northern and operates as
a distinct entity. As at June 30, 2014, the Company had $222,114 in cash. If the
Company cannot continue as a going concern the value of the Company's assets may
approach a level close to zero. Investors should be cautioned that the Company
could cease to operate and if this occurs, the Company may only recover a small
fraction of the original costs of its assets should a liquidation of the
Company's assets occur. The Financial Statements do not include any adjustments
that might result if the going concern assumption is not valid.