UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 2011
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
(Issuer's 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
issuer's classes of common equity as of the latest practicable date: March 15
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 Annual Report on Form 10-K 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.
ITEM 1 - DESCRIPTION OF BUSINESS
BACKGROUND
Mindesta Inc. (Mindesta , MDST or the Company) was
incorporated on November 6, 1996 and from December 2001 to July 25, 2011,
operated under the name Industrial Minerals, Inc. (IDSM). Effective July 26,
2011, the Company consolidated its shares on a one for twenty basis, and changed
its name to Mindesta Inc. On January 31, 2002, the Company acquired a 100%
interest in the Bissett Creek graphite property (the Bissett Creek Project)
and assigned its rights to then wholly-owned subsidiary, Industrial Minerals Canada Inc., which has since
been renamed Northern Graphite Corporation (Northern Graphite, Northern or
the Corporation). On April 18, 2011 Northern Graphite closed an Initial Public
Offering (IPO) and issued 8,000,000 common shares at a price of CDN$0.50 per
share for gross proceeds of CDN $4,000,000. Northern Graphite began trading on
the TSX Venture Exchange as a Tier 2 Mining Issuer on April 20, 2011 under the
trading symbol NGC.
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 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 (approximately 25%
of the Northern Graphite common shares outstanding) on the basis of one share of
Northern Graphite for each share of Company common stock held.
As a result of the financings and other transactions described
herein, the Company had a 26.1% interest in Northern Graphite as at December 31,
2011. The Companys interest in Northern Graphite has decreased to 0.9%
primarily as a result of the distribution of Northern Graphite shares.
Up until the Companys distribution of most of the shares of
Northern Graphite owned by the Company in January of 2012, the Bissett Creek
Project was the primary focus of the activities of the Company and the sole
focus of Northern Graphite.
In August 2004, Northern Graphite received notice from the
Ministry of Northern Development and Mines for the Province of Ontario that the
Bissett Creek Project Certified Closure Plan as per Subsection 141(3)(a) of the
Mining Act for the Province of Ontario was considered filed. Northern Graphite
is therefore authorized to begin production of graphite from the Bissett Creek
Project and during production must comply with the Bissett Creek Closure Plan as
filed. The Bissett Creek Project did not achieve commercial production and was
put on a care and maintenance basis in 2005. In 2010, Northern Graphite raised
additional financing and has initiated the environmental and permitting process,
metallurgical testing and a Pre Feasibility Study. After the completion of
Northern Graphites IPO, Northern Graphite began to implement the recommended
work program in the Technical Report in July, 2010 and completed a 2,900m
drilling program. Northern Graphite also decided to forgo a Pre Feasibility
Study and proceed to a full Feasibility Study (FS). Throughout the last six
months of 2011, Northern Graphite focused its efforts on completing the FS,
environmental and mine permitting work, and a pilot plant test to refine the
flowsheet and provide test product for potential customers. In September, 2011
Northern Graphite announced a significant increase in estimated resources based
on the results from the 51 hole, 2,927 meter drilling program. On January 11,
2012, Northern Graphite announced positive pilot plant test results from its
Bissett Creek Graphite Project. The pilot plant has confirmed the technical
viability and operating performance of Northern Graphite's process plant design
for the production of high purity, large flake graphite. Furthermore, results
indicated that 50% of the graphite concentrate produced would be jumbo size, +48
mesh flake with a very high carbon content averaging 97.7% graphitic carbon
("Cg").
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. On signing of the property option agreement, all obligations of
Nubian under the revolving loan agreement were applied against the expenditure
requirements of the Company under the property option agreement. 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. On December 2, 2011, this facility was amended to increase the maximum of
the revolving loan agreement to a $150,000 credit facility.
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.
Item 1A - RISK FACTORS
The Company's business is subject to numerous risk factors, and
it has the following concerns:
1. While
Northern Graphite intends to develop the Bissett Creek Project, they have no
history of operations and must raise the necessary capital. A processing
building and some equipment exists on site but a substantial amount of
additional equipment must be purchased and installed in order to commence
production.
2. The
Company has no record of earnings or cash flow from mining operations. It is
also subject to all the risks inherent in a developing business enterprise including lack of cash flow,
and no assurance of recovery and sale of graphite. Furthermore, specific to the
Bissett Creek Project, there has been minimal graphite production to date and if
it proceeds to production, commercial viability will be affected by factors that
are beyond the control of the Company and Northern Graphite, including the
recoverability of graphite from the deposit, uncertainty over graphite prices,
the cost of constructing and operating a mine, the availability of economic
sources for energy, government regulations including regulations relating to
prices, royalties, as well as costs of protection of the environment. There are
currently no purchase orders for graphite to be produced from the Bissett Creek
Project.
3. The
success and growth of the Companys continued investment in Northern Graphite
will depend on the ability of Northern Graphite to mine the Bissett Creek
Project , process and recover graphite, and successfully sell it on world
markets which in turn is dependent upon the market's acceptance of the quality
and consistency of the product produced.
4. The
need for additional financing is a concern for the Company as substantial
financing must be raised to build and operate a mine on the Bissett Creek
Project in which the Company still holds an investment as well as to fund
planned exploration expenditures in East Africa. The Company is dependent on the
ability of its management team and its Board of Directors, as well as those of
Northern Graphite, to obtain such capital and there is no assurance that the
Company, as well as Northern Graphite, will be able to do so, or do so on terms
favorable to the Company as well as Northern Graphite. The Company may suffer
from a lack of liquidity in the future that could impair its production efforts
and adversely affect its results from operations.
5. The
Company is funding exploration activities in the Republic of Somaliland and
intends on expanding these activities to other jurisdictions in East Africa
including Ethiopia. While the Company believes that the government of the
Republic has held three free, fair, and non-violent elections, it jails pirates
and extremists, and it is one of the few functioning democracies in Africa and
the Middle East, there is a significant potential for political and/or criminal
risks to arise and impact the exploration activities in the Republic of
Somaliland. Somaliland is a former British colony that gained its independence
in 1960 and became a member of the United Nations. Somaliland subsequently
agreed to join Italian Somaliland, in an informal partnership that was never
ratified by their respective parliaments, to form the greater Somalia.
Following the collapse of the Somalia government in 1992, Somaliland withdrew
from the partnership and reasserted its independence. At this point in time, no
other countries have recognized the Republic of Somalilands independence.
Somaliland does not have a modern mining code with all of the protections
regarding rights and obligations that exist in many other countries. Nubians,
and as an extension, the Companys ability to carry on its business in the
normal course may be adversely affected by political and economic considerations
such as civil and tribal unrest, political instability, instability in the
portion of Somalia external to the Republic of Somaliland spreading beyond its
borders, Somalia attempting to reassert its control over Somaliland or
challenging rights and titles awarded by Somaliland, changing government
regulations with respect to mining including environmental requirements,
taxation, land tenure, income repatriation and capital recovery, fluctuations in
currency exchange and inflation rates, import and export restrictions,
challenges to the Companys title to properties, problems renewing licenses and
permits, and the expropriation of property interests. Any of these events could
result in conditions that delay or in fact prevent Nubian, and ultimately, the
Company from exploring or ultimately developing its properties if economic
quantities of minerals are found. The Company does not currently maintain
Political Risk insurance.
6.
Mineral exploration is a highly subjective process that requires a very
high degree of education, experience, expertise and luck. Furthermore, the
Company will be subject to many risk factors that knowledge, expertise and
perseverance are insufficient to overcome. The Company is also competing against
a large number of companies that have substantially greater financial and
technical resources. The probability of finding mineralization in economic
quantities that can be profitably mined are very small and no assurances can be
given that the Company will be successful.
5. The
Company is wholly dependent at the present upon the personal efforts and
abilities of its Officers and Directors, who exercise control over the
day-to-day affairs of the Company.
There are no dividends anticipated by the Company.
ITEM 1B - Unresolved Staff Comments
As a smaller reporting company, the Company is not required to
include this Item.
ITEM 2 - DESCRIPTION OF PROPERTIES
Bissett Creek Project
The Company’s sole asset and primary focus has historically been the Bissett Creek Graphite Project through its investment in Northern Graphite. Northern Graphite 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.
Effective February 22, 2011 the Company and Northern filed an amended and restated technical report with respect to the Bissett Creek Project, prepared in accordance with Canadian National Instrument 43-101 –
Standards of Disclosure for
Mineral Projects
(“NI 43-101”).
Northern’s sole focus is the potential development of the Bissett Creek Project. Northern has no other properties or rights to acquire other properties. Northern expects to complete a full bankable feasibility study (“FS”) for the
Bissett Creek Project in the second quarter of 2012. The environmental and mine permitting process is expected to be completed in the second quarter of 2012 at which time Northern will be in a position to begin construction of a mine on the Bissett
Creek Project, subject to positive results from the FS and the availability of capital to build a mine.
Don Baxter P.Eng is Northern’s qualified person as that term is defined within National Instrument 43-101 and is responsible for and supervises all technical aspects of the Bissett Creek Project and the disclosure related thereto.
Northern holds a 100% interest in the Bissett Creek Project, which contains a large crystal, flake graphite deposit that is approximately 15 km from the Trans-Canada Highway (Highway 17) and 53 kilometres east of Mattawa, Ontario, Canada. The
Bissett Creek Project is located in the United Townships of Head, Clara and Maria, in the County of Renfrew, Province of Ontario, approximately 300 km north-northeast of Toronto, Canada.
The Bissett Creek Project consists of a Mining Lease, being Ontario mining lease number 106693 issued in 1993 for 21 years covering 564.6 hectares, and Mining Claims, covering 2,424 hectares for a total land coverage of 2,989 hectares with the well
explored area being less than 100 hectares.
The Bissett Creek Project was extensively explored in the 1980’s and over 8,400 metres of drilling was carried out. A full feasibility study was completed, including the calculation of a proven and probable reserve, but the Bissett Creek
Project was not developed due to a subsequent decline in graphite prices. The feasibility study and reserve estimate pre-date NI 43-101 and are non-compliant. While historical information is presented for information purposes only and cannot be
relied upon from a regulatory perspective, it represents a substantial body of work that has a great deal value in the FS process. The price of graphite has almost tripled since 2005 due to the ongoing industrialization of emerging economies which
has led to demand growth in traditional steel and automotive markets. In addition, lithium-ion batteries, vanadium redox batteries, fuel cells and new nuclear technologies are all large users of graphite and have the potential to create substantial
additional demand growth in the future. As a result, there is renewed interest in graphite projects.
In May 2007, the Company retained SGS Canada Inc., formerly and then named Systèmes Geostat International Inc. (“
SGS
”), to prepare a NI 43-101 compliant technical report on the Bissett Creek Project. In 2010 SGS updated
their 2007 work and produced a technical report (the “
Technical Report
”) entitled “Technical Report Preliminary Economic Assessment on the Bissett Creek Graphite Property of Industrial Minerals, Inc. & Northern Graphite
Corporation” dated July 16, 2010 and revised February 2, 2011. It was prepared by Gilbert Rousseau P.Eng and Claude Duplessis P.Eng of SGS, each of whom is an independent Qualified Person pursuant to National Instrument 43-101 –
Standards of Disclosure for Mineral Projects
(“
NI 43-101
”). The Technical Report is available under the Company’s profile at
www.sedar.com
.
Prospective investors should be aware that certain historical technical disclosure regarding the Bissett Creek Project by Mindesta did not comply with NI 43-101 and should not be relied upon. Prospective investors should rely only on the
information contained in the Northern’s Annual Information Form and the Technical Report
.
The preliminary assessment in the Technical Report covers the technical and financial aspects of the Bissett Creek Project, including the construction and operation of milling facilities capable of processing 870,000 tonnes per year of graphite
bearing rock. Annual production should be in the range of 18,500 tonnes of graphitic flakes, spread more or less in the three following size ranges: 30% +35mesh, 40% -35 to +48 mesh and 30% -48 mesh.
SGS’s conclusion is that development of the Bissett Creek deposit appears to be economically attractive. A discount rate of 10% yields a NPV of approximately $77.6 million, and a corresponding projected IRR of approximately 24% before
taxes based on a $62.9 million capital expenditure requirement. The payback period in the base case is six years.
This preliminary assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral
reserves. As well, there is no certainty that the results of this preliminary assessment will be realized by Northern.
Exploration and Development
Northern began to implement the recommended work program in the Technical Report in July, 2010 and has completed a 2,900m drilling program at a cost of approximately $536,000 and has spent approximately $163,290 on metallurgical testing,
$557,811on the bankable Feasibility Study and $592,122 on environmental and permitting. In addition, Northern has spent in excess of $240,928 on hydrogeological drilling, an airborne topographical survey and a geophysical survey. Over
the next six months, Northern expects to spend approximately $1.8 million to complete the FS, environmental and mine permitting work, and a pilot plant test to refine the flowsheet and provide test product for potential customers.
Northern has retained G Mining to complete the FS. Consultants that were working on a PFS will continue to fulfill their mandate as part of the FS. SGS Canada Inc. - Geostat has prepared a new resource calculation that will form the basis for a new
mine plan, SGS Mineral Services (Lakefield) is confirming previous metallurgical work and finalizing the mill flow sheet, Knight Piesold Ltd. is completing environmental and mine permitting and designing the tailings facility, and Met-Chem Canada
Inc. is responsible for mill layout and design.
Mineral Resources
In September, 2011 Northern announced a significant increase in estimated resources based on the results from the 51 hole, 2,927 meter drilling program. The updated base case mineral resource for the Bissett Creek Project, using a cut off of 0.986%
graphitic carbon (“Cg”), now totals 25,983,000 tonnes grading 1.81% Cg in the indicated category (470,300 tonnes of contained graphite) while inferred resources total 55,038,000 tonnes grading 1.57% Cg (864,100 tonnes of contained
graphite). Grades are minable and diluted. In order to establish a reasonable prospect of economic extraction in an open-pit context, mineral resources were limited to an optimized whittle pit shell using an average graphite price of US$2,000
per tonne and operating and capital costs were updated from the Technical Report.
(Mineral resources are not mineral reserves and do not have demonstrated economic viability)
The new resource represents a 44% increase in contained graphite within the indicated category and a 117% increase in contained graphite within the inferred category over undiluted resources previously reported which used an average price of
US$1,700/tonne and a base case cut off of 1.5% . The 1% cut off used in the new base case is now more appropriate given higher graphite prices. The deposit remains open along strike to the north and south, and down dip to the east.
The
drilling program and resource estimate confirm that near surface graphite mineralization exists in an area that is now over one square kilometer in size. The deposit is also flat and tabular with good continuity between holes and there is a high
probability that inferred resources can be upgraded with additional drilling. The waste to ore ratio for the new resource is 0.27.
Bissett Creek Flake Graphite Deposit
2011 Updated Mineral Resources (Diluted)
|
Indicated
|
Inferred
|
%Cg
Cut-off
|
Tonnage*
(metric
tons)
|
Cg(%)
by
LECO
|
In Situ
Graphite**
(metric tons)
|
Tonnage*
(metric
tons)
|
Cg(%)
by
LECO
|
In Situ
Graphite**
(metric tons)
|
0.986
|
25,983,000
|
1.81
|
470,300
|
55,038,000
|
1.57
|
864,100
|
1.227
|
24,588,000
|
1.85
|
454,900
|
50,472,000
|
1.62
|
817,600
|
1.50
|
19,954,000
|
1.99
|
397,100
|
33,672,000
|
1.81
|
609,500
|
1.75
|
16,031,000
|
2.34
|
375,100
|
21,417,000
|
2.21
|
473,300
|
2.0
|
11,921,000
|
2.50
|
298,000
|
14,584,000
|
2.37
|
345,600
|
Relative density 2.63t/m3, 10% dilution, 90% mine recovery,
*rounded to nearest 1k, **rounded to nearest .1k
The new mineral resource estimate was prepared by François
Thibert, M.Sc. P. Geo. from SGS Canada Inc. (Geostat), independent Qualified
Person under NI 43-101, using the Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and
Guidelines.
The mineral resources were estimated using analytical data from
50 recent surface drill holes and 162 historical surface drill holes for which
2,745 samples were assayed for Cg using the LECO analytical method. The deposit
was historically drilled on an approximately 64m x 46m drill pattern with one
area drilled on a 25m x 25m grid. Recent drilling was carried out on a wider
100m x 100m grid. Interpretation on 25m spaced N68º sections and modeling of a
3D wireframe envelope was completed to outline the mineralized graphitic
horizon. A block model of 10 m (E-W) by 10 m (N-S) by 6 m (vertical) was
interpolated using geostatistical methods (ordinary kriging) within the
mineralized envelope. It covers a strike length of approximately 1,300m and it
reaches a maximal depth of 100m below surface. Spatial continuity of the Cg
composites was assessed by variography and it showed good continuity of grade in
almost all directions within the horizontal plane but very limited continuity
within the vertical plane. An anisotropic search ellipsoid was selected for the
grade interpolation process based on the analysis of the spatial continuity of
Cg composites. 6m bench composites were used to reflect an assumed bench height
of 6m. No capping was applied to composites Cg grades.
Recent Developments and Future Plans on Bissett Creek
Project
In September, 2011 Northern Graphite announced that
metallurgical testing on its Bissett Creek Project has indicated that almost 50%
of the graphite concentrate produced will be jumbo size, +48 mesh flake with a
very high carbon content averaging 98%. This is an exceptional product that will
attract a premium price based on both flake size and carbon content. Testing
also confirmed results from the extensive historical testing, bulk sampling and
pilot plant work that was carried out in the past and has validated the
performance of the new flow sheet that will form the basis for the bankable
Feasibility Study (FS) currently underway.
SGS Metallurgical Services (Lakefield) performed Locked Cycle
Testing on composite material taken from drill core samples across the deposit.
The test produced six final concentrates which showed consistent flake size
distribution and carbon grade. The overall concentrate grade averaged 95%C. A
concentrate which grades 94%C and has a flake size distribution of 80% greater
than +80 mesh is the industry standard premium product. Current prices are
$2,500 to 3,000 per tonne and almost all Bissett Creek production meets this
specification as the final concentrates averaged over 70%, +80 mesh.
Approximately 6% of the concentrate was +100 mesh and 12% was +200 mesh, both
with high carbon content. Less than 10% was very small, -200 mesh flake and
powder with a carbon content in the low 80s.
Most significantly, almost 50% of the graphite concentrate
produced was jumbo size, +48 mesh flake which averaged 98%C with one value as
high as 99.2%C. Test work at SGS has been ongoing for the past year and
culminated with the pilot plant program.
On January 12, 2012, Northern Graphite announced positive pilot
plant test results from its Bissett Creek Graphite Project. The pilot plant has
confirmed the technical viability and operating performance of Northern
Graphite's process plant design for the production of high purity, large flake
graphite. Furthermore, results indicate that 50% of the graphite concentrate
produced will be jumbo size, +48 mesh flake with a very high carbon content
averaging 97.7% graphitic carbon ("Cg"). This is an exceptional product that
will attract a premium price. The pilot plant test was designed, built and
operated by SGS Minerals Services ("SGS") in Lakefield, Ontario. SGS processed a
130 tonne bulk sample of graphitic material from the Bissett Creek deposit in
the pilot plant and produced five final products which showed consistent flake
size distribution and an overall carbon grade averaging 95% Cg. The final
concentrates averaged almost 80%, +80 mesh at 96.7% Cg. Significantly, 50% of
the graphite concentrate produced was jumbo size, +48 mesh flake averaging 97.7%
Cg. Pilot plant recoveries ranged from 90.5% to 94.4 at concentrate grades of
94.5% Cg or greater. Northern announced that it is confident of achieving
recoveries of 94 to 95% in the full scale plant for the following reasons:
-- operation of a pilot plant does not allow enough time to
optimize the process with respect to balancing grinding, retention time and
reagents;
-- due to its small scale, the pilot plant used mechanical
cells for rougher flotation. The full plant will use column flotation which is
more efficient for the recovery of coarse graphite flotation products;
-- the bulk sample showed some signs of surface oxidation that
affected recovery. This will not be a factor in the full scale mining
operation.
-- a coarser final flake concentrate is also expected as a rod
mill was used for primary grinding in laboratory and pilot plant testing whereas
the full scale plant will utilize a SAG Mill which is the best method of
grinding to preserve flake size.
Northern Graphite is planning to complete its Feasibility Study
and expects permitting to be completed in the second quarter of 2012.
Somaliland Project Option Agreement
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 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.
Mindesta has decided to focus 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. As initial steps in executing this strategy, the Company
appointed C. Tucker Barrie Ph.D., P. Geo. as Vice President, Corporate
Development. Dr. Barrie has 20 years of experience in mineral exploration with
expertise in VMS and Ni-Cu-PGE deposits, as well as orogenic gold and porphyry
Cu deposits. He has authored 40 publications, is an adjunct professor at two
Canadian Universities, and is a recognized expert with a great deal of practical
experience in the Arabia/Nubian Shield. Mindesta intends to acquire additional
permits based on Mr. Barries extensive contacts and expertise in the region.
The Nubian Shield encompasses parts of Saudi Arabia, Egypt,
Sudan, Eritrea and Somaliland and is host to many major mineral deposits
including Bisha in Eritrea, Sukari in Egypt, and five gold/base metal mines in
Saudi Arabia that are owned and operated by Maaden Gold, the state mining
company. Somaliland has over 30,000 km
2
of exposed Precambrian rocks.
Extensive sampling and mapping by the British, US and Russians in the 1970s
identified a number of areas that are anomalous in gold, copper, lead, zinc and
nickel. Nubians permits cover the most prospective areas and it initiated a
stream sediment, prospecting and sampling program in September, 2011 to define
potential drill targets. Results are expected in the second quarter of 2012. The
program is being supervised by Remi Bosc who has 15 years of experience as a
mineral exploration, resource and mining geologist in Europe, Africa and
south-east Asia. He started his career with the French Bureau of Geological and
Mining Research (BRGM) and was project geologist during the discovery of the
Tasiast deposit in Mauritania.
While the Companys new strategy is not without risk, the
Company has achieved first mover status in an area of the world which it
believes has very attractive geology and an underappreciated political
situation. Mindesta plans to raise additional financing for its exploration
activities and will investigate seeking a listing in Canada subject to the
completion of all corporate and regulatory requirements and approvals.
Gregory Bowes, CEO and a director of Mindesta, is a major
shareholder of Nubian and therefore the option agreement with Nubian represents
a related party transaction. The transaction was approved by all of the
independent directors of the Company with Mr. Bowes abstaining from voting. The
independent committee approved the transaction following a review of, among
other things:
1. A
geological report by Mr. Tucker Barrie who visited the permits and who is a
Qualified Person under NI 43-101.
2. A
budget and work program proposed by Mr. Remi Bosc who visited the permits and is
a Qualified Person under NI 43-101.
3.
Similar agreements relating to early stage exploration projects in Africa.
The potential acquisition of the balance of Nubians interest
in the permits would be subject to a fairness opinion and to a shareholder vote.
The Republic of Somaliland is located on the Red Sea between
Djibouti to the west, Somalia to the east and Ethiopia to the south. Somaliland
is a former British colony that gained its independence in 1960 and became a
member of the United Nations. Somaliland subsequently agreed to join Italian
Somaliland, in an informal partnership that was never ratified by their
respective parliaments, to form the greater Somalia. Following the collapse of
the Somalia government in 1992, Somaliland withdrew from the partnership and
reasserted its independence. While the rest of the world has not yet officially
recognized Somalilands re-independence”, the Company believes that could happen based on its belief that Somaliland has held three free, fair, and non-violent elections, it jails pirates and extremists, and it is one of the few functioning democracies in Africa and the
Middle East.
ITEM 3 - LEGAL PROCEEDINGS
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.
ITEM 4 - REMOVED AND RESERVED
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Registrant's common stock is traded in the
over-the-counter market under the symbol MDST (OTC Bulletin Board Symbol). The
table below sets forth the high and low bid prices of the Registrant's common
stock for the periods indicated. Such prices are inter-dealer prices, without
mark-up, mark-down or commissions and do not necessarily represent actual sales.
Fiscal Quarter Ending
|
High
|
Low
|
March 31, 2008
|
$1.60
|
$1.40
|
June 30, 2008
|
$1.60
|
$1.20
|
September 30, 2008
|
$0.80
|
$0.40
|
December 31, 2008
|
$0.20
|
$0.20
|
March 31, 2009
|
$1.00
|
$1.00
|
June 30, 2009
|
$0.40
|
$0.40
|
September 30, 2009
|
$0.80
|
$0.80
|
December 31, 2009
|
$0.40
|
$0.20
|
March 31, 2010
|
$0.60
|
$0.20
|
June 30, 2010
|
$0.40
|
$0.20
|
September 30, 2010
|
$0.40
|
$0.20
|
December 31, 2010
|
$0.80
|
$0.20
|
March 31, 2011
|
$2.00
|
$0.80
|
June 30, 2011
|
$1.60
|
$0.60
|
September 30, 2011
|
$1.50
|
$0.50
|
December 31, 2011
|
$0.85
|
$0.36
|
(b) As of December 31, 2011, there were 318 shareholders of
record of the registrant's common stock.
(c) The Registrant has neither declared nor paid any cash
dividends on its common stock, and it is not anticipated that any such dividend
will be declared or paid in the foreseeable future.
Effective August 11, 1993, the Securities and Exchange
Commission (the "Commission") adopted Rule 15g-9, which established the
definition of a "penny stock," for purposes relevant to the Company, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) that the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form,(i)sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) states
that the broker or dealer received a signed, written agreement from the investor
prior to the transaction. Disclosure also has to be made about the risks of
investing in penny stock in both public offerings and in secondary trading, and
about commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.
Equity Compensation Plan Information
|
|
|
(c) Number of securities
|
|
|
|
remaining available for future
|
|
(a) Number of securities to be
|
|
issuance under equity
|
|
issued upon exercise of
|
(b) Weighted average exercise
|
compensation plans (excluding
|
|
outstanding options, warrants
|
price of outstanding options,
|
securities reflected in column
|
Plan Category
|
and rights
|
warrants and rights
|
(a)
|
Equity compensation plans
approved by security holders
|
None
|
n/a
|
n/a
|
Equity compensation plans not approved by
security holders
|
225,000
|
$0.85
|
None
|
Using the Black-Scholes option pricing model, the Company had
stock compensation expense for the year of $155,396.
Dividends
The Company has not paid any cash dividends to date, and has no plans to do so in the immediate future.
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 common stock for each share of Company common stock held. The U.S. Financial Industry Regulatory Authority (“FINRA”) established January 26, 2012 as the ex-dividend date (the “Ex-Dividend Date”) for this
distribution.
ITEM 6 - SELECTED FINANCIAL DATA
As a smaller reporting company, the Company is not required to include this Item.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 Company’s 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 Company’s interest in Northern from
100% to approximately 51%. The Company’s 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. Mr. Robert Dinning CA continued as a director and was also reappointed CFO effective June 23, 2008. In May 2009, Gregory Bowes was appointed as 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 Northern’s 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”.
The Company recognizes that Northern will require substantial additional capital in the future to continue the development of the Bissett Creek Project. While the Company is optimistic such capital can be obtained, there is no assurance that it will
be available or available on terms that are attractive to Northern.
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 common stock for each share of Company common
stock held. 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 Company’s interest in Northern Graphite has
decreased to 0.8% primarily as a result of the distribution of Northern Shares.
Effective January 2nd, 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 Nubian’s 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.
RESULTS OF OPERATIONS
For the year ended December 31, 2011, the Company recorded a gain of $3,738,515, or $0.42 per share, compared to a net loss of $1,097,719 for the year ended December 31, 2010, or $0.13 per share. This net gain during the year ended
December 31, 2011 resulted from the Company recognizing a gain of $6,035,839 on the deconsolidation of its investment holdings in Northern due to the sale of 2,000,000 shares of Northern and the resultant decline in the Company’s 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 years ended December 31, 2011 and 2010. The Company is an exploration stage company and will not have
revenues unless its exploration efforts are successful and one of the properties in which it has an interest is eventually brought into production. For the year ended December 31, 2011, expenses amounted to $757,935 compared to $2,070,144
for the year ended December 31, 2010. There were higher expenses for the year ended December 31, 2010 as the Company consolidated the results of Northern during this period. Management fees and salaries decreased to $179,469 for the year ended
December 31, 2011 compared to $442,666
for the year ended December 31, 2010. Higher fees in 2010 resulted from Northern having initiated exploration activities on the Bissett Creek Project, hired a full time CEO and retained a number of consultants to raise financing and manage its
affairs during the year ended December 31, 2010 and portions of these expenses were included in the Company’s expenses as a result of the Company having consolidated Northern during this period. Included in expenses for the year ended December
31, 2011 were $155,396 in stock compensation expense compared to $154,408 in 2010. Professional fees increased to $262,058 in the year ended December 31, 2011 from $ 176,708 in 2010, due to increased activity levels within the
Company and on the Bissett Creek Project.
The Company currently has no full time employees. It contracts with a number of consultants for management, engineering, technical, administrative and financial services.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash as at December 31, 2011 of $569,378 versus $46,191 as at December 31, 2010, due to the sale of Northern shares and the repayment by Northern of the intercompany revolving loan during the year ended December 31, 2011. On
January 2, 2011, the Company sold 2,000,000 common shares of Northern for CDN $0.50 per share and realized total proceeds of CDN$1,000,000. The Company used these funds to support Northern and keep work going on the Bissett Creek Property
pending the completion of Northern’s IPO.
In 2009, Northern raised C$465,000 in a non-brokered financing with various lenders, including a director of the Company, of senior secured convertible non-interest bearing notes (the “Notes”). A first mortgage and security interest
over all of the assets of Northern, including Bissett Creek was granted to 2221862 Ontario Inc., a company incorporated and controlled by a Director of the Company and of Northern, to hold the security on behalf of the Note holders as well as to
hold the proceeds from sale of the Notes in trust, and to distribute such proceeds to Northern as required to cover the costs that were to be incurred in connection with a proposed going public transaction and financing and to pay existing and
future expenses which were critical and necessary to keep Northern functional and solvent and protect its assets. In the first quarter of 2010 the principal amount of the Notes was increased to C$600,000 to provide additional working capital,
the Notes were converted to units of Northern pursuant to their terms and the completion of the private placements described herein, and the security interest was released.
On February 15, 2010 a lender agreed to a settlement of C$95,000 in cash plus 160,000 units of Northern as per the private placement terms, in settlement of loans payable plus accrued interest. On February 15, 2010, the Company settled a loan
payable of $161,000 through the issuance of a $150,000 non-interest bearing note with a term of one year. Subsequent to the end of the year, the $150,000 loan was extended for one year at an interest rate of 10% and is repayable in the
event that Northern completes an IPO of at least CDN $2,000,000. In addition, the lender received a cash payment of C$35,000 on other loans due plus 140,000 units of Northern as per the private placement terms. Another loan payable of
US$105,072 (C$110,000) plus accrued interest was settled through the payment of C$125,000 (US$119,400) plus the issuance of 100,000 units of Northern as per the private placement terms.
An outstanding loan of $385,665 was settled through the issuance of 1,091,600 shares of the Company in the second quarter of 2010. In the second quarter the Company also agreed to settle $83,195 in payables through the issuance of 75,000
common shares.
In March, 2010, Northern completed a number of non-brokered private placement financings consisting of the issuance of 7,327,000 units at a price of C$0.25 per unit, each unit being comprised of one common share and one common share purchase
warrant exercisable at a price of C$0.35 per share for a period of 18 months from the date upon which Northern or its successor becomes a reporting issuer in a jurisdiction of Canada. Gross proceeds were C$1,831,750. In addition, Northern
had increased the capital raised through the issuance of the Notes to C$600,000 and the Notes, pursuant to their terms, automatically converted into 3,428,571 units upon the closing of the private placement at a conversion price of $0.175
per unit, each unit consisting of one common share and one common share purchase warrant exercisable at a price of C$0.245 per share for a period of 18 months from the date upon which Northern or its successor becomes a reporting issuer in a
jurisdiction of Canada. In addition, Northern issued 400,000 units, with the same terms, as part of debt settlement agreements with three creditors. In the second quarter of 2010 Northern issued an additional 31,354 common shares to settle claims
against the Company.
As a result of the private placements, the conversion of the Notes and the debt settlements, Northern issued a total of 11,186,925 common shares, and 11,155,571 common share purchase warrants
Effective March 1st, 2011, the Company and Northern entered an intercompany revolving loan agreement whereby all amounts due from Northern to the Company would be provided under a $600,000 credit facility. It is repayable in two years, unless an
IPO of at least $3,000,000 was completed by Northern before such date. In this case, the Company could demand repayment immediately. The credit facility bore interest from March 1st, 2011 at an annual rate of 7.5 per cent, is payable annually,
and has since been repaid in full.
Northern has a long-term deposit with the Ministry of Finance for the Province of Ontario to ensure that enough funds are available to affect the proper reclamation and closure of the Bissett Creek Property. Northern’s initial deposit in 2004
amounted to C$288,363 and since that time accrued interest has increased the deposit to $316,219 as at December 31, 2011.
The funding raised by the Company and its non-consolidated affiliate, Northern, is sufficient to pay operating and administrative costs for the time being. However, both the Company and Northern require additional funding to continue operations.
Mindesta will require additional financing to continue planned exploration activities and Northern will require substantial additional financing for construction of a mine on the Bissett Creek Property and there is no assurance that such financing
will be available or will be available on terms acceptable to the Company or Northern.
CRITICAL ACCOUNTING ESTIMATES
The consolidated financial statements of Mindesta, Inc. are prepared in conformity with GAAP, which requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the periods presented. Mindesta, Inc.'s accounting policies are described in Note
2 to the consolidated financial statements. Critical accounting estimates are described in this
section. An accounting estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made, different estimates reasonably could have been used, or if
changes in the estimate that would have a material impact on the Company’s financial condition or results of operations are reasonably likely to occur from period to period. Management believes that the accounting estimates employed are
appropriate and resulting balances are reasonable. However, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The Company has discussed the development, selection and disclosures of
these critical accounting estimates with the Audit Committee and the Board of Directors, and the Audit Committee has reviewed the Company's disclosures relating to these estimates.
GOING CONCERN
The Company's 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 gain attributable to the Company of $3,738,515 and a loss
from operations of $757,935 for the year ended December 31, 2011. The Company’s net gain for this period included a gain on deconsolidation of $6,035,839. The Company has had recurring losses and an accumulated deficit of
$11,993,473 since inception. The Company’s 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 and Northern believe that they 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 Company's 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 Company's assets occur. The
accompanying financial statements do not include any adjustments that might result if the going concern assumption is not valid.
IMPAIRMENT OF LONG-LIVED ASSETS
Mindesta periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of when events and circumstances warrant such a review. This review
is performed using estimates of future cash flows as well as industry and market conditions and the Company’s future development plans. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the long-lived asset exceeds its fair value.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Mindesta Inc.
We have audited the accompanying balance sheets of Mindesta Inc. as of December 31, 2011 and 2010, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three year
period ended December 31, 2011. Mindesta Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mindesta Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years
in the three year period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company is in the exploration stage, has no
established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. These factors, along with other matters as set forth in Note 2, raise substantial doubt that the Company will be
able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
March 15, 2012
|
|
Vancouver, British Columbia
|
Chartered Accountants
|
|
|
|
ACCOUNTING CONSULTING TAX
2300, 1055 DUNSMUIR STREET, BOX 49148, VANCOUVER, BC V7X 1J1
1.877.688.8408 P: 604.685.8408 F: 604.685.8594 mnp.ca
|
Mindesta Inc.
(formerly Industrial Minerals Inc.)
(an exploration stage company)
Balance Sheets
|
|
As at
|
|
|
As at
|
|
|
|
December 31
|
|
|
December 31
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
( note 1c
|
)
|
|
(note 1c
|
)
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
569,378
|
|
|
46,191
|
|
Receivables
|
|
151
|
|
|
165,854
|
|
Due from related
parties (note 8)
|
|
145,113
|
|
|
-
|
|
Prepaid expenses and deposits
|
|
36,092
|
|
|
174,570
|
|
Deferred costs
|
|
-
|
|
|
133,047
|
|
Total current assets
|
|
750,734
|
|
|
519,662
|
|
Investment in
non-consolidated affiliate (notes 1c, 3)
|
|
3,432,261
|
|
|
-
|
|
Reclamation deposit (note 6)
|
|
-
|
|
|
316,218
|
|
Fixed assets (note 5)
|
|
-
|
|
|
426,396
|
|
Total assets
|
|
4,182,995
|
|
|
1,262,276
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
452,473
|
|
|
746,696
|
|
Other payable
|
|
-
|
|
|
48,016
|
|
Loans payable (note 7)
|
|
-
|
|
|
150,000
|
|
Dividend payable (note 11)
|
|
3,274,072
|
|
|
-
|
|
Total current liabilities
|
|
3,726,545
|
|
|
944,712
|
|
Asset retirement obligations (note 6)
|
|
-
|
|
|
316,218
|
|
Total liabilities
|
|
3,726,545
|
|
|
1,260,930
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
Common stock 200,000,000
shares authorized, $0.0001 par value; 9,300,634 shares issued and
outstanding (note 5)
|
|
18,592
|
|
|
17,767
|
|
Additional paid-in capital
|
|
12,537,316
|
|
|
12,228,245
|
|
Accumulated other
comprehensive income
|
|
(105,985
|
)
|
|
(105,985
|
)
|
Deficit accumulated during exploration stage (note 11)
|
|
(11,993,473
|
)
|
|
(12,457,916
|
)
|
|
|
456,450
|
|
|
(317,889
|
)
|
Non-controlling interest (note 3)
|
|
-
|
|
|
319,235
|
|
Total stockholders' equity
|
|
456,450
|
|
|
1,346
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
4,182,995
|
|
|
1,262,276
|
|
Nature of operations and going
concern (note 1b)
|
|
|
|
|
|
|
Commitments and
contingencies (note 7)
|
|
|
|
|
|
|
Subsequent event (note 13)
|
|
|
|
|
|
|
See accompanying notes to financial statements
Approved by Board:
|
(signed) Gregory Bowes
|
(signed) Cam Birge
|
|
Director
|
Director
|
F16
Mindesta Inc.
(formerly Industrial Minerals Inc.)
(an exploration stage company)
Statements of Operations and
Deficit
|
|
Year ended
December 31
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
(note 1c
|
)
|
|
(note 1c
|
)
|
General and administrative
expenses
|
|
|
|
|
|
|
Professional fees
|
|
262,058
|
|
|
176,708
|
|
Royalties
|
|
-
|
|
|
26,214
|
|
Depreciation and amortization
|
|
-
|
|
|
70,365
|
|
Management fees and salaries
(note 8)
|
|
179,469
|
|
|
442,666
|
|
Exploration expense
|
|
-
|
|
|
1,044,717
|
|
General and administration
|
|
316,408
|
|
|
309,474
|
|
|
|
757,935
|
|
|
2,070,144
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(757,935
|
)
|
|
(2,070,144
|
)
|
Interest and other income
|
|
6,671
|
|
|
18,611
|
|
Foreign exchange loss
|
|
(19,021
|
)
|
|
(28,861
|
)
|
Gain on debt settlement (note
|
|
-
|
|
|
487,222
|
|
Net loss attributable to non-controlling
interest
|
|
-
|
|
|
495,453
|
|
Gain on partial disposal of
subsidiary (note 3)
|
|
6,035,839
|
|
|
-
|
|
Loss attributable to equity investee (note 3)
|
|
(1,518,789
|
)
|
|
-
|
|
Gain (loss) on revaluation of debt
|
|
(8,250
|
)
|
|
-
|
|
Income (loss) for the year
|
|
3,738,515
|
|
|
(1,097,719
|
)
|
|
|
|
|
|
|
|
Net earnings (loss) per share basic
|
|
0.42
|
|
|
(0.13
|
)
|
Weighted average number of common shares outstanding
basic (note 5)
|
|
8,920,635
|
|
|
8,472,833
|
|
Net earnings (loss) per share fully diluted
|
|
0.40
|
|
|
(0.13
|
)
|
Weighted average number of common shares outstanding
fully diluted (note 5)
|
|
9,492,485
|
|
|
8,472,833
|
|
See accompanying notes to financial statements
F17
Mindesta Inc.
(formerly Industrial Minerals
Inc.)
(an exploration stage company)
Statements of Cash Flows
|
|
Year ended December
31
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
(note 1c
|
)
|
|
(note 1c
|
)
|
Cash provided by (used
in)
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
Income (loss) for the year
|
|
3,738,515
|
|
|
(1,097,719
|
)
|
Depreciation and amortization
|
|
-
|
|
|
70,365
|
|
Stock-based compensation
|
|
155,396
|
|
|
154,408
|
|
Gain on settlement of accounts payable
|
|
-
|
|
|
(18,611
|
)
|
Gain on debt settlement
|
|
-
|
|
|
(487,222
|
)
|
Net loss attributable to non-controlling
interest
|
|
-
|
|
|
(495,453
|
)
|
Gain on deconsolidation
|
|
(6,035,839
|
)
|
|
-
|
|
Equity loss pick-up
|
|
1,518,789
|
|
|
-
|
|
(Gain) loss on amounts due to
related party
|
|
8,250
|
|
|
-
|
|
Changes in non-cash operating working
capital:
|
|
|
|
|
|
|
Receivables
|
|
-
|
|
|
(157,851
|
)
|
Due from affiliate
|
|
(16,147
|
)
|
|
-
|
|
Prepaid expenses
and deposits
|
|
(19,659
|
)
|
|
(174,571
|
)
|
Accounts payable and accrued liabilities
|
|
334,563
|
|
|
532,052
|
|
|
|
(316,132
|
)
|
|
(1,674,602
|
)
|
Financing activities
|
|
|
|
|
|
|
Proceeds from issuance of
notes
|
|
-
|
|
|
132,922
|
|
Due to related party
|
|
-
|
|
|
(106,536
|
)
|
Change in notes payable
|
|
(138,938
|
)
|
|
-
|
|
Advances to related party
|
|
-
|
|
|
-
|
|
Loan repayments
|
|
-
|
|
|
(241,002
|
)
|
Deferred costs
|
|
-
|
|
|
(133,047
|
)
|
Net proceeds from sale of
common stock of subsidiary
|
|
-
|
|
|
1,797,288
|
|
Proceeds from the exercise of options
|
|
101,250
|
|
|
-
|
|
|
|
(37,688
|
)
|
|
1,449,625
|
|
Investing activities
|
|
|
|
|
|
|
Due from related party
|
|
(128,393
|
)
|
|
-
|
|
Proceeds from the sale of shares of affiliate (Note 3)
|
|
1,005,400
|
|
|
-
|
|
|
|
877,007
|
|
|
-
|
|
Net increase (decrease) in cash and cash equivalents
|
|
523,187
|
|
|
(224,977
|
)
|
Cash and cash equivalents, beginning of period
|
|
46,191
|
|
|
271,168
|
|
Cash and cash equivalents, end of period
|
|
569,378
|
|
|
46,191
|
|
Non-cash transactions
|
|
|
|
|
|
|
Shares issued for the settlement of accounts
payable
|
|
-
|
|
|
155,423
|
|
Shares issued for the
settlement of amounts due to related parties
|
|
53,250
|
|
|
-
|
|
Shares issued for settlement of debt
|
|
-
|
|
|
16,374
|
|
|
|
|
|
|
|
|
Supplementary information
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
-
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
See accompanying notes to financial statements
F18
Mindesta Inc.
(formerly Industrial Minerals
Inc.)
(An exploration stage company)
STATEMENT OF
STOCKHOLDERS' EQUITY
For the period from November 6, 1996 (Date of
Inception of Exploration Stage) to December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Accumulated
|
|
|
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During
|
|
|
Other
|
|
|
Non
|
|
|
Stock
|
|
|
Stockholders'
|
|
|
|
Number
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Exploration
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
Subscriptions
|
|
|
Equity
|
|
|
|
of Shares
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Income
|
|
|
Interest
|
|
|
Received
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception - November 6, 1996
- See Note A below
|
|
-
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
Balance at December 31, 1998
|
|
15,678
|
|
|
40,928
|
|
|
76
|
|
|
505,092
|
|
|
(750,830
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(245,662
|
)
|
Issuance of common stock for
cash
|
|
1,500
|
|
|
4,500
|
|
|
9
|
|
|
146,612
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
146,621
|
|
Issuance of common stock for services
|
|
2,750
|
|
|
8,250
|
|
|
17
|
|
|
274,983
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
275,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(259,404
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(259,404
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 1999
|
|
19,928
|
|
|
53,678
|
|
|
102
|
|
|
926,687
|
|
|
(1,010,234
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(83,445
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
4,245
|
|
|
12,735
|
|
|
25
|
|
|
413,045
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
413,070
|
|
Issuance of common stock for
services
|
|
3,500
|
|
|
10,500
|
|
|
21
|
|
|
349,979
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
350,000
|
|
Issuance of common stock for Multiplex stock
|
|
150
|
|
|
450
|
|
|
1
|
|
|
29
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30
|
|
Issuance of common stock for
acquisition
|
|
23,773
|
|
|
71,319
|
|
|
143
|
|
|
4,603
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(694,758
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(694,758
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2000
|
|
51,596
|
|
|
148,682
|
|
|
292
|
|
|
1,694,343
|
|
|
(1,704,992
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10,357
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
compensation
|
|
1,500
|
|
|
4,500
|
|
|
9
|
|
|
59,991
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(67,251
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(67,251
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2001
|
|
53,096
|
|
|
153,182
|
|
|
301
|
|
|
1,754,334
|
|
|
(1,772,243
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,608
|
)
|
Issuance of common stock re acquisition of
Industrial Minerals Incorporated
|
|
1,750,000
|
|
|
5,250,000
|
|
|
10,500
|
|
|
(1,747,393
|
)
|
|
1,696,982
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(39,911
|
)
|
Minimum 50 shares post- split
allocation
|
|
1,538
|
|
|
4,614
|
|
|
6
|
|
|
(6
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(520,242
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(520,242
|
)
|
See accompanying notes to financial statements
F19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Accumulated
|
|
|
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During
|
|
|
Other
|
|
|
Non
|
|
|
Stock
|
|
|
Stockholders'
|
|
|
|
Number
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Exploration
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
Subscriptions
|
|
|
Equity
|
|
|
|
of Shares
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Income
|
|
|
Interest
|
|
|
Received
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2002
|
|
1,804,634
|
|
|
5,407,796
|
|
|
10,807
|
|
|
6,935
|
|
|
(595,503
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(577,761
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum 50 shares post- split
allocation
|
|
16
|
|
|
49
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,133,197
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,133,197
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
3,603,195
|
|
|
5,407,845
|
|
|
10,807
|
|
|
6,935
|
|
|
(1,728,700
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,710,958
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation on round-up of
shares
|
|
0
|
|
|
0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock in settlement of
debt
|
|
174,606
|
|
|
174,606
|
|
|
349
|
|
|
4,190,189
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,190,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(561,153
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(561,153
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
5,582,451
|
|
|
5,582,451
|
|
|
11,156
|
|
|
4,197,124
|
|
|
(2,289,853
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,918,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,844,219
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,844,219
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
5,582,451
|
|
|
5,582,451
|
|
|
11,156
|
|
|
4,197,124
|
|
|
(4,134,072
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
74,208
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
10,000
|
|
|
10,000
|
|
|
20
|
|
|
69,640
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
69,660
|
|
Issuance of common stock in
settlement of debt
|
|
312,791
|
|
|
312,791
|
|
|
625
|
|
|
1,876,118
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,876,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,255,584
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,255,584
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
5,905,242
|
|
|
5,905,242
|
|
|
11,801
|
|
|
6,142,882
|
|
|
(5,389,656
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
765,027
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
cash
|
|
659,685
|
|
|
659,685
|
|
|
1,319
|
|
|
1,569,486
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,570,805
|
|
Issuance of common stock for services
|
|
320,350
|
|
|
320,350
|
|
|
641
|
|
|
641,976
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
642,617
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
-
|
|
|
446,853
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
446,853
|
|
Foreign Currency Translation
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(105,985
|
)
|
|
-
|
|
|
-
|
|
|
(105,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
1,804,634
|
|
|
5,407,796
|
|
|
-
|
|
|
-
|
|
|
(2,761,455
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,761,455
|
)
|
See accompanying notes to financial statements
F20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Accumulated
|
|
|
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During
|
|
|
Other
|
|
|
Non
|
|
|
Stock
|
|
|
Stockholders'
|
|
|
|
Number
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Exploration
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
Subscriptions
|
|
|
Equity
|
|
|
|
of Shares
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Income
|
|
|
Interest
|
|
|
Received
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
6,885,277
|
|
|
6,885,277
|
|
|
13,761
|
|
|
8,801,197
|
|
|
(8,151,111
|
)
|
|
(105,985
|
)
|
|
-
|
|
|
-
|
|
|
557,862
|
|
Issuance of common stock for cash
|
|
-
|
|
|
462,447
|
|
|
925
|
|
|
484,275
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(265,000
|
)
|
|
220,200
|
|
Issuance of common stock for
services
|
|
-
|
|
|
630,250
|
|
|
1,261
|
|
|
445,439
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
446,700
|
|
Stock compensation expense
|
|
-
|
|
|
|
|
|
-
|
|
|
176,427
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
176,427
|
|
Common stock subscriptions
received
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
265,000
|
|
|
265,000
|
|
Issuance of common stock for settlement of
debt
|
|
-
|
|
|
62,500
|
|
|
125
|
|
|
64,875
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,579,801
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,579,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
-
|
|
|
8,040,474
|
|
|
16,072
|
|
|
9,972,214
|
|
|
(9,730,913
|
)
|
|
(105,985
|
)
|
|
-
|
|
|
-
|
|
|
151,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
-
|
|
|
125,000
|
|
|
250
|
|
|
49,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Stock compensation expense
|
|
-
|
|
|
|
|
|
-
|
|
|
179,221
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
179,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,629,281
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,629,281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
-
|
|
|
8,165,474
|
|
|
16,322
|
|
|
10,201,185
|
|
|
(11,360,194
|
)
|
|
(105,985
|
)
|
|
-
|
|
|
-
|
|
|
(1,248,672
|
)
|
Issuance of common stock for services and
debt settlement
|
|
-
|
|
|
722,660
|
|
|
1,445
|
|
|
215,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,798
|
|
Net Loss
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(1,097,722
|
)
|
|
-
|
|
|
(495,451
|
)
|
|
-
|
|
|
(1,593,173
|
)
|
Gain in dilution in interest of subsidiary
|
|
-
|
|
|
|
|
|
|
|
|
1,657,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,657,299
|
|
NCI pickup on dilution in
interest of subsidiary
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
814,686
|
|
|
-
|
|
|
814,686
|
|
Stock compensation expense
|
|
-
|
|
|
|
|
|
-
|
|
|
154,408
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
154,408
|
|
Consolidated Balance at
December 31, 2010
|
|
-
|
|
|
8,888,134
|
|
|
17,767
|
|
|
12,228,245
|
|
|
(12,457,916
|
)
|
|
(105,985
|
)
|
|
319,235
|
|
|
-
|
|
|
1,346
|
|
See accompanying notes to financial statements
F21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Accumulated
|
|
|
Non
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During
|
|
|
Other
|
|
|
Controlling
|
|
|
Stock
|
|
|
Stockholders'
|
|
|
|
Number
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Exploration
|
|
|
Comprehensive
|
|
|
Interest
|
|
|
Subscriptions
|
|
|
Equity
|
|
|
|
of Shares
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Income
|
|
|
|
|
|
Received
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance subsequent to 1:20
stock consolidation
|
|
|
|
|
8,888,134
|
|
|
17,767
|
|
|
12,228,245
|
|
|
(12,457,916
|
)
|
|
(105,985
|
)
|
|
319,235
|
|
|
-
|
|
|
1,346
|
|
Issuance of common stock for debt
|
|
|
|
|
75,000
|
|
|
150
|
|
|
53,100
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
53,250
|
|
Issuance of common stock
pursuant to the exercise of stock options
|
|
|
|
|
337,500
|
|
|
675
|
|
|
100,575
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
101,250
|
|
Stock compensation expense
|
|
|
|
|
-
|
|
|
-
|
|
|
155,396
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
155,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(770,285
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(770,285
|
)
|
Gain on deconsolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,035,839
|
|
|
|
|
|
|
|
|
|
|
|
6,035,839
|
|
Equity loss pickup
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,518,789
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,518,789
|
)
|
Loss on due to related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,250
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,250
|
)
|
NCI pickup on dilution in interest in
subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(319,235
|
)
|
|
|
|
|
(319,235
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,274,072
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,274,072
|
)
|
Non- consolidated Balance at December 31,
2011
|
|
|
|
|
9,300,634
|
|
|
18,592
|
|
|
12,537,316
|
|
|
(11,993,473
|
)
|
|
(105,985
|
)
|
|
-
|
|
|
-
|
|
|
456,450
|
|
See accompanying notes to financial statements
The number of common shares used in this statement is
accounted for after giving effect to the 20:1 stock consolidation on July 29,
2011 (note 6 B.)
F22
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
NOTE 1 - BASIS OF PRESENTATION
(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 carried out through the Companys 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, has reduced the Companys ownership to 26.1% as at December
31, 2011. 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) Nature of Operations and Going Concern
The Company had a 26.1% interest in Northern as at December 31,
2011, which owns 100% of the mineral rights to the Bissett Creek Property which
is located in the Province of Ontario, Canada. The primary focus of Company and
the sole focus of Northern is the potential development of the Bissett Creek
Property. Northern is in the process of completing its Feasibility Study and has
initiated the environmental and mine permitting processes with the objective of
making a construction decision in the first half of 2012, subject to financing.
Subsequent to the end of 2011 the Company distributed most of its shares of
Northern to its shareholders and has made a strategic decision to focus on
mineral exploration in east Africa (see note 13).
The Company is an Exploration Stage Company that incurred a net
gain of $3,738,515 for the year ended December 31, 2011 (2010 - $1,097,719) and
has an accumulated deficit of $11,974,973 since the inception of the Company.
Excluding a non-cash dividend payable of $3,274,072 that will not be paid from
current assets, current assets exceed current liabilities by $298,262. 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 Company and Northern have raised additional capital to settle
loans and payables and to advance the Bissett Creek Property but the Companys
investment in Northern is dependent on Northern receiving substantial additional
financing to ultimately build a mine and processing plant on the Bissett Creek
Property and Company will require significant financing to continue its
operations and fund planned exploration 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 its endeavors.
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.
NOTE 2 - ACCOUNTING POLICIES
(a) Basis of Accounting and Consolidation
As a result of the Company having reduced its ownership of
Northern to an amount less than majority ownership as at January 7
th
,
2011, the Company deconsolidated its interest in Northern and has presented its
ownership in Northern according to the equity method of accounting until
December 12, 2011 when the Company declared a dividend of most of its investment
in Northern and as a result, no longer exerted significant influence over the
investee. The financial statements have therefore been prepared on a
non-consolidated basis for the periods ending December 31, 2011, whereas the
financial statements and interim financial statements of the Company for the
periods ending December 31, 2010 and the notes thereto have been prepared on a
consolidated basis.
F23
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
In June 2009, the FASB issued authoritative guidance (which was
codified into ASC Topic 810, "Consolidation" with the issuance of ASU No.
2009-17) that requires a primarily qualitative analysis to determine if an
enterprise is the primary beneficiary of a variable interest entity. This
analysis is based on whether the enterprise has (a) the power to direct the
activities of the variable interest entity that most significantly impact the
entity's economic performance and (b) the obligation to absorb losses of the
entity or the right to receive benefits from the entity that could potentially
be significant to the variable interest entity. In addition, enterprises are
required to more frequently reassess whether an entity is a variable interest
entity and whether the enterprise is the primary beneficiary of the variable
interest entity. In accordance with this guidance, the Company has determined
that it has no obligation to absorb losses of Northern or the right to receive
benefits from Northern that could potentially be significant to the variable
interest entity and accordingly, Northern was deconsolidated in January of 2011
and is being accounted for under the equity method of accounting up until
December 12, 2011 upon which the Company no longer exerted significant influence
on Northern. The deconsolidation of Northern resulted in a decrease in assets,
liabilities and non-controlling interest as of January 1, 2011 of $1,205,663,
$1,084,783 and $319,235, respectively. These changes included the
deconsolidation of: (a) mine reclamation deposit totaling $316,218; (b)
property, plant and equipment, net totaling $426,396; and (c) asset retirement
obligation liabilities totaling $316,218. The Company recognized a gain on its
deconsolidation of $6,035,839. The portion of this gain related to the
remeasurement of retained investment in Northern related to its fair value was
$4,714,873. Fair value was determined using the share price of $0.50 received in
proceeds in the Companys sale of shares in the deconsolidation transaction with
a non-related party. Additionally, as a result of Mindestas investment in
Northern being accounted for under the equity method, an investment of
$11,069,565 was recorded on January 1, 2011.
The Company accounts for non-marketable investments using the
equity method of accounting if the investment gives it the ability to exercise
significant influence over, but not control of, an investee. Significant
influence generally exists if there is an ownership interest representing
between 20% and 50% of the voting stock of the investee. Under the equity method
of accounting, investments are stated at initial cost and are adjusted for
additional investments and their proportionate share of earnings or losses and
distributions. The Company records its share of the investees earnings or
losses in earnings (losses) from unconsolidated entities, net of income taxes,
in its consolidated statements of operations. Equity investments of less than
20% are stated at cost. The cost is not adjusted for its proportionate share of
earnings or losses. The Company evaluates its equity method investments for
impairment when events or changes in circumstances indicate, in managements
judgment, that the carrying value of such investments may have experienced an
other-than-temporary decline in value. When evidence of loss in value has
occurred, the Company compares fair value of the investment to its carrying
value to determine whether impairment has occurred. If the estimated fair value
is less than the carrying value and management considers the decline to be other
than temporary, the excess of the carrying value over the estimated fair value
is recognized as impairment in the consolidated financial statements.
Investments in non-consolidated affiliates consist of the
Companys ownership interest in Northern Graphite Corporation.
(b) Cash and Cash Equivalents
Cash and cash equivalents include bank balances, funds held in
trust with lawyers, and short term investments that are readily convertible into
cash with original maturities of three months or less.
(c) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities at the
date of the financial statements, and revenues and expenses for the period. By
their nature, these estimates and judgments are subject to management
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant. Significant estimates and
judgments include those relating to the assessment of the Companys ability to
continue as a going concern, estimates to determine whether impairment of long
lived assets is required, asset retirement obligations, the fair value of stock
options, depreciation rates and estimated useful lives of buildings and
equipment, and the recognition of deferred tax balances. Actual results may
differ from those estimates and judgments.
F24
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(d) Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets, from 3 to 20 years. Significant improvements are capitalized, while
expenditures for maintenance, repairs and replacements are charged to expense as
incurred. Upon disposal of depreciable property, the appropriate property
accounts are reduced by the related costs and accumulated depreciation and gains
and losses are reflected in the statements of operations.
(e) Long-Lived Assets
The Company monitors the recoverability of long-lived assets
based on factors such as current market value, future asset utilization,
business climate and future undiscounted cash flows expected to result from the
use of the related assets. The Company records an impairment loss in the period
it is determined that the carrying amount of the asset may not be recoverable.
The impairment loss is calculated as the amount by which the carrying value of
the asset exceeds its fair value.
(f) Basic and Diluted Loss Per Share
Basic loss per share was computed by dividing the amount of the
loss for the period by the weighted average number of common shares outstanding
during the period. Diluted loss per share is calculated using the treasury stock
method, whereby the weighted average number of shares outstanding used in the
calculation assumes that the deemed proceeds received from the exercise of stock
options that are in the money would be used to repurchase common shares of the
Company at the average market price during the year. Existing stock options have
not been included in the computation of diluted loss per share as they are
anti-dilutive, and therefore, basic and diluted loss per share amounts are the
same.
(g) Comprehensive Income (Loss)
The Company adopted ASC 220 (formerly SFAS No. 130),
Comprehensive Income. ASC 220 establishes standards for reporting and
presentation of comprehensive income (loss) and its components in a full set of
financial statements. Comprehensive income (loss) is presented in the
consolidated financial statements of operations and foreign currency translation
adjustments. ASC 220 requires only additional disclosures in the consolidated
financial statements and does not affect the Companys financial position or
results of operations.
(h) Fair Value of Financial Instruments
On July 1, 2008, the Company adopted SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS
159 permits entities to choose to measure many financial instruments and certain
other assets and liabilities at fair value on an instrument-by-instrument basis
(fair value option) with changes in fair value reported in earnings. The
adoption of SFAS 159 had no impact on the financial statements as management did
not elect the fair value option for any other financial instruments or other
assets and liabilities.
Fair Value Measurements
FASB ASC 820 (formerly SFAS 157) defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. This standard is now the single source in
GAAP for the definition of fair value, except for the fair value of leased
property as defined in SFAS 13. ASC 820 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and (2) an
entitys own assumptions about market participant assumptions developed based on
the best information available in the circumstances (unobservable inputs). The
fair value hierarchy consists of three broad levels, which gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1
|
Unadjusted quoted prices in active markets that
are accessible at the measurement date for identical, unrestricted assets
or liabilities.
|
|
|
Level 2
|
Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets or liabilities in
active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted
prices that are observable for the asset or liability (e.g., interest rates); and
inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
|
|
|
Level 3
|
Inputs that are both significant to the fair
value measurement and unobservable.
|
F25
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
As required by ASC 820, assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the
fair value measurement. Cash and accounts receivable (level 1), accounts
payable, loans payable, notes payable, and due to related parties (level 2) are
reflected in the consolidated balance sheets at carrying value, which
approximates fair value due to the short-term nature of these instruments.
(i) Income Taxes
The Company uses the asset and liability method of accounting
for income taxes. Under this method deferred income tax assets and liabilities
are determined based on differences between the financial statement carrying
values of existing assets and liabilities and their respective income tax bases
(temporary differences), and losses carried forward. Deferred income tax assets
and liabilities are measured using the enacted tax rates which will be in effect
when the temporary differences are likely to reverse. The effect on deferred
income tax assets and liabilities of a change in tax rates is included in
operations in the period in which the change is enacted. The amount of deferred
income tax assets recognized is limited to the amount of the benefit that is
more likely than not to be realized.
(j) Translation of Foreign Currencies
The functional currencies of the Company and its subsidiary
have been determined to be the U.S. dollar. The assets and liabilities of the
subsidiary located outside of the United States are translated in U.S. dollars
at the rates of exchange at the balance sheet dates. Revenue and expense items
are translated at the rate of exchange in effect on the transaction date.
Foreign currency transaction gains or losses are reflected in the results of
operations.
(k) Asset Retirement Obligations
The fair value of an asset retirement obligation is recorded in
the period in which it is incurred. When the liability is initially recorded,
the cost is capitalized by increasing the carrying amount of the related
long-lived asset. Over time, the liability is adjusted to reflect the passage of
time (accretion expense) and for changes in estimated future cash flows.
Accretion expense is charged to the statement of operations, while adjustments
related to changes in estimated cash flows are recorded as increases or
decreases in the carrying value of the asset. The capitalized cost is amortized
over the useful life of the related asset. Upon settlement of the liability, a
gain or loss is recorded if the actual costs incurred are different from the
liability recorded.
(l) Recent 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. The Company does not anticipate this guidance having a
material effect on its financial condition, results of operation, or cash flows.
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. The
Company does not anticipate this guidance having a material effect on its
financial condition, results of operation, or cash flows.
F26
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
Exchange Rates & U.S. Dollar
All assets and liabilities are translated using period-end
exchange rates. Statements of operations items are translated using average
exchange rates for the period. The resulting translation adjustment is recorded
within accumulated other comprehensive loss, a separate component of
stockholders' equity. Foreign currency transaction gains and losses are
recognized in the consolidated statements of operations, including unrealized
gains and losses on short-term inter-company obligations using period-end
exchange rates. Unrealized gains and losses on long-term inter-company
obligations are recognized within accumulated other comprehensive loss, a
separate component of stockholders' equity.
Exchange gains and losses are primarily the result of
fluctuations in currency rates between the U.S. dollar (the functional reporting
currency) and the Canadian dollar (currency of the foreign non-consolidated
affiliate in which the Company has an investment), as well as their effect on
the dollar denominated inter-company obligations between the Company and the
foreign non-consolidated affiliate in which the Company has an investment. All
inter-company balances are revolving in nature and are not deemed to be
long-term balances. For the year ended December 31, 2011 and 2010, foreign
currency losses of $19,021 and $28,861, respectively, were recognized.
NOTE 3 - INVESTMENT IN NON-CONSOLIDATED AFFILIATE
On January 7, 2011, the Company sold 2,000,000 common shares of
Northern for CDN $0.50 per share and realized total proceeds of CDN$1,000,000.
Due to the reduction in the Companys interest in Northern arising from this
transaction, the results of Northern are no longer consolidated. The Company
recognized a gain on deconsolidation of $6,035,839, of which $5,835,457 related
to the remeasurement of the Companys retained investment in the former
subsidiary to its fair value. Subsequent to deconsolidation Northern remains a
related party by way of directors and officers in common.
As at December 31, 2011, the Company owned 9,750,000 common
shares of Northern which represents a 26.1% interest. If all of Northerns
warrants were exercised the Companys interest in Northern would be 22.9% . The
estimated fair value of this investment at December 31,2011was $8,872,500 based
on the quoted trading price of these shares on the Toronto Stock Exchange. The
carrying value of this investment is as follows:
Investment
|
|
$
|
|
Non-consolidated balance at
December 31, 2010
|
|
11,069,565
|
|
Proceeds from sale of investment
|
|
(1,005,400
|
)
|
Retained deficits of Northern
Graphite
|
|
(11,148,954
|
)
|
Gain on deconsolidation
|
|
6,035,839
|
|
Equity pickup for year ending December 31, 2011
|
|
(1,518,789
|
)
|
Non-consolidated balance at December 31, 2011
|
|
3,432,261
|
|
The following presents unaudited summary financial information
for Northern.
|
|
December 31, 2011
|
|
|
|
$ CDN
|
|
Current assets
|
|
2,189,747
|
|
Non-current assets
|
|
4,244,352
|
|
Current liabilities
|
|
(459,669
|
)
|
Non-current liabilities
|
|
(317,041
|
)
|
Equity
|
|
(5,657,389
|
)
|
NOTE 4 - NORTHERN GRAPHITE CORPORATION FINANCINGS
In the fourth quarter of 2009, Northern raised C$465,000 in a
non brokered financing consisting of senior secured convertible non-interest
bearing notes (the Notes) to keep Northern and the Company solvent and to pay
the costs of attempting to raise financing and take Northern public in Canada.
The Notes were secured by a security interest over all of the assets of
Northern, including the mineral claims and the mining lease comprising the
Bissett Creek Property. During the first quarter of 2010, the amount of the
Notes was increased to C$600,000 and pursuant to their terms they automatically
converted into 3,428,571 units, upon the closing of various private placements,
at a conversion price of $0.175 per unit, each unit consisting of one common
share and one common share purchase warrant exercisable at a price of C$0.245 per share
for a period of 18 months from the date after which Northern became a reporting
issuer in a jurisdiction of Canada.
F27
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
In March, 2010, Northern completed a number of non-brokered
private placement financings consisting of the issuance of a total of 7,327,000
units at a price of C$0.25 per unit, each unit being comprised of one common
share and one common share purchase warrant exercisable at a price of C$0.35 per
share for a period of 18 months from the date after which Northern became a
reporting issuer in a jurisdiction of Canada. Gross proceeds were C$1,831,750.
In addition, Northern issued 400,000 units, with the same terms, as part of debt
settlement agreements with three creditors. In the second quarter of 2010,
Northern issued an additional 31,354 common shares in settlement of various
claims against the Company.
On April 18, 2011 Northern Graphite closed its Initial Public
Offering (IPO) and issued the maximum of 8,000,000 common shares that were
qualified for distribution under its final prospectus at a price of CDN$0.50 per
share for gross proceeds of CDN $4,000,000. In connection with the offering, the
Company issued 560,000 common share purchase warrants entitling the holder to
purchase one common share at a price of $0.50 per common share until April 18,
2012
As a result of the private placements, the conversion of the
Notes, the debt settlements, the IPO of Northern, and the conversion of
warrants, Northern issued a total of 25,665,167 common shares, and
11,715,571common share purchase warrants, and had 37,415,167common shares
outstanding as at December 31, 2011. As at December 31, 2011, the Company owned
9,750,000 common shares of Northern which represented a 26.1% interest.
NOTE 5 - BUILDING AND EQUIPMENT
Building and equipment are recorded at cost. Building and
equipment as at December 31, 2011 and 2010 were as follows:
|
|
2011
|
|
|
|
|
|
|
(non-
|
|
|
2010
|
|
|
|
consolidated)
|
|
|
(consolidated)
|
|
Building and improvements
|
$
|
-
|
|
$
|
591,005
|
|
Equipment
|
|
-
|
|
|
652,506
|
|
Mine closure deposit
|
|
-
|
|
|
-
|
|
Total building and equipment
|
|
-
|
|
|
1,243,511
|
|
Less accumulated depreciation
|
|
-
|
|
|
817,115
|
|
Net building and equipment
|
$
|
-
|
|
$
|
426,396
|
|
NOTE 6 - 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. Stock is issued from treasury for options
exercised.
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 September 20, 2010, the Company granted stock options to
purchase 450,000 common shares at a price of $0.30 per share until September 20,
2015. 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 2.24%; and
an expected term of 5 years.
F28
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
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.
The following table summarizes stock option activity for the
year ended December 31, 2011:
|
|
Number of securities to be
|
|
|
|
|
|
|
issued upon exercise of
|
|
|
Weighted-average exercise
|
|
Equity compensation plans not approved by
security holders
|
|
outstanding options
|
|
|
price of outstanding options
|
|
Outstanding December 31, 2010
|
|
450,000
|
|
$
|
0.30
|
|
Issued
|
|
112,500
|
|
$
|
1.40
|
|
Exercised
|
|
(337,500
|
)
|
$
|
0.30
|
|
Outstanding at December 31, 2011
|
|
225,000
|
|
$
|
0.85
|
|
Exercisable at December 31, 2011 225,000. Intrinsic value at
December 31, 2011 - $Nil.
During the year 337,500 stock options were exercised for
proceeds of $101,250. These options had an intrinsic value of $160,875.
Using the Black-Scholes option pricing model, the Company had
stock compensation expense for the year ending December 31, 2011 of $155,396
(2010-$154,408).
B.
COMMON STOCK
The number of common shares outstanding for December 31, 2011
and December 31, 2010, 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
|
|
December 31, 2011
|
|
n/a
|
|
|
9,300,634
|
|
December 31, 2010
|
|
177,701,620
|
|
|
8,885,081
|
|
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 year ended:
|
|
20:1 consolidation
|
|
|
consolidation
|
|
December 31, 2011
|
|
n/a
|
|
|
8,920,188
|
|
December 31, 2010
|
|
169,456,663
|
|
|
8,472,833
|
|
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 year ended:
|
|
20:1 consolidation
|
|
|
consolidation
|
|
December 31, 2011
|
|
n/a
|
|
|
9,492,038
|
|
December 31, 2010
|
|
169,456,663
|
|
|
8,472,833
|
|
For the year ended December 31, 2010, the inclusion of common
stock equivalents in the calculation of the weighted average number of shares is
anti-dilutive.
F29
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Mine Development and Closure
A Mine Development and Closure Plan for Northern has been filed
with, and accepted by, the Ministry of Northern Development and Mines (MNDM),
in accordance with the MINING ACT, R.S.O. 1990, Ontario Regulation 240/00,
including the standards, procedures and requirements of the Mining Code of
Ontario. As the Company no longer consolidates the operations of Northern, no
amount has been accounted for as a long term deposit as at December 31, 2011. A
financial assurance in the amount of $316,218 was accounted for as a long term
deposit as at December 31, 2010. Northern had paid this amount to the Minister
of Finance for the Province of Ontario. This financial assurance represents the
estimated amount that would be required to restore the Bissett Creek Property to
its original environmental state. The money pledged for this financial assurance
will be returned to Northern once the MNDM is satisfied that the obligations
contained in the Mine Development and Closure Plan have been performed. Should
Northern not perform its obligations contained in the Mine Development and
Closure Plan the MNDM will restore the Bissett Creek Property to its original
environmental state using the assurance and Northern will be responsible for any
costs in excess of this amount.
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.
NOTE 8 - NOTES AND LOANS PAYABLE
During the year ended December 31, 2011, there were no
transactions involving notes and loans payable. As the Company no longer
consolidates the operations of Northern, no amount has been accounted for as a
note or loan payable as at December 31, 2011.
During the year ended December 31, 2010:
(a) the Company settled $379,792 of loans payable and $102,183
of accrued interest through the issuance of 400,000 units of Northern, the
payment of $236,859 cash and the issuance of a $150,000 note. The note payable
is unsecured, non-interest bearing and matured on February 20, 2011. Effective
February 20th, 2011, the Company entered a debt settlement agreement extension
with the lender. The note will become due and payable on the earlier of the date
that Northern completes an initial public offering of its common shares for
total proceeds equal to at least $2,000,000 CDN or one year from the effective
date. Interest of 10% annually will be payable on same date from February 20th,
2011.
(b) 54,580 common shares of the Company were issued in
settlement of a $385,665 loan payable. Common shares were valued at $0.30 per
share, and the Company recognized a gain of $369,291 on the settlement.
(c) 1,105,799 common shares of the Company were issued in
settlement of $84,740 in accounts payable. Common shares were valued at $0.30
per share, and the Company recognized a gain of $22,795 on the settlement.
(d) The Company agreed to issue 75,000 shares in settlement of
$83,194 in accounts payable to a related party. Common shares were valued at
$0.60 per share, and the Company recorded an unrealized gain of $38,194. These
share were issued during 2011 and there no remaing liability as at December 31,
2011.
NOTE 9 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2011:
a) The Company and Northern entered into an intercompany
revolving loan agreement whereby all amounts due from Northern to the Company
would be provided under a $600,000 credit facility which was repayable in two
years, unless an initial public offering of at least $3,000,000 was completed by
Northern before such date. In this case, Mindesta could demand repayment
immediately. The credit facility bore interest from March 1st, 2011 at an annual
rate of 7.5 per cent and was payable annually, or earlier at any time that the
credit facility was repaid in full. The debt of $506,734 and the related
interest of $2,822 were settled as at April 26th, 2011.
b) The Company expensed management fees to directors and to
companies controlled by directors of $ $23,867 (2010 $209,294).
F30
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
c) The Company made office rental payments of $nil (2010
$14,078) to a Company whose CEO and a Director is also a Director of Northern.
d) 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. As
at December 31, 2011, Nubian has received advances of $127,994 under this
revolving loan agreement and the Company has accrued $972 of interest
receivable.
e) The Company agreed to issue 75,000 shares in settlement of
$83,194 in accounts payable to a related party. Common shares were valued at
$0.60 per share, and the Company recorded an unrealized gain of $38,194 (Note
8).
|
|
As at
|
|
Due from related parties
|
|
December 31, 2011
|
|
|
|
|
|
|
|
$
|
|
Due from Northern
|
|
16,147
|
|
Due
from Nubian
|
|
128,966
|
|
Total due from related parties
|
|
145,113
|
|
As at December 31, 2011, accounts payable and accrued
liabilities included $nil (December 31, 2010 - $141,961) due to directors and to
companies controlled by directors for professional management fees related to
the services of the directors and officers.
NOTE 10 - CAPITAL STOCK
There were 412,500 common shares of capital stock issued during
2011 as a result of the exercise of options and for settlement of debt. The
share issuances were recorded for total consideration of $154,500. The Company
had 9,300,634 shares issued and outstanding at December 31, 2011 (2010-
8,888,134).
There were 722,660 common shares of capital stock issued during
2010 in return for services and settlement of debt. The share issuances were
recorded at a trading value of $0.30 for total consideration of $216,798.
NOTE 11 - DIVIDENDS
On December 12, 2011, the Board of Directors declared a pro
rata dividend-in-kind on the basis of one share of Northern common stock for
each share of Company common stock held, payable January 25, 2012 to
shareholders of record as at January 5, 2012. The Company has recorded
$3,274,072 of dividends and dividends payable in the year ending December 31,
2011 related to the declared dividend-in-kind.
F31
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
NOTE 12 - INCOME TAXES
As at December 31, 2011, the Company's deferred tax asset
attributable to its net operating loss carry forward is approximately $2,986,224
(2010 - $9,240,388). This benefit has been fully offset by a valuation allowance
based on management's determination that it is not more likely than not that
some or all of this benefit will be realized. These losses expire as follows:
|
|
$
|
|
|
|
|
|
2025
|
|
332,582
|
|
2026
|
|
320,767
|
|
2027
|
|
706,439
|
|
2028
|
|
677,116
|
|
2029
|
|
365,666
|
|
2030
|
|
-
|
|
2031
|
|
(482,998
|
)
|
For the years ended December 31, 2011 and 2010, a
reconciliation of income tax benefit at the U.S. federal statutory rate to
income tax benefit at the Company's effective tax rates is as follows.
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Income (Loss) for the year
|
|
3,758,023
|
|
|
(1,593,174
|
)
|
Expected income tax (Recovery)
|
|
1,277,728
|
|
|
(541,679
|
)
|
Deconsolidation of Northern
Graphite
|
|
(1,227,231
|
)
|
|
-
|
|
Effect of lower tax rate in subsidiary
|
|
-
|
|
|
42,871
|
|
Non-deductible items
|
|
59,627
|
|
|
53,481
|
|
Expiry of loss carry forwards
|
|
-
|
|
|
553,524
|
|
Effect of lower tax rate
|
|
-
|
|
|
(24,170
|
)
|
Change in valuation allowance
|
|
(110,124
|
)
|
|
(84,025
|
)
|
Total income tax payable
|
|
-
|
|
|
-
|
|
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax
assets (liabilities) at December 31, 2011 and 2010 are comprised of the
following:
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Net operating loss
carryforward
|
|
652,654
|
|
|
2,554,342
|
|
Capital loss carryforward
|
|
-
|
|
|
-
|
|
Investment in Northern
Graphite
|
|
1,897,093
|
|
|
(563,458
|
)
|
Mineral Property Interest
|
|
-
|
|
|
267,733
|
|
Share issuance cost
|
|
-
|
|
|
1,960
|
|
Tax
value of Capital assets in excess of book value
|
|
-
|
|
|
38,717
|
|
|
|
2,549,741
|
|
|
2,862,751
|
|
Valuation allowance
|
|
(2,549,741
|
)
|
|
(2,862,751
|
)
|
Deferred income tax asset
|
|
-
|
|
|
-
|
|
F32
MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 30, 2011 and 2010
Accounting for uncertainty for Income Tax
Effective January 1, 2009, we adopted the interpretation for accounting for uncertainty in income taxes which was an interpretation of the accounting standard accounting for income taxes. This interpretation created a single model to address
accounting for uncertainty in tax positions. This interpretation clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. During 2011, the Company filed all statutory income tax returns outstanding. The Company had $250,605 and $80,000 accrued for
penalties as of December 31, 2011, and December 31, 2010, respectively related to statutory income tax returns that have now been filed. We do not have any unrecognized tax benefits or loss contingencies. Unrecognized tax benefits are not expected
to increase or decrease within the next twelve months. Interest and penalties are included in general and administrative costs.
NOTE 13 - SUBSEQUENT EVENTS
Mindesta entered an option agreement, effective January 2
nd
, 2012, 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 Nubian’s remaining interest in the permits at fair market value at any time after incurring the first $750,000 of exploration expenditures.
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 common stock for each share of Company common stock held. The U.S. Financial Industry Regulatory Authority (“FINRA”) established January 26, 2012 as the ex-dividend date (the “Ex-Dividend Date”) for this
distribution. As at the close of trading January 25, 2012, the Company’s interest in Northern Graphite has decreased to 0.8% .
F33
MINDESTA INC.
(formerly Industrial Minerals Inc.)
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective October 1, 2009 Rotenberg and Company LLP merged with another CPA firm, EFP Group, to form a new firm. Rotenberg and Company, LLP resigned as the Company’s auditors in connection with such merger. All of the partners and employees of
Rotenberg and Company LLP and EFP Group have joined the new firm, EFP Rotenberg LLP. EFP Rotenberg LLP succeeded Rotenberg and Company LLP as the Registrant’s independent registered public accounting firm.
On October 30, 2009, with the approval of the Audit Committee of the Company’s Board of Directors, EFP Rotenberg, LLP was engaged as the Company’s independent registered public accountant effective concurrent with the merger. Prior to
such engagement, during the two most recent years, the Company has not consulted with EFP Rotenberg, LLP on any matter.
The audit reports of Rotenberg and Company LLP for the years ended December 31, 2008 and December 31, 2007, expressed an unqualified opinion and included an explanatory paragraph relating to the Registrant’s ability to continue as a going
concern due to significant recurring losses and other matters. Such audit reports did not contain any other adverse opinion or disclaimer of opinion or qualification.
The Registrant and Rotenberg and Company LLP have not, during the Registrant’s two most recent fiscal years or any subsequent period through to the date of dismissal, had any disagreement on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to Rotenberg and Company LLP’s satisfaction, would have caused Rotenberg and Company, LLP to make reference to the subject matter of the
disagreement in connection with its reports.
The Registrant provided Rotenberg and Company LLP with a copy of the disclosures made in the Current Report on Form 8-K prior to filing. A copy of Rotenberg and Company LLP’s letter, dated November 4, 2009 was attached as Exhibit 16.1.
On March 1, 2010 the Registrant dismissed EFP Rotenberg LLP as the Registrant’s independent registered public accounting firm. Also on March 1, 2010, with the approval of the Audit Committee of the Registrant’s Board of Directors, Meyers
Norris Penny LLP (“MNP”) was engaged as the Company’s independent registered public accountant.
The audit reports of MNP for the years ended December 31, 2011, December 31, 2010 and December 31, 2009, expressed an unqualified opinion and included an explanatory paragraph relating to the Registrant’s ability to continue as a going concern
due to significant recurring losses and other matters. Such audit reports did not contain any other adverse opinion or disclaimer of opinion or qualification. The Registrant and MNP have not, during the Registrant’s two most recent fiscal
years had any disagreement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to MNP’s satisfaction, would have caused MNP to make reference
to the subject matter of the disagreement in connection with its reports. MNP has not advised the Company of any reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
MNP was not required or engaged to audit the Company’s internal control over financial reporting.
During the years ended December 31, 2008 and 2007, and through March 1, 2010, the Company did not consult with Meyer Norris Penny LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
ITEM 9A - 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 Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”), of the effectiveness of the design and operations of the Company’s 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 Management’s 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
Company’s 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.
F34
MINDESTA INC.
(formerly Industrial Minerals Inc.)
Management's 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 Company’s internal control over financial reporting was not effective during the year ended December 31, 2011. Management has determined that (i) inadequate staffing
and supervision, and the resulting 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
Company’s internal control over financial reporting.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal period covered by this annual report that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
On May 10, 2010 Robert Dinning resigned as CEO and CFO of the Company and Gregory Bowes was appointed CEO/CFO. On April 1, 2010 Miles Nagamatsu was appointed CFO of Northern and Tracy Albert was appointed Controller. On February 1, 2011 Stephen
Thompson replaced Miles Nagamatsu as CFO of Northern
ITEM 9B - OTHER INFORMATION
Not applicable
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The current Chief Executive Officer and Chief Financial Officer of Registrant at March 15, 2012 is Gregory Bowes.
The directors of the Registrant as at March 15, 2012 are Gregory Bowes, age 58, Campbell Birge, age 59, Douglas Perkins, age 59, and Albert Zapanta, age 71.
Mr. Bowes was granted stock awards of 100,000 common shares in 2008 and 25,000 common shares in 2009 for his services as a director, in lieu of fees.
Business Experience
The following is a brief account of the business experience during at least the past five years of the directors and officers of the Registrant, indicating the principal occupation and employment during that period by each, and the name and
principal business of the organizations by which they were employed.
Gregory B. Bowes - Director - Appointed a director on June 23, 2008 and CEO/CFO on May 10, 2010, Mr. Bowes holds an MBA in Finance and Accounting from Queens University (1979) and an Honours BA in Earth Sciences (Geology) from the University of
Waterloo (1977). Mr. Bowes has been CFO and Senior VP of Orezone Gold Corporation, a publicly traded mining company with projects in West Africa. From February of 2006 to March of 2008, Mr. Bowes was the President and CEO of San Anton Resource
Corporation, an exploration company listed on the Toronto Stock Exchange. From January of 2004 to March of 2007, Mr. Bowes was
the Vice President and then Chief Financial Officer of Orezone Resources Inc. which was listed on the Toronto Stock Exchange. Mr. Bowes is 58 years old. In May 2009, Mr. Bowes was appointed President and CEO of the Company’s wholly owned
subsidiary, Northern Graphite.
F35
MINDESTA INC.
(formerly Industrial Minerals Inc.)
Mr. Birge was Chief Financial Officer of Wind Works Power Corp (WWPW:OTC:BB) beginning September of 2009 and is currently Secretary/Treasurer of Wind Works Power Corp.. He was previously the President, Chief Executive Officer and a Director of Ammex
Gold Mining Corp., a publicly traded gold mining company, from December 2007 until September 2009. Prior to that, he was President, Chief Executive Officer and a Director of the Company from October 2006 until April 2007. He served on the Advisory
Board and as Vice President of Operations of the Trust for Sustainable Development and was Business and Operations Analyst – Southern Ontario for Bell Canada Mobile. Mr. Birge was an Associate Professor at United States International
University (Mexico City Campus) and was twice elected to serve on the Academic Counsel as the Head of Graduate Business Studies. He is a consultant to public and private companies doing business in Canada, the United States and Mexico and is also a
partner in a Honda car dealership. Mr. Birge attended Simon Fraser University (BA), the University of Calgary (B.Ed) and the United States International University (M.Sc.). Mr. Birge is 59 years old.
Mr. Perkins was appointed to the Board of Directiors effective April 20, 2011 Mr. Perkins an experienced mining company executive who is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V). He is President & Director member of
Jien Nunavik Mining Exploration Limited. Mr.Perkins is President and Director of 7264496 Canada Inc. through which he provided executive management services on a contract basis. These same services were previously provided through Perkins
International. From November, 2005 until February, 2010 he was Chief Executive Officer and Executive Director of GMA Resources Plc, an AIM listed company in London, United Kingdom, which evolved from a junior explorer to a mid size gold producer
through the successful development and construction of a heap leach gold mine in Algeria. Mr. Perkins was Vice President and Chief Financial Officer of Orezone Resources Inc. (ORZ:TSX) from January, 2003 to October, 2005. He earned a Bachelor of
Commerce degree, majoring in accounting, from Concordia University in 1978 and is fluently bilingual in French and English. Mr. Perkins is 59 years old.
Mr. Zapanta was appointed to the Company’s Board of Directors on December 15, 2012. Mr. Zapanta was born in Los Angeles, CA and received an Associate of Arts degree from East Los Angeles College. He completed a Bachelor of Arts degree in
Industrial Psychology, a Master of Arts in Public Administration and studies for a PhD in International Political Economics all at the University of Southern California. He also graduated from the Harvard Graduate School of Business and the
Inter-American Defense College, National War College, in Washington, D.C.. Mr. Zapanta was the first U.S. senior officer appointed to lead a Peacekeeping Mission to the United Nations Referendum on the Western Sahara to serve with the USSR,
People’s Republic of China, French and British military officers as the Chief of Staff. General Zapanta’s military record includes the award of the Silver Star, five Bronze Stars for Valor, the Purple Heart and thirty other awards during
the Vietnam War. He was also recently awarded the Joint Service Commendation Medal for Desert Shield/Desert Storm, Restore Hope in Somalia and Restore Democracy in Haiti. Mr. Zapanta was appointed by the Governor of Virginia to the rank of Major
General and achieved one of the highest ranks of any officer of Mexican descent in the US army. In the private sector, he worked as an industrial engineer for Bethlehem Steel, and as Director of Governmental Affairs for Atlantic Richfield Company
(“ARCO”) until his retirement in 1993 after 18 years of service as a senior executive. During his time with ARCO, he was responsible for negotiations with PEMEX on oil and gas matters and the copper mines owned by Anaconda Copper Mining
company, an acquisition of ARCO. He was the company’s representative to local, state and federal governments on oil and gas, environmental and transportation-related regulation and public affairs. Mr. Zapanta has held numerous Presidential
appointments, including a White House fellow in 1973-74 and Assistant Secretary of the Interior for Management and Administration from 1976-77. He was appointed by President Ronald Reagan to the U.S. State Department Advisory Committee on
International Trade Technology and Development from 1981-1987, and by President George W. Bush as a private sector delegate to the U.S.-Mexico Partnership for Prosperity from 2001 to the present. U.S. Secretary of Defense Donald H. Rumsfeld
appointed him to serve as Chairman of the Reserve Forces Policy Board from 2002-2004. Mr, Zapanta retired from ARCO on January 2, 1993 and began work with the US-Mexico Chamber of Commerce on January 2, 1993. Mr. Zapanta owns 100% of a private
coporation called Planning Inc. He is presently the President and CEO of the United States-Mexico Chamber of Commerce and is responsible for operations in eight regional offices in the United States and nine in Mexico. Mr. Zapanta is a Director of
Tyson Foods Inc. (TSN:NYQ). Mr. Zapanta is 71 years old.
No appointee for a director position has been found guilty of any civil regulatory or criminal offense or is currently the subject of any civil regulatory proceeding or any criminal proceeding.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires that the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, file reports of
ownership and changes
in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent stockholders are required by regulation to furnish to the Company copies of all Section 16(s) forms they file.
F36
MINDESTA INC.
(formerly Industrial Minerals Inc.)
During the past two fiscal years as required under Section 16(a) Greg Bowes did not timely file a Form 3, Initial Statement of Beneficial Ownership and Form 4, Statement of Changes in Beneficial Ownership and Albert Zapanta did not timely file a
Form 3, Initial Statement of Beneficial Ownership.
Conflicts of Interest
Members of the Company's management are associated with other firms involved in a range of business activities, particularly in the mineral exploration industry. Consequently, there are potential inherent conflicts of interest in their acting as
officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, it may affect the amount of time they can devote to the Company's affairs.
The Company's Board of Directors reviews all transactions whereby the Company seeks a merger with, or acquisition of, any entity in which any officer or director serves as an officer or director or in which they or their family members own or hold a
controlling ownership interest. Gregory Bowes, CEO and a director of Mindesta,
is a major shareholder of Nubian Gold Corporation and therefore the option
agreement with Nubian represents a related party transaction. The transaction
was approved by all of the independent directors of the Company with Mr. Bowes
abstaining from voting. The independent committee approved the transaction
following a review of, among other things:
1. A geological report by Mr. Tucker Barrie who visited the permits and who is a
Qualified Person under NI 43-101.
2. A budget and work program proposed by Mr. Remi Bosc who visited the permits and is a Qualified Person under NI 43-101.
3. Similar joint venture agreements relating to early stage exploration projects in Africa.
The potential acquisition of the balance of Nubian’s interest in the permits would be subject to a fairness opinion and to a shareholder vote.
There can be no assurance that management will resolve all actual or potential conflicts of interest in favor of the Company.
F37
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
ITEM 11- EXECUTIVE COMPENSATION
The following table discloses all compensation received by the
Company's Chief Executive Officer and Chief Financial Officer during the fiscal
years ending December 31, 2011; 2010; and 2009. During this period no executive
officer received annual salary and bonus payments from the Company in excess of
$100,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Plan
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Compensation
|
|
Name
and Principal position
|
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Greg Bowes
|
|
|
2011
|
|
|
20,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Greg Bowes
|
|
|
2010
|
|
|
50,000
|
|
|
|
|
|
75,000
|
|
|
0
|
|
Robert Dinning (CEO &
CFO)
|
|
|
2009
|
|
|
78,000
|
|
|
0
|
|
|
10,000
|
|
|
0
|
|
Robert Dinning, CEO
|
|
|
2008
|
|
|
108,000
|
|
|
|
|
|
0
|
|
|
0
|
|
David Wodar, CEO
|
|
|
2009
|
|
|
50,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
David Wodar, CEO
|
|
|
2008
|
|
|
61,212
|
|
|
|
|
|
|
|
|
|
|
Northern Graphite has a management contract with Gregory Bowes,
its CEO, whereby Mr. Bowes was paid a monthly retainer of CDN $6,000 per month
from May 1, 2009 to October 1, 2009, and CDN$12,500 from November 2009 to
January 2011. Effective February 1, 2011, Mr. Bowes is paid an annual salary of
CDN$200,000 by Northern, and ten percent of his annual salary is expensed
through Mindesta. In 2009 Mr. Bowes was granted 100,000 shares of the Company as
a stock award. In 2010 Mr. Bowes was paid a cash bonus of CDN $12,000 and was
granted an additional stock award of 125,000 common shares for his success in
raising financing and turning the Company around.
GRANTS OF PLAN-BASED AWARDS
The Company did not grant any Plan Based Awards during the
fiscal year ended December 31, 2011.
The Company adopted SFAS 123 "Accounting for Stock-Based
Compensation", effective April 1, 2007. Compensation cost for the Company's
stock options had been determined in accordance with the fair value based method
prescribed as SFAS 123. 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 with the following weighted average assumptions used for
options granted during the year ending December 31, 2007. Expected volatility of
86.74%, risk-free interest rate 4%; and an expected life of up to 4 years.
Using the Black-Scholes option pricing model, the Company had
stock compensation expense for the year of $155,396.
Other than as disclosed above, no director or officer has been
or was previously paid separate annual fees, meeting fees or any other form of
compensation. Fees as outlined above to the officer listed above are the sum
total of compensation paid during the year.
COMMITTEES OF THE BOARD OF DIRECTORS (as of December 31, 2011)
|
1)
|
Audit Committee - Members are Douglas Perkins who acts as
chairman, Campbell Birge and Albert Zapanta. Mr. Birge, Mr. Perkins and
Mr. Zapanta are independent Directors of the Company.
|
|
|
|
|
2)
|
Compensation and Nominating Committee - Members are
Campbell Birge, Douglas Perkins, and Albert Zapanta. Mr. Birge, Mr.
Perkins and Mr. Zapanta are independent Directors of the
Company.
|
F38
MINDESTA INC.
(formerly Industrial Minerals Inc.)
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis (CD&A) provides information on the compensation programs established for our "Named Executive Officers" during our fiscal year ended December 31, 2011. All information provided herein should be
read in conjunction with the tables provided below.
The Compensation and Nomination Committee is comprised of Messrs. Birge, Perkins, and Zapanta. Mr. Birge is independent within the meaning of National Policy 58-201 –
Corporate Governance Guidelines
(“NP 58-201”). Mr. Bowes
is a director and CEO/CFO of the Company and is not independent.
The Compensation and Nomination Committee oversees the remuneration, nomination and appointment policies and practices of the Company. The principal responsibilities of the Compensation and Nomination Committee include: (i) considering the
Company’s overall remuneration strategy and, where information is available, verifying the appropriateness of existing remuneration levels using external sources for comparison; (ii) comparing the nature and amount of the Company’s
directors’ and executive officers’ compensation to performance against goals set for the year while considering relevant comparative information, independent expert advice and the financial position of the Company; (iii) making
recommendations to the Board of Directors in respect of director and executive officer remuneration matters with the overall objective of ensuring maximum shareholder benefit from the retention of high quality board and executive team members; (iv)
considering nominees for independent directors of the Company; and (v) planning for the succession of directors and executive officers of the Company, including appointing, training and monitoring senior management to ensure that the Board of
Directors and management have appropriate skill and experience.
The Board of Directors and the Compensation and Nomination Committee are responsible for establishing, implementing and monitoring the policies governing compensation for executives. Officers may be members of the Board of Directors and are able to
vote on matters of compensation. During the year ended December 31, 2011 neither the Board nor the Compensation and Nomination Committee employed any outside consultants to assist in carrying out their responsibilities with respect to executive
compensation, although they have access to general executive compensation information regarding both local and national industry compensation practices. In future periods the Company may participate in regional and national surveys that benchmark
executive compensation by peer group factors such as company size, annual revenues, market capitalization and geographical location.
The executive employment market in general is very competitive due to the number of companies with whom we compete to attract and retain executive and other staff with the requisite skills and experience to carry out our strategy and to maintain
compliance with multiple Federal and State regulatory agencies. Many of these companies have significantly greater economic resources than our own. The Board has recognized that compensation packages must be able to attract and retain highly
talented individuals that are committed to the Company’s goals and objectives, without at this time paying cash salaries that are competitive with some peers that have greater economic resources. The Company’s compensation structure is
weighted towards equity compensation in the form of stock awards and options to acquire common stock, which the Board believes motivates and encourages executives to pursue strategic opportunities while managing the risks involved in our current
business stage, and aligns compensation incentives with value creation for our shareholders.
Components of Our Executive Compensation Program
The Company’s executive compensation program incorporates components we believe are necessary in order for the Company to provide a competitive compensation package relative to its peers and to provide an appropriate mix between short-term and
long-term cash and non-cash compensation. Elements of the Company’s executive compensation are listed below:
Base Salary
Stock Awards
Stock Options
Other benefits available to all employees
Items specific to our President and Chief Executive Officer per an employment agreement
Base Salary: At present we do not have a salary structure for employees and Executives, and amounts are based on skill set, knowledge and responsibilities. Base salaries are established as necessary. During the year ended December 31, 2011 none of
our Named Executive Officers received a salary increase.
Stock Awards: A portion of compensation paid to our executives is equity based. We believe equity compensation helps align the interests of our executives with the interests of our shareholders. In that regard, our executives' compensation is
subject to downside
risk in the event that our common stock price decreases. In addition, we believe stock awards provide incentives to aid in the retention of key executives. Gregory Bowes was granted 125,000 common shares during the year ending December 31, 2009.
F39
MINDESTA INC.
(formerly Industrial Minerals Inc.)
Other Benefits: Executive Officers and employees receive no other benefits.
Audit Committee
The Audit Committee is comprised of Messrs. Birge, Perkins, and Zapanta. The Audit Committee is compliant with Canada’s Multilateral Instrument 52-110 -
Audit Committees
(“MI 52-110”) because the majority of the members are
independent. Mr. Birge, Mr. Perkins, and Mr. Zapanta are independent. Each member of the Audit Committee is financially literate within the meaning of MI 52-110.
The Company has adopted a Charter for its Audit Committee. The Audit Committee is a committee of the Board of Directors which assists the Board in overseeing the Corporation’s financial controls and reporting and in fulfilling its legal and
fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the Corporation. The Audit Committee’s primary duties and responsibilities are to:
-
Oversee: (i) the integrity of the Corporation’s financial statements; (ii) the Corporation’s compliance with legal and regulatory requirements with respect to financial controls and reporting; and (iii) the auditors’ qualifications
and independence.
-
Serve as an independent and objective party to monitor the Corporation’s financial reporting processes and internal control systems.
-
Review and appraise the audit activities of the Corporation’s independent auditors.
-
Provide open lines of communication among the independent auditors, financial and senior management and the Board of Directors for financial reporting and control matters.
Each member of the Company’s Audit Committee has adequate education and experience that is relevant to their performance as an Audit Committee member and, in particular, education and experience that have provided the member with: (a) an
understanding of the accounting principles used by the Company to prepare its financial statements and the ability to assess the general application of those principles in connection with estimates, accruals and reserves; (b) experience preparing,
auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the
Company’s financial statements or experience actively supervising individuals engaged in such activities; and (c) an understanding of internal controls and procedures for financial reporting. Mr. Perkins an experienced mining company executive
who is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V). He is President & Director member of Jien Nunavik Mining Exploration Limited. Mr.Perkins is President and Director of 7264496 Canada Inc. through which he provided
executive management services on a contract basis. From November, 2005 until February, 2010 he was Chief Executive Officer and Executive Director of GMA Resources Plc, an AIM listed company in London, United Kingdom. Mr. Perkins was Vice President
and Chief Financial Officer of Orezone Resources Inc. (ORZ:TSX) from January, 2003 to October, 2005. He earned a Bachelor of Commerce degree, majoring in accounting, from Concordia University in 1978. These CEO and CFO positions with other publicly
listed companies have provided Mr. Perkins with experience with financial statements and reporting requirements of public companies. Mr. Birge was the Chief Financial Officer and is the Secretary/Treasurer of Wind Works Power Corp (WWPW –
OTC:BB). He was previously the President, Chief Executive Officer and a Director of Ammex Gold Mining Corp. (AMXG - OTC:BB), a publicly traded gold mining company, from December 2007 until September 2009. Prior to that, he was President, Chief
Executive Officer and a Director of the Company (IDSM – OTC:BB) from October 2006 until April 2007. He served on the Advisory Board and as Vice President of Operations of the Trust for Sustainable Development and was Business and Operations
Analyst – Southern Ontario for Bell Canada Mobile. Mr. Birge was an Associate Professor at United States International University (Mexico City Campus) and was twice elected to serve on the Academic Counsel as the Head of Graduate Business
Studies. He is a consultant to public and private companies doing business in Canada, the United States and Mexico and is also a partner in a Honda car dealership. Mr. Birge attended Simon Fraser University (BA), the University of Calgary (B.Ed) and
the United States International University (M.Sc.). Mr. Zapanta is presently the President and CEO of the United States-Mexico Chamber of Commerce and is responsible for operations in eight regional offices in the United States and nine in Mexico..
Mr. Zapanta is is a Director of Tyson Foods Inc. (TSN:NYQ). In these capacities, they have had experience preparing, analyzing or evaluating financial statements for public companies or large complex organizations or actively supervising individuals
engaged in such activities, and have developed an understanding of the accounting principles used by the Company to prepare its financial statements and an understanding of internal controls and procedures for financial reporting.
Directors’ and Officers’ Liability Insurance
The Company carries directors’ and officers’ liability insurance but does not maintain any key man insurance.
Reliance on Certain Exemptions
The Company is not relying upon any exemptions under MI 52-110.
F40
MINDESTA INC.
(formerly Industrial Minerals Inc.)
Pre-approval Policy
The Company has not yet adopted any specific policies or procedures for the engagement of non-audit services. Such matters are the subject of review and pre-approval by the Audit Committee.
CORPORATE GOVERNANCE
The Company does not currently have a Corporate Governance Committee and therefore is not in compliance with Canada’s NP 58-201. It is the Company’s intention to form a Corporate Governance Committee and to pass a written mandate of the
Board of Directors in compliance with NP 58-201.
The Corporate Governance Committee will oversee the Company’s approach to corporate governance matters. The principal responsibilities of the Corporate Governance Committee will include: (i) monitoring and overseeing the quality and
effectiveness of the corporate governance practices and policies of the Company; (ii) adopting and implementing corporate communications policies and ensuring the effectiveness and integrity of communication and reporting to the Company’s
shareholders and the public generally; and (iii) administering the Board of Directors’ relationship with the management of the Company.
The Board of Directors of the Company is comprised of four members. Mr. Birge, Mr. Perkins and Mr. Zapanta are independent. Mr. Bowes is a director and CEO/CFO of the Company and is not independent. Mr. Bowes is also a director of Mazorro Resources
Ltd (TSXV), Mr. Birge is the Chief Financial Officer of Wind Works Power Corp., Mr. Perkins is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V)and Mr. Zapanta is is a Director of Tyson Foods Inc. (TSN:NYQ).
The Board of Directors held a number of formal meetings in 2011, and all directors were in attendance, and a number of resolutions of the Board of Directors were passed through the use of unanimous written consent resolutions.
Position Descriptions
The Board of Directors has not developed written position descriptions for the chair of each committee of the Board of Directors, and the Board of Directors and its Chief Executive Officer have not developed a written position description for the
Chief Executive Officer. The Board of Directors and the Chief Executive Officer will consider the development of written position descriptions in the future, taking into consideration the size of the Company and its Board of Directors, the stage of
the Company’s development and enabling the Board of Directors and its committees to operate in an efficient and flexible manner. In the meantime, the Board of Directors expects the members of the Board of Directors to provide leadership and to
manage the Board of Directors and ensure that it carries out its duties and responsibilities, and the Chief Executive Officer reports to the Board of Directors. Similarly, the Board of Directors expects the members of each committee to provide
leadership and to manage the committee and ensure that the committee carries out its duties and responsibilities.
Orientation and Continuing Education
The Company does not have a formal orientation and education program for new directors. The Company has not held a formal orientation for the members of its Board of Directors, but the members of the Board of Directors are aware of the Company and
its operations, activities and plans throughout the course of their meetings and discussions. The Company will make directors aware of current disclosure, governance and reporting guidelines and regulations and directors are also encouraged to keep
informed of new developments individually. Board members are also encouraged to communicate with management, auditors and technical consultants as required.
Ethical Business Conduct
The Company is committed to conducting its business in accordance with applicable laws, rules and regulations, and in accordance with industry standards of business ethics, and to full and accurate disclosure in compliance with applicable securities
laws. In furtherance of the foregoing, the Company has adopted a written Code of Business Conduct and Ethics (the “Code”) which applies to all directors, officers and employees of the Company and sets forth specific policies to guide
such individuals in the performance of their duties. The Company has also instituted a whistle blower policy and an insider trading policy.
Under applicable corporate laws, any director or executive officer that has a material interest in a transaction or agreement that is being considered by the Company is required to declare a conflict of interest and is excluded from voting and from
the decision making process with respect to that issue.
F41
MINDESTA INC.
(formerly Industrial Minerals
Inc.)
Other Board Committees
The Company has no current or proposed standing committees
other than the Audit Committee and Nominating and Compensation Committee.
Assessments
The Board of Directors has not conducted any assessment of the
Board of Directors, its committees or individual directors. The Company will
consider conducting such assessments as and when appropriate. The Company has a
relatively small Board of Directors which provides the opportunity for all
directors to actively interact and to become familiar with one another. It is
expected that any issues with respect to effectiveness and contribution would
readily become apparent in this environment.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table shows the share ownership of officers,
directors and 5% or greater shareholders as of March 15, 2011. There were
9,413,581 shares outstanding as at March 15, 2012 as well as the date hereof.
Name
and Address* of Beneficial Owner
|
|
|
Amount of
Beneficial Ownership
|
|
|
Percent of
Ownership of Class
|
|
Campbell Birge, Director
|
|
|
402,250
|
|
|
4.3%
|
|
Gregory Bowes, Director
|
|
|
575,000
|
|
|
6.1%
|
|
Directors and officers as a
Group
|
|
|
977,250
|
|
|
10.4%
|
|
*Suite 201, 290 Picton Avenue, Ottawa, Ontario, Canada K1Z 8P8
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
(1) Audit Fees
|
2011: $61,902
|
2010: $73,985
|
(2) Audit-Related Fees:
|
|
None
|
(3) Tax Fees:
|
|
None
|
(4) All Other Fees: included with registration statement.
|
|
2010: None
|
(5)
|
|
|
F42
MINDESTA INC.
(formerly Industrial Minerals Inc.)
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(1)
|
See attached Financial Statements.
|
|
|
(2)
|
Not applicable.
|
|
|
(3)
|
Exhibits filed or incorporated by reference with this
annual report.
|
EXHIBIT NO.
|
|
DESCRIPTION
|
3.1
|
|
Articles of Incorporation (1)
|
3.2
|
|
Bylaws (2)
|
14.1
|
|
Code of Ethics (3)
|
16.1
|
|
Rotenberg and Company, LLP letter dated
November 4, 2009 (4)
|
16.2
|
|
EFP Rotenberg, LLP letter dated
March 4, 2010 (5)
|
31.1
|
|
Section 302 Certification (CEO)
|
31.2
|
|
Section 302 Certification (CFO)
|
32.1
|
|
Section 906 Certification (CEO)
|
32.2
|
|
Section 906 Certification (CFO)
|
(1)
|
Incorporated by reference from the exhibits included with
the Company's prior Report on Form 8K filed with the Securities and
Exchange Commission, dated March 16, 2004.
|
|
|
(2)
|
Incorporated by reference from the exhibits included with
the Company's prior Report on Form 8K filed with the Securities and
Exchange Commission, dated January 6, 2004.
|
|
|
(3)
|
Incorporated by reference from the exhibits included with
the Company's 8-K filed with the Securities and Exchange Commission,
January 6, 2004
|
|
|
(4)
|
Incorporated by reference from the exhibits included with
the Company's 8-K filed with the Securities and Exchange Commission,
November 9, 2009.
|
|
|
(5)
|
Incorporated by reference from the exhibits included with
the Company's 8-K filed with the Securities and Exchange Commission, March
5, 2010.
|
ITEM 16 - 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: March 15, 2012
|
MINDESTA INC.
|
|
|
|
By:
/s/ Gregory
Bowes
|
|
President and CEO
|
F43
MINDESTA INC.
(formerly Industrial Minerals Inc.)
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: March 15, 2012
|
MINDESTA INC.
|
|
|
|
By:
/s/ Gregory
Bowes
|
|
Gregory Bowes, Chief Financial Officer
|
F44
CTT Pharmaceutical (PK) (USOTC:CTTH)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
CTT Pharmaceutical (PK) (USOTC:CTTH)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024