-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P6/Frw5GG2Q/ILAcyTOdWKPUXk0UNWKiv3DESxD0Jb6ofgaAXn+5k45FwY8NIGKl 7lNIX8ob7j7Z5P7bUIQ8tg== 0001093287-06-000045.txt : 20060420 0001093287-06-000045.hdr.sgml : 20060420 20060420141146 ACCESSION NUMBER: 0001093287-06-000045 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20060420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Mistral Ventures Inc. CENTRAL INDEX KEY: 0001329944 IRS NUMBER: 202845212 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-133426 FILM NUMBER: 06769542 BUSINESS ADDRESS: STREET 1: SUITE 809-4438 WEST 10TH AVENUE CITY: VANCOUVER STATE: A1 ZIP: V6R 4R8 BUSINESS PHONE: 604-689-4088 MAIL ADDRESS: STREET 1: SUITE 809-4438 WEST 10TH AVENUE CITY: VANCOUVER STATE: A1 ZIP: V6R 4R8 SB-2 1 mistral-sb2final.txt REGISTRATION STATEMENT ON FORM SB-2 As filed with the U.S. Securities and Exchange Commission on April 17, 2006. Registration No._________ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM SB-2 Registration Statement Under the Securities Act of 1934 MISTRAL VENTURES INC. -------------------------------------------- (Name of Small Business Issuer in Its Charter) NEVADA 1000 20-2745790 ---------------------------- ------------------ ---------------- (State or Other Jurisdiction (Primary Standard (I.R.S. Employer of Incorporation or Classification Identification No.) organization) Number) 711- South Carson Street, Suite #4, Carson City NV, 89701 Telephone: 775-881-3478 ------------------------------------------------------------------ (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) The Law Office of Michael M. Kessler Esq. 3436 American River Drive, Suite 11 Sacramento, CA 95864 Phone: (916) 239-4000 Fax: (916) 239-4008 ------------------------------------------------------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service) Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box andlist the Securities Act registration statement number of the earlier effective registration statement for the same offering.( ) If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ( ) If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ( ) If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ( )
- ------------------------------------------------------------------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------- Title of Number Proposed Proposed each Class of Offering Maximum Amount of of Securities Shares Price Aggregate Registration to be to be per Unit Offering Fee (1) Registered Registered(2) (3) Amount(4) - ------------------------------------------------------------------------- Units 2,000,000 $ .05 $100,000 $ -- Common Stock 2,000,000 $ .05 $100,000 $11.77 Common Stock Underlying Purchase Warrants 4,000,000 $ .10 $400,000 $47.08 - ------------------------------------------------------------------------- Total 6,000,000 $500,000 $58.85 - -------------------------------------------------------------------------
(1) Registration Fee has been paid via Fedwire for this registration. (2) We intend to offer, on a best efforts basis, 2,000,000 Units of our common stock. One Unit consists of one share of common stock and two warrants. In the event we do not sell all of the Units before the expiration date of the offering, all funds raised will be returned promptly to the subscribers without deductions or interest. (3) This is an initial offering and no current trading market exists for our common stock. (4) Each Unit consists of one share of Common Stock and two Common Stock Purchase Warrants. Each Common Stock Purchase Warrant will entitle the holder to purchase one additional share of Common Stock at a price of $.10 per Share for a period of two years from the effective date of this offering. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 2 PROSPECTUS MISTRAL VENTURES INC. 2,000,000 Units at $.05 per Unit consisting of 2,000,000 shares of Common Stock at $.05 per share and 4,000,000 warrants to purchase shares of Common Stock at $.10 per share ------------------------------------------------------------------------ This is the initial offering of Common Stock of Mistral Ventures Inc. and no public market currently exists for the securities being offered. Mistral Ventures Inc. is offering for sale a total of 2,000,000 Units of Common Stock on a "self-underwritten" basis, which means that our officer and sole director will attempt to sell the shares. Our officer and sole director, John Xinos, will receive no proceeds or commissions from the sale of these shares. Each Unit consists of one share of Common Stock and two Common Stock Purchase Warrants. Each Common Stock Purchase Warrant will entitle the holder to purchase one additional share of Common Stock at a price of $.10 per Share for a period of two years from the date of this offering. There is no required minimum number of shares to be purchased by any individual purchaser. The offering is being made on a "best efforts," " all-or-none" basis which means that we have to sell all of the shares before we can use any of the proceeds. We will place all funds from the offering in a standard, non-interest bearing, bank checking account to be used only for the deposit of funds received from the sale of the Units in this offering. If all Units are not sold and the total offering amount is not deposited by the expiration date of the offering, all monies will be returned promptly to investors, without interest or deduction. The Units will be offered at a price of $.05 per share for a period of one hundred and eighty (180) days from the effective date of this prospectus. Mistral Ventures Inc. is an exploration stage company and currently has no operations. Any investment in the shares offered herein involves a high degree of risk. You should only purchase Units if you can afford a complete loss of your investment. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY, THE RISK FACTORS SECTION BEGINNING ON PAGE 8. Neither the U.S. Securities and Exchange Commission nor any state securities division has approved or disapproved of these securities, or determined if this prospectus is current or complete. Any representation to the contrary is a criminal offense.
- ---------------------------------------------------------------------- Public Underwriting Proceeds Offering or Sales to Us (1) Price Commissions Per Unit - ---------------------------------------------------------------------- Common Stock $.05 $ 0 $100,000 Common Stock Underlying Warrants $.10 $ 0 $400,000 (2) - ----------------------------------------------------------------------
3 1. The proceeds to us are shown before deduction for legal, accounting, printing and other expenses, estimated at $6,500. 2. Assumes exercise of all warrants within a two-year period; however, there is no guarantee that any or all of the warrants will ever be exercised. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. The information in this prospectus is not complete and may be changed. We will not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission for review has been cleared of comments and is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer of sale is not permitted. Subject to Completion, Dated April 12, 2006 4 TABLE OF CONTENTS ================= Page No. SUMMARY OF PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . 4 General Information . . . . . . . . . . . . . . . . . . . 4 Offering . . . . . . . . . . . . . . . . . . . . . . . . .4 RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Risks Associated with our Company . . . . . . . . . . . . 8 Risks Associated with this Offering . . . . . . . . . . .10 FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . 12 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . .12 DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . . . .13 DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 14 Offering will be Sold by Our Officer and Director . . . .14 Terms of the Offering . . . . . . . . . . . . . . . . . .15 Deposit of Offering Proceeds . . . . . . . . . . . . . . 15 Procedures for and Requirements for Subscribing . . . . .16 Exercise of Warrants . . . . . . . . . . . . . . . . . . 16 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 16 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS . .16 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .17 DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . .18 INTEREST OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . .19 DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES . . . . . . . . . 19 ORGANIZATION WITHIN LAST FIVE YEARS . . . . . . . . . . . . . . .19 DESCRIPTION OF OUR BUSINESS . . . . . . . . . . . . . . . . . . .20 Glossary . . . . . . . . . . . . . . . . . . . . . . . . 20 General Information . . . . . . . . . . . . . . . . . . .24 Competition . . . . . . . . . . . . . . . . . . . . . . .33 Compliance with Government Regulation . . . . . . . . . .33 Patents and Trademarks . . . . . . . . . . . . . . . . . 34 Need for Any Government Approval of Principal Products . 35 Research and Development . . . . . . . . . . . . . . . . 35 Employees . . . . . . . . . . . . . . . . . . . . . . . .35 Reports to Security Holders . . . . . . . . . . . . . . .35 PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . .35 DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . .42 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . 42 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . .43 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . 45 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 46 CHANGES IN & DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . . . . .46 DEALER PROSPECTUS DELIVERY OBLIGATION . . . . . . . . . . . . . .47 5 MISTRAL VENTURES INC. 711 CARSON STREET S., SUITE 4 CARSON CITY, NV, 89701 SUMMARY OF PROSPECTUS ===================== To obtain full and complete information about our company, it is important to read the following summary, together with the more detailed business information and the financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our," "the Company," and "Mistral Ventures" are to Mistral Ventures Inc. General Information about Our Company - ------------------------------------- Mistral Ventures Inc. (the "Company") was incorporated in the State of Nevada on May 13, 2005 to engage in the acquisition, exploration and development of natural resource properties. We intend to use the net proceeds from this Offering to develop our business operations. (See "Business of the Company" and "Use of Proceeds".) We are an exploration stage company with no revenues and limited operating history. By "exploration stage" we mean that we are engaged in the search for mineral deposits or reserves and not in either development or production. Our mining property, the Gold Bug Project, is located in south central British Columbia, Canada, centered approximately 3 miles (5km) southwest of Beaverdell " a community that was involved in silver mining for over 90 years. Our principal executive offices are located in Nevada at 711 S. Carson Street, Suite 4., Carson City, Nevada and our sole officer and director, Mr. John Xinos, is a Canadian citizen who resides in Vancouver, British Columbia, Canada. Our only asset is our cash in the bank in the approximate amount of $5,837. Since the Gold Bug Project is located in British Columbia, the Canadian Crown owns the property and our only right to the property consists of mining claims that are owned in the name of our sole director, Mr. John Xinos. Mr. Xinos holds a Free Miner's Certificate and has registered for a BCeID (British Columbia electronic Identification). Our registered statutory office is located at 711 S. Carson Street, Suite 4, Carson City, Nevada 89701. We believe an office would be an unnecessary expense for the first two phases of exploratory work on our property and therefore our sole officer and director will use his home or office equipment to complete all preparation work and to hire the expert contractors to do the actual claim work for this first year of operations. For convenience for our sole director, Mr. Xinos, will also receive mail when required at Suite 809 4438 West 10th Ave. in Vancouver BC, Canada. Our fiscal year end is December 31. 6 We received our initial funding of $9,000 through the sale of common stock to our sole officer and director who purchased 900,000 shares of our common stock at $0.01 per share on October 27, 2005. In addition, on February 9, 2006, an additional 900,000 common shares of our stock with a deemed value of $.01 per share, or an aggregate amount of $9,000, were issued to our officer and director for the acquisition of his rights and interests in and to the Gold Bug Project mining claims. From inception until the date of this filing, we have had limited operating activities, have generated no revenues and have incurred a net loss of $19,483. Our independent auditors, James Stafford Chartered Accountants, have rendered an opinion in their audit report expressing substantial doubt as to our ability to continue as a going concern. We have not engaged the services of a professional geologist or mining engineer to examine our mineral claims and have not yet commenced any exploration activities on the claims. Our mining claims are without known reserves and there is the possibility that they will not contain any reserves, which means that any funds we expend on exploration could be lost. Even if we complete our current exploration program and are successful in identifying a mineral deposit on our claims, we will be required to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve. There is no current public market for our securities. We have no current public offering and no proposed public offering of our equity. As our stock is not publicly traded, investors should be aware they probably will be unable to sell their shares and their investment in our securities is not liquid. The Offering - ------------ Securities Being Offered 2,000,000 Units of Common Stock for $.05 per Unit. Each Unit consists of one share of common stock and two Common Stock Purchase Warrants (the Warrants). Each Warrant entitled the holder to purchase one additional share of common stock at a price of $.l0 per share for a period of two (2) years from the effective date of this offering. Offering Period The Units are being offered for a period of six months or 180 days from the effective date. Offering Proceeds This is an "all-or-none" offering, which means if we do not sell all of the Units before the expiration date of the offering, all funds raised will be returned promptly to the subscribers without deductions or interest. The proceeds received will not be held in an escrow or trust account, but rather, will be held in a separate bank account until all Units are sold and all funds are received. 7 Net Proceeds to Us Approximately $100,000 (before deduction of the expenses of this offering estimated at approximately $6,500) and an additional $400,000 assuming exercise of all Warrants; however, there can be no guarantee that any or all of the Warrants will be exercised. Use of Proceeds We intend to use the proceeds to pay for offering expenses and for implementing our business operations. Securities Issued and Outstanding Before the Offering 1,800,000 shares of common stock were issued and outstanding as of the date of this prospectus. Shares of Common Stock 3,800,000 Outstanding After 5,800,000 (assuming exercise of all Warrants) RISK FACTORS ============ An investment in these securities involves an exceptionally high degree of risk and is extremely speculative in nature. In addition to the other information regarding our company contained in this prospectus, you should consider many important factors in determining whether to purchase the Units. Following are what we believe are all of the material risks involved if you decide to purchase Units in this offering. RISKS ASSOCIATED WITH OUR COMPANY: - ---------------------------------- 1. We are an exploration stage company; have not commenced exploration activities on our mining claim; have generated no revenues; lack an operating history; and expect to incur losses for the foreseeable future. Therefore, an investment in the Units offered herein is highly risky and could result in a complete loss of your investment if we are unsuccessful in our business plans. - ------------------------------------------------------------------------ Our company was incorporated on May 13, 2005 and to date, we have been involved primarily in organizational activities and the acquisition of the mineral claims. We have not yet commenced exploration on the Gold Bug Project claims, nor fully commenced our proposed business operations and, accordingly, we have no way to evaluate the likelihood of the success of our future prospects. Such prospects must be considered in light of the substantial risks, expenses, difficulties and low success rate encountered by new entrants into our industry. We have not earned any revenues as of the date of this prospectus. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of mineral properties. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from development of the Gold Bug Project claims and the production of minerals from the claims, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and it is doubtful that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail and you could lose any investment you make in our securities. 2. Because management has no technical experience in mineral exploration, our business has a high risk of failure. - ---------------------------------------------------------------------------- Our sole director has no professional training or credentials in the field of geology nor in the areas of exploring, developing and operating a mine. As a result, we may not be able to recognize and take advantage of potential acquisition and exploration opportunities in the sector without the aid of qualified geological consultants. Also, with no direct training or experience, our current management may not be fully aware of the specific requirements related to working in this industry. His decisions and choices may not take into account standard engineering or managerial approaches commonly used by mineral exploration companies. Consequently, our operations, earnings and ultimate financial success may suffer irreparable harm and you could lose any investment you make in our securities. 3. Our independent auditors have issued the opinion that in our current state, there is substantial doubt whether we will be able to continue as a going concern. - ---------------------------------------------------------------------------- Our limited exploration stage and lack of any guaranteed sources of future capital and/or revenues raises substantial doubt as to our ability to continue as a going concern. If our business plan does not work, we could remain a start-up company with limited or no material operations, revenues, or profits. In such event, you could risk a total loss of any investment you make in our securities. 4. We will require additional funding to sustain and expand our operations once exploration is complete. - ---------------------------------------------------------------------------- Even if we complete our initial exploration program and are successful in identifying a mineral deposit, we will still be required to expend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve. We will require additional financing to perform our additional development activities. We do not currently have any arrangements for financing and may not be able to find such financing if and when required. Obtaining additional financing would be subject to a number of factors, including the market price for the minerals, investor acceptance of our claims and general market conditions. These factors may make the timing, amount, terms or 9 conditions of additional financing unavailable to us. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. Without additional funding, we may be only partially successful in implementing our business plan, and our shareholders could suffer a loss of their investment. 5. We have not yet had our property examined in the field by a professional geologist or mining engineer, there is the risk that our property does not contain any known bodies of ore. - ---------------------------------------------------------------------------- There is the likelihood of our mineral claims containing little or no economic mineralization or reserves of gold, silver and other minerals. While we have geological reports detailing previous exploration within the current property boundaries completed by professional geologists between 1981 and 1998, we have not yet engaged the services of a professional geologist or mining engineer to examine our mineral claims in the field. There is the possibility that the previous work was not carried out properly and the Gold Bug Project claims do not contain any reserves, resulting in any funds spent by us on exploration being lost. Also, problems such as unusual or unexpected formations and other conditions involved in mineral exploration often result in unsuccessful exploration efforts. In such case, we would be unable to complete our business plans and you could risk a total loss of any investment you make in our securities. 6. Because we have not surveyed the Gold Bug Project claims, we may discover mineralization on the claims that is not within our claim boundaries. - --------------------------------------------------------------------------- While we have conducted a mineral claims title search to confirm that Madman Mining Company (an unrelated third party) had the right to sell the claims to our president, John Xinos, who now holds the claims in trust, this should not be construed as a guarantee of claim boundaries. Until the claims are surveyed, the precise location of the boundaries of the claims may be in doubt. If we discover mineralization that is close to the estimated claim boundaries, it is possible that some or all of the mineralization may occur outside our boundaries and we may not be able to extract them, which could result in a total loss of any investment you make in our securities. 7. If we discover commercial reserves of precious metals on our mineral property, we can provide no assurance that we will be able to successfully advance the mineral claims into commercial production. - ---------------------------------------------------------------------------- Our mineral property does not contain any known commercially viable bodies of ore, although mineral concentrations of gold and silver have been found in at least 10 trenches or open cuts and one caved adit on the claim site. (An adit is an opening driven horizontally into the side of a mountain or hill to provide access to proven or potential mineral deposits.) If our exploration program is successful in establishing ore of commercial tonnage and grade, we will require additional funds in order to advance the mineral claims into commercial production. In such event, we may be unable to obtain any such funds, or to obtain such funds on terms that we consider economically feasible and you may lose your investment in this offering. 10 8. Because of the accessibility and previous work on the property, there is a risk that we may incur liabilities or damages as we conduct our business. - ---------------------------------------------------------------------------- Our mineral property has tunnels and trenches from previous mining work. As a result, we may become subject to liability for hazards, including pollution, cave-ins and other hazards against which we cannot insure, or against which we may elect not to insure. In addition, sections of the southern part of our claim are only accessible by all-terrain-vehicles and as such, access may be difficult or even dangerous and could result in accidents or other hazards. Because of the uncertain nature of the possible difficulties/damages we may be unable or unwilling to insure against them. The payment of such liabilities may have a material adverse effect on our financial position, which could result in a loss of any investment you make in our securities. 9. Because access to our mineral claims is often restricted by inclement weather, we may be delayed in our exploration and any future mining efforts. - ---------------------------------------------------------------------------- It is possible that snow or rain could cause roads leading to our claims to be impassable. We anticipate being able to access our mineral claims between the months of May and November during which time we intend to conduct our field exploration. However if the roads are impassable we would be delayed in our exploration timetable, which could delay any possible revenues we may gain at any time in the future. 10. Government regulation or other legal uncertainties may increase costs, which would negatively impact our business operations. - ---------------------------------------------------------------------------- There are several governmental regulations that materially restrict mineral claims exploration and development. Under Canadian mining law, to engage in certain types of exploration requires work permits, posting of bonds, as well as the performance of remediation work for any physical disturbance to the land. While these current laws will not affect our initial exploration phase, if we identify exploitable minerals and proceed to our Phase Two operations, which include drilling operations, we will incur regulatory compliance costs based upon the size and scope of our operations. In addition, the legal and regulatory environment that pertains to the exploration of ore is uncertain and may change. Uncertainty and new regulations could increase our costs of doing business and prevent us from exploring and extracting ore deposits on our claims. In addition to new laws and regulations being adopted, existing laws may be applied to the mining industry that have not as yet been applied. These new laws may increase our cost of doing business with the result that our financial condition and operating results may be harmed, thereby causing a total loss of any investment you make in our securities. 11. Our continued existence and future profitability is highly dependent upon the price of precious metals and ores. - -------------------------------------------------------------------------- Recently, the price of gold has reached all-time highs. The economic viability of our minerals exploration program will be highly dependent on, among many other factors, political issues and general economic conditions. During periods of economic downturn or slow economic growth, coupled with 11 eroding consumer confidence or rising inflation, the price and/or sale of precious metals could be severely impacted. Such factors would likely have an immediate effect on our business operations and/or profitability, which could severely impact your ability to ever resell any of our securities you purchase in this offering at a profit, or at all. RISKS ASSOCIATED WITH THIS OFFERING: - ------------------------------------ 12. The trading in our securities will be regulated by Securities and Exchange Commission Rule 15g-9 which established the definition of a "penny stock." Buying low-priced penny stocks is very risky and speculative. - --------------------------------------------------------------------------- The shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 ($300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares underlying the Units you may purchase in this offering in the public markets. 13. The offering price of the Units has been determined arbitrarily by us and does not bear any relationship to our assets, book value, earnings or other established criteria for valuing a privately held company. - ------------------------------------------------------------------------- We have arbitrarily determined the offering price of the Units. In determining the number of Units to be offered and the offering price, we took into consideration the amount of money we would need to implement our business plans and the number of Units we wanted to offer to the public. Accordingly, the offering price should not be considered an indication of the actual value of our securities which could be considerably lower and may never achieve the value you pay for them. As a result, you may lose part or all of the money you invest. 14. We are selling this offering without an underwriter and may be unable to sell any Units. - ------------------------------------------------------------------------- This offering is self-underwritten, that is, we are not going to engage the services of an underwriter to sell the shares; we intend to sell them through our sole officer and director, who will receive no commissions. 12 Mr. Xinos will offer the shares to his friends, relatives, acquaintances and business associates, however, there is no guarantee that he will be able to sell any of the Units. In the event we are unable to sell all of the Units in this offering, we will be forced to reduce or abandon our proposed business operations until such time as additional monies can be obtained, either through loans or financings. 15. Our common stock currently has no trading market and there is no guarantee a trading market will ever develop for our securities. Therefore, you may have difficulty selling any shares you purchase in this offering. - -------------------------------------------------------------------------- We are not registered on any public stock exchange. There is presently no demand for our common stock and no public market exists for the shares being offered in this prospectus. While we do intend to engage the services of a market make to file an application on our behalf for quotation in the Over-the-Counter Bulletin Board following completion of this offering and implementation of our business plans, we cannot guarantee that our application will be approved and our stock listed and quoted for sale on any public market. If no market is ever developed for our common stock, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or be able to liquidate your shares without considerable delay, if at all. In addition, if we fail to have our common stock quoted on a public trading market, your common stock will not have a quantifiable value and it may be difficult, if not impossible, to ever resell your shares in our company, resulting in an inability to realize any value from your investment and, possibly, a total loss of your investment. 16. You will incur immediate and substantial dilution of the price you pay for your shares. - -------------------------------------------------------------------------- Our sole officer and director, who is our only existing stockholder, acquired his shares at a cost of $.01 per share for 900,000 shares (plus the Gold Bug Project which he vended into the company at the same value for an additional 900,000 shares), which cost per share is substantially less than that which you will pay for any securities you purchase in this offering. Upon completion of this offering, the net tangible book value of the shares held by our existing stockholder (1,800,000 shares) will be increased by approximately $.0232 (103%) per share without any additional investment on his part. The purchasers of Units in this offering will incur immediate dilution (a reduction in the net tangible book value per share from the offering price of $.05 per Share) of $.026 (52%) per share. As a result, after completion of the offering, the net tangible book value of the shares held by purchasers in this offering would be $.024 per share, reflecting an immediate reduction in the price paid. 13 17. We will be holding all proceeds from the offering in a standard bank checking account until all Units are sold. Because the funds will not be held in an escrow or trust account, there is a risk your monies will not be returned if all the Units are not sold. - ---------------------------------------------------------------------------- All funds received from the sale of Units in this offering will be deposited into a separate standard bank checking account until all Units are sold and the offering is closed, after which time, the proceeds will be transferred to our business operating account. In the event all Units in the offering are not sold, we will promptly return all monies deposited to the original purchasers, without interest or penalty. However, since the funds will not be placed into an escrow, trust or other similar account, there can be no guarantee that any third party creditor who may obtain a judgment or lien against us would not satisfy the judgment or lien by executing on the bank account where the offering proceeds are being held, resulting in a loss of any investment you make in our securities. 18. Our sole director/officer beneficially owns 100% of the outstanding shares of our common stock. After the completion of this offering he will beneficially own 47% of the outstanding shares. If he chooses to sell his shares in the future, it might have an adverse effect on the price of our stock. - ---------------------------------------------------------------------------- Due to the controlling amount of his share ownership in our company, if our sole director/officer decides to sell his shares in the public market, the market price of our stock could decrease and all shareholders suffer a dilution to the value of their stock. If our director/officer decides to sell any of his common stock, he will be subject to Rule 144 under the 1933 Securities Act. Rule 144 restricts the ability of our director or officer (affiliate) to sell shares by limiting the sales of securities made under Rule 144 during any three-month period to the greater of: (1) 1% of the outstanding common stock of the issuer; or (2) the average weekly reported trading volume in the outstanding common stock reported on all securities exchanges during the four calendar weeks preceding the filing of the required notice of the sale under Rule 144 with the SEC. 19. There is no guarantee or assurance that the offering proceeds will not be prematurely used before satisfaction of the "all-or-none" condition of our offering. - ----------------------------------------------------------------------------- Because the proceeds received from investors in this offering will not be held in an escrow or trust account, there can be no assurance that we will be in a position to return funds to investors in this offering in the event we are unable to sell all of the Units, as required by the "all-or-none" provisions. In the event we prematurely use any of the offering proceeds, we may be unable to return all of the offering proceeds to investors. There can be no guarantee without the use of an escrow agent or trust account that the funds will be available for refund if and when needed. In any such event, you could risk a total loss of any investment you make in our securities. 14 FORWARD LOOKING STATEMENTS ========================== This prospectus contains forward-looking statements that involve risk and uncertainties. We use words such as "anticipate", "believe", "plan", "expect", "future", "intend", and similar expressions to identify such forward-looking statements. Investors should be aware that all forward-looking statements contained within this filing are the good faith estimates of management as of the date of this filing. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us as described in the "Risk Factors" section and elsewhere in this prospectus. USE OF PROCEEDS =============== We have estimated the net proceeds from this offering to be $100,000, assuming all Units are sold, which we can't guarantee. During the offering period, we will be placing all monies received from the sale of Units into a separate bank account, where it will remain until the offering is completed. Since this is an "all-or-none" offering, if we are not successful in completing the offering, we will promptly return all monies collected to the subscribers without interest or deduction. Assuming sale of all of the Shares offered herein, of which there is no assurance, the Company estimates that the net proceeds from this Offering will be approximately $93,500 after deducting $6,500 for estimated offering expenses, which include legal, accounting and all filing fees. If we are successful in completing this offering, we expect to disburse the proceeds in the priority set forth below, during the first 12 months of operation:
Total Proceeds to the Company $ 100,000 (1) Less: Offering Expenses 6,500 ------- Net Proceeds to the Company $ 93,500 Phase I Exploration Program 25,000 Phase II Exploration Program 63,000 Administration, Rental and Supplies 1,500 Legal & Accounting 3,000 Working Capital (2) 1,000 -------- Total Use of Net Proceeds $ 93,500 =========
(1) If any or all of the Warrants are exercised during the 2-year period following completion of this offering, of which there can be no guarantee, the proceeds from such exercise will be used for our mining exploration and development activities, thereby reducing the additional funding we will need. 15 DETERMINATION OF OFFERING PRICE =============================== The offering price of the Units has been determined arbitrarily by us. The price does not bear any relationship to our assets, book value, earnings, or other established criteria for valuing a privately held company. In determining the number of shares to be offered underlying the Units and Warrants, and the offering prices, we took into consideration our cash assets and the amount of money we would need to implement our business plans. Accordingly, the offering price should not be considered an indication of the actual value of the securities. The exercise price of the warrants was arbitrarily determined by us and does not bear any relationship to our assets, book value, earnings, projected revenues or other established criteria. Given the fact that the exercise price of $.10 per share is 2 times the $.05 offering price of the Units in this Offering and 10 times the $.01 price per share paid by our current shareholder for his shares, there is no guarantee that any or all of the Warrants will ever be exercised. DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES ============================================== Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the offering price of the Units being offered. Dilution of the value of the shares within the Units you purchase is also a result of the lower book value of the shares held by our existing stockholders. As of February 28, 2006, the net tangible book value of our shares of common stock issued and outstanding was ($1,483), a negative value per share of approximately ($.0008), based upon 1,800,000 shares issued and outstanding. Upon completion of this offering, but without taking into account any change in the net tangible book value after completion of this offering other than that resulting from the sale of the Units and receipt of the total proceeds of $100,000, less offering expenses of $6,500, for a total net proceeds to us of $93,500, the net tangible book value of the 3,800,000 shares to be outstanding will be $92,017, or approximately $.024 per share. Accordingly, the net tangible book value of the shares held by our existing stockholder (1,800,000 shares) will be increased by $.0232 (or approximately 103%) per share without any additional investment on his part. The purchasers of Units in this offering will incur immediate dilution (a reduction in the net tangible book value per share from the offering price of $.05 per Share) of $.026 (52%) per share. As a result, after completion of the offering, the net tangible book value of the shares held by purchasers in this offering would be approximately $.024, reflecting an immediate reduction in the price they paid for their shares. 16 After completion of the offering, and prior to the exercise of any Warrants, the existing shareholder will own 47% of the total number of shares (1,800,000 shares) then outstanding, for which he will have made an investment of $9,000 (plus a mining property which he exchanged for 900,000 Company shares), or $.01 per Share. Upon completion of the offering, the purchasers of the Units offered hereby will own 53% of the total number of shares then outstanding, for which they will have made a cash investment of $100,000, or $.05 per Share. The following table illustrates the per share dilution to the new investors:
Public Offering Price per Share $ .05 Net Tangible Book Value Prior to this Offering $ (.0008) Net Tangible Book Value After Offering $ .024 Immediate Dilution per Share to New Investors $ .026 Immediate Increase per Share to Current Stockholder $ .0232
The following table summarizes the number and percentage of shares purchased, the amount and percentage of consideration paid and the average price per Share paid by our existing stockholder and by new investors in this offering: If this offering is successful:
Price Number of Percent of Consideration Per Share Shares Held Ownership Paid --------- ----------- ---------- ------------- Existing Stockholder $ .01 1,800,000 47% $ 9,000 Investors in This Offering $ .05 2,000,000 53% $100,000
Assuming exercise of all Warrants within two years of completion of this offering, of which there can be no guarantee, the investors would receive financial benefit from the sale of their shares (Warrants), but the percentage of shares held by them in this offering would be further reduced by the number of warrants exercised by the issuance of up to 4,000,000 additional shares of common stock. If all Warrants are exercised, investors in this offering would hold approximately 77% of the total issued and outstanding shares of common stock. There can be no guarantee, however, that any or all of the Warrants will ever be exercised. 17 PLAN OF DISTRIBUTION ==================== Offering Will Be Sold By Our Sole Officer and Director - ------------------------------------------------------ This is a self-underwritten offering. This Prospectus is part of a registration statement filed with the U.S. Securities and Exchange Commission that permits our sole officer and director to sell the Units directly to the public, with no commission or other remuneration payable to him for any Units he may sell. There are no plans or arrangements to enter into any contracts or agreements to sell the Units with a broker or dealer. John Xinos, our officer and director, will sell the Units and intends to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, our officer and director will rely on the safe harbor from broker dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934. The officer and director will not register as a broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934, in reliance upon Rule 3a4-1, which sets forth those conditions under which a person associated with an Issuer may participate in the offering of the Issuer's securities and not be deemed to be a broker-dealer. a. Our officer and director is not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation; and, b. Our officer and director will not be compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and c. Our officer and director is not, nor will be at the time of his participation in the offering, an associated person of a broker- dealer; and d. Our officer and director meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of our company, other than in connection with transactions in securities; and (B) is not a broker or dealer, or been associated person of a broker or dealer, within the preceding twelve months; and (C) has not participated in selling and offering securities for any Issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii). Our officer, director, control person and affiliates do not intend to purchase any Units in this offering. Terms of the Offering - --------------------- The Units will be sold at the fixed price of $.05 per Unit until the completion of this offering. There is no minimum amount of subscription required per investor, and subscriptions, once received, are irrevocable. 18 This offering will commence on the date of this prospectus and continue for a period of 180 days (the "Expiration Date"). If we are not successful in completing our offering, we will promptly return all money to the investors without interest or deductions. Deposit of Offering Proceeds - ---------------------------- This is a "best efforts", "all or none" offering and, as such, we will not be able to spend any of the proceeds unless and until all Units are sold and all proceeds are received. We intend to hold all monies collected for subscriptions in a separate bank account until the total amount of $100,000 has been received. At that time, the funds will be transferred to our business account for use in the implementation of our business plans. In the event the offering is not sold out prior to the Expiration Date, all monies will be returned to investors, without interest or deduction. We feel the use of an escrow agent is an expense the company cannot bear at this time. We determined the use of the standard bank account was the most efficient use of our available funds. We strongly urge you to read the risks factor section of this prospectus relating to the risk to you as a purchaser of any Units and possible resulting loss of any investment you may make in our securities. Procedures and Requirements for Subscription - -------------------------------------------- If you decide to subscribe for any Units in this offering, you will be required to execute a Subscription Agreement and tender it, together with a check or certified funds to us. Subscriptions, once received by the company, are irrevocable. All checks for subscriptions should be made payable to Mistral Ventures Inc. Exercise of Warrants - -------------------- Each Unit consists of one share of Common Stock and two Common Stock Purchase Warrants. Each Common Stock Purchase Warrant will entitle the holder to purchase one additional share of Common Stock at the price of $.10 per Share for a period of two years from the date of this offering. We intend to complete and enter into a Warrant Agreement with Signature Stock Transfer, our registered stock transfer agent, to allow them to handle the issuance of the Common Stock underlying the warrants upon surrender and payment of the exercise price to us by any holders. Upon completion of this offering, the Warrants will become immediately detachable and may be individually sold in any public market which may develop. LEGAL PROCEEDINGS ================= We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions. 19 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ============================================================ The name, address, age and position of our present sole officer and director is set forth below:
Name & Address Age Position Date First Elected Term Expires - -------------- --- ---------- ------------------ ------------ John Xinos 39 President, 05/13/05 05/13/06 Suite 809 Secretary, 4438 West 10th Avenue Treasurer, Vancouver BC, Canada, CFO, CEO & V6J 1M7 Director
The foregoing person is a promoter of Mistral Ventures Inc., as that term is defined in the rules and regulations promulgated under the Securities and Exchange Act of 1933. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified. The director and officer currently devotes approximately 5 to 7 hours per week to manage the business affairs of our company. After receiving funding per our business plan, Mr. Xinos intends to devote as much time as the board of directors deems necessary to manage the affairs of the company. The sole officer or director of the corporation has not been the subject of any order, judgment, or decree of any court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limiting him or her from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities. The sole executive officer and director of the corporation has not been convicted in any criminal proceeding (excluding traffic violations) nor is the subject of a criminal proceeding which is currently pending. The sole officer and director of the corporation is not the subject of any pending legal proceedings. 20 Background of Officer and Director - ---------------------------------- John Xinos has been the President, CEO, Treasurer, CFO, Secretary, and Director of Mistral Ventures Inc. since inception. For the past 7 years, Mr. Xinos has been the owner and president of two private companies - Pine Street Investments and Fir Street Investments - which are solely involved in the purchase and/or rental or sale of real estate within British Columbia. Mr. Xinos has studied business management at the University of British Columbia although has not registered for the final year required to complete a degree. Mr. Xinos currently devotes approximately 5-7 hours per week to our business. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ============================================================== The following table sets forth information on the ownership of the voting securities held by officers, directors and 5% shareholders as of the date of this prospectus:
No. of No. of Percentage Name and Shares Shares of Ownership: Address of Before After Before After Beneficial Owner(1) Offering Offering Offering Offering - ------------------- ----------- --------- -------- -------- John Xinos 1,800,000 1,800,000 100% 47% 809-4438 W. 10th Ave. Vancouver BC Canada, V6R 4R8 - -------------------- All Officers and Directors as a Group 1,800,000 1,800,000 100% 47%
(1) The person named above may be deemed to be a "parent" and "promoter" of the Company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct holdings in the Company. DESCRIPTION OF SECURITIES ========================= Common Stock - ------------ The authorized capital stock of our company consists of 75,000,000 shares of Common Stock, par value $.001. The holders of Common Stock currently (i) have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of the affairs of the Company; (iii) do not have preemptive, subscription or conversion rights and there are no 21 redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stockholders may vote. All shares of Common Stock now outstanding are fully paid for and non-assessable and all shares of Common Stock which are the subject of this Offering, when issued, will be fully paid for and non-assessable. Reference is made to the Company's Articles of Incorporation, By-Laws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company's securities. Non-cumulative Voting - --------------------- The holders of our Common Stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of the Company's directors. After this Offering is completed, the present stockholder will own 47% of the outstanding shares. If all Warrants were to be exercised within two years, the current owner would own 23% of the outstanding shares and all other investors would own 77% of the outstanding shares. Cash Dividends - --------------- As of the date of this prospectus, we have not declared or paid any cash dividends to stockholders. The declaration or payment of any future cash dividend will be at the discretion of the Board of Directors and will depend upon our earnings, if any, capital requirements and financial position, general economic conditions, and other pertinent conditions. It is our present intention not to declare or pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our future business operations. INTEREST OF NAMED EXPERTS AND COUNSEL ===================================== None of the below described experts or counsel have been hired on a contingent basis and none of them will receive a direct or indirect interest in our company. Our financial statements for the period from inception to the year ended December 31, 2005, plus the two-month period ended February 28, 2006, included in this prospectus have been audited and reviewed, respectively, by James Stafford Chartered Accountants, Suite 350 , 1111 Melville Street, Vancouver BC, V6E 3V6, telephone number (604) 669-0711. We include the financial statements in reliance on their reports, given upon their authority as experts in accounting and auditing. The Law Office of Michael M. Kessler Esq., 3436 American River Drive, Suite 11, Sacramento, California 95864, Telephone (916) 239-4000, has acted as our legal counsel. 22 Mr. Lloyd Brewer, of Madman Mining Co. Ltd., Suite 314, 800 Pender Street, Vancouver BC, Canada V6C 2V6, an unrelated third party, has provided us with the geology report entitled "Summary Report On the Gold Bug Project". DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ======================================================== Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the By-Laws of the company, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or other control person in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. ORGANIZATION WITHIN LAST FIVE YEARS =================================== Mistral Ventures Inc. is a new company incorporated in Nevada on May 13, 2005 to engage in the business of acquisition, exploration and development of natural resource properties. At that time, Mr. John Xinos was named director and sole officer of the company and as such, voted to seek capital and begin development of our business plans. We received our initial funding of $9,000 through the sale of common stock to Mr. Xinos who purchased 900,000 shares of our Common Stock at $0.01 per share on October 27, 2005. On February 9, 2006, an additional 900,000 shares of Common Stock were issued to Mr. Xinos in exchange for mining claims valued in the amount of $9,000 or $0.01 per share. Mr. Xinos, therefore owns a total of 1,800,000 shares of our Common Stock. There are no other stockholders. DESCRIPTION OF BUSINESS ======================= We are an exploration stage company with no revenues and limited operating history. We are involved in the search for mineral deposits or reserves that are not yet in either the development or production stage. Our independent auditors have issued an audit opinion that includes a statement expressing substantial doubt as to our ability to continue as a going concern in our current state. The source of information contained in this discussion is our geology report that has been included as Exhibit 99.3 to this prospectus. 23 There has been only preliminary work done on our mining claim site, the Gold Bug Project, and as with any prospective mining claim, there is the possibility, or even likelihood, of our mineral claims containing little or no economically viable mineralization or reserves of gold, silver and other minerals. We have not engaged the services of a professional geologist or mining engineer to examine our mineral claims in the field. Because of the possibility that the Gold Bug Project claims do not contain any reserves, funds that we spend on exploration could be lost. Even if we complete our current exploration program and are successful in identifying a mineral deposit, we will be required to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve. There are no plans to combine with any other business or to change the company's business activities. In the event that commercially viable minerals are not found on the company's current property, we may seek other mineral properties to explore or other possible business opportunities. In this Prospectus a combination of Imperial and metric measures are used with respect to mineral properties located in Canada. Conversion rates from Imperial measure to metric and from metric to Imperial are provided below:
- ----------------------------------------------------------------------------- Imperial Measure = Metric Unit Metric Measure = Imperial Unit - ----------------------------------------------------------------------------- 2.47 acres 1 hectare 0.4047 hectares 1 acre 3.28 feet 1 metre 0.3048 metres 1 foot 0.62 miles 1 kilometre 1.609 kilometres 1 mile 0.032 ounces (troy) 1 gram 31.1 grams 1 ounce (troy) 1.102 tons (short) 1 tonne 0.907 tonnes 1 ton 0.029 ounces (troy)/ ton 1 gram/tonne 34.28 grams/tonne 1 ounce (troy) ton - -----------------------------------------------------------------------------
Below is a listing of mining terminology for convenience. We have also included an explanation of each term as it appears in the body of this prospectus to allow for easier reading. Glossary of Mining Terms - ------------------------ Adit - An opening driven horizontally into the side of a mountain or hill for providing access to a mineral deposit. Altered - Physically or chemically changed rock or mineral subsequent to its formation. Amphibole - An important group of dark-colored rock-forming, silicate minerals that generally containing ions of iron Andesite- Volcanic rock characteristically medium dark in color and containing 54 to 62% silica 24 Anomalous - A departure from the norm which may indicate the presence of mineralization Basalt- An extrusive volcanic rock Batholith- A plutonic rock mass which increases in size downward, has no determinable floor, and shows an area of surface exposure exceeding 100 km2.BeddingThe arrangement of sedimentary rocks in layers Breccia - Rock consisting of fragments, more or less angular, in a matrix of finer-grained material or of cementing material. Cadmium or Cd - A soft, bluish-white metal and is easily cut with a knife. Physically similar to zinc. Cadmium is used in silver solder and is highly toxic Carboniferous Age - An Epoch in Earth history about 354-290 million years ago Chalcopyrite - A sulphide mineral of copper and iron; the most important ore mineral in copper Channel sample - A sample composed of pieces of vein or mineralized rock that have been taken from a small trench or channel, usually about 3 inches wide and 1 inch deep Chlorite - A dark green, soft, flaky mineral similar to mica; it is common as an alteration or metamorphic mineral Copper or Cu - A reddish or salmon-pink isometric mineral, the native metallic element of copper. It is ductile and malleable, a good conductor of heat and electricity, usually dull and tarnished Cretaceous - Epoch in Earth history from about 63 million to 135 million years ago. Also refers to the rocks and sediment deposited in that epoch Dacite - Volcanic rock that characteristically is light in color and contains 62% to 69% silica and moderate amounts of sodium and potassium Diamond drill - A rotary type of rock drill that cuts a core of rock that is recovered in long cylindrical sections Down drill Dyke - A long and relatively thin body of igneous rock that, while in the molten state, intruded older rocks Eocene age - Epoch in earths history about 34-55 million years ago Equigranular - Grains within a rock are very similar in size/shape Erosional remnants - Literally remnants of a rock unit that has not completely eroded away 25 Fault - A fracture dividing a rock into two sections that have visibly moved relative to each other Feldspars - silicate minerals which occur in igneous rocks - plagioclase contains calcium and sodium Felsic - Light-colored rocks containing feldspar and silica Foliated - the arrangement of a set of minerals in parallel, sheet-like layers that lie perpendicular to the flattened plane of a rock. Occurs in metamorphic rocks Galena - A lead sulphide - the most common ore mineral of lead Gangue - Worthless minerals in an ore deposit Geological mapping - The process of observing and measuring geological features in a given area and plotting these features, to scale, onto a map Geophysical survey - A method of exploration that measures the physical properties of rock formations including magnetism, specific gravity, electrical conductivity and resistance Gold or Au - A heavy, soft, yellow, ductile, malleable, metallic element. Gold is a critical element in computer and communications technologies Granite - A coarse-grained intrusive igneous rock consisting of quartz, feldspar and mica Granodiorite - IgnEous rock, less felsic than granite, typically light in color; rough plutonic equivalent of dacite Greenstone - Metamorphosed basalt Hornblende - An igneous rock that contains magnesium, iron, silica and aluminum - is black, brown and green in color. It occurs in crystals of many igneous rocks Hornfels - A fine-grained contact metamorphic rock Igneous Rocks - Rocks that crystallize from magma Interbeds - Several layers of sedimentary rock located side by side Isolated Rafts - Literally small bodies of a rock unit that "sit" on top of a different rock Jurassic - Epoch in Earth history from about 135 million to 190 million years ago. Also refers to the rocks and sediment deposited in that epoch Lead or Pb - Heavy, easily fusible soft malleable base metal of dull pale bluish-grey colour 26 Limestones - A sedimentary rock composed primarily of calcium carbonate Lithologies - the character of a rock described in terms of structure, color, mineral composition, grain size, and arrangement of its component parts Mafic - class of rock which crystallizes from silicate minerals at relatively high temperatures. It is also sometimes called basalt Metamorphic -A rock that has undergone chemical or structural changes (heat, pressure, or a chemical reaction) that causes changes to its original state - High-grade metamorphic is a large amount of change Meta-wacke - A soft, earthy, dark-colored rock or clay derived from the alteration of basaltMineral claimA portion of land held either by a prospector or a mining company, in British Columbia each claim is 500m x 500m (1,640 ft2) MMI (Mobile Metal Ion) - A highly sensitive analytical technique that measures the Ions of various metals that are moving upwards from depth Monzonite - A felsic igneous rock usually light colored with > 20% quartz contentOreA mixture of mineralized rock from which at least one of the metals can be extracted at a profit Outcrop - A surface exposure of bedrockPlagioclaseAny of a group of feldspars containing a mixture of sodium and calcium feldspars Plugs - A roughly cylindrical body of igneous rock that, while in the molten state, intruded older rocksPotassicRock that contains potassium PortalThe entrance to an adit Precious metal- Any of several metals, including gold and platinum, that have high economic value " metals that are often used to make coins or jewelry Pyrite- A yellow iron sulphide mineral " sometimes referred to as "fools gold" Quartz- Common rock forming mineral consisting of silicon and oxygen Quartz diorite - quartz diorite is a medium to dark grey, medium to coarse-grained intrusive rock. It consists mainly of plagioclase feldspar, some quartz, and abundant dark minerals (roughly a third) Schists -A coarse-grained, strongly foliated metamorphic rock that develops from phyllite and splits easily into flat, parallel slabs Sedimentary - Secondary rocks formedfrom material derived from other rocks and laid down underwater. Shale - A sedimentary rock composed of fine sediment particles - tend to be red, brown, black, or gray, and usually originate in relatively still waters 27 Shear zone - A zone in which shearing has occurred on a large scale Silver or Ag - A white metallic element that is ductile, very malleable and capable of a high polish. This precious metal has major industrial applications in photography, x-rays, electronics and electrical contacts, batteries, brazing alloys, catalysts, mirrors, jewelry and sterling ware Strike - The direction or bearing from true north, of a vein or rock formation measured on a horizontal surface Soil sampling - The collecting of samples of soil, usually 2 pounds per sample, from soil thought to be covering mineralized rock. The samples are submitted to a laboratory that will analyze them for mineral content Sphalerite - A zinc sulphide mineral; the most common ore mineral of zinc Syenite - Usually light in colour - rock contains 90% feldspar in large crystals Trachytes -light-colored, very fine-grained extrusive igneous rock that is composed chiefly of feldspar with minor amounts other minerals Trenching - The digging of long, narrow excavation through soil, or rock, to expose mineralization TRIM map - BC Gov"t - Terrain Resource Information Management Program that produces highly accurate topographical base maps Tuff - Rock composed of fine volcanic ash Vein - A crack in the rock that has been filled by minerals that have traveled upwards from a deeper source Volcanic rock - Igneous rocks formed from magma that has flowed out or has been violently ejected from a volcano Winze - A secondary vertical or near-vertical opening sunk from a point inside a mine for the purpose of connecting with a lower level or of exploring the ground for a limited depth below a level Zinc or Zn - A white metallic element The Gold Bug Mining Claim - ------------------------- Currently, our only property, on which the net proceeds of the offering will be spent, is the Gold Bug Project claim, consisting of a six (6) mineral cell claims having a total surface area of approximately 315 acres. The claim is in Beaverdell, British Columbia, Canada (the "Property") and is within the Greenwood Mining Division. The official report lists the Gold Bug claim as being located at 49o24"N latitude and 119o08"W longitude on National Topographic Sheet 82E/06E and alternatively on BC TRIM map sheets 082E035 & 082E045. As a reference point, the site is approximately 170 miles 28 due north of the Grand Coulee Dam in Washington State. The town of Beaverdell is located 3 miles to the northeast of the Property. There is good gravel road access to most, but not all parts of the Property. Further, secondary roads and ATV trails provide access to other parts of the property. At the current time, the Property is without known exploitable reserves(1) and the proposed program is exploratory in nature. We have not carried out any exploration work on the claim and have incurred no exploration costs. The future cost of exploration work on the property is disclosed in detail in the Plan of Operation section of this prospectus. (1) Reserves: For the purposes of this registration statement: that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves consist of: (a) Proven (Measured) Reserves. Reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (ii) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. (b) Probable (Indicated) Reserves. Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation. There is not a plant or any equipment currently located on the Property. As noted in the History of Previous Work subsection below, prior to 1971, previous work on the property was done in at least 10 trenches. This work intersected a quartz vein containing some mineralization of gold and silver; however, it must be concluded that it was not at that time, considered to be commercially viable. Further activity was done in 1971, by Husky Oil; in 1981 , by Midland Energy Corporation; and in 1983, by Belinda Mines, but no further development was undertaken, so again, it may be that results were not significant enough to move forward with development. Limited rock sampling, geological sampling and a single survey line across the property were conducted by St. Elias Mines Ltd. without known results. There has been no known activity on the claim site since 1998. The Geological Survey Branch of the British Columbia Ministry of Energy and Mines has classified the mineralization within the project as a shear(2a)(2b) hosted polymetallic vein(3) (Silver-"Ag", Lead-"Pb", Zinc-"Zn", and Gold-"Au"). The word shear is used in mining with different meanings: (2a)Shear: a deformation of rocks formed by rock surfaces sliding laterally against each other, usually occurring under pressure caused by earthquakes, volcanos or glacial movement and sometimes containing a variety of mineral resources. (2b)Shear: can also refer to the face of a vertical cut or groove in the land as sometimes made in open pit mining " a process called "shearing". 29 (3)Shear-hosted polymetallic vein: a vein of ores contained within a fault or shear that has been recognized to contain a variety of minerals which may or may not be commercially viable. Shear-hosted polymetallic veins are frequently the source of both proven mineral resources and further exploration to try to discover commercial value. In the case of the Gold Bug Project, there are some showings considered to be worth further exploration, specifically in what is known as the Gold Bug Zone, where trenches and open cuts have exposed a mineralized vein, but it must be understood that substantial potential value is still unproven. Samples from the zone include 5.8 oz/ton of silver, 1.52% lead and 0.54% zinc from an unspecified interval of diamond drilling and 0.14 oz/ton gold from a grab sample collected from the dump of the caved adit. A single line of soil geochemical sampling identified a silver, lead and gold anomaly located along the projected strike (extension) of the Gold Bug Vein. The down-dip and strike extensions (both north and south) of the known gold, silver, lead and zinc mineralization presents a good target. Hydro electrical power lines that supply power to the town of Beverdeall are located near the claim boundary. It is however expected that the initial exploration will not be heavily dependent on electrical power, but will be supported by generators. Location and Access - -------------------- The Gold Bug Project is located approximately 170 miles due north of the Grand Coulee Dam in Washington State, within south-central British Columbia, Canada approximately 180 miles (290km) east of Vancouver, near Beaverdell " an area which has been mined since the early 1900s. Locally it is on the southern end of Cranberry Ridge within the Eugene Creek Valley. The Property is in the Greenwood Mining Division, and is centered at approximately 49O24"N latitude and 119o08"W longitude on NTS map sheet 82 E/6E and alternatively on BC TRIM (BC Gov?t. Terrain Resource Information Management) map sheets 082E035 and 082E045. Beaverdell lies 3 miles (5km) to the northeast, on Highway 33; Kelowna and the junction with Highway 97 lies some 50 miles (80km) to the north, while Rock Creek and the junction of Highways 3 and 33 is 27 miles (45km) to the south. The Eugene Creek logging road leaves Highway 33 approximately 4.3 miles (7km) south of Beaverdell and affords excellent access to the southern area of the claim. Further secondary roads and all terrain vehicle trails provide access to the eastern and central portions of the claim. Physiography - ------------- The Property is situated within the Monashee Mountains of the BC Southern Interior Physiographic Region, and elevations within the claims ranges from 4,100 feet (1,260m), near the northeastern corner of the Claim to 2,800 feet (850m) within the Eugene Creek valley at the southeastern corner of the Claim. Slopes within the Claim area are gentle except for the local fairly steep slopes in the area where the land climbs out of the Eugene Creek 30 valley. Vegetation consists mainly of fir; larch and pine, much of it mature second growth. Some of the area has been recently logged. There is relatively little underbrush, and open grassy areas are common. Outcrop of the underlying rock units is poor throughout the Project. It is estimated that less than 5% of the Project contains good rock outcrop exposure. (Outcrop: a protrusion of rock through the soil?s surface.) The climate features warm summers and mild winters. The West Kettle Valley is fairly dry in the summers with an average yearly precipitation of 20 inches (50cm). A snow pack of 2-3 feet (0.6-0.9m) begins to accumulate in December and lingers in places into May. The recommended field season for initial phases of exploration is from early May to late November. Drilling and underground development can be carried out on a year-round basis with the aid of a bulldozer to keep access roads snow-free. Ample water is available from Eugene Creek and Tuzo Creek to support all phases of exploration and development. Proposed Exploration and Development Programs - --------------------------------------------- PHASE I: The Phase I exploration program will be funded from the proceeds of this offering and will take approximately three weeks to complete with an additional three weeks required for analysis. The estimated cost of the Phase I program is $51,000 U.S. ($60,000CDN). This phase will consist of (1) grid emplacement, that is putting into place a grid for the exploratory work to be done so that the site is methodically, rather than randomly examined for possible reserves; and (2) soil sampling, as well as testing the effectiveness of Mobile Metal Ion and Biogeochemical methods. The additional 3 weeks will include: complete analysis of samples, data compilation and interpretation, drafting and report writing. Results gained from the program will lead to a better understanding of, the location of and controls of, mineralization at known showings as at any new showings and/or anomalous areas discovered as a result of the Phase I program. (In this case, anomalous areas refers to a departure from the rock or soil around it which may indicate the presence of mineralization.) We plan to commence Phase 1 of the exploration program on the claims in late spring or early summer of 2006, as soon as weather conditions in the area permit, or when we have completed this offering and have sufficient funds to do so. 31 The following exploration estimates were provided by the Canadian geologist as part of his report and the dollars are stated in Canadian dollars.
Personnel: - ---------- Senior Geologist 5 days @ $400.00 $ 2,000.00 Project Geologist 22 days @ $300.00 6,600.00 Prospector/Field Assistant 20 days @ $225.00 4,500.00 Prospector/Field Assistant 20 days @ $200.00 4,000.00 Field Costs: - ----------- Field Camp and Supplies 60 man/days @ $60.00/m/d (including camp rental, GPS rental, food, prospecting and sampling equipment, first aid and chain saw) 3,600.00 Field Communications Long Distance charges Motorola 2 way field radios 500.00 Auger Rentals 2,000.00 Survey Consumables Sample bags, survey flagging, pickets etc. 3,200.00 Transportation: - -------------- Truck Rental 20 days @ $100.00/day 2,000.00 ATV/Trailer Rental 20 days @ $75.00/day 1,500.00 Mob/de-mob Vancouver-Beaverdell return (fuel/meals/motel & truck mileage charges) 500.00 Analytical: - ---------- Soil Samples 500 samples @ $23.50/sample (Au + 32 element ICP) 11,750.00 MMI/Bio Geochemical 10 samples 350.00 Rock Samples 30 samples @ $25.00/sample 750.00 Office & Engineering: - -------------------- Report Writing Based on results of Phase I exploration program 5,000.00 Drafting/Cartography (including field base map and all final maps detailing geological mapping, sample locations and results, location of old workings and compilation of results from previous work on property) 4,000.00 Overhead & Contingency 7,750.00 ---------- Total estimate cost of the Phase I exploration program $60,000.00 ==========
32 PHASE II: The Phase II exploration program is contingent upon the success of the Phase I program and will be partially funded from the proceeds of this offering. Mechanical trenching and diamond drilling are foreseen to be the logical next step. The minimum estimated cost of the Phase II program is $86,000 U.S. ($100,000CDN) and will take approximately three (3) months to complete, including the collection and interpretation of all exploration data. Although the funds from this offering will not allow us to complete all of the analysis of the data received in the exploratory work in Phase II, we do believe we will have enough information to know whether it will likely be viable to proceed or whether we should consider other alternatives including obtaining a different property. In general, we would like to have indications that the mineralization within the veins is worth at least $100 U.S. per ton (gross metal value) to further explore/develop the claims. If a large mineralized vein system is present, the project could be developed on a large scale and, conversely, if a smaller mineralization vein system is present, then the property could be developed on a smaller scale. The discussions contained herein are management's estimates only, based on the information we have obtained from Madman Mining Co. Ltd., former owner of the Property. Because we have not yet commenced our exploration program, we cannot provide a more detailed discussion of what our plans will be if we find a viable store of minerals on our Property. As there is no guarantee that exploitable mineralization will be found, the quantity or type of minerals if they are found and the extraction process that will be required is unknown at this time. We are also unable to guarantee that we will be able to raise the additional funding that will be needed to proceed with any subsequent work on the claims if mineralization is found in Phases I and II either from the exercise of the Warrants in this offering or from other sources, including bank loans or additional sales of our equity securities. Based on previous work in the area, recent (limited scale) exploration work and the Summary Report on the Gold Bug Project by Lloyd C. Brewer attached to this prospectus as Exhibit 99.3, indications are that the vein in which the showing is located shows that "the high-grade silver with gold, lead and zinc mineralization occurring within the Project is consistent of the overall grades obtained from the past producing Inyo-Ackworth mine (located to the north of the project), as well as the main mines on Wallace Mountain. It is highly probable that further mineralization will be discovered below and along strike from the known mineralization workings at this area." The information from analytical results of samples collected during the previous work are helpful, as they provide some indication as to the grades and location of minerals present on the claims, although there is no guarantee that previous or future work will result in any exploitable mineral deposits. Acquisition and Retention of and Title to our Mining Property - ------------------------------------------------------------- The claims are currently held in trust for us in the name of our sole officer and director, John Xinos, whom we acquired them from on February 9, 2006 for 900,000 shares of our common stock with a deemed value of $.01 per share, or an aggregate amount of $9,000. The claim was purchased by John Xinos from Madman Mining Co. Ltd., an unrelated third party mining company, on February 3, 2006 for $10,000 CDN (approximately $8,000 USD). 33 In order to retain title to the property, exploration work in the amount $1,800 CDN must be completed and filed with the British Columbia Department of Energy Mines and Petroleum Resources ("BCDM"). If work is completed, in any one year (using a year based on the staking date of the claim " in this case March 28), in an amount greater than $1,800, then the excess work can be applied towards future years" exploration requirements. The BCDM charges a filing fee, equal to 10% of the value of the work done to record the work. Alternatively the company can pay "cash in lieu" of, which is also $1,800 per year with a 10% filing fee. We have paid this money in advance to allow us time to complete this offering and raise the proceeds necessary to commence exploratory work on the claim. Competition - ------------ The mining industry is highly competitive and fragmented. We do not compete directly with anyone for the exploration or removal of minerals from our Property, as we currently hold all interest and rights to the claims. Readily available commodities markets exist in Canada and around the world for the sale of gold, silver and other minerals. Therefore, we will likely be able to sell any gold, silver or other minerals that we are able to recover if and when we find any mineralization on our claims and are able to extract and bring them to market. We will, however, be subject to competition and unforeseen limited sources of supplies in the industry in the event spot shortages arise for supplies such as dynamite, and certain equipment such as bulldozers and excavators that we will need to conduct exploration. Mining is a large industry in Western Canada, which could result in such material and equipment shortages when we are ready to acquire them. We have not yet attempted to locate or negotiate with any suppliers of products, equipment or services and will not do so until funds are received from this offering. If we are unsuccessful in securing the products, equipment and services we need, we may have to suspend our exploration plans until we are able to obtain them. Bankruptcy or Similar Proceedings - ---------------------------------- We have been involved in no bankruptcy, receivership or similar proceedings. Reorganizations, Purchase or Sale of Assets - ------------------------------------------- There have been no material reclassifications, mergers, consolidations, or purchase or sale of a significant amount of our assets not in the ordinary course of business, nor are any expected in the near future. Compliance with Government Regulation - ------------------------------------ We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Canada, generally, and in British Columbia, specifically. 34 The initial steps of exploration can be carried out without permits or notification to any governmental body, as such work is deemed to be "low-disturbance/low-impact" by the British Columbia Department of Energy Mines and Petroleum Resources (BCDM). With respect to the mechanized trenching or diamond drilling " a plan of operation will need to be filed with the BCDM. This plan will detail the extent, location and amount of surface disturbance for the trenching and/or drilling. As the amount of trenching and drilling (initially) will be limited, we expect that a permit should be issued within 30 days of the filing of our plan of operations. We will be required to obtain a refundable bond in the amount of $2,000-$5,000 (depending on the anticipated amount of disturbance). The bond is to ensure that we reclaim or repair the disturbance caused by our trenching and drilling program. Usually this reclaiming work entails filling in and smoothing the surface at trenching sites, clean up and removal of any work material, and seeding native grass/plants at the sites of disturbance. Although there has recently been some logging in the area, in the event that trees larger than 6 inches in diameter need to be cut down, a permit will need to be obtained from the BC Ministry of Forests. This usually takes less than 30 days to obtain. We will try to adjust the areas we work and trench to work around larger trees (initially) to avoid any disturbance to the trees; however, if the disturbance to larger trees is unavoidable, then a permit to cut will be obtained. There are nominal costs involved in obtaining the BCDM or Forestry permits (less than $100 each). The bond required by the BCDM is returned (with interest) upon proper cleanup of the site. There will be costs for the crew and equipment required to fill in the trenches, but as heavy equipment is available locally, and the amount of disturbance is expected to be minimal, our estimate for these costs will be most likely be less than $2,000 (1 day " equipment/crew). Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts - -------------------------------------------------------------------------- We have no current plans for any registrations such as patents, trademarks, copyrights, franchises, concessions, royalty agreements or labor contracts. We will assess the need for any of these on an ongoing basis; however, we don't expect to enter into any such agreements in the near term. Research and Development Costs During the Last Two Years - --------------------------------------------------------- We have not expended funds for research and development costs since inception. The geology report and history of the claims were included in the $9,000 payment for the claims and not itemized as a separate cost. 35 Number of Employees - -------------------- We do not currently have any paid employees. Our only employee is our sole officer and director who currently spends 5-7 hours per week on our business matters. Upon completion of this offering and receipt of the proceeds therefrom, of which there is no assurance, Mr. Xinos plans to devote as much time as the board of directors determines is necessary to manage the affairs of the company. Reports to Security Holders - --------------------------- We will provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation S-B for a small business issuer under the Securities Exchange Act of 1934. We will become subject to disclosure filing requirements once our registration statement becomes effective, including filing Form 10-KSB annually and Form 10-QSB quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS =============================================================== General - ------- We are a start-up company and have not yet generated or realized any revenues from our business operations. Our financial statements from inception (May 13, 2005) through February 28, 2006 report no revenues and a net book value loss of $19,483. Furthermore, as we are still in the development stage and expect to continue to operate at a loss for most or all of the first year of our operations as we develop our business. The following table provides selected financial data about our company for the period from the date of inception on May 13, 2005 to December 31, 2005 and for the 2-month period ended February 28, 2006. For more detailed financial information, please see our financial statements included in this prospectus.
Balance Sheet Data: 12/31/05 2/28/06 -------------------------------------------- Cash in bank $ 8,677 $ 5,837 Total assets $ 8,927 $ 5,987 Total liabilities $ 5,700 $ 7,470 Stockholders' equity $ 3,227 $(1,483)
36 We have incurred total expenses of $19,483 since inception, $9,000 of which was spent for the acquisition of our mineral property interests, $8,900 in legal and accounting fees incurred in connection with the preparation and filing of a registration statement on Form SB-2 with the U.S. Securities and Exchange Commission, of which this prospectus is a part. We are relying solely on the proceeds of this offering to commence our exploration and development programs; however, there is no guarantee we will be successful in completing this offering or completing our proposed business plans. Other than the Units offered by this prospectus, no other source of capital has been identified or sought. We have never had any discussions with any possible acquisition candidate, nor have we any intention of doing so. We do not expect to purchase any real estate and do not own any to sell. We do not expect to hire full time employees until our business operations are established and we have constructed and placed our first kiosk. We have no off-sheet balance arrangements or obligations or other interests that could affect finances or operations. Other than the shares offered by this prospectus, no other source of capital has been has been identified or sought. Plan of Operation - ----------------- Our plan of operation for the twelve months following the date of this prospectus is to complete the first phase of exploration programs on the Gold Bug Project claims consisting of re-sampling of old workings, geologic mapping, analytical and test surveys. In addition to the $51,000 ($60,000CDN) we anticipate spending for Phase I of the exploration program as outlined below, we anticipate spending an additional 40,000 (approx. $46,500CDN) on the early stages of Phase II and approximately $12,000 in professional fees, including fees payable in connection with the filing of this registration statement and complying with our subsequent public company reporting obligations, as well as general administrative costs. Total expenditures over the next 12 months are therefore expected to be approximately $103,000, which includes the $100,000 to be raised in this offering and our existing cash assets. We are relying solely on the funds from this offering to proceed with our business plans. PHASE I: The Phase I exploration program will be funded from the proceeds of this offering and will take approximately three weeks to complete with an additional three weeks required for analysis. This phase will consist of (1) grid emplacement, that is putting into place a grid for the exploratory work to be done so that the site is methodically, rather than randomly examined for possible reserves; and (2) soil sampling, as well as testing the effectiveness of Mobile Metal Ion and Biogeochemical methods. The additional 3 weeks will include: complete analysis of samples, data compilation and interpretation, drafting and report writing. Results gained from the program will lead to a better understanding of, the 37 location of and controls of, mineralization at known showings as at any new showings and/or anomalous areas discovered as a result of the Phase I program. (In this case, anomalous areas refers to a departure from the rock or soil around it which may indicate the presence of mineralization.) We plan to commence Phase 1 of the exploration program on the claims in late spring or early summer of 2006, as soon as weather conditions in the area permit, or when we have completed this offering and have sufficient funds to do so. The estimated cost of the Phase I program is $51,000 U.S. ($60,000CDN). PHASE II: The Phase II exploration program is contingent upon the success of the Phase I program and will be partially funded from the proceeds of this offering. Mechanical trenching and diamond drilling are foreseen to be the logical next step. We estimate this phase will take approximately three (3) months to complete, including the collection and interpretation of all exploration data. Although the funds from this offering will not allow us to complete all of the analysis of the data received in the exploratory work in Phase II, we do believe we will have enough information to know whether it will likely be viable to proceed or whether we should consider other alternatives including obtaining a different property. In general, we would like to have indications that the mineralization within the veins is worth at least $100 U.S. per ton (gross metal value) to further explore/develop the claims. If a large mineralized vein system is present, the project could be developed on a large scale and, conversely, if a smaller mineralization vein system is present, then the property could be developed on a smaller scale. The minimum estimated cost of the Phase II program is $86,000 U.S. ($100,000CDN). Liquidity and Capital Resources - ------------------------------- Our current cash in the bank is $5,837. We believe this small cash balance will be sufficient to fund limited levels of our operations until such time as we are able to sell the Units and raise the funds in this offering. If we experience a shortage of funds prior to funding, our sole officer and director has informally agreed to advance funds to allow us to pay for offering costs, filing fees and miscellaneous expenses; however, we have no formal commitment, arrangement or legal obligation with him to advance or loan funds to us if and when needed. In order to achieve our business plan goals, we are relying solely on receipt of the proceeds from this offering. We are an exploration stage company and have generated no revenue to date. We have sold $9,000 in equity securities to our sole officer and director to implement our minimum level of operations and prepare this prospectus to raise additional funds needed for the exploration and development of our Property. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as a going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated revenues and no revenues are anticipated until we begin removing and selling minerals from our Property, of which there can be no assurance. 38 Our exploration target is to find exploitable minerals on our property. Our success depends on achieving that target. There is the likelihood that our mineral claims will contain little or no economic mineralization or reserves of gold and other minerals. We have not yet engaged the services of a professional geologist or mining engineer to examine our mineral claims in the field, and we will not do so until this offering is completed and we have the funds to do so, of which there is no guarantee. There is the possibility that the Gold Bug claims do not contain any reserves and funds that we spend on exploration will be lost. Even if we complete our current exploration program and are successful in identifying any mineral deposits, we will be required to expend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve. We are unable to assure you we will be able to raise the additional funds necessary through the exercise of the Warrants to implement any future exploration or extraction program even if mineralization is found. Critical Accounting Policies - ---------------------------- Use of estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Income taxes - We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Management feels the company will have a net operating loss carryover to be used for future years. We have not established a valuation allowance for the full tax benefit of the operating loss carryovers due to the uncertainty regarding realization. Net loss per common share - We compute net loss per common share in accordance with SFAS No. 128, Earnings per Share (SFAS 128) and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. For the period from May 13, 2005 (Date of Inception) through February 2006, no options and warrants were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive. 39 Revenue recognition " We have had no revenues to date from operations; as a result, a revenue recognition policy has not yet been formulated by our board of directors. Stock-based compensation " We will apply Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations, in accounting for stock options issued to employees. Under APB No. 25, employee compensation cost is recognized when estimated fair value of the underlying stock on date of the grant exceeds exercise price of the stock option. For stock options and warrants issued to non- employees, we will apply SFAS No. 123, Accounting for Stock-Based Compensation, which requires the recognition of compensation cost based upon the fair value of stock options at the grant date using the Black-Scholes option pricing model. There were no stock options granted for the period from inception to February 28, 2006. There are additionally no written or verbal agreements related to the sale of any stock, option or warrants of our common stock as of February 28, 2006. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". SFAS No. 148 amends the transition and disclosure provisions of SFAS No. 123. We are currently evaluating SFAS No. 148 to determine if it will adopt SFAS No. 123 to account for employee stock options using the fair value method and, if so, when to begin transition to that method. DESCRIPTION OF PROPERTY ----------------------- We are currently using the office premises of our sole officer and director on a rent-free basis at 809-4438 West 10th Avenue, Vancouver BC, Canada, V6R 4R8. The premises include a telephone, answering machine, fax machine and a computer system, which is adequate for our current business operations. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- The principal executive office and telephone number are provided by our sole officer and director at no cost to us. The costs associated with the use of the telephone and mailing address were deemed to be immaterial as the telephone and mailing address were almost exclusively used by him for other business purposes. As of June 9, 2005, we owed our sole officer and director $500 for a cash loan advanced to us for incorporation expenses. The loan is unsecured and interest free with no specified terms of repayment. 40 On October 27, 2005, a total of 900,000 shares of Common Stock were issued in exchange for cash in the amount of $9,000 U.S., or $.01 per share. On February 9, 2005, a total of 900,000 shares of Common Stock were issued in exchange for mining claims valued in the amount of $9,000 U.S., or $.01 per share. The terms of these stock issuances were as fair to the company, in Mr. Xinos's opinion as the sole officer and director, as could have been made with an unaffiliated third party. In making this determination, he relied upon the fact that the 900,000 shares were valued and purchased for approximately $9,000 in cash and the 900,000 shares issued for the $9,000 valuation of the mineral claim interest which was the amount he had paid for the mining claims. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -------------------------------------------------------- Following completion of this offering, of which there is no guarantee, we plan to contact a market maker to file an application on our behalf to have our shares quoted on the OTC Electronic Bulletin Board (OTCBB). The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter (OTC) securities. The OTCBB is not an issuer listing service, market or exchange. Although the OTCBB does not have any listing requirements per se, to be eligible for quotation on the OTCBB, issuers must remain current in their filings with the SEC or applicable regulatory authority. Market Makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30 or 60 day grace period if they do not make their required filing during that time. We cannot guarantee that our application will be accepted or approved and our stock listed and quoted for sale. As of the date of this filing, there have been no discussions or understandings between our company nor anyone acting on our behalf with any market maker regarding participation in a future trading market for our securities. As of the date of this filing, there is no public market for our securities. There has been no public trading of our securities, and, therefore, no high and low bid pricing. As of the date of this prospectus, we had one shareholder of record. We have paid no cash dividends and have no outstanding options. Penny Stock Rules - ------------------ The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). 41 A purchaser is purchasing penny stock which limits the ability to sell the stock. The shares offered by this prospectus constitute penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which: - - contains a description of the nature and level of risk in the market for penny stock in both public offerings and secondary trading; - - contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act of 1934, as amended; - - contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" price for the penny stock and the significance of the spread between the bid and ask price; - - contains a toll-free telephone number for inquiries on disciplinary actions; - - defines significant terms in the disclosure document or in the conduct of trading penny stocks; and - - contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation; The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer: - - the bid and offer quotations for the penny stock; - - the compensation of the broker-dealer and its salesperson in the transaction; - - the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and - - monthly account statements showing the market value of each penny stock held in the customer's account. 42 In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities. Regulation M - ------------ Our officer and director, who will offer and sell the Shares, is aware that he is required to comply with the provisions of Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the officer and director, sales agent, any broker-dealer or other person who participates in the distribution of shares in this offering from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Transfer Agent - -------------- The stock transfer agent for our securities is Signature Stock Transfer, 2301 Ohio Drive " Suite 100, Plano, Texas 75093 telephone (972)612-4120. EXECUTIVE COMPENSATION ---------------------- Our current sole officer and director receives no compensation.
- ---------------------------------------------------------------------------- SUMMARY COMPENSATION TABLE - ---------------------------------------------------------------------------- Annual Compensation Long-Term Comp. Awards Payouts Name and Consulting Other Annual Position(s) Year Fees Bonus Compensation - ---------------------------------------------------------------------------- John Xinos, 2005 0 0 0 0 0 President 2006 0 0 0 0 0 - ----------------------------------------------------------------------------
There are no current employment agreements with our sole officer and director. 43 The officer currently devotes an immaterial amount of time to manage the affairs of the company, approximately 5-7 hours per week. The director and principal officer has agreed to work with no remuneration until such time as the company receives sufficient revenues necessary to provide management salaries. At this time, management cannot accurately estimate when sufficient revenues will occur to implement this compensation, nor what the amount of the compensation will be. There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any. FINANCIAL STATEMENTS -------------------- Our financial statements for the period from the date of inception on May 13, 2005 to December 31, 2005 (audited) and for the 2-month period ended February 28 2006 (unaudited), immediately follow. 44 Mistral Ventures, Inc. (An Exploration Stage Company) Financial Statements (Expressed in U.S. Dollars) 31 December 2005 45 James Stafford Chartered Accountants* Suite 350 - 1111 Melville Street Vancouver, British Columbia Canada V6E 3V6 Telephone +1 604 669 0711 Facsimile +1 604 669 0754 * Incorporated professional Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Mistral Ventures, Inc. (An Exploration Stage Company) We have audited the balance sheet of Mistral Ventures, Inc. as of 31 December 2005 and the related statements of operations, cash flows and changes in stockholders' equity for the period from the date of inception on 13 May 2005 to 31 December 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of 31 December 2005 and the results of its operations, its cash flows and its changes in stockholders' equity for the period from the date of inception on 13 May 2005 to 31 December 2005 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ James Stafford Chartered Accountants Vancouver, Canada 23 March 2005 46
Assets - ------ Current - ------- Cash and cash equivalents 8,677 Prepaid expenses 250 -------- 8,927 ======== Liabilities - ---------- Current - ------- Accounts payable and accrued liabilities (Note 3) 5,200 Due to related party (Note 4) 500 -------- 5,700 -------- Stockholders' equity - -------------------- Capital stock (Note 5) Authorized 75,000,000 of common shares, par value $0.001 Issued and outstanding 2005 - 900,000 common shares, par value $0.001 900 Additional paid in capital 8,100 Deficit, accumulated during the exploration stage (5,773) -------- 3,227 -------- 8,927 ========
Nature and Continuance of Operations (Note 1) Subsequent Event (Note 8) On behalf of the Board: /s/ John Xinos, Director By: John Xinos The accompanying notes are an integral part of these financial statements. 47
Mistral Ventures, Inc. (An Exploration Stage Company) Statement of Operations (Expressed in U.S. Dollars) For the period from the date of inception on 13 May 2005 to 31 December 2005 $ Expenses - -------- Legal and accounting 5,200 Office and miscellaneous 18 Transfer agent fees 555 ------- Net loss for the period (5,773) ======= Basic and diluted earnings per common share (0.01) ======= Weighted average number of common shares used in per share calculations 900,000 =======
The accompanying notes are an integral part of these financial statements. 48
Mistral Ventures, Inc. (An Exploration Stage Company) Statement of Cash Flows (Expressed in U.S. Dollars) For the period from the date of inception on 13 May 2005 to 31 December 2005 $ Cash flows from operating activities - ------------------------------------ Net loss for the period (5,773) Changes in operating assets and liabilities Increase in prepaid expenses (250) Increase in accounts payable and accrued liabilities 5,200 Increase in due to related party 500 ------ (323) Cash flows from financing activities - ------------------------------------ Common shares issued for cash 9,000 ------ Increase in cash and cash equivalents, being cash and cash equivalents, end of period 8,677 ======
Supplemental Disclosures with Respect to Cash Flows (Note 7) The accompanying notes are an integral part of these financial statements. 49
Mistral Ventures, Inc. (An Exploration Stage Company) Statements of Changes in Stockholders' Equity (Expressed in U.S. Dollars) Additional Number of Share Paid-In Stockholders' Shares Capital Capital Deficit Equity --------- ------- -------- ---------- ------------ Balance at May 13, 2005 (Inception) - $ - $ - $ - $ - Common shares issued - cash ($0.01 per share) (Note 5) 900,000 900 8,100 - 9,000 Net loss for the period - - - (5,773) (5,773) ------------------------------------------------------ Balance at 31 December 2005 900,000 $ 900 $ 8,100 $ (5,773) $ (3,227) ========================================================
The accompanying notes are an integral part of these financial statements. 50 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 1. Nature and Continuance of Operations Mistral Ventures, Inc. was incorporated in the State of Nevada on 13 May 2005 to engage in the acquisition, exploration and development of natural resources properties. The Company is an exploration stage company as defined by Statement of Financial Accounting Standard ('SFAS") No. 7. The Company had not acquired any mineral properties interest at 31 December 2005 but did acquire one property interest subsequent to 31 December 2005 (Note 8). The Company has not yet determined whether this property contains reserves that are economically recoverable. The recoverability of property expenditures will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying property, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreement and upon future profitable production or proceeds for the sale thereof. The Company's financial statements as at 31 December 2005 and for the period from the date of inception on 13 May 2005 to 31 December 2005 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $5,773 for the period from the date of inception on 13 May 2005 to 31 December 2005 and has working capital of $3,227 at 31 December 2005. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. However, based on its prior demonstrated ability to raise capital, management believes that the Company's capital resources should be adequate to continue operating and to maintain its business strategy during fiscal 2006. However, if the Company is unable to raise additional capital in the near future, due to the Company's liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 2. Significant Accounting Policies The following is a summary of significant accounting policies used in the preparation of these financial statements. 51 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 Basis of presentation The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to exploration stage companies, and are expressed in U.S. dollars. The Company's fiscal year end is 31 December. Cash and cash equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. Mineral property costs The Company has been in the exploration stage since its formation on 13 May 2005 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisition and exploration costs are charged to operations as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. Although the Company will take steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. Reclamation costs The Company's policy for recording reclamation costs is to record a liability for the estimated costs to reclaim mined land by recording charges to production costs for each tonne of ore mined over the life of the mine. The amount charged is based on management's estimation of reclamation costs to be incurred. The accrued liability is reduced as reclamation expenditures are made. Certain reclamation work is performed concurrently with mining and these expenditures are charged to operations at that time. Financial instruments The carrying value of cash, accounts payable and accrued liabilities, and due to related party approximates their fair value because of the short maturity of these instruments. The Company's operations are in Canada and virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates. The 52 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 Company's financial risk is the risk that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Derivative financial instruments The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Environmental expenditures The operations of the Company have been, and may in the future be, affected from time to time, in varying degrees, by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries. Income taxes Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. 53 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 Basic and diluted net loss per share The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. SFAS No. 128 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive. Comprehensive loss SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at 31 December 2005, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements. Segments of an enterprise and related information SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has evaluated this SFAS and does not believe it is applicable at this time. Start-up expenses The Company has adopted Statement of Position No. 98-5, Reporting the Costs of Start-up Activities, which requires that costs associated with start-up activities be expensed as incurred. Accordingly, start-up costs associated with the Company's formation have been included in the Company's general and administrative expenses for the period from the date of inception on 13 May 2003 to 31 December 2005. 54 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 Foreign currency translation The Company's functional and reporting currency is in U.S. dollars. The financial statements of the Company are translated to U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates. Recent accounting pronouncements In May 2005, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 154, Accounting Changes and Error Corrections " A Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 changes the requirements for the accounting for and the reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after 15 December 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position. In March 2005, the Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin ("SAB") No. 107 to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB No. 107 during implementation of SFAS No. 123R. 55 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets " An Amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after 15 June 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company's results of operations or its financial position. In December 2004, the FASB issued SFAS No. 123R, Share Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and its related implementation guidance. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant- date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award " the requisite service period (usually the vesting period). SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS No. 123R in the first interim or annual reporting period that begins after 15 December 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or its financial position. 56 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 The FASB has also issued SFAS No. 151 and 152, but they will not have an effect of the financial reporting of the Company. 3. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year. 4. Due to Related Party As at 31 December 2005, the amount due to related party consists of $500 payable to a director and shareholder of the Company. This balance is non- interest bearing, unsecured and has no fixed terms of repayment. 5. Capital Stock Authorized The total authorized capital is 75,000,000 common shares with a par value of $0.001 per common share. Issued and outstanding The total issued and outstanding capital stock is 900,000 common shares with a par value of $0.001 per common share. On 27 October 2005, 900,000 common shares of the Company was issued for cash proceeds of $9,000. 6. Income Taxes The Company has losses carried forward for income tax purposes to 31 December 2005. There are no current or deferred tax expenses for the year ended 31 December 2005 due to the Company"s loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. 57 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) 31 December 2005 The provision for refundable federal income tax consists of the following:
For the period from the date of inception on 13 May 2005 to 31 December 2005 $ Deferred tax asset attributable to: Current operations 1,963 Less: Change in valuation allowance (1,963) --------- Net refundable amount - =========
The composition of the Company's deferred tax assets as at 31 December 2005 is as follows:
31 December 2005 $ Net income tax operating loss carryforward (5,773) ========= Statutory federal income tax rate 34% Effective income tax rate 0% Gross deferred tax assets 1,963 Less: Valuation allowance (1,963) --------- Net deferred tax asset - =========
The potential income tax benefit of these losses has been offset by a full valuation allowance. As at 31 December 2005, the Company has an unused net operating loss carry- forward balance of approximately $5,773 that is available to offset future taxable income. This unused net operating loss carry-forward balance expires in 2025. 58 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Audited) 31 December 2005 7. Supplemental Disclosures with Respect to Cash Flows
For the period from the date of inception on 13 May 2005 to 31 December 2005 $ Cash paid during the year for interest - Cash paid during the year for income taxes -
8. Subsequent Event Subsequent to 31 December 2005, the Company acquired a 100% interest in a mineral property located in Greenwood Mining Division, British Columbia, Canada (the "Gold Bug Property") from a director and shareholder of the Company for proceeds of 900,000 common shares of the Company valued at $9,000. The Gold Bug Property is currently held in trust for the Company by the director and shareholder. 59 Mistral Ventures, Inc. (An Exploration Stage Company) Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 60
Mistral Ventures, Inc. (An Exploration Stage Company) Balance Sheets (Expressed in U.S. Dollars) (Unaudited) 28 February 31 December 2006 2005 $ $ Assets - ------ Current - ------- Cash and cash equivalents 5,837 8,677 Prepaid expenses 150 250 -------- -------- 5,987 8,927 ======== ======== Liabilities - ----------- Current - ------- Accounts payable and accrued liabilities (Note 4) 6,970 5,200 Due to related party (Note 5) 500 500 -------- -------- 7,470 5,700 -------- -------- Stockholders' equity - -------------------- Capital stock (Note 7) Authorized 75,000,000 of common shares, par value $0.001 Issued and outstanding 28 February 2006 - 1,800,000 common shares, par value $0.001 31 December 2005 - 900,000 common shares, par value $0.001 1,800 900 Additional paid in capital 16,200 8,100 Deficit, accumulated during the exploration stage (19,483) (5,773) -------- ------- (1,483) 3,227 -------- ------- 5,987 8,927 ======== =======
Nature and Continuance of Operations (Note 1) On behalf of the Board: /s/ John Xinos, Director By: John Xinos 61
Mistral Ventures, Inc. (An Exploration Stage Company) Statements of Operations (Expressed in U.S. Dollars) (Unaudited) For the period from the date of For the two inception month on 13 May period 2005 to 28 ended 28 February February 2006 2006 $ $ Expenses - -------- Acquisition of mineral property interest (Notes 3 and 6) 9,000 9,000 Bank charges and interest 15 15 Legal and accounting 8,900 3,700 Office and miscellaneous 843 825 Transfer agent fees 725 170 -------- -------- Net loss for the period (19,483) (13,710) ======== ======== Basic and diluted earnings per common share (0.01) ======== Weighted average number of common shares used in per share calculations (Note 2) 1,189,831 ========= 62 Mistral Ventures, Inc. (An Exploration Stage Company) Statements of Cash Flows (Expressed in U.S. Dollars) (Unaudited) For the period from the date of For the two inception month on 13 May period 2005 to 28 ended 28 February February 2006 2006 $ $ Cash flows from operating activities - ------------------------------------ Net loss for the period (19,483) (13,710) Adjustments to reconcile loss to net cash used by operating activities Mineral property acquisition costs for common shares (Notes 3 and 6) 9,000 9,000 Changes in operating assets and liabilities Decrease (increase) in prepaid expenses (150) 100 Increase in accounts payable and accrued liabilities 6,970 1,770 Increase due to related party 500 - --------- -------- (3,163) (2,840) Cash flows from financing activities - ------------------------------------ Common shares issued for cash 9,000 - Increase (decrease) in cash and cash equivalents 5,837 (2,840) Cash and cash equivalents, beginning of period - 8,677 --------- -------- Cash and cash equivalents, end of period 5,837 5,837 ========= ========
Supplemental Disclosures with Respect to Cash Flows (Note 9) 63
Mistral Ventures, Inc. (An Exploration Stage Company) Statements of Changes in Stockholders' Equity (Expressed in U.S. Dollars) (Unaudited) Additional Number of Share Paid-In Stockholders' Shares Capital Capital Deficit Equity --------- ------- -------- ---------- ------------ Balance at May 13, 2005 (Inception) - $ - $ - $ - $ - Common shares issued - cash ($0.01 per share) 900,000 900 8,100 - 9,000 Net loss for the period - - - (5,773) (5,773) ------------------------------------------------------ Balance at 31 December 2005 900,000 $ 900 $ 8,100 $ (5,773) $ (3,227) Common shares issued - mineral property ($0.01 per share)(Notes 3 and 6) 900,000 900 8,100 - 9,000 Net loss for the period - - - (13,710) (13,710) ------------------------------------------------------ Balance at 28 February 2006 1,800,000 $1,800 $ 16,200 $(19,483) $ (1,483) ======================================================
6 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 1. Nature and Continuance of Operations Mistral Ventures, Inc. was incorporated in the State of Nevada on 13 May 2005 to engage in the acquisition, exploration and development of natural resources properties. The Company is an exploration stage company as defined by Statement of Financial Accounting Standard ('SFAS") No. 7. The Company has acquired a mineral property interest located in the Province of British Columbia, Canada and has not yet determined whether this property contains reserves that are economically recoverable. The recoverability of property expenditures will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying property, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreement and upon future profitable production or proceeds for the sale thereof. The Company's financial statements as at 28 February 2006 and for the two month then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $13,710 for the two month period ended 28 February 2006 and working capital deficit of $1,483 at 28 February 2006 (31 December 2005 ' working capital of $3,227). Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. However, based on its prior demonstrated ability to raise capital, management believes that the Company's capital resources should be adequate to continue operating and to maintain its business strategy during fiscal 2006. However, if the Company is unable to raise additional capital in the near future, due to the Company's liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 2. Significant Accounting Policies The following is a summary of significant accounting policies used in the preparation of these financial statements. 65 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 Basis of presentation These unaudited interim financial statements have been prepared in accordance with accounting policies as set out in the Company's audited financial statements for the period ended 31 December 2005, except as described in this note. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") applicable for exploration stage company for interim financial information and are expressed in U.S. dollars. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the two month period ended 28 February 2006 are not necessarily indicative of the results that may be expected for the year ended 31 December 2006. For further information, refer to the audited financial statements of the Company for the period ended 31 December 2005. Cash and cash equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. Mineral property costs The Company has been in the exploration stage since its formation on 13 May 2005 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisition and exploration costs are charged to operations as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. Although the Company will take steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. 66 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 Reclamation costs The Company's policy for recording reclamation costs is to record a liability for the estimated costs to reclaim mined land by recording charges to production costs for each tonne of ore mined over the life of the mine. The amount charged is based on management's estimation of reclamation costs to be incurred. The accrued liability is reduced as reclamation expenditures are made. Certain reclamation work is performed concurrently with mining and these expenditures are charged to operations at that time. Financial instruments The carrying value of cash, accounts payable and accrued liabilities, and due to related party approximates their fair value because of the short maturity of these instruments. The Company's operations are in Canada and virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates. The Company's financial risk is the risk that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Derivative financial instruments The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Environmental expenditures The operations of the Company have been, and may in the future be, affected from time to time, in varying degrees, by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries. 67 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 Income taxes Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. Basic and diluted net loss per share The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. SFAS No. 128 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive. Comprehensive loss SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at 28 February 2006, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements. Segments of an enterprise and related information 68 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has evaluated this SFAS and does not believe it is applicable at this time. Start-up expenses The Company has adopted Statement of Position No. 98-5, Reporting the Costs of Start-up Activities, which requires that costs associated with start-up activities be expensed as incurred. Accordingly, start-up costs associated with the Company's formation have been included in the Company's general and administrative expenses for the period from the date of inception on 13 May 2003 to 28 February 2006. Foreign currency translation The Company's functional and reporting currency is in U.S. dollars. The financial statements of the Company are translated to U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates. 69 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 Concentrations of credit risk The Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and related party payables. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company's management also routinely assesses the financial strength and credit worthiness of any parties to which it extends funds and as such, it believes that any associated credit risk exposures are limited. Risks and uncertainties The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure. Recent accounting pronouncements In May 2005, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 154, Accounting Changes and Error Corrections " A Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 changes the requirements for the accounting for and the reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after 15 December 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position. In March 2005, the Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin ("SAB") No. 107 to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB No. 107 during implementation of SFAS No. 123R. 70 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets " An Amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after 15 June 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company's results of operations or its financial position. In December 2004, the FASB issued SFAS No. 123R, Share Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and its related implementation guidance. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award " the requisite service period (usually the vesting period). SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS No. 123R in the first interim or annual reporting period that begins after 15 December 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or its financial position. The FASB has also issued SFAS No. 151 and 152, but they will not have an effect of the financial reporting of the Company. 71 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 3. Mineral Property During the two month period ended 28 February 2006, the Company acquired a 100% interest in a mineral property located in Greenwood Mining Division, British Columbia, Canada (the "Gold Bug Property") from a director and shareholder of the Company for proceeds of 900,000 common shares of the Company valued at $9,000. The Gold Bug Property is currently held in trust for the Company by the director and shareholder (Notes 6, 7 and 9). 4. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year. 5. Due to Related Party As at 28 February 2006, the amount due to related party consists of $500 payable to a director and shareholder of the Company (31 December 2005 - $500). This balance is non-interest bearing, unsecured and has no fixed terms of repayment. 6. Related Parties Transactions During the two month period ended 28 February 2006, the Company acquired an interest in the Gold Bug Property from a director and shareholder of the Company (Notes 3, 7 and 9). 7. Capital Stock Authorized The total authorized capital is 75,000,000 common shares with a par value of $0.001 per common share. Issued and outstanding The total issued and outstanding capital stock is 1,800,000 common shares with a par value of $0.001 per common share. On 9 February 2006, the Company issued 900,000 common shares valued at $0.01 per share for the acquisition of mineral property interests (Note 3s 3, 6 and 9). 72 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 8. Income Taxes The Company has losses carried forward for income tax purposes to 28 February 2006. There are no current or deferred tax expenses for the period ended 28 February 2006 due to the Company's loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. The provision for refundable federal income tax consists of the following:
For the period from the date of For the two inception on month period 13 May 2005 to ended 28 31 December 2005 February 2006 $ $ Deferred tax asset attributable to: Current operations 6,624 4,661 Less: Change in valuation allowance (6,624) (4,661) --------- -------- Net refundable amount - - ========= ========
The composition of the Company's deferred tax assets as at 28 February 2006 and 31 December 2005 are as follows:
28 February 31 December 2006 2005 $ $ Net income tax operating loss carryforward (19,483) (5,773) ========== ========== Statutory federal income tax rate 34% 34% Effective income tax rate 0% 0% Gross deferred tax assets 6,624 1,963 Less: Valuation allowance (6,624) (1,963) ---------- ---------- Net deferred tax asset - - ========== ==========
73 Mistral Ventures, Inc. (An Exploration Stage Company) Notes to Financial Statements (Expressed in U.S. Dollars) (Unaudited) 28 February 2006 The potential income tax benefit of these losses has been offset by a full valuation allowance. As at 28 February 2006, the Company has an unused net operating loss carry- forward balance of approximately $19,483 that is available to offset future taxable income. This unused net operating loss carry-forward balance expires in 2025. 9. Supplemental Disclosures with Respect to Cash Flows
For the period from the date of For the two inception month on 13 May period 2005 to 28 ended 28 February February 2006 2006 $ $ Cash paid during the year for interest - - Cash paid during the year for income taxes - -
During the two month period ended 28 February 2006, the Company issued 900,000 common shares valued at $9,000 for the acquisition of the mineral property interests (Notes 3, 6 and 7). 74 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS ================================================ Item 24 - Indemnification of Directors and Officers - --------------------------------------------------- Pursuant to certain provisions in our Articles of Incorporation and By-Laws we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue. Item 25 - Other Expenses of Issuance and Distribution - ----------------------------------------------------- Expenses incurred or (expected) relating to this Registration Statement and distribution are as follows:
SEC Filing Fees $ 70 Legal Fees $ 2,000 Accounting/Auditing $ 3,000 Transfer Agent Fees $ 500 Printing of Prospectus $ 300 Misc./Contingency $ 630 -------- TOTAL $ 6,500
75 Item 26 - Recent Sales of Unregistered Securities - ------------------------------------------------- Following is the issuance of securities without registration since inception. No issuance involved the use of an underwriter; no advertising or public solicitation were involved; the securities bear a restrictive legend and no commissions were paid in connection with the issuance of these securities. On October 27, 2005, 900,000 shares were issued to John Xinos, our founder, President, Secretary, Treasurer, Chief Financial Officer and sole director, as founder's shares, in exchange for services rendered to date to registrant, which include: the original company incorporation and office setup, the business plan, basic office supplies, a home office and computer and basic office equipment usage. The total value of these securities is $9,000, which is 900,000 shares at $.01 per share. These securities were issued in reliance upon the exemption contained in Section 4(2) of the Securities Act of 1933. The securities bear a restrictive legend and were issued to a non- US resident. Item 27 - Exhibits - ------------------ Exhibit Index: - -------------- The following exhibits are filed as part of this Registration Statement:
Number Description ------- ------------ 3.1 Articles of Incorporation 3.2 Bylaws 5 Opinion re: Legality 10 Trust Agreement between Mistral Ventures and John Xinos 23.1 Consent of Counsel (see Exhibit 5) 23.2 Consent of Independent Auditor 23.3 Consent of Geologist 99.1 Proposed Form of Subscription Agreement 99.2 Proposed Form of Warrant Agreement 99.3 Geology Report
Item 28 - Undertakings - ---------------------- The undersigned registrant hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act; 76 (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low and high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) Include any additional or changed material information on the plan of distribution. 2. That, for the purpose of determining any liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Each prospectus filed pursuant to Rule 424(b) (ss.230.424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on 439A (ss.230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supercede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. 3. To remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the end of the offering. 4. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the By-Laws of the company, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or other control person in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 77 5. For determining any liability under the Securities Act, we shall treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by us under Rule 424(b)(1), or (4), or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective. 6. For determining any liability under the Securities Act, we shall treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that the offering of the securities at that time as the initial bona fide offering of those securities. SIGNATURES ========== In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe it meets all of the requirements for filing Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the city of Vancouver BC, country of Canada. April 12, 2006 Mistral Ventures, Inc. /s/ John Xinos By: John Xinos, President, CEO and Principal Executive Officer In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and dates stated. April 12, 2006 Mistral Ventures, Inc. /s/ John Xinos By: John Xinos, President, CEO, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer 78 EX-3.1 2 articles3-1.txt ARTICLES OF INCORPORATION EXHIBIT 3.1 =========== DEAN HELLER Secretary of State 206 North Carson Street Carson City, Nevada 89701-4299 (775) 684 5708 Website: secretaryofstate.biz Articles of Incorporation (PURSUANT TO NRS 78) Entity # E0290232005-6 Document Number: 20050178218-94 Date Filed: 5/13/2005 9:19:34 AM In the office of /s/ Dean Heller Secretary of State 1. Name of Corporation MISTRAL VENTURES, INC. 2. Resident Agent Name and Street Address RESIDENT AGENTS OF NEVADA, INC. R/A#83364 711 S. CARSON STREET, STE.#4, CARSON CITY, NEVADA, 89701 3. Shares 75,000,000 shares with a par value of $0.001 4. Names and Addresses of Board of Directors JOHN XINOS PENTHOUSE 1111 - WEST HASTINGS STREET VANCOUVER, BC, CANADA, V6E 2J3 5. Purpose ANY LEGAL PURPOSE 6. Name, Address and Signature of Incorporator SANDRA L. MILLER 711 S. CARSON STREET CARSON CITY, NEVADA, 89701 7. Certificate of Acceptance of Appointment of Resident Agent I hereby accept appointment as Resident Agent for the above-named corporation. /s/ SANDRA L. MILLER MAY 13, 2005 1 ARTICLES OF INCORPORATION of Mistral Ventures, Inc. A Nevada Corporation I, the undersigned, being the original incorporator herein named, for the purpose of forming a corporation under and pursuant to Chapter 78 of the Nevada Revised Statutes, the general corporation laws of the State of Nevada, do make and file these Articles of Incorporation declaring and certifying that the facts herein stated are true: ARTICLE I NAME The name of the corporation is Mistral Ventures, Inc.. ARTICLE II PRINCIPLE OFFICE Section 2.01 Resident Agent. The name and address of its resident agent for service process is Resident Agents of Nevada, Inc 711 S. Carson, Ste 4, Carson City, Nevada 89701. Section 2.02 Other Offices. The corporation may also maintain offices for the transaction of any business at such other places within or without the State of Nevada as it may from time to time determine. Corporate business of every kind and nature maybe conducted, and meetings of directors and stockholders held outside the State of Nevada with the same effect as if in the State of Nevada. ARTICLE III PURPOSE The corporation is organized for the purpose of engaging in any lawful activity, within or without the State of Nevada. ARTICLE IV SHARES OF STOCK Section 4.01 Number and Class. The amount of the total authorized capital stock of this corporation is Seventy-Five Million (75,000,000) shares with a par value of $.001 designated as Common Stock. The Common Stock may be issued from time to time without action by the stockholders. The Common Stock may be issued for such consideration as may be fixed from time to time by the Board of Directors. The Board of Directors may issue such shares of Common Stock in one or more eries, with such voting powers, designations, preferences and rights or qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions adopted by them. Section 4.02 No Preemptive Rights. Holders of the Common Stock of the corporation shall not have any preference, preemptive rights, or right of subscription to acquire any shares of the corporation authorized, issued or sold, or to be authorized, issued or sold, or to any obligations or shares authorized or issued or to be authorized or issued, and convertible into shares of the corporation , nor to any right of subscription thereto, other than the extent, if any, the Board of Directors in its discretion, may determine from time to time. 2 Section 4.03 Assessment of Shares. The Common Stock of the corporation, after the amount of the subscription price has been paid, in money, property or services, as the directors of the corporation shall determine, shall not be subject to assessment to pay the debts of the corporation, nor for any other purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles of Incorporation shall not be amended in this particular. ARTICLE V DIRECTORS Section 5.01 Governing Board. The members of the Board of Directors of the corporations shall be styled directors. Section 5.02 Initial Board of Directors. The Board of Directors shall consist of at least one (1) but no more than five (5) members. The name(s) and address(es) of the initial members of the Board of Directors are as follows: NAME ADDRESS John Xinos of Penthouse 1111 West Hastings St., Vancouver BC, Canada V6E 2J3 These individuals shall serve as directors of the corporation until the first annual meeting of the stockholders or until their successors shall have been elected and qualified. Section 5.03 Change in the Number of Directors. The number of directors may be increased or decreased by duly adopted amendments to the By-laws of the corporation. ARTICLE VI INCORPORATORS The name and address of the sole incorporator is Sandra L. Miller 711 S. Carson S, Ste 4 Carson City, Nevada 89701. ARTICLE VII PERIOD OF DURATION This corporation is to have A PERPETUAL existence. ARTICLE VIII DIRECTORS AND OFFICERS' LIABILITY A director or officer of the corporation shall not be personally liable to this corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, but this Article shall not eliminate or limit the liability of a director or officer for i) acts of fraud or a knowing violation of th e law, or ii) the unlawful payment of dividends. Any repeal or modification of this Article by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the corporation for acts and omissions prior to such repeal or modification. ARTICLE IX INDEMNITY Every person who was or is party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, or a person of whom he is the legal representative, is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time to time against all expenses, liability and loss (including attorneys? fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connections therewith. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. The expenses of officers and directors incurred in defending a civil or criminal action, suit or 3 proceeding must be paid by the corporation as they are incurred and in advance adopt By-laws from time to time with respect to indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause the corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprises, against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the corporation would have the power to indemnify such person. The indemnification provided in this Article shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such person. ARTICLE X AMENDMENTS Subject at all times to the express provisions of Section 4.03, hereof, which c annot be amended, this corporation reserves the right to amend, alter, change, or repeal any provision contained in these Articles of Incorporation or its By-laws, in the manner now or hereafter prescribed by statute or by these Articles of Incorporation or said By-laws, and all rights conferred upon the stockholders are granted subject to this reservation. ARTICLE XI POWERS OF DIRECTORS In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (1) Subject to the By-laws, if any, adopted by the stockholders, to make, alter or repeal the By-laws of the corporation; (2) To authorize and cause to be executed mortgages and liens, with or without limit as to amount, upon the real and personal property of the corporation; (3) To authorize the guarantee by the corporation of securities, evidences of indebtedness and obligations of other persons, corporations and business entities; (4) To set apart out of any funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve; and (5) By resolution adopted by a majority of the whole Board of Directors, to designate one or more committees, each committee to consist of one or more of the directors of the corporation, which, to the extent provided in the resolution or in the By-laws of the Board of Directors in the management of the business and affairs of the corporation, any may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the By-laws of the corporation or as maybe determined from time to time by resolution adopted by the Board of Directors. All corporate powers of the corporation shall be exercised by the Board of Directors, except as otherwise provided herein or by law. IN WITNESS WHEREOF, I have hereto set my hand this 13th day of May, 2005, hereby declaring and certifying that the facts stated herein above are true. /s/ SANDRA L. MILLER By: Sandra L. Miller, Sole Incorporator 4 ACKNOWLEDGMENT -------------- STATE OF NEVADA ) ) ss: CITY OF CARSON ) On this 13th day of May, 2005, Sandra L. Miller personally appeared before me, a Notary Public, and acknowledged to me that she executed the foregoing instrument for the purposes therein set forth. /s/ Diane E. Kalinowski, Notary Public State of Nevada Appointment No. 99-58966-5 My appt. espires Oct 24, 2007 CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT ---------------------------------------------------------- IN THE MATTER OF: Mistral Ventures, Inc. Resident Agents of Nevada, Inc., Resident Agent #83364, with address at 711 S. Carson, Suite 4, Carson City, Nevada 89701, hereby accepts the appointment as Resident Agent of the above-entitled corporation in accordance with NRS 78.090. Furthermore, that the mailing address for the above registerest office is as set forth above. IN WITNESS WHEREOF, I hereunto set my hand this 13th day of May, 2005. By: /s/ Sandra L. Miller Resident Agents of Nevada, Inc. Resident Agent #83364 Resident Agents 5 EX-3.2 3 bylaws3-2.txt BYLAWS EXHIBIT 3.2 =========== BYLAWS OF MISTRAL VENTURES INC. ARTICLE I OFFICES Section 1.01 Location of Offices. The corporation may maintain such offices within or without the State of Nevada as the Board of Directors may from time to time designate or require. Section 1.02 Principal Office. The address of the principal office of the corporation shall be at the address of the registered office of the corporation as so designated in the office of the Lieutenant Governor/ Secretary of State of the state of incorporation, or at such other address as the Board of Directors shall from time to time determine. ARTICLE II SHAREHOLDERS Section 2.01 Annual Meeting. The annual meeting of the shareholders shall be held in February of each year or at such other time designated by the Board of Directors and as is provided for in the notice of the meeting, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day designated for the annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient. Section 2.02 Special Meetings. Special meetings of the shareholders may be called at any time by the chairman of the board, the president, or by the Board of Directors, or in their absence or disability, by any vice president, and shall be called by the president or, in his or her absence or disability, by a vice president or by the secretary on the written request of the holders of not less than one-tenth of all the shares entitled to vote at the meeting, such written request to state the purpose or purposes of the meeting and to be delivered to the president, each vice-president, or secretary. In case of failure to call such meeting within 60 days after such request, such shareholder or shareholders may call the same. Section 2.03 Place of Meetings. The Board of Directors may designate any place, either within or without the state of incorporation, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the state of incorporation, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the principal office of the corporation. Section 2.04 Notice of Meetings. The secretary or assistant secretary, if any, shall cause notice of the time, place, and purpose or purposes of all meetings of the shareholders (whether annual or special), to be mailed at least 10 days, but not more than 50 days, prior to the meeting, to each shareholder of record entitled to vote. Section 2.05 Waiver of Notice. Any shareholder may waive notice of any meeting of shareholders (however called or noticed, whether or not called or noticed and whether before, during, or after the meeting), by signing a written waiver of notice or a consent to the holding of such meeting, or an approval of the minutes thereof. Attendance at a meeting, in person or by proxy, shall constitute waiver of all defects of call or notice regardless of whether waiver, consent, or approval is signed or any objections are made. All such waivers, consents, or approvals shall be made a part of the minutes of the meeting. Section 2.06 Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any annual meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the share transfer books shall be closed, for the purpose of determining shareholders entitled to notice of or to vote at such meeting, but not for a period exceeding 50 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at such meeting, such books shall be closed for at least 10 days immediately preceding such meeting. In lieu of closing the share transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 50 and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting or to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. Failure to comply with this Section shall not affect the validity of any action taken at a meeting of shareholders. Section 2.07 Voting Lists. The officer or agent of the corporation having charge of the share transfer books for shares of the corporation shall make, at least 10 days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of, and the number of shares held by each, which list, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder during the whole time of the meeting. The original share transfer book shall be prima facie evidence as to the shareholders who are entitled to examine such list or transfer books, or to vote at any meeting of shareholders. Section 2.08 Quorum. One-half of the total voting power of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders. If a quorum is present, the affirmative vote of the majority of the voting power represented by shares at the meeting and entitled to vote on the subject shall constitute action by the shareholders, unless the vote of a greater number or voting by classes is required by the laws of the state of incorporation of the corporation or the Articles of Incorporation. If less than one-half of the outstanding voting power is represented at a meeting, a majority of the voting power represented by shares so present may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 2.09 Voting of Shares. Each outstanding share of the corporation entitled to vote shall be entitled to one vote on each matter submitted to vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or series of stock are determined and specified as greater or lesser than one vote per share in the manner provided by the Articles of Incorporation. Section 2.10 Proxies. At each meeting of the shareholders, each shareholder entitled to vote shall be entitled to vote in person or by proxy; provided, however, that the right to vote by proxy shall exist only in case the instrument authorizing such proxy to act shall have been executed in writing by the registered holder or holders of such shares, as the case may be, as shown on the share transfer of the corporation or by his or her or her attorney thereunto duly authorized in writing. Such instrument authorizing a proxy to act shall be delivered at the beginning of such meeting to the secretary of the corporation or to such other officer or person who may, in the absence of the secretary, be acting as secretary of the meeting. In the event that any such instrument shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or if only one be present, that one shall (unless the instrument shall otherwise provide) have all of the powers conferred by the instrument on all persons so designated. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held and the persons whose shares are pledged shall be entitled to vote, unless in the transfer by the pledge or on the books of the corporation he or she shall have expressly empowered the pledgee to vote thereon, in which case the pledgee, or his or her or her proxy, may represent such shares and vote thereon. Section 2.11 Written Consent to Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting, if a consent in writing, setting forth the action so taken, shall be signed by a majority of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III DIRECTORS Section 3.01 General Powers. The property, affairs, and business of the corporation shall be managed by its Board of Directors. The Board of Directors may exercise all the powers of the corporation whether derived from law or the Articles of Incorporation, except such powers as are by statute, by the Articles of Incorporation or by these Bylaws, vested solely in the shareholders of the corporation. Section 3.02 Number, Term, and Qualifications. The Board of Directors shall consist of one to nine persons. Increases or decreases to said number may be made, within the numbers authorized by the Articles of Incorporation, as the Board of Directors shall from time to time determine by amendment to these Bylaws. An increase or a decrease in the number of the members of the Board of Directors may also be had upon amendment to these Bylaws by a majority vote of all of the shareholders, and the number of directors to be so increased or decreased shall be fixed upon a majority vote of all of the shareholders of the corporation. Each director shall hold office until the next annual meeting of shareholders of the corporation and until his or her successor shall have been elected and shall have qualified. Directors need not be residents of the state of incorporation or shareholders of the corporation. Section 3.03 Classification of Directors. In lieu of electing the entire number of directors annually, the Board of Directors may provide that the directors be divided into either two or three classes, each class to be as nearly equal in number as possible, the term of office of the directors of the first class to expire at the first annual meeting of shareholders after their election, that of the second class to expire at the second annual meeting after their election, and that of the third class, if any, to expire at the third annual meeting after their election. At each annual meeting after such classification, the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the second succeeding annual meeting, if there be two classes, or until the third succeeding annual meeting, if there be three classes. Section 3.04 Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this bylaw immediately following, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide by resolution the time and place, either within or without the state of incorporation, for the holding of additional regular meetings without other notice than such resolution. Section 3.05 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the president, vice president, or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the state of incorporation, as the place for holding any special meeting of the Board of Directors called by them. Section 3.06 Meetings by Telephone Conference Call. Members of the Board of Directors may participate in a meeting of the Board of Directors or a committee of the Board of Directors by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. Section 3.07 Notice. Notice of any special meeting shall be given at least 10 days prior thereto by written notice delivered personally or mailed to each director at his or her regular business address or residence, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting solely for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 3.08 Quorum. A majority of the number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than a majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. Section 3.09 Manner of Acting. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, and the individual directors shall have no power as such. Section 3.10 Vacancies and Newly Created Directorship. If any vacancies shall occur in the Board of Directors by reason of death, resignation or otherwise, or if the number of directors shall be increased, the directors then in office shall continue to act and such vacancies or newly created directorships shall be filled by a vote of the directors then in office, though less than a quorum, in any way approved by the meeting. Any directorship to be filled by reason of removal of one or more directors by the shareholders may be filled by election by the shareholders at the meeting at which the director or directors are removed. Section 3.11 Compensation. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 3.12 Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her or her dissent shall be entered in the minutes of the meeting, unless he or she shall file his or her or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or shall forward such dissent by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 3.13 Resignations. A director may resign at any time by delivering a written resignation to either the president, a vice president, the secretary, or assistant secretary, if any. The resignation shall become effective on its acceptance by the Board of Directors; provided, that if the board has not acted thereon within ten days from the date presented, the resignation shall be deemed accepted. Section 3.14 Written Consent to Action by Directors. Any action required to be taken at a meeting of the directors of the corporation or any other action which may be taken at a meeting of the directors or of a committee, may be taken without a meeting, if a consent in writing, setting forth the action so taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be. Such consent shall have the same legal effect as a unanimous vote of all the directors or members of the committee. Section 3.15 Removal. At a meeting expressly called for that purpose, one or more directors may be removed by a vote of a majority of the shares of outstanding stock of the corporation entitled to vote at an election of directors. ARTICLE IV OFFICERS Section 4.01 Number. The officers of the corporation shall be a president, one or more vice-presidents, as shall be determined by resolution of the Board of Directors, a secretary, a treasurer, and such other officers as may be appointed by the Board of Directors. The Board of Directors may elect, but shall not be required to elect, a chairman of the board and the Board of Directors may appoint a general manager. Section 4.02 Election, Term of Office, and Qualifications. The officers shall be chosen by the Board of Directors annually at its annual meeting. In the event of failure to choose officers at an annual meeting of the Board of Directors, officers may be chosen at any regular or special meeting of the Board of Directors. Each such officer (whether chosen at an annual meeting of the Board of Directors to fill a vacancy or otherwise) shall hold his or her office until the next ensuing annual meeting of the Board of Directors and until his or her successor shall have been chosen and qualified, or until his or her death, or until his or her resignation or removal in the manner provided in these Bylaws. Any one person may hold any two or more of such offices, except that the president shall not also be the secretary. No person holding two or more offices shall act in or execute any instrument in the capacity of more than one office. The chairman of the board, if any, shall be and remain a director of the corporation during the term of his or her office. No other officer need be a director. Section 4.03 Subordinate Officers, Etc. The Board of Directors from time to time may appoint such other officers or agents as it may deem advisable, each of whom shall have such title, hold office for such period, have such authority, and perform such duties as the Board of Directors from time to time may determine. The Board of Directors from time to time may delegate to any officer or agent the power to appoint any such subordinate officer or agents and to prescribe their respective titles, terms of office, authorities, and duties. Subordinate officers need not be shareholders or directors. Section 4.04 Resignations. Any officer may resign at any time by delivering a written resignation to the Board of Directors, the president, or the secretary. Unless otherwise specified therein, such resignation shall take effect on delivery. Section 4.05 Removal. Any officer may be removed from office at any special meeting of the Board of Directors called for that purpose or at a regular meeting, by vote of a majority of the directors, with or without cause. Any officer or agent appointed in accordance with the provisions of Section 4.03 hereof may also be removed, either with or without cause, by any officer on whom such power of removal shall have been conferred by the Board of Directors. Section 4.06 Vacancies and Newly Created Offices. If any vacancy shall occur in any office by reason of death, resignation, removal, disqualification, or any other cause, or if a new office shall be created, then such vacancies or new created offices may be filled by the Board of Directors at any regular or special meeting. Section 4.07 The Chairman of the Board. The Chairman of the Board, if there be such an officer, shall have the following powers and duties. (a) He or she shall preside at all shareholders' meetings; (b) He or she shall preside at all meetings of the Board of Directors; and (c) He or she shall be a member of the executive committee, if any. Section 4.08 The President. The president shall have the following powers and duties: (a) If no general manager has been appointed, he or she shall be the chief executive officer of the corporation, and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs, and property of the corporation and general supervision over its officers, employees, and agents; (b) If no chairman of the board has been chosen, or if such officer is absent or disabled, he or she shall preside at meetings of the shareholders and Board of Directors; (c) He or she shall be a member of the executive committee, if any; (d) He or she shall be empowered to sign certificates representing shares of the corporation, the issuance of which shall have been authorized by the Board of Directors; and (e) He or she shall have all power and shall perform all duties normally incident to the office of a president of a corporation, and shall exercise such other powers and perform such other duties as from time to time may be assigned to him or her by the Board of Directors. Section 4.09 The Vice Presidents. The Board of Directors may, from time to time, designate and elect one or more vice presidents, one of whom may be designated to serve as executive vice president. Each vice president shall have such powers and perform such duties as from time to time may be assigned to him or her by the Board of Directors or the president. At the request or in the absence or disability of the president, the executive vice president or, in the absence or disability of the executive vice president, the vice president designated by the Board of Directors or (in the absence of such designation by the Board of Directors) by the president, the senior vice president, may perform all the duties of the president, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the president. Section 4.10 The Secretary. The secretary shall have the following powers and duties: (a) He or she shall keep or cause to be kept a record of all of the proceedings of the meetings of the shareholders and of the board or directors in books provided for that purpose; (b) He or she shall cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by statute; (c) He or she shall be the custodian of the records and of the seal of the corporation, and shall cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the corporation prior to the issuance thereof and to all instruments, the execution of which on behalf of the corporation under its seal shall have been duly authorized in accordance with these Bylaws, and when so affixed, he or she may attest the same; (d) He or she shall assume that the books, reports, statements, certificates, and other documents and records required by statute are properly kept and filed; (e) He or she shall have charge of the share books of the corporation and cause the share transfer books to be kept in such manner as to show at any time the amount of the shares of the corporation of each class issued and outstanding, the manner in which and the time when such stock was paid for, the names alphabetically arranged and the addresses of the holders of record thereof, the number of shares held by each holder and time when each became such holder or record; and he or she shall exhibit at all reasonable times to any director, upon application, the original or duplicate share register. He or she shall cause the share book referred to in Section 6.04 hereof to be kept and exhibited at the principal office of the corporation, or at such other place as the Board of Directors shall determine, in the manner and for the purposes provided in such Section; (f) He or she shall be empowered to sign certificates representing shares of the corporation, the issuance of which shall have been authorized by the Board of Directors; and (g) He or she shall perform in general all duties incident to the office of secretary and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors or the president. Section 4.11 The Treasurer. The treasurer shall have the following powers and duties: (a) He or she shall have charge and supervision over and be responsible for the monies, securities, receipts, and disbursements of the corporation; (b) He or she shall cause the monies and other valuable effects of the corporation to be deposited in the name and to the credit of the corporation in such banks or trust companies or with such banks or other depositories as shall be selected in accordance with Section 5.03 hereof; (c) He or she shall cause the monies of the corporation to be disbursed by checks or drafts (signed as provided in Section 5.04 hereof) drawn on the authorized depositories of the corporation, and cause to be taken and preserved property vouchers for all monies disbursed; (d) He or she shall render to the Board of Directors or the president, whenever requested, a statement of the financial condition of the corporation and of all of this transactions as treasurer, and render a full financial report at the annual meeting of the shareholders, if called upon to do so; (e) He or she shall cause to be kept correct books of account of all the business and transactions of the corporation and exhibit such books to any director on request during business hours; (f) He or she shall be empowered from time to time to require from all officers or agents of the corporation reports or statements given such information as he or she may desire with respect to any and all financial transactions of the corporation; and (g) He or she shall perform in general all duties incident to the office of treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors or the president. Section 4.12 General Manager. The Board of Directors may employ and appoint a general manager who may, or may not, be one of the officers or directors of the corporation. The general manager, if any shall have the following powers and duties: (a) He or she shall be the chief executive officer of the corporation and, subject to the directions of the Board of Directors, shall have general charge of the business affairs and property of the corporation and general supervision over its officers, employees, and agents: (b) He or she shall be charged with the exclusive management of the business of the corporation and of all of its dealings, but at all times subject to the control of the Board of Directors; (c) Subject to the approval of the Board of Directors or the executive committee, if any, he or she shall employ all employees of the corporation, or delegate such employment to subordinate officers, and shall have authority to discharge any person so employed; and (d) He or she shall make a report to the president and directors as often as required, setting forth the results of the operations under his or her charge, together with suggestions looking toward improvement and betterment of the condition of the corporation, and shall perform such other duties as the Board of Directors may require. Section 4.13 Salaries. The salaries and other compensation of the officers of the corporation shall be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents appointed in accordance with the provisions of Section 4.03 hereof. No officer shall be prevented from receiving any such salary or compensation by reason of the fact that he or she is also a director of the corporation. Section 4.14 Surety Bonds. In case the Board of Directors shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sums and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his or her duties to the corporation, including responsibility for negligence and for the accounting of all property, monies, or securities of the corporation which may come into his or her hands. ARTICLE V EXECUTION OF INSTRUMENTS, BORROWING OF MONEY, AND DEPOSIT OF CORPORATE FUNDS Section 5.01 Execution of Instruments. Subject to any limitation contained in the Articles of Incorporation or these Bylaws, the president or any vice president or the general manager, if any, may, in the name and on behalf of the corporation, execute and deliver any contract or other instrument authorized in writing by the Board of Directors. The Board of Directors may, subject to any limitation contained in the Articles of Incorporation or in these Bylaws, authorize in writing any officer or agent to execute and delivery any contract or other instrument in the name and on behalf of the corporation; any such authorization may be general or confined to specific instances. Section 5.02 Loans. No loans or advances shall be contracted on behalf of the corporation, no negotiable paper or other evidence of its obligation under any loan or advance shall be issued in its name, and no property of the corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed as security for the payment of any loan, advance, indebtedness, or liability of the corporation, unless and except as authorized by the Board of Directors. Any such authorization may be general or confined to specific instances. Section 5.03 Deposits. All monies of the corporation not otherwise employed shall be deposited from time to time to its credit in such banks and or trust companies or with such bankers or other depositories as the Board of Directors may select, or as from time to time may be selected by any officer or agent authorized to do so by the Board of Directors. Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances, checks, endorsements, and, subject to the provisions of these Bylaws, evidences of indebtedness of the corporation, shall be signed by such officer or officers or such agent or agents of the corporation and in such manner as the Board of Directors from time to time may determine. Endorsements for deposit to the credit of the corporation in any of its duly authorized depositories shall be in such manner as the Board of Directors from time to time may determine. Section 5.05 Bonds and Debentures. Every bond or debenture issued by the corporation shall be evidenced by an appropriate instrument which shall be signed by the president or a vice president and by the secretary and sealed with the seal of the corporation. The seal may be a facsimile, engraved or printed. Where such bond or debenture is authenticated with the manual signature of an authorized officer of the corporation or other trustee designated by the indenture of trust or other agreement under which such security is issued, the signature of any of the corporation's officers named thereon may be a facsimile. In case any officer who signed, or whose facsimile signature has been used on any such bond or debenture, should cease to be an officer of the corporation for any reason before the same has been delivered by the corporation, such bond or debenture may nevertheless be adopted by the corporation and issued and delivered as through the person who signed it or whose facsimile signature has been used thereon had not ceased to be such officer. Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers, endorsements, and assignments of stocks, bonds, and other securities owned by or standing in the name of the corporation, and the execution and delivery on behalf of the corporation of any and all instruments in writing incident to any such sale, transfer, endorsement, or assignment, shall be effected by the president, or by any vice president, together with the secretary, or by any officer or agent thereunto authorized by the Board of Directors. Section 5.07 Proxies. Proxies to vote with respect to shares of other corporations owned by or standing in the name of the corporation shall be executed and delivered on behalf of the corporation by the president or any vice president and the secretary or assistant secretary of the corporation, or by any officer or agent thereunder authorized by the Board of Directors. ARTICLE VI CAPITAL SHARES Section 6.01 Share Certificates. Every holder of shares in the corporation shall be entitled to have a certificate, signed by the president or any vice president and the secretary or assistant secretary, and sealed with the seal (which may be a facsimile, engraved or printed) of the corporation, certifying the number and kind, class or series of shares owned by him or her in the corporation; provided, however, that where such a certificate is countersigned by (a) a transfer agent or an assistant transfer agent, or (b) registered by a registrar, the signature of any such president, vice president, secretary, or assistant secretary may be a facsimile. In case any officer who shall have signed, or whose facsimile signature or signatures shall have been used on any such certificate, shall cease to be such officer of the corporation, for any reason, before the delivery of such certificate by the corporation, such certificate may nevertheless be adopted by the corporation and be issued and delivered as though the person who signed it, or whose facsimile signature or signatures shall have been used thereon, has not ceased to be such officer. Certificates representing shares of the corporation shall be in such form as provided by the statutes of the state of incorporation. There shall be entered on the share books of the corporation at the time of issuance of each share, the number of the certificate issued, the name and address of the person owning the shares represented thereby, the number and kind, class or series of such shares, and the date of issuance thereof. Every certificate exchanged or returned to the corporation shall be marked "Canceled" with the date of cancellation. Section 6.02 Transfer of Shares. Transfers of shares of the corporation shall be made on the books of the corporation by the holder of record thereof, or by his or her attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the secretary of the corporation or any of its transfer agents, and on surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares. Except as provided by law, the corporation and transfer agents and registrars, if any, shall be entitled to treat the holder of record of any stock as the absolute owner thereof for all purposes, and accordingly, shall not be bound to recognize any legal, equitable, or other claim to or interest in such shares on the part of any other person whether or not it or they shall have express or other notice thereof. Section 6.03 Regulations. Subject to the provisions of this Article VI and of the Articles of Incorporation, the Board of Directors may make such rules and regulations as they may deem expedient concerning the issuance, transfer, redemption, and registration of certificates for shares of the corporation. Section 6.04 Maintenance of Stock Ledger at Principal Place of Business. A share book (or books where more than one kind, class, or series of stock is outstanding) shall be kept at the principal place of business of the corporation, or at such other place as the Board of Directors shall determine, containing the names, alphabetically arranged, of original shareholders of the corporation, their addresses, their interest, the amount paid on their shares, and all transfers thereof and the number and class of shares held by each. Such share books shall at all reasonable hours be subject to inspection by persons entitled by law to inspect the same. Section 6.05 Transfer Agents and Registrars. The Board of Directors may appoint one or more transfer agents and one or more registrars with respect to the certificates representing shares of the corporation, and may require all such certificates to bear the signature of either or both. The Board of Directors may from time to time define the respective duties of such transfer agents and registrars. No certificate for shares shall be valid until countersigned by a transfer agent, if at the date appearing thereon the corporation had a transfer agent for such shares, and until registered by a registrar, if at such date the corporation had a registrar for such shares. Section 6.06 Closing of Transfer Books and Fixing of Record Date. (a) The Board of Directors shall have power to close the share books of the corporation for a period of not to exceed 50 days preceding the date of any meeting of shareholders, or the date for payment of any dividend, or the date for the allotment of rights, or capital shares shall go into effect, or a date in connection with obtaining the consent of shareholders for any purpose. (b) In lieu of closing the share transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding 50 days preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital shares shall go into effect, or a date in connection with obtaining any such consent, as a record date for the determination of the shareholders entitled to a notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent. (c) If the share transfer books shall be closed or a record date set for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for, or such record date shall be, at least 10 days immediately preceding such meeting. Section 6.07 Lost or Destroyed Certificates. The corporation may issue a new certificate for shares of the corporation in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate or his or her legal representatives, to give the corporation a bond in such form and amount as the Board of Directors may direct, and with such surety or sureties as may be satisfactory to the board, to indemnify the corporation and its transfer agents and registrars, if any, against any claims that may be made against it or any such transfer agent or registrar on account of the issuance of such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors, it is proper to do so. Section 6.08 No Limitation on Voting Rights; Limitation on Dissenter's Rights. To the extent permissible under the applicable law of any jurisdiction to which the corporation may become subject by reason of the conduct of business, the ownership of assets, the residence of shareholders, the location of offices or facilities, or any other item, the corporation elects not to be governed by the provisions of any statute that (i) limits, restricts, modified, suspends, terminates, or otherwise affects the rights of any shareholder to cast one vote for each share of common stock registered in the name of such shareholder on the books of the corporation, without regard to whether such shares were acquired directly from the corporation or from any other person and without regard to whether such shareholder has the power to exercise or direct the exercise of voting power over any specific fraction of the shares of common stock of the corporation issued and outstanding or (ii) grants to any shareholder the right to have his or her stock redeemed or purchased by the corporation or any other shareholder on the acquisition by any person or group of persons of shares of the corporation. In particular, to the extent permitted under the laws of the state of incorporation, the corporation elects not to be governed by any such provision, including the provisions of the Nevada Control Share Acquisitions Act, Sections 78.378 to 78.3793, inclusive, of the Nevada Revised Statutes, or any statute of similar effect or tenor. ARTICLE VII EXECUTIVE COMMITTEE AND OTHER COMMITTEES Section 7.01 How Constituted. The Board of Directors may designate an executive committee and such other committees as the Board of Directors may deem appropriate, each of which committees shall consist of two or more directors. Members of the executive committee and of any such other committees shall be designated annually at the annual meeting of the Board of Directors; provided, however, that at any time the Board of Directors may abolish or reconstitute the executive committee or any other committee. Each member of the executive committee and of any other committee shall hold office until his or her successor shall have been designated or until his or her resignation or removal in the manner provided in these Bylaws. Section 7.02 Powers. During the intervals between meetings of the Board of Directors, the executive committee shall have and may exercise all powers of the Board of Directors in the management of the business and affairs of the corporation, except for the power to fill vacancies in the Board of Directors or to amend these Bylaws, and except for such powers as by law may not be delegated by the Board of Directors to an executive committee. Section 7.03 Proceedings. The executive committee, and such other committees as may be designated hereunder by the Board of Directors, may fix its own presiding and recording officer or officers, and may meet at such place or places, at such time or times and on such notice (or without notice) as it shall determine from time to time. It will keep a record of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors next following. Section 7.04 Quorum and Manner of Acting. At all meeting of the executive committee, and of such other committees as may be designated hereunder by the Board of Directors, the presence of members constituting a majority of the total authorized membership of the committee shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee. The members of the executive committee, and of such other committees as may be designated hereunder by the Board of Directors, shall act only as a committee and the indiviual members thereof shall have no powers as such. Section 7.05 Resignations. Any member of the executive committee, and of such other committees as may be designated hereunder by the Board of Directors, may resign at any time by delivering a written resignation to either the president, the secretary, or assistant secretary, or to the presiding officer of the committee of which he or she is a member, if any shall have been appointed and shall be in office. Unless otherwise specified herein, such resignation shall take effect on delivery. Section 7.06 Removal. The Board of Directors may at any time remove any member of the executive committee or of any other committee designated by it hereunder either for or without cause. Section 7.07 Vacancies. If any vacancies shall occur in the executive committee or of any other committee designated by the Board of Directors hereunder, by reason of disqualification, death, resignation, removal, or otherwise, the remaining members shall, until the filling of such vacancy, constitute the then total authorized membership of the committee and, provided that two or more members are remaining, continue to act. Such vacancy may be filled at any meeting of the Board of Directors. Section 7.08 Compensation. The Board of Directors may allow a fixed sum and expenses of attendance to any member of the executive committee, or of any other committee designated by it hereunder, who is not an active salaried employee of the corporation for attendance at each meeting of said committee. ARTICLE VIII INDEMNIFICATION, INSURANCE, AND OFFICER AND DIRECTOR CONTRACTS Section 8.01 Indemnification: Third Party Actions. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees) judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with any such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, he or she had reasonable cause to believe that his or her conduct was unlawful. Section 8.02 Indemnification: Corporate Actions. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such a person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine on application that, despite the adjudication of liability but in view of all circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Section 8.03 Determination. To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Sections 8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. Any other indemnification under Sections 8.01 and 8.02 hereof, shall be made by the corporation upon a determination that indemnification of the officer, director, employee, or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 8.01 and 8.02 hereof. Such determination shall be made either (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding; or (ii) by independent legal counsel on a written opinion; or (iii) by the shareholders by a majority vote of a quorum of shareholders at any meeting duly called for such purpose. Section 8.04 General Indemnification. The indemnification provided by this Section shall not be deemed exclusive of any other indemnification granted under any provision of any statute, in the corporation's Articles of Incorporation, these Bylaws, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of the heirs and legal representatives of such a person. Section 8.05 Advances. Expenses incurred in defending a civil or criminal action, suit, or proceeding as contemplated in this Section may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon a majority vote of a quorum of the Board of Directors and upon receipt of an undertaking by or on behalf of the director, officers, employee, or agent to repay such amount or amounts unless if it is ultimately determined that he or she is to indemnified by the corporation as authorized by this Section. Section 8.06 Scope of Indemnification. The indemnification authorized by this Section shall apply to all present and future directors, officers, employees, and agents of the corporation and shall continue as to such persons who ceases to be directors, officers, employees, or agents of the corporation, and shall inure to the benefit of the heirs, executors, and administrators of all such persons and shall be in addition to all other indemnification permitted by law. 8.07. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against any such liability and under the laws of the state of incorporation, as the same may hereafter be amended or modified. ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. ARTICLE X DIVIDENDS The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and on the terms and conditions provided by the Articles of Incorporation and these Bylaws. ARTICLE XI AMENDMENTS All Bylaws of the corporation, whether adopted by the Board of Directors or the shareholders, shall be subject to amendment, alteration, or repeal, and new Bylaws may be made, except that: (a) No Bylaws adopted or amended by the shareholders shall be altered or repealed by the Board of Directors. (b) No Bylaws shall be adopted by the Board of Directors which shall require more than a majority of the voting shares for a quorum at a meeting of shareholders, or more than a majority of the votes cast to constitute action by the shareholders, except where higher percentages are required by law; provided, however that (i) if any Bylaw regulating an impending election of directors is adopted or amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors, the Bylaws so adopted or amended or repealed, together with a concise statement of the changes made; and (ii) no amendment, alteration or repeal of this Article XI shall be made except by the shareholders. CERTIFICATE OF SECRETARY The undersigned does hereby certify that he is the secretary of Mistral Ventures Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Nevada; that the above and foregoing Bylaws of said corporation were duly and regularly adopted as such by the Board of Directors of the corporation at a meeting of the Board of Directors, which was duly and regularly held on the 14th day of May, 2005, and that the above and foregoing Bylaws are now in full force and effect. DATED THIS 14th day of May, 2005. /s/ John Xinos, Secretary EX-5 4 legalopinion5.txt LEGAL OPINION AND CONSENT OF COUNSEL EXHIBIT 5 ========= LAW OFFICE OF MICHAEL M. KESSLER, P.C. April 18, 2006 Mr. John Xinos 711 S. Carson Street, Suite 4 Carson City, Nevada 89701 RE: Registration Statement on Form SB-2 Under the Securities Act of 1933 (the "Registration Statement"), of Mistral Ventures, Inc., a Nevada corporation (the "Company") Dear Mr. Xinos: The Law Office of Michael M. Kessler has acted as special counsel for the Mistral Ventures Inc. for the limited purpose of rendering this opinion in connection with the registration (pursuant to the Registration Statement) of 6,000,000 shares (the "Shares") of the common stock, par value $0.001 per share, of the Company which are the underlying shares for the offering of 2,000,000 Units with each Unit being comprised of one share of the Company's common stock and two (2) Warrants to purchase an additional share each of the of common stock of the Company. In our capacity as special counsel to the Company, we have examined originals, or copies certified or otherwise identified to my satisfaction, of the following documents: 1. Certificate of Incorporation of the Company, as amended to date; 2. Bylaws of the Company, as amended to date; 3. The records of corporate proceedings relating to the issuance of the Shares and Warrants and authorizing the offering. 4. Such other instruments and documents, if any, as we believe to be necessary for the purpose of rendering the following opinion. 5. A copy of the proposed Warrant Agreement attached to the Company's SB-2 registration statement and identified as Exhibit 99.2 which the Company states will be issued in the proposed transaction. In such examinations, we have assumed the authenticity and completeness of all documents, certificates and records submitted to me as originals, the conformity to the original instruments of all documents, certificates and records submitted to me as copies, and the authenticity and completeness of the originals of such instruments. As to certain matters of fact relating to this opinion, we have relied on the accuracy and truthfulness of certificates of officers of the Company and on certificates of public officials, and have made such investigations of law as we have believed necessary and relevant. Michael M. Kessler, the principal of the firm is a licensed attorney. We do not express any opinion as to the laws of any other jurisdiction other than the General Corporation Law of the State of Nevada (the "NVCL"), all applicable provisions of the State of Nevada Constitution and all reported judicial decisions interpreting those laws as well as U.S. federal securities law. No opinion is expressed herein with respect to the qualification of the Shares under the securities or blue sky laws of any state or any foreign Jurisdiction. This opinion is limited to the laws, including the rules and regulations thereunder, as in effect on the date hereof. Based on the following I am of the following opinion: 1. Mistral Ventures, Inc. (the "Company") is a duly and legally organized and existing Nevada State Corporation, with its registered statutory office located at 711 S. Carson Street, Suite 4, Carson City, Nevada 89701 and its additional mailing receipt office located at 4438 West 10th Street, Suite 809, Vancouver British Columbia Canada. The Articles of Incorporation and corporate registration fees were submitted to the Nevada Secretary of State's office and filed with the office on May 13, 2005. The Company's existence and form is valid and legal pursuant to the representation above and from a review of the corporate filing information at the Nevada Secretary of States Office. 2. The Company is a fully and duly incorporated Nevada corporate entity. The Company has one class of Common Stock at this time. Neither the Articles of Incorporation, Bylaws, and amendments thereto, nor subsequent resolutions change the non-assessable characteristics of the Company's common shares of stock. The Common Stock previously issued by the Company is in legal form and in compliance with the laws of the State of Nevada, and when such stock was issued it was fully paid for and non- assessable. The common stock to be sold under this Form SB-2 Registration Statement is likewise legal under the laws of the State of Nevada. 3. To our knowledge, the Company is not a party to any legal proceedings nor are there any judgments against the Company, nor are there any actions or suits filed or threatened against it or its officers and directors, in their capacities as such, other than as set forth in the registration statement. We know of no disputes involving the Company and the Company has no claim, actions or inquires from any federal, state or other government agency, other than as set forth in the registration statement. We know of no claims against the Company or any reputed claims against it at this time, other than as set forth in the registration statement. 4. The Company's outstanding shares are all common shares. There is no liquidation preference right held by the present Shareholder upon voluntary or involuntary liquidation of the Company. 5. By directors' resolution, the Company has authorized the issuance of 6,000,000 shares of common stock for this offering. The Company's Articles of Incorporation presently set the authorized capital stock of the Company at 75,000,000 shares designated as Common Stock, with a $0.001 par value. 6. By director's resolution the Company has approved and duly authorized the Warrant Agreement and the underlying shares identified as Exhibit 99.2 in the Company's SB-2 registration and upon appropriate signature by the company will become a legal and binding obligation of the Company. Based upon the foregoing, I am of the opinion that the shares being offered for sale and issuable by the Company pursuant to this Registration Statement will be duly authorized and validly issued, fully paid and non-assessable when issued as contemplated by the registration statement. The Firm does hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the references to this firm in the Registration Statement. In giving this consent, I do not hereby admit that I was acting within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder. Yours truly, Law Office of Michael M. Kessler, P.C. /s/ Michael M. Kessler, Esq. By: Michael M. Kessler, Esq LAW OFFICE OF MICHAEL M. KESSLER, P.C. 3436 AMERICAN RIVER DRIVE, SUITE 11 TELEPHONE (916) 239-4000 FACSIMILE (916) 239-4008 EX-10 5 exhibit10-trust.txt TRUST AGREEMENT FOR PROPERTY OWNERSHIP EXHIBIT 10 ========== DECLARATION OF TRUST This declaration of trust is made by John Xinos (the "Trustee) in favor of Mistral Ventures Inc.. (the "Beneficiary"). The trustee solemnly declares that he holds a 100% interest in the Gold Bug Project mineral claim, Event Number 4068254Tenure Number 509735 inclusive (the "Property") located in the Eugene Creek/Cranberry Ridge area (NTS Map 082E/06E-BC TRIM MAP 082E035 & 082E045) of the Greenwood Mining Division, British Columbia, Canada, in trust solely for the benefit to the beneficiary. The trustee further promises the Beneficiary not to deal with the property in any way, except to transfer the Property to the Beneficiary, without written instructions, direction and consent of the Beneficiary. Given at Vancouver BC, Canada on the 9th day of February, 2006. SIGNED SEALED AND DELIVERED by ) ) JOHN XINOS to the presence of ) ) /s/ Freyja White ) /s/ John Xinos SIGNATURE OF WITNESS ) By: JOHN XINOS ) Freyja White ) NAME OF WITNESS ) ) ) 104-1560 West 13th Ave, ) Vancouver BC, ) Canada, V6J 2G4 ) ADDRESS OF WITNESS ) EX-23.2 6 auditorconsent232.txt AUDITOR'S CONSENT Exhibit 23 - Consent of Auditors - -------------------------------- James Stafford Chartered Accountants* Suite 350 - 1111 Melville Street Vancouver, British Columbia Canada V6E 3V6 Telephone +1 604 669 0711 Facsimile +1 604 669 0754 * Incorporated professional Consent of Independent Registered Public Accounting Firm We consent to the incorporation of our report dated 23 March 2006, with respect to the balance sheet of Mistral Ventures, Inc. as at 31 December 2005, and the related statements of operations, cash flows and changes in stockholder' equity for the period from the date of inception on 13 May 2005 to 31 December 2005 in the Form SB-2 of Mistral Ventures, Inc. /s/ James Stafford Chartered Accountants Vancouver, Canada 14 April 2006 EX-99.1 7 warrantagmnt-991.txt PROPOSED FORM OF WARRANT AGREEMENT EXHIBIT 99.2 -------DRAFT ----- WARRANT AGREEMENT MISTRAL VENTURES, INC. AND SIGNATURE STOCK TRANSFER Warrant Agent ________________________, 2006 1 THIS AGREEMENT (the "Agreement") is dated as of _______________, 2006, by and between MISTRAL VENTURES, INC., a Nevada corporation (the "Company") and SIGNATURE STOCK TRANSFER (the "Warrant Agent"). WHEREAS, the Company will issue Warrant Certificates in connection with a public offering of its securities. Pursuant to the terms of the offering, there will be two Stock Purchase Warrants (the "Warrants") issued for each Unit purchased in the offering. Each Warrant will entitle the holder to purchase one share of the Company's common stock at a price of $.10 for a period of two (2) years from the date of the offering, or ________________, 200__. WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer and exchange of the Warrant Certificates and, thereafter, exercise of the Warrants. NOW THEREFORE, in consideration of the promises and the mutual agreements hereinafter set forth, it is agreed that: 1. Warrants/Warrant Certificates. Each Warrant shall entitle the holder (the "Registered Holder" or, in the aggregate the "Registered Holders") in whose name the Warrant Certificate shall be registered on the books maintained by the Warrant Agent to purchase one share of Common Stock of the Company on exercise thereof, subject to modification and adjustment as provided in Section 7. Warrant Certificates representing the right to purchase Warrant Shares shall be executed by the Company's President, attested to by the Company's Secretary, and delivered to the Warrant Agent upon execution of this Agreement. Subject to the provisions of Sections 3, 5 and 6, the Warrant Agent shall deliver Warrant Certificates in the required whole number denominations to the Registered Holders in connection with any transfer or exchange permitted under this Agreement. Except as provided in Section 6 hereof, no Warrant Certificates shall be issued except i) Warrant Certificates initially issued hereunder, (ii) Warrant Certificates issued on or after the initial issuance date, upon the exercise of any Warrants, to evidence the unexercised Warrants held by the exercising Registered Holder, and (iii) Warrant Certificates issued after the initial issuance date, upon any transfer or exchange of Warrant Certificates or replacements of lost or mutilated Warrant Certificates. 2. Form and Execution of Warrant Certificates. The Warrant Certificates shall be substantially in the form attached hereto as Exhibit A. The Warrant Certificates shall be dated as of the date of their issuance, whether on initial issuance, transfer or exchange or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates. Each such Warrant Certificate shall be numbered serially in accordance with the Common Stock initially attached thereto with the letter "W" appearing on each Warrant Certificate. The Warrant Certificates may immediately be detached. The Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In the event any officer of the Company who executed the Warrant Certificates shall cease to be an officer of the Company before the date of issuance of the Warrant Certificates or before countersignature and delivery by the Warrant Agent, such Warrant Certificates may be countersigned, issued and delivered by the Warrant Agent with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be an officer of the Company. 2 3. Exercise. Subject to the provisions of Sections 4 and 7, the Warrants, when evidenced by a Warrant Certificate, may be exercised in whole or in part at any time during the period (the "Exercise Period") commencing on _______________, 2006 (the "Exercise Date") until ________________, 2008 (the "Warrant Expiration Date", unless extended by a majority vote of the Company's Board of Directors, but in no event after such extended expiration date. The Company shall promptly notify the Warrant Agent and the Registered Holders of any such extension of the Exercise Period. A Warrant shall be deemed to have been exercise immediately prior to the close of business on the date (the "Exercise Date") of the surrender for exercise of the Warrant Certificate. The exercise form shall be executed by the Registered Holder thereof or his attorney duly authorized in writing and shall be delivered, together with payment therefore, to the Company at its corporate offices located at 711 S. Carson Street, Suite #4, Carson City, NV, 89701 (the "Corporate Office"), in cash or by official bank or certified check, in an amount equal to the aggregate Exercise Price, in lawful money. Unless Warrant Shares may not be issued as provided herein, the person entitled to receive the number of Warrant Shares deliverable on such exercise shall be treated for all purposes as the holder of such Warrant Shares as of the close of business on the Exercise Date. In addition, the Warrant Agent shall also, at such time, verify that all of the conditions precedent to the issuance of Warrant Shares set forth in Section 4 have been satisfied as of the Exercise Date. The Company shall not be obligated to issue any fractional share interests in Warrant Shares issuable or deliverable on the exercise of any Warrant, or scrip or cash therefor, and such fractional shares shall be of no value whatsoever. If more than one Warrant shall be exercised at one time by the same Registered Holder, the number of full Shares which shall be issuable on exercise thereof shall be computed on the basis of the aggregate number of full Shares issuable on such exercise. Within thirty (30) days after the Exercise Date and in any event prior to the Expiration Date, the Warrant Agent shall cause to be issued and delivered to the person or persons entitled to receive the same, a ertificate or certificates for the number of Warrant Shares deliverable on such exercise. No adjustment shall be made in respect of cash dividends, if any, on Warrant Shares delivered on exercise of any Warrant. The Company may deem and treat the Registered Holders of the Warrants as he absolute owners thereof for all purposes, and the Company shall not be affected by any notice to the contrary. The Warrants shall not entitle the holders thereof to any of the rights of shareholders or to any dividends declared on the Common Stock unless the Registered Holder shall have exercised the Warrants and purchased Shares of Common Stock prior to the record date fixed by the Board of Directors of the Company for the determination of holders of Common Stock entitled to any such dividend or other rights. 3 4. Reservation of Shares and Payment of Taxes. The Company covenants that it will at all times reserve and have available from its authorized Common Stock such number of shares as shall then be issuable upon the exercise of all outstanding Warrant Certificates. The Company covenants that all Warrant Shares which shall be so issuable shall be duly and validly issued, fully paid, non-assessable, and free from all taxes, liens and charges of whatsoever nature with respect to the issuance thereof. The Company and the Warrant Agent acknowledge that the Company will be required, pursuant to the Securities Act of 1993, as amended (the "Act"), that no Warrants may be exercised nor may Warrant Shares be issued by the Warrant Agent unless, on the Exercise Date: the Company has an effective registration statement covering the issuance of the Warrant Shares under the Act or such issuance is exempt from registration under the applicable state and federal securities laws, rules and regulations of the state in which such Registered Holder resides. If any Shares of Common Stock to be reserved for the purpose of exercise of Warrant Certificates hereunder require any other registration with or approval of any government authority under any federal or state law before such shares may be validly issued or delivered, then the Company covenants that it will, in good faith and as expeditiously as possible, endeavor to secure such registration or approval, as the case may be. No Warrant Shares shall be issued unless and until any such registration requirements have been satisfied if and when required. The Registered Holder shall pay all documentary, stamp, or similar taxes and other government charges that may be imposed with respect of the issuance of the Warrants, or the issuance, transfer or delivery of any Warrant Shares on exercise of the Warrants. In the event the Warrant Shares are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate, no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of any such taxes or charges incident thereto. In the event the Warrant Agent ceases to also serve as the stock transfer agent for the Company, the Warrant Agent is irrevocably authorized to requisition the Company's new transfer agent from time to time for Certificates of Warrant Shares required upon exercise of the Warrants, and the Company will authorize such transfer agent to comply with all such requisitions. The Company will file with the Warrant Agent a statement setting forth the name and address of its new transfer agent for Shares of Common Stock or other capital stock issuable upon exercise of the Warrants and of each successor transfer agent appointed by the Company during the term of this Agreement. 5. Registration of Transfer. The Warrant Certificates may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Company at its Corporate Office. The Company shall execute and the Warrant Agent shall countersign, issue and deliver in exchange therefor the Warrant Certificate(s)which the Registered Holder making the transfer shall be entitled to receive. The Warrant Agent shall keep transfer records of all such transactions at its corporate offices which shall register Warrant Certificates and any transfers 4 thereof. On due presentment for registration of transfer of any Warrant Certificate, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee or transferees' a new Warrant Certificate(s) representing an equal aggregate number of Warrants. All Warrant Certificates presented for registration of transfer or exercise shall be duly endorsed or accompanied by a written instrument or instruments or transfer in form satisfactory to the Company and the Warrant Agent. Any reasonable fee for any registration of transfer of Warrant Certificates shall be paid by the Registered Holder. The Company may require payment of a sum sufficient to cover any tax or other government charge that may be imposed in connection therewith. All Warrant Certificates so surrendered, or surrendered for exercise, or for exchange in case of mutilated Warrant Certificates, shall be promptly canceled by the Warrant Agent and thereafter retained by the Warrant Agent until termination of the agency created by this Agreement. Prior to due presentment for registration of transfer thereof, the Company and the Warrant Agent may treat the Registered Holder of any Warrant Certificate as the absolute owner thereof (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company or the Warrant Agent), and the parties hereto shall not be affected by any notice to the contrary. 6. Loss or Mutilation. On receipt by the Company and the Warrant Agent of evidence satisfactory as to the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate, the Company shall execute, and the Warrant Agent shall countersign and deliver in lieu thereof, a new Warrant Certificate representing an equal aggregate number of Warrants. In the case of loss, theft or destruction of any Warrant Certificate, the individual requesting issuance of a new Warrant Certificate shall be required to indemnify the Company and the Warrant Agent in an amount satisfactory to each of them. In the event a Warrant Certificate is mutilated, such Certificate shall be surrendered and canceled by the Warrant Agent prior to delivery of a new Warrant Certificate. Applicants for a new Warrant Certificate shall also comply with such other regulations and pay such other reasonable charges as the Company may prescribe. 7. Adjustment of Exercise Price and Shares. In the event of any adjustment of the Exercise Price pursuant to this Section 7, the number of Shares of Common Stock purchasable on the exercise of each Warrant shall be the number derived by dividing any such adjusted Exercise Price into the original Exercise Price. The Exercise Price shall be subject to adjustment as follows: (a) In the event, prior to the expiration of the Warrants by exercise or by their terms, the Company shall issue any Shares of its Common Stock as a share dividend or shall subdivide the number of outstanding Shares of Common Stock into a greater number of Shares, then, in either of such events, the Exercise Price per Share of Common Stock purchasable pursuant to the Warrants shall be increased proportionately. Conversely, in the event the Company shall reduce the number of Shares of its outstanding Common Stock by combining such Shares into a smaller number of Shares, then, in such event, the Exercise Price per Share 5 purchasable pursuant to the Warrants in effect at the time of such action shall be increased proportionately and the number of Shares of Common Stock at that time purchasable pursuant to the Warrants shall be decreased proportionately. Any dividend paid or distributed on the Common Stock in Shares of any other class of the Company's securities, or in securities convertible into shares of Common Stock of the Company, shall be treated as a dividend paid in Common Stock to the extent that Shares of Common Stock are issuable on the conversion thereof. (b) In the event the Company, at any time while the Warrants shall remain unexpired and unexercised, shall sell all or substantially all of its property, or dissolves, liquidates or winds up its affairs, prompt, proportionate, equitable, lawful and adequate provisions shall be made as part of the terms of any such sale, dissolution, liquidation or winding up such that the holder of a Warrant may thereafter receive, on exercise thereof, in lieu of each Share of Common Stock of the Company which he/she/ it would have been entitled to receive, the same kind and amount of any share, securities, or assets as may be issuable, distributable or payable on any such sale, dissolution, liquidation or winding up with respect to each Share of Common Stock of the Company; provided, however, that in the event of any such sale, dissolution, liquidation or winding up, the right to exercise a Warrant shall terminate on a date fixed by the Company, such date to be not earlier than 5:00 p.m., Pacific Standard Time, on the 30th day next succeeding the date on which notice of such termination of the right to exercise the Warrants has been given by mail to the Registered Holders thereof at such addresses as may appear on the records of the of the Company and the Warrant Agent. (c) Notwithstanding the provisions of this Section 7, no adjustment on the Exercise Price shall be made whereby such Price is adjusted in an amount less than $0.001, the par value of the Company's Common Stock, or until the aggregate of such adjustments shall equal or exceed $0.001. (d) In the event, prior to the expiration of the Warrant Certificates by exercise or by their terms, the Company shall determine to take a record of the Registered Holders of its Common Stock for the purpose of determining shareholders entitled to receive any Share dividend or other right which will cause any change or adjustment in the number, amount, price or nature of the Shares of Common Stock or other securities or assets deliverable on exercise of the Warrants pursuant to the foregoing provisions, the Company shall give to the Registered Holders of the Warrants at the addresses as may appear on the books of the Company at least 15 days prior written notice to the effect that it intends to take such a record. Such notice hall specify the date as of which such record is to be taken; the purpose for which such record is to be taken; and the number, amount, price and nature of the Common Stock or other Shares, securities or assets which will be deliverable on exercise of the Warrants after the action for which such record will be taken has been completed. Without limiting the obligation of the Company to provide notice to the Registered Registered Holders of the Warrant Certificates of any corporate action hereunder, the failure of the Company to give notice shall not invalidate such corporate action of the Company. (e) No adjustment of the Exercise Price shall be made as a result of or in connection with (i) the issuance of Common Stock of the Company pursuant to options, warrants and share purchase agreements outstanding or in effect on the date hereof, (ii) the establishment of additional option plans of the Company, the modification, renewal or extension of any plan now in effect or hereafter created, or the issuance of Common Stock on exercise of any options pursuant to such plans, or (iii) the issuance of Common Stock in connection ith an acquisition or merger of any type (therefore, the anti-dilution provisions of this Section 7 will not apply in the event a merger or 6 acquisition is undertaken by the Company), in connection with compensation arrangements for officers, employees or agents of the Company or any subsidiary, or the like. (f) Before taking any action which would cause an adjustment reducing the Exercise Price below the then par value of the Shares of Common Stock issuable upon exercise of the Warrants, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non- assessable Shares of such Common Stock at such adjusted Exercise Price. Upon any adjustment of the Exercise Price required to be made pursuant to this Section 7, the Company, within 30 days thereafter, shall (a) cause to be filed with the Warrant Agent a certificate setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, and (b) cause to be mailed to each of the Registered Holders of the Warrant Certificates written notice of such adjustment. 8. Duties, Compensation and Termination of Warrant Agent. The Warrant Agent shall act hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrant Certificates or by any other act hereunder, be deemed to make any representations as to the validity, value or authorization of the Warrant Certificates or the Warrants represented thereby or of the Common Stock or other property delivered on exercise of any Warrant. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of the Warrant Certificates to make or cause to be made any adjustment of the Exercise Price or to determine whether any fact exists which may require any such adjustment. The Warrant Agent shall not (i) be liable for any recital or statement of fact contained herein or for any action taken or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement except for its own negligence or willful misconduct. The Company agrees to indemnify the Warrant Agent against any and all losses, expenses and liabilities which the Warrant Agent may incur in connection with the exercise of any Warrants as set forth in Section 4. The Warrant Agent may at any time consult with counsel satisfactory to it (which may be counsel for the Company) and shall incur no liability or responsibility for any action taken or omitted by it in good faith in accordance with the opinion or advice of such counsel. Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by aninstrument signed by its President and attested to by its Secretary or Assistant Secretary. The Warrant Agent shall not be liable for any action taken or omitted by it in accordance with such notice, statement, instruction, request, order or demand. The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse the Warrant Agent for its reasonable expenses. The Company further agrees to indemnify the Warrant Agent against any and all losses, expenses and liabilities arising as a result of the Warrant Agent's negligence or willful misconduct. The Warrant Agent may resign its duties or the Company may terminate the Warrant Agent and the Warrant Agent shall be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own negligence or willful misconduct), on thirty days' prior written notice to the other party. At least fifteen days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant Certificate. On such resignation or termination, the Company shall appoint a new Warrant Agent. If the Company shall fail to make such appointment within a period of thirty days after it has been notified in writing of the resignation by the Warrant Agent, then the Registered Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent. After acceptance in writing of an appointment of a new Warrant Agent is received by the Company, such new Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; provided, however, if it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed. The Company shall file a notice of appointment of a new Warrant Agent with the resigning Warrant Agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant Certificate. Any corporation into which the Warrant Agent or any new Warrant Agent may be converted or merged, or any corporation resulting from any consolidation to which the Warrant Agent or any new Warrant Agent shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent shall be a successor to the Warrant Agent under the provisions of the preceding paragraph. Any such successor Warrant Agent shall promptly cause notice of its succession as Warrant Agent to be mailed to the Company and to the Registered Holder of each Warrant Certificate. No further action shall be required for establishment and authorization of such successor Warrant Agent. The Warrant Agent, its officers or directors and its subsidiaries or affiliates may buy, hold or sell Warrants or other securities of the Company and otherwise deal with the Company in the same manner and to the same extent and with like effect as though it were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 9. Modification of Agreement. The Warrant Agent and the Company may, by supplemental agreement, make any changes or corrections in this Agreement (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or mistake or error herein contained; or (ii) that they may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates; provided, however, this Agreement shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders of Warrant Certificates representing not less than 51% of the Warrants outstanding. Additionally, except as provided in Section 7, no change in the number or nature of the Warrant Shares purchasable on exercise of a Warrant, the Exercise Price therefor, or the Expiration Date of a Warrant shall be made without the consent in writing of the Registered Holder of the Warrant Certificate representing such Warrant, other than such changes as are specifically prescribed or allowed by this Agreement. 10. Notices. All notices, demands, elections, opinions or requests (however characterized or described) required or authorized hereunder shall be deemed given sufficiently if in writing and sent by registered or certified mail, return receipt requested and postage prepaid, or by tested telex, telegram or cable to, in the case of the Company: 711 S. Carson Street, Suite #4 Carson City, NV, 89701 and in the case of the Warrant Agent: Signature Stock Transfer 2301 Ohio Drive - Suite 100 Plano, Texas 75093, USA and if to the Registered Holder of a Warrant Certificate, at the address of such holder as set forth on the records maintained by the Warrant Agent and the Company. 11. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the Company, the Warrant Agent and their respective successors and assigns, and the Holders of the Warrant Certificates. Nothing in this Agreement is intended or shall be construed to confer upon any other person any fright, remedy or claim or to impose on any other person any duty, liability or obligation. 12.Further Instruments. The parties shall execute and deliver any and all such other instruments and shall take any and all other actions as may be reasonably necessary to carry out the intention of this Agreement. 13. Severability. If any provision of this Agreement shall be held, declared or pronounced void, voidable, invalid, unenforceable or inoperative for any reason by any court of competent jurisdiction, government authority or otherwise, such holding, declaration or pronouncement shall not affect adversely any other provision of this Agreement, which shall otherwise remain in full force and effect and be enforced in accordance with its terms and the effect of such holding, declaration or pronouncement shall be limited to the territory or jurisdiction in which made. 14. Waiver. All the rights and remedies of either party under this Agreement are cumulative and not exclusive of any other rights and remedies as provided by law. No delay or failure on the part of either party in the exercise of any right or remedy arising from a breach of this Agreement shall operate as a waiver of any subsequent right or remedy arising from a subsequent breach of this Agreement. The consent of any party where required hereunder to act or occurrence shall not be deemed to be a consent to any other action or occurrence. 15. General Provisions. This Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Nevada. Except as otherwise expressly stated herein, time is of the essence in performing hereunder. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, and this Agreement may not be modified or amended or any term or provisions hereof waived or discharged except in writing signed by the party against who such amendment, modification, waiver or discharge is sought to be enforced. The headings of this Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. MISTRAL VENTURES, INC. (Corporate Seal) By: /s/ John Xinos, President THE WARRANT AGENT: SIGNATURE STOCK TRANSFER By:------------------------------- Authorized Officer Title:---------------------------- EX-99.2 8 stocksub992.txt PROPOSED FORM OF SUBSCRIPTION AGREEMENT STOCK SUBSCRIPTION OFFER MISTRAL VENTURES INC. TO: BOARD OF DIRECTORS: 1. Subscription: ____________________________ (the "Undersigned"), whose address is ________________________________________________________, hereby offers to subscribe for __________________________________________ (__________) Units (the "Units") consisting of one share of Common Stock (the "Stock") and two Common Stock Purchase Warrants (the "Warrants") of MISTRAL VENTURES INC., a Nevada corporation ("the Company") whose address is 711 South Carson Street, Suite #4, Carson City NV, 89701. The par value of the Common Stock is $.001. Each Warrant entitles the holder to purchase one share of the Company's Common Stock at an exercise price of $.10,for a period of two years from the date of this offering, expiring on _____________________. The Undersigned agrees to pay $.05 per Unit for such Units, for an aggregate purchase price of _________________________________ ($__________), payable at the time of subscription. 2. Representations and Warranties of the Undersigned: The Undersigned hereby represents and warrants that: A. The Undersigned is financially responsible, able to meet his/her/its obligations hereunder, and acknowledges this investment may be long term and is by its nature speculative; further, the Undersigned acknowledges he/she/it is financially capable of bearing the risk of this investment. B. The Undersigned has had substantial experience in business or investments in one or more of the following: (i) knowledge of and investment experience with securities, such as stocks and bonds; (ii) ownership of interests in new ventures and/or start-up companies; (iii) experience in business and financial dealings, and the Undersigned can protect his/her/its own interests in an investment of this nature and does not have a "Purchaser Representative," as that term is defined in Regulation D of the Securities Act of 1933, as amended, (the "Securities Act") and does not need such a Representative. C. The Undersigned is capable of bearing the high degree of economic risks and burdens of this investment, including, but not limited to, the possibility of complete loss of all his/her/its investment capital and the lack of a liquid public market, such that he/she/it may not be able to readily liquidate the investment whenever desired or at the then current asking price of the Stock. 1 D. At no time was the Undersigned presented with or solicited by anyleaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising otherwise than in connection and concurrently with this Offer. E. The Stock which the Undersigned hereby subscribes is being acquired solely for his/her/its own account, for investment, and is not being purchased with a view to or for the resale or distribution thereof and the Undersigned has no present plans to enter into any contract, undertaking, agreement or arrangement for such resale or distribution. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of any acceptance of this Offer by the Company and shall survive the date of such acceptance by the Company. 3. Access to and Furnishing Information: The Company has provided the Undersigned with a copy of the Prospectus filed with the U.S. Securities and Exchange Commission. 4. Common Stock Purchase Warrants (the "Warrants"): Each Warrant entitles the holder to purchase one share of the Company's Common Stock at an exercise price of $.10, for a period of two years from the date of the Prospectus, expiring on __________________________. 5. Revocation: The undersigned agrees that he/she/it shall not cancel, terminate or revoke this Agreement or any provisions hereof or any agreement of the Undersigned made hereunder. 6. Notices: All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Undersigned or to the Company at their respective addresses set forth below. 7. Governing Law: This Agreement and other transactions contemplated hereunder shall be construed in accordance with and governed by the laws of the State of Nevada. 8. Entire Agreement: This Offer constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties. IN WITNESS WHEREOF, the parties hereto have executed this Offer as of the date and year set forth below. DATED this ________ day of __________, ______. --------------------------------------------- Signature --------------------------------------------- Name (Please Print) --------------------------------------------- Address --------------------------------------------- City Province/State Postal/Zip Code --------------------------------------------- Telephone ACCEPTED BY: MISTRAL VENTURES, INC. __________________________________________ John Xinos, President and CEO EX-99.3 9 goldbugsummary993.txt REPORT AND CONSENT OF MINING EXPERS SUMMARY REPORT on the GOLD BUG PROJECT PROPERTY: GOLD BUG CLAIM located on the southern end of Cranberry Ridge within the Eugene Creek Valley, centered approximately 3 miles (5km) southwest of Beaverdell,in south-central British Columbia, Canada Latitude: 49o24' N Longitude: 119o08' W NTS Map: NTS 082 E/06E BCTRIM Map: 082E035 & 082E045 Greenwood Mining Division WRITTEN FOR: JOHN XINOS Suite 809, 4438 West 10th Avenue Vancouver, British Columbia Canada V6R 4R8 WRITTEN BY: LLOYD C. BREWER Suite 314, 800 West Pender Street Vancouver, British Columbia Canada V6C 2V6 DATE: December 15, 2005 1 TABLE OF CONTENTS PAGE Summary....................................................1 Location and Access........................................2 Physiography, Vegetation and Climate.......................2 Claim Information and Property Ownership...................5 History....................................................5 Regional Geology...........................................6 Property Geology and Mineralization........................8 Conclusions and Recommendations............................9 References................................................11 Statement of Qualifications...............................12 LIST OF FIGURES Property Location Map................................omitted Claim Map............................................omitted Regional Geology Map.................................omitted SUMMARY The Gold Bug Project (the "Project, Claims or Property") is located within the historic Beaverdell Mining Camp of southern British Columbia, Canada. Silver was discovered on Wallace Mountain in 1887, and production of silver commenced in 1901. The camp has produced nearly 50,000,000 ounces of silver to date. The first written information describing the Gold Bug Zone, which is the main showing within the project, is in 1973. There are numerous old workings at and surrounding the Gold Bug Zone including a caved adit, open cuts, pits and trenches. The Gold Bug Project consists of a six (6) cell mineral claim having a total surface area of approximately 315 acres. The Claim is in the Greenwood Mining Division, and is centered at approximately 49o24'N latitude and 119o08'W longitude on National Topographic Sheet 82E/06E and alternatively on BC TRIM map sheets 082E035 & 082E045. The town of Beaverdell is located 3 miles to the northeast of the Property. There is good gravel road access to most parts of the Property. The area is within the Omineca Crystalline Belt; a NW trending belt dominated by plutonic and high-grade metamorphic rocks. The Project itself is underlain by; Eocene age synite and quartz monzonite and feldspar dykes, granodiorite of the Jurassic Age and West-Kettle Batholith/Nelson Plutonic group and. The mineralization within the Project is classified, by the geological survey branch of the British Columbia Ministry of Energy and Mines, as a shear hosted polymetallic veins (Silver "Ag" - Lead "Pb" - Zinc "Zn" +/- Gold "Au"). 2 The Gold Bug Project contains a mineralized showing known as the "Gold Bug Zone". One caved adit and at least 10 trenches and open cuts have exposed a mineralized vein that strikes 010o. Samples from the zone include 5.8 oz/Ton Ag, 1.52% Pb and 0.54% Zn from an unspecified interval of diamond drilling and 0.14 oz/Ton Au from a grab sample collected from the dump of the caved adit. A single line of soil geochemical sampling identified a silver, lead and gold anomaly located along the projected strike (extension) of the Gold Bug Vein. The down-dip and strike extensions (both north and south) of the known gold, silver, lead and zinc mineralization presents a good target. Further exploration work consisting control grid emplacement, geological mapping and soil geochemical sampling is recommended. A second phase of trenching and diamond drilling would be the next logical exploration step. The recommended budget for the first phase of work is $60,000. LOCATION AND ACCESS The Gold Bug Project is located within south-central British Columbia, Canada approximately 180 miles (290km) east of Vancouver, near Beaverdell. Locally it is on the southern end of Cranberry Ridge within the Eugene Creek Valley (Figures 1 & 2). The Property is in the Greenwood Mining Division, and is centered at approximately 49O24'N latitude and 119o08'W longitude on NTS map sheet 82 E/6E and alternatively on BC TRIM map sheets 082E035 and 082E045. Beaverdell lies 3 miles (5km) to the northeast, on Highway 33; Kelowna and the junction with Highway 97 lies some 50 miles (80km) to the north, while Rock Creek and the junction of Highways 3 and 33 is 27 miles (45km) to the south. The Eugene Creek logging road leaves Highway 33 approximately 4.3 miles (7km) south of Beaverdell and affords excellent access to the southern area of the Claim. Further secondary roads and all terrain vehicle trails provide access to the eastern and central portions of the Claim. 3 PHYSIOGRAPHY, VEGETATION AND CLIMATE The Property is situated within the Monashee Mountains of the Southern Interior Physiographic Region, and elevations within the claims ranges from 4,100 feet (1,260m), near the northeastern corner of the Claim to 2,800 feet (850m) within the Eugene Creek valley at the southeastern corner of the Claim. Slopes within the Claim area are gentle except for the local fairly steep slopes in the area where the land climbs out of the Eugene Creek valley. Vegetation consists mainly of fir; larch and pine, much of it mature second growth. Some of the area has been recently logged. There is relatively little underbrush, and open grassy areas are common. Outcrop of the underlying rock units is poor throughout the Project. It is estimated that less than 5% of the Project contains good rock outcrop exposure. The climate features warm summers and mild winters. The West Kettle Valley is fairly dry in the summers, although not as dry as the Okanagan valley to the west. Average yearly precipitation is 20 inches (50cm). A snow pack of 2-3 feet (0.6-0.9m) begins to accumulate in December and lingers in places into May. The recommended field season for initial phases of exploration is from early May to late November. Drilling and underground development can be carried out on a year-round basis with the aid of a bulldozer to keep access roads snow-free. Ample water is available from Eugene Creek and Tuzo Creek to support all phases of exploration and development. CLAIM INFORMATION AND PROPERTY OWNERSHIP The Gold Bug Project is comprised of one 6 cell mineral claim. The Claim is currently in the authours name but is in the process of being transferred to Mr. John Xinos. Further claim information is provided in the table below: Claim Tenure Number of Anniversary Name Number Claim Cells Date GOLD BUG 509735 6 March 2, 2006 The total surface area of the project is approximately 315 acres. Refer to Figure 2 for further detail. 4 HISTORY The Gold Bug Project is located within the western area of the historic Beaverdell Mining Camp. Exploration in the camp dates to the late 1880's, with the discovery of silver on Wallace Mountain in 1897, and production of silver from as early as 1901. The Highland Bell Mine silver mine was in continuous production for 76 years (1913 to 1989). At closure in 1989, the mine had produced a total of over 46 million ounces of Silver, 12,500 tons of Lead and 15,000 tons of Zinc as well as minor amounts of Cd, Cu and Au. Exploration activity within the claim area dates back to the early 1900's to the period when the initial discovery of the Wallace Mountain mineralization occurred. Development on the Gold Bug claim includes of a caved adit and at least 10 trenches and open cuts. These workings intersected quartz vein mineralized containing gold and silver values associated with galena, pyrite and sphalerite. No further records of exploration are found until 1971 when Husky Oil conducted regional geological and geochemical surveys. Although the current Project area was included within the Husky Oil claim package it is unknown is any samples were collected from within property. In 1981 the area was owned by Midland Energy Corporation. During that year they conducted a four day long exploration program that consisted of prospecting and geological mapping. In 1983, Belinda Mines Ltd., completed four short diamond drill holes designed to investigate a vein discovered by trenching and surface sampling the year before. Drill hole #1 was completed to a depth of 35 feet and intersected the vein. Drill holes #2 and #3 were abandoned due to drilling difficulties at depths of 8 feet and 12 feet respectively. Drill hole #4 was completed to a depth of 52.5 feet and intersected several strongly altered breccia zones containing pyrite and silica. Between 1995 and 1997 the area was again included in a much larger claim package that included the Inyo-Ackworth Mine and most of Cranberry Ridge. The project was owned and operated by St. Elias Mines Ltd. Limited rock geochemical sampling, geological mapping and a single survey line on which geochemical sampling was conducted crossed the property. There is no record of further activity within the project area from 1998 to present. Addition information regarding the property history and showings is provided in the "Property Geology and Mineralization" section of this report. 5 REGIONAL GEOLOGY The area is within the Omineca Crystalline Belt; a NW trending belt dominated by plutonic and high-grade metamorphic rocks. Regional geology is presented in Figure 3, the source of which is G.S.C. Map 1736A by Templeman-Kluit. The Beaverdell area is underlain principally by middle Jurassic Nelson plutonics. The lithologies are dominantly quartz diorite, monzonite and granodiorite. Quartz may range from trace to 20% by volume. Both potassic and plagioclase feldspars are present, while mafic minerals include hornblende and biotite in varying amounts. Feldspar and/or amphibole may occur as coarse-grained crystals, but the rock is generally equigranular and moderately foliated. In the Beaverdell area this foliation generally trends E-W to SSE-NNW. The Nelson Plutonics intrude greenstones, amphibolites, mafic schists, meta-wackes and lesser limestone of the Carboniferous and older Anarchist Group. This sedimentary and volcanic package occurs as isolated rafts or roof pendants surrounded by the younger intrusive. The Valhalla intrusions (granite and granodiorite) of Jurassic-Cretaceous age are distinguished from the Nelson Plutonics by their porphyritic nature and general lack of foliation. The contacts between the units are locally gradational, although clearly crosscutting relationships have been observed as well. The regional-scale Okanagan Batholith surrounds the Nelson plutonics in the Beaverdell area and is considered to be equivalent in age to the Valhalla intrusives. The Coryell Group are Eocene porphyritic felsic intrusions that occur throughout south central B.C. They include the Beaverdell Stock that outcrops on the West Kettle River valley bottom just south of the Beaverdell town site, as well as numerous plugs and dykes on Cranberry Ridge. The Coryell syenites are likely coeval with the Eocene Marron Group of felsic to intermediate volcanic rocks. These trachytes, andesites and lesser tuff and shale interbeds outcrop in erosional remnants on the property and in fault bounded outliers throughout the Okanagan region. PROPERTY GEOLOGY AND MINERALIZATION Previous reports, and government regional geological maps, indicate that the Gold Bug Project is underlain by granodioite, quartz diorite, quartz monzonite and monzonite of the Middle Jurassic Nelson intrusions and Cretaceous to Tertiary Okanagan batholith. The Gold Bug Zone is the primary mineralized zone identified within the Claim to date. It is located within the approximate center of the Gold Bug Claim on the southern end of Cranberry Ridge. The Geological Survey Branch of the British Columbia Ministry of Energy and Mines has classified the mineralization within the project as a shear hosted polymetallic (Ag-Pb-Zn +/- Au) vein. 6 The Gold Bug Zone consists of gold and silver mineralization occurring within a 1.0 meter (3.28 feet) wide quartz vein. The vein is hosted in a shear zone that strikes 010o and dips 270o to the east. A four hole diamond drilling program was conducted in 1983. Only 1 segment of drill core was assayed (in 1985). This sample, from the top of abandoned Hole #2, returned 5.8 oz/Ton Ag, 1.52% Pb and 0.54% Zn. In 1995 a grab sample of quartz vein material collected from the dump of a caved adit returned 4.886g/t Au (0.14 oz/Ton). A geological report discussing the drill program (Crowe, 1985) stated that there were two additional intersections (of drill core) that were of particular interest and may be significant with respect to gold and silver mineralization. In Drill Hole #1, a 6-foot long interval (24' to 30') hosted up to 2% pyrite, in a heavily chloritized breccia with white siliceous fragments. Magnetite was also present. A 3 - foot long section of Drill Hole #4 (18' to 21') intersected a heavily chloritized shear, with up to 1% pyrite. Core was lost over this interval. A similar zone was encountered further down the hole, between 32' and 36'. Here an intense stockwork of epidote and chlorite veining containing pyrite was intersected. A single line of soil geochemical sampling identified a silver, lead and gold anomaly located along the projected strike (extension) of the Gold Bug Vein. It is also stated (Gal, 1997) that anomalous levels of gold occur in several test pits located upslope (to the north) of the adit. CONCLUSIONS AND RECOMMENDATIONS The Gold Bug Project is located within a prolithic silver, lead zinc mining camp. Silver, gold, lead and zinc shear hosted vein mineralization is located within the Project. Limited soil geochemical sampling indicates that the vein extends to the north. The high-grade silver with gold, lead and zinc mineralization occurring within the Project is consistent of the overall grades obtained from the past producing Inyo-Ackworth mine (located to the north of the project) as well as the main mines on Wallace Mountain. It is highly probable that further mineralization will be discovered below and along strike from the known mineralization workings at this area. 7 As with many historic mining camps past exploration work has primarily focused on the known high-grade showings. Modern exploration techniques and mineralization theories should be implemented to test for a larger body of mineralization that could be the causative source for the numerous mineral showings in the area. The success of these methods is demonstrated by the anomalous results obtained on single survey line of geochemical sampling that were completed within the Property during the 1990's. The results of the previous work carried out on the Gold Bug Project area indicates that there is strong potential for the discovery of addition silver, gold lead and zinc mineralization. It is therefore recommended that the following steps be carried out to further test the mineralization within the Property: 1. emplace approximately 14 line-miles (22.5km) of flagged and slashed control grid with 100m (328 feet) line spacing and 25m (82 feet) sample spacing over the entire Gold Bug Project; 2. conduct soil sampling (for geochemical analysis) along the grid lines that are in the area of the known mineralization and along both the western and eastern strike extensions. Test pits should be dug to determine the optimal depth for sample collection. 3. MMI (Mobile Metal Ion) geochemical and bio-geochemical methods should also be tested as to viability to define mineralized zones. 4. the usage of advanced (modern) geophysics should also be considered. 5. Mechanized trenching, where overburden depth allows, and diamond drilling should be carried out in the targets identified in the previous 4 steps. All initial samples should be analyzed for Au+32 element ICP, as previous exploration programs carried out in the area appear to have been mineral specific and the analysis of the soil/rock samples did not cover all economic elements. A table detailing the costs of the Phase I exploration is located on the following page. The aforementioned recommendation not withstanding, the following two-phase exploration for the Gold Bug Project is recommended: PHASE I: - -------- The Phase I program will require approximately 3 weeks to complete and will consist of grid emplacement, soil sampling as well as testing the effectiveness of MMI and Biogeochemical methods. An additional 3 weeks will be required to complete analysis of samples, data compilation and interpretation, drafting and report writing. Results gained from the program will lead to a better understanding of, the location of and controls of, mineralization at known showings as at any new showings 1 and/or anomalous areas discovered as a result of the Phase I program. 8 Personnel: Senior Geologist 5 days @ $400.00 $ 2,000.00 Project Geologist 22 days @ $300.00 $ 6,600.00 Prospector/Field Assistant 20 days @ $225.00 $ 4500.00 Prospector/Field Assistant 20 days @ $200.00 $ 4,000.00 Field Costs: Field Camp and Supplies 60 man/days @ $60.00/m/d $ 3,600.00 (including camp rental, GPS rental,food, prospecting and sampling equipment, first aid and chain saw) Field Communications Long Distance charges Motorola 2 way field radios $ 500.00 Auger Rentals $ 2,000.00 Survey Consumables Sample bags,survey flagging, $ 3,200.00 pickets etc. Transportation: Truck Rental 20 days @ $100.00/day $ 2,000.00 ATV/Trailer Rental 20 days @ $75.00/day $ 1,500.00 Mob/de-mob Vancouver-Beaverdell return $ 500.00 (fuel/meals/motel & truck mileage charges) Analytical: Soil Samples 500 samples @ $23.50/sample (Au + 32 element ICP) $ 11,750.00 MMI/Bio Geochemical 10 samples $ 350.00 Rock Samples 30 samples @ $25.00/sample $ 750.00 Office & Engineering: Report Writing based on results of Phase $ 5,000.00 I exploration program $ 4,000.00 Drafting/Cartography (including field base map and all final maps detailing geological mapping, sample locations and results, location of old workings and compilation of results from previous work on property) Overhead & Contingency $ 7,750.00 Total estimate cost of the Phase I exploration program $ 60,000.00 PHASE II: - --------- The Phase II exploration program is contingent on the success of the Phase I program. mechanical trenching and diamond drilling are foreseen to be the logical next step. The minimum estimated cost of the Phase II program is $100,000. 9 REFERENCES B.C. Minister of Mines Mineral Inventory File ("MINFILE"): 082E SW 235-Bug, Goldbug Group Cox, D & Singer, D. A. Mineral Deposit Models, USGS Bulletin 1693 Crowe, G.G. Diamond Drilling Report on the Goldbug Group, written for Belinda Mines Ltd., Assessment Report #14317 (1985) Gal, L.P. Geological, Geochemical and Geophysical Report on the Cranberry Ridge Property, written for St. Elias Mines Ltd., Assessment Report #24465 (1996) Kregosky, R. Prospecting Report on the Bill Claim, written for Midland Energy Corp, Assessment Report #10044 (1981) Kregosky, R. Geochemical Report on the Bill Claim, written for Midland Energy Corp, Assessment Report #10044 (1983) Little, H.W. Geology, Kettle River (West Half), British Columbia; Geological Survey of Canada, Map 15-1961 Paine, D. Drilling and Prospecting Report on the Bug Claim written for Goldfever Resources, Assessment Report #11357 (1984) Rineke, L Ore Deposits of the Beaverdell Map Area, Geological Survey of Canada Memoir 79 (1915) Tempelman-Kluit, D.J. Geology, Penticton, British Columbia; Geological Survey of Canada, Map 1736A, scale 1:250 000 (1989) White, W.H. The Beaverdell Silver Camp, Minister of Mines, B.C., Annual Report, pp. 138-148 (1949) 10 -----END PRIVACY-ENHANCED MESSAGE-----