<PAGE> 1
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
-------------------------------
Commission file number 333-3074
-------------------------------
WINDSTAR RESOURCES, INC
(Exact name of Registrant as specified in its charter.)
ARIZONA 37-1356503
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
528 Fon du Lac Drive
East Peoria, Illinois 61611
(Address of principal executive offices including zip code.)
(309) 699-8725
(Registrant's telephone number, including area code.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.
YES x NO
The number of shares outstanding of the Registrant's Common Stock,
$.0001 par value per share, at March 31, 1999 was 4,212,530 shares.
=================================================================
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
Windstar Resources, Inc.
East Peoria, IL
We have reviewed the accompanying balance sheets of Windstar Resources,
Inc. (a development stage company) as of March 31, 1999 and the related
statements of operations and retained earnings and cash flows for the
period then ended. The review was conducted in accordance with
Statements on Standards for Accounting and Review Services issued by
the American Institute of Certified Public Accountants. All
information included in these financial statements is the
representation of the management of Windstar Resources, Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.
The financial statements for the year ended December 31, 1998, were
audited by us, and we expressed an unqualified opinion on them in our
report dated March 10, 1999, but we have not performed any auditing
procedures since that date.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 9
to the financial statements, the Company is in the development stage
and has experienced significant operating losses since inception, which
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in the Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
May 5, 1999
F-1
<PAGE> 3
WINDSTAR RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 351 $ 1,744
Accounts receivable
-------- ---------
TOTAL CURRENT ASSETS 351 1,744
-------- ---------
OTHER ASSETS
Organization cost, net of
amortization 240 274
Mining claims 79,076 79,076
-------- ---------
TOTAL OTHER ASSETS 79,316 79,350
-------- ---------
TOTAL ASSETS $ 79,667 $ 81,094
======== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 4
WINDSTAR RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 21,860 $ 21,637
Accrued interest 22,137 16,484
Accrued payroll and payroll taxes 124,871 90,951
Notes payable 57,225 53,417
---------- ----------
TOTAL CURRENT LIABILITIES 226,093 182,489
---------- ----------
LONG TERM LIABILITIES
Notes payable, net of
current portion 27,600 27,600
---------- ----------
TOTAL LIABILITIES 253,693 210,089
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
---------- ----------
STOCKHOLDERS EQUITY (DEFICIT)
Common stock - $0.0001 par value;
50,000,000 shares authorized;
4,212,530 shares issued and
outstanding 421 421
Preferred stock - $0.0001 par value;
10,000,000 shares authorized;
no shares issued and outstanding - -
Additional paid-in capital 162,760 162,760
Accumulated deficit during
the development stage (337,207) (292,176)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (174,026) (128,995)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 79,667 $ 81,094
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 5
WINDSTAR RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
For the For the March 22, 1995
Quarter Quarter (Inception)
Ended Ended Through
March 31, 1999 March 31, 1998 March 31, 1999
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES $ - $ - $ 383
---------- ---------- ----------
GENERAL AND ADMINISTRATIVE
EXPENSES
Officer's compensation 28,750 - 127,082
Professional services 6,681 - 39,687
General and
administrative 2,883 31,539 148,467
---------- ---------- ----------
TOTAL EXPENSES 38,314 31,539 315,236
---------- ---------- ----------
LOSS FROM OPERATIONS (38,314) (31,539) (314,853)
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense (6,717) - (22,354)
---------- ---------- ----------
TOTAL OTHER INCOME
(EXPENSE) (6,717) - (22,354)
---------- ---------- ----------
NET LOSS $ (45,031) $ (31,539) $ (337,207)
========== ========== ==========
NET LOSS COMMON SHARE $ (0.0107) $ nil $ (0.1138)
========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 4,212,530 4,162,223 2,963,959
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 6
WINDSTAR RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in
Shares Amount Capital
<S> <C> <C> <C>
Beginning Balance
March 22, 1995
(Inception) - $ - $ -
Sale of shares for cash
at $0.0002 per share 188,000,000 1,880 42,570
Shares exchanged for
mining claims at
$0.000042 per share 310,000,000 3,100 9,900
Net loss - - -
------------- -------- --------
Balance,
December 31, 1995 498,000,000 4,980 52,470
Shares exchanged for
mining claims at
$0.000165 per share 400,000,000 4,000 62,076
Deferred registration
costs charged to
paid-in capital - - (36,838)
Net loss - - -
------------- -------- --------
Balance,
December 31, 1996 898,000,000 8,980 77,708
Sale of shares for
cash at $0.000074
per share 135,000,000 1,350 8,650
Net loss - - -
------------- -------- --------
Balance,
December 31, 1997 1,033,000,000 $ 10,330 $ 86,358
------------- -------- --------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 7
WINDSTAR RESOURCES, INC
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
Accumulated
Deficit Total
<S> <C> <C>
Beginning Balance
March 22, 1995
(Inception) $ - $ -
Sale of shares for cash
at $0.0002 per share - 44,450
Shares exchanged for
mining claims at
$0.000042 per share - 13,000
Net loss (10,094) (10,094)
---------- ----------
Balance,
December 31, 1995 (10,094) 47,356
Shares exchanged for
mining claims at
$0.000165 per share - 66,076
Deferred registration
costs charged to
paid-in capital - (36,838)
Net loss (4,434) (4,434)
---------- ----------
Balance,
December 31, 1996 (14,528) 72,160
Sale of shares for
cash at $0.000074
per share - 10,000
Net loss (116,984) (116,984)
---------- ----------
Balance,
December 31, 1997 $ (131,512) $ (34,824)
---------- ----------
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 8
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
Additional
Common Stock Paid-in
Shares Amount Capital
<S> <C> <C> <C>
Balance Forward
December 31, 1997 1,033,000,000 $ 10,330 $ 86,358
Reverse stock split
at 250 to 1 (1,028,867,930) (9,917) 9,917
Shares issued in
exchange for debt at
$2.50 per share 22,000 2 54,998
Warrants exercised
for shares at
$0.25 per share 58,000 14,964 14,964
Registration costs
charged to paid-
in capital - - (3,477)
Net loss - - -
------------- -------- ---------
Balance,
December 31, 1998 4,212,530 421 162,760
Net loss - - -
------------- -------- ---------
Balance,
March 31, 1999 4,212,530 $ 421 $ 162,760
============= ======== =========
The accompanying notes are an integral part of these financial
statements
F-5c
<PAGE> 9
WINDSTAR RESOURCES, INC
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
Accumulated
Deficit Total
<S> <C> <C>
Balance Forward
December 31, 1997 $ (131,512) $ (34,824)
Reverse stock split
at 250 for 1 - -
Shares issued in
exchange for debt
at $2.50 per share - 55,000
Warrants exercised
for shares at $0.25
per share - 14,970
Registration costs
charged to paid-in
capital - (3,477)
Net loss (160,664) (160,664)
---------- ----------
Balance,
December 31, 1998 (292,176) (128,995)
Net loss (45,031) (45,031)
---------- ----------
Balance,
March 31, 1999 $ (331,207) $ (174,026)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5d
<PAGE> 10
WINDSTAR RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
Development
For the For the Stage 03/22/95
quarter quarter (Inception
Ended Ended Through
03/31/99 03/31/98 03/31/99
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $ (45,031) $ (31,539) $ (337,207)
Adjustment to reconcile
net loss to net cash provided
by operating activities:
Amortization 34 - 445
Changes in assets and liabilities
Accounts receivable - - -
Accounts payable 223 31,929 21,860
Accrued interest 5,653 - 22,137
Accrued payroll and
payroll taxes 33,920 - 124,871
--------- --------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (5,201) 390 (167,894)
-------- --------- ----------
Cash flows from
investing activities - - -
-------- --------- ----------
Cash flows from financing activities:
Stock issuance and
offering costs - - 83,420
Proceeds received on
notes payable 3,808 - 84,825
-------- --------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,808 - 168,245
-------- --------- ----------
Net increase (decrease) in cash
and cash equivalents (1,393) 390 351
Cash and cash equivalents,
beginning of period 1,744 387 -
-------- -------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 351 $ 777 $ 351
======== ======== ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ - $ - $ -
======== ======== ==========
Income taxes paid $ - $ - $ -
======== ======== ==========
Non-cash financing activities
Common stock issued in
exchange for debt $ - $ - $ 55,000
======== ======== ==========
Common stock issued for
mineral property $ - $ - $ 79,076
======== ======== ==========
</TABLE>
<PAGE> 11
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Windstar Resources, Inc. (Windstar) was incorporated on March 22, 1995,
under the laws of the State of Arizona under the name of Turtleback
Mountain Gold Co., Inc. to conduct business in the fields of mineral
exploration, construction and mining.
On December 31, 1997, the board of directors authorized amending the
Articles of Incorporation to change the name of the Company from
Turtleback Mountain Gold Co., Inc. to Windstar Resources, Inc.
The Company is seeking additional capital to enable the Company to
continue its operations. However, there are inherent uncertainties in
mining operations and management cannot provide assurances that it will
be successful in this endeavor. Furthermore, the Company is in the
development stage, as it has not realized any significant revenues from
its planned operations.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting.
Loss Per Share
Loss per share was computed by dividing the net loss for the period by
the weighted average number of shares outstanding during the period.
The weighted average number of shares was calculated by taking the
number of shares outstanding and weighting them by the amount of time
they were outstanding.
Outstanding warrants were not included in the computation of loss per
share because of the antidilutive effect.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Mineral Properties
Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and
leases are expensed as incurred. When a property reaches the
production stage, the related capitalized costs will be amortized using
the units of production method on the basis of periodic estimates of
ore reserves. Mineral properties are periodically assessed for
impairment of value and any losses are charged to operations at the
time of impairment.
F-7
<PAGE> 12
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . . . continued
Mineral Properties . . . continued
Should a property be abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable portion of
capitalized costs attributable to properties sold. Capitalized costs
are allocated to properties sold based on the proportion of claims sold
to the claims remaining within the project area.
Provision for Taxes
At March 31, 1999, the Company had net operating loss carryforwards of
approximately $337,000 that may be offset against future taxable income
through 2013. No tax benefit has been reported in the financial
statements, as the Company believes there is a 50% or greater chance
the net operating loss carryforwards will expire unused. Accordingly,
the potential tax benefits of the net operating loss carryforwards are
offset by a valuation allowance of the same amount.
Stock Split
The Company restates all references to the number of common shares and
per-share amounts in the balance sheets and statements of operations to
reflect any stock splits or reverse stock splits.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-lived Assets."
This standard is effective for years beginning after December 15, 1995.
In complying with this, the Company reviews its long-lived assets
quarterly to determine if any events or changes in circumstances have
transpired which indicate that the carrying value of its assets may not
be recoverable. The Company does not believe any adjustments are
needed to the carrying value of its assets at March 31, 1999.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3 MINERAL PROPERTIES
Eight mining claims were transferred to the Company on June 30, 1995 by
quitclaim deed in exchange for 310,000,000 shares of common stock. The
mining claims are reflected in the balance sheet at the transferor cost
of $13,000.
F-8
<PAGE> 13
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 3: MINERAL PROPERTIES . . . continued
One hundred twenty-eight mining claims located in the La Paz, Maricopa,
and Yuma counties of Arizona were transferred to the Company on
November 16, 1996 by quitclaim deed in exchange for 400,000,000 units
as explained in note 5. The mining claims are reflected in the balance
sheet at the transferor cost of $66,076.
The Four Red Raven II claims purchased from Maxam Gold Corporation have
a royalty fee clause attached to them. The royalty fee is five percent
of the net income from operations on the claims or $50,000 annually
(whichever is greater) starting July 14, 1996. During 1998, the
Company settled a default on the $50,000 annual payment, which was due
July 14, 1997 by the exchange of 22,000 shares of its common stock.
This included $5,000 of interest, which had been accrued on the
indebtedness. As part of this settlement, the $50,000 annual fee has
been rescinded and future royalty fees will be calculated on 2.5% of
net smelter return from production from those claims, if any.
NOTE 4 INTANGIBLE ASSETS
Organization costs are recorded at cost. Amortization of these
intangible assets is determined using the straight-line method over the
expected useful lives of the assets, which has been determined to be 5
years.
NOTE 5 COMMON STOCK
During the year ended December 31, 1995, the Company issued 310,000,000
shares of common stock in exchange for eight mining claims. The stock
was issued at $0.000042 per share.
During the year ended December 31, 1996, the Company issued 400,000,000
units in exchange for one hundred twenty eight mining claims (Note 3).
Each unit consisted of one share of common stock, one "Class A Warrant"
and one "Class B Warrant". The stock was issued at $0.000165 per
share. See Note 6.
During the year ended December 31, 1998, the Board of Directors
authorized a 1-for-250 reverse stock split, thereby decreasing the
number of issued and outstanding shares and increasing the par value of
each share to $0.0001. All references in the accompanying balance
sheets and statements of operations to number of common shares and per-
share amounts for 1998 and 1999 have been restated to reflect the
reverse stock split.
The Company issued 22,000 shares of its common stock during the year
ended December 31, 1998 in lieu of outstanding debt that was owed to
Baragan Mountain Mining, LLC for an unpaid royalty fee and the interest
accrued. The shares were issued at $2.50 per share.
<PAGE> 14
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 5: COMMON STOCK . . . continued
During the period ended March 31, 1999, no new stock transactions were
executed.
NOTE 6 STOCK WARRANTS
During the year ended December 31, 1996, the Company issued 400,000,000
units. As stated in Note 5, each unit consisted of one share of common
stock, one "Class A Warrant" and one "Class B Warrant". Each "Class A
Warrant" may be exercised to purchase one share of common stock at an
exercise price of $0.01. Each "Class B Warrant" may be exercised to
purchase one share of common stock at an exercise price of $0.02. The
warrants are redeemable at any time upon the Company giving thirty days
written notice to the holder thereof at redemption price of $0.00001
per warrant. The warrants are exercisable up to five years from the
effective date of the offering unless called sooner.
During the year ended December 31, 1998, the Board of Directors voted
to reduce the warrants authorized and outstanding based on a 1 for 250
shares reverse split. This reduced the authorized and outstanding
"Class A Warrants" to 1,600,000 exercisable at prices ranging from
$0.25 to $2.50 and the authorized and outstanding "Class B Warrants" to
1,600,000 exercisable at $5.00. As of March 31, 1999, 1,548,558 "Class
A Warrants" remain authorized and outstanding (not exercised). No
warrants were exercised during 1998 or 1999.
NOTE 7 SALE OF STOCK AND GRANT OF OPTIONS
The Company sold 135,000,000 shares of common stock to its president
and chief executive officer for $10,000 cash and granted purchase
options during November 1997. Certain shares of the common stock are
held in escrow until May 31, 1999. If the option purchaser has
permanently terminated his association with the Corporation prior to
May 31, 1999, any shares of the stock still to be delivered to the
purchaser on the next or forthcoming due dates shall be returned to the
Corporation for cancellation and any unused portion of the purchase
price shall be remitted to the purchaser at the rate of $0.000074 for
each share returned to the Corporation. The Company granted to the
purchaser options ("Stock Options") to purchase up to 40,000,000 shares
of the stock during the ten-year period commencing on the second
anniversary of the date of this agreement for the exercise price of
$0.01 per share, and up to 40,000,000 additional shares of stock during
the ten-year period commencing on the third anniversary of the date of
this agreement for the exercise price of $0.02 per share. This
agreement was dated November 11, 1997.
F-10
<PAGE> 15
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 7: SALE OF STOCK AND GRANT OF OPTIONS . . . continued
During the year ended December 31, 1998, based on a 1-for-250 reverse
stock split, the Board of Directors reduced these stock options to
160,000 shares during the ten-year period commencing on the second
anniversary of the date of this agreement at an exercise price ranging
from $0.25 to $2.50 per share and 160,000 additional shares of stock
during the ten-year period commencing on the third anniversary of the
date of this agreement at an exercise price of $5.00 per share. No
options were granted or exercised during 1998 or 1999.
NOTE 8 NOTES PAYABLE
The Company's long-term debt at March 31, 1999 consists of an unsecured
note with Phoenix International Mining, Inc. dated August 1, 1997 with
interest due at 1% per month and the principal payable at the
discretion of Windstar Resources, Inc. with the full amount due not
later than five years from the date of the note. Under terms of the
note, the Company may borrow from time to time in varying amounts up to
the sum of one million dollars within the two years from the date of
the note. The balance due at March 31, 1999 was $27,600.
All other notes are short-term, unsecured demand notes with an interest
rate of 12% per annum.
Maturities of the notes payable are as follows:
1999 $ 53,417
2000 -
2001 -
2002 27,600
2003 -
NOTE 9 GOING CONCERN
As shown in the financial statements, the Company incurred a net loss
of $45,031 during the period ended March 31, 1999 and an accumulated
deficit of $337,207 since inception.
These factors indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments
related to the recoverability and classification of recorded assets, or
the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence. The Company
plans on developing a program to evaluate the mineral content of
certain claims to determine the economic value of the claims. This
will be done by a controlled plan of drilling and trenching for samples
along with laboratory testing and assaying the samples for content.
F-11
<PAGE> 16
WINDSTAR RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 11: GOING CONCERN
The Company must obtain additional capital in order to fully develop
its claims. The Company intends to raise additional capital in the
future through loans or the sale of common stock. There is no
guarantee that the Company will be successful in its efforts to raise
the necessary capital and, if not, it may not be able to continue as a
going concern.
F-12
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is considered to be in the development stage as
defined in the Statement of Financial Accounting Standards No. 7.
There have been no operations since incorporation.
Liquidity and Capital Resources
On April 15, 1998, the Company's shareholders approved, among other
things, a 1 for 250 share of Common Stock reverse stock split; and, a
change in the authorized capital from 3,000,000,000, shares of Common
Stock, $0.00001 par value per share to 50,000,000, shares of Common
Stock , $0.0001 par value, and from 400,000,000 shares of Preferred
Stock, $0.00001 par value per share to 10,000,000 shares of Preferred
Stock, $0.0001 par value per share.
The Company sold 1,992,000 shares of its Common Stock to nineteen
persons and two corporations for $44,450 in cash and property. The
cash has been used for organizational matters and initial start-up.
Eight mining claims were transferred to the Company on June 30,
1995 by "Quitclaim Deed" in exchange for 1,240,000 shares on Common
Stock. The mining claims are reflected in the balance sheet at the
transferor cost of $13,000.
One hundred twenty-eight mining claims were transferred to the
Company on November 16, 1996 by "Quitclaim Deed" in exchange for
1,600,000 shares of Common Stock. The mining claims are reflected in
the balance sheet at the transferor cost of $66,076.
Included in this group of claims are the four Red Raven II Claims
which carry an annual minimum payment of $50,000 or 5% of the net
income from operations (whichever is greater) starting July 1, 1996.
The Company defaulted on the minimum annual payment due on the first
anniversary date and interest accrued at the annual rate of 5% payable
to affiliated entities which are either principally owned or
controlled, directly or beneficially by Dale L. Runyon and Robert M.
Brown, Chairman and member on the Company's Board of Directors,
respectively. On June 18, 1998, a settlement with Baragan Mountain
Mining LLC was finalized curing the default on the Red Raven II Claims.
In exchange for the past due annual payment and interest thereon
together totaling $55,000 and the elimination of all future similar
minimum annual payment obligations, the Company's independent board of
director members approved and authorized the issuance of 22,000 shares
of restricted Common Stock at a value of $2.50 per share, to settle the
default amount on these claims. In addition, the future production
royalty interest on the four claims was reduced from 5% to 2-1/2% net
smelter return on the sale of commercially mined minerals from these
claims, if any.
<PAGE> 18
In order to maintain the mining rights to the 136 unpatented
mining claims the Company must pay an annual maintenance fee of $100
per claim to the United States government and $10 per claim to the
county where the claims are located. This amount of $14,960 is payable
by August 31 each year. The Company paid the annual assessment amount
for the current year, however, failure to meet this payment obligation
in the future could result in the loss of these claims and mining
rights.
As part of the employment agreement dated November 11, 1997 the
Company sold Fred R. Schmid, pursuant to a Stock Purchase Agreement,
540,000 shares of Common Stock at a purchase price of $10,000, which
has been paid to the Company. The agreement also provides an option
for the purchase of 160,000 shares at $2.50 per share and 160,000
shares at $5.00 per shares for a period of ten years.
The Company must obtain additional capital in order to fully
develop its claims. The Company intends to raise additional capital in
the future through loans or the sale of common stock. On August 1,
1997 the company established a line of credit for one million
($1,000,000) dollars with Phoenix International Mining Inc.(a principle
stockholder), with interest to be at one (1%)percent per month of the
outstanding balance. The Company has borrowed $27,600. However, at the
time of this report this source of funding has been delayed and future
loans may not be available due to unforeseen circumstances beyond
Phoenix's control. The Company is therefore considering the exercise
of the outstanding 3,200,000 "A" and "B" Warrants as its best source of
raising capital for funding the initial phase of exploration work on
the claims. The Company has no operating history.
On June 19, 1998, Amendment No. 1 to the Form S-1 Registration
Statement under the Securities Act of 1933 became effective. The
Company has registered 3,200,000 shares of Common Stock underlying the
Company's Class "A" and Class "B" Warrants of 1,600,000 shares,
respectively. Each A Warrant entitles the holder to purchase one share
of Common Stock at $2.50 per share; and each B Warrant entitles the
holder to purchase one share of Common Stock at $5.00 per share; on or
before August 15, 2001, unless the Warrants are called sooner by the
Company. On July 29, 1998, the Company notified Class A Warrantholders
of an offer to exercise the Class A Warrants at a reduced price for a
specific time period, subject to the written approval of each
Warrantholder to modify the same. A majority of the Class A
Warrantholders did reply and approved a lower exercise price of the
Class A Warrant. To date, $12,839 has been raised through the exercise
of a small portion of the Class A Warrants by some of the
Warrantholders who approved the modification. Funds must continue to be
raised through the exercise of the Class A and Class B Warrants. There
is no assurances that the Warrants will be exercised, nor that the
Company will realize any funding from this transaction.
On September 16, 1998, the National Association of Securities
Dealers ("NASD") cleared Olsen Payne & Company's (a brokerage company)
request to quote the Company's Common Stock for trading on the OTC
Bulletin Board ("OTCBB"). After 30 days other brokerage companies could
also become market makers in the Company's securities. The symbols used
<PAGE> 19
for trading on the OTCBB are WSRI for the common stock; WSRIW for the
Class A Warrant; and WSRIZ for the Class B Warrant. The current gold
market price continues to be depressed and this has affected gold
mining companies' stock prices and also their ability to raise capital.
The Company has estimated that a minimum of $950,000 of proceeds
to be derived from the exercise of the Warrants is necessary to
undertake the initial exploratory phase of operations on the first
target area, namely, Lost Horse Peak Claim. Following the initial
phase, if results warrant further exploratory operations, it is
estimated that an additional $1,500,000 will be required to proceed
with further exploration development on the Lost Horse Peak Claim.
Other target areas will also be considered when necessary. There is no
assurance that the Company will be successful in undertaking the
exploration of the claims.
The foregoing figures reflects a 1 for 250 share reverse split
which occurred on April 15, 1998.
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (year 2000)
approaches. The "year 2000" problem is pervasive and complex as
virtually every computer operation will be affected in some way by the
rollover of the two digit year value to 00. The issue is whether
computer systems will properly recognize date sensitive information
when the year changes to 2000. Systems that do not properly recognize
such information could generate erroneous data or cause a system to
fail. Since the Company is not producing or maintaining time sensitive
operations at present, the year 2000 problem is not anticipated to have
a significant impact on the Company's operations.
The Company's management continues to explore opportunities which
could create valuation for shareholders. The Company has received
expressions of interest from several companies concerning a possible
joint-venture, acquisition or merger transaction. However, due to the
depressed price for gold and the fact that many mining companies have
curtailed exploration activities in favor of pursuing properties with
proven reserves or production, the Company has been unable to conclude
a joint-venture transaction or raise funds for exploration and
development of the properties. Management believes that a significant
increase in the price of gold is necessary before the Company is
successful in raising capital for its operations. Discussion with
interested joint-venture, acquisition or merger candidates shall
continue.
Management is also investigating a possible reverse acquisition
transaction with a private company which would permit the private
company to become a public company using our company as a means of
achieving their goal. The reverse acquisition company candidate in that
case would have the major stock and control position in the company and
all current shareholders' stock position in the company would be
significantly diluted. Since it is likely that a reverse acquisition
company candidate would not be a gold mining company or be interested
in our assets, our precious metal claims would be transferred to a
private company and current shareholders would receive stock in the
<PAGE> 20
private company on a prorata basis to their current stock holdings in
the Company. Management is of the opinion that it is not presently
economical to continue as a public company and has engaged the services
of a consultant to assist the company in finding a suitable reverse
acquisition company candidate. At the time of this report no suitable
candidates have been identified nor is it possible to guarantee that
the Company will be successful in this endeavor.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K.
(a) Exhibits
Exhibit
Number Description
27 Financial Data Schedule
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated this 17th day of March, 1999.
WINDSTAR RESOURCES INC.
(the "Registrant")
BY: /s/ Fred R. Schmid
Fred R. Schmid
President and a member of the Board of
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheets at March 31, 1999 (Unaudited) and the Statement of Operations
for the three months ended March 31, 1999 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 79,667
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