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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended - June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 333-94631
PALAL MINING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0435904
(State or other jurisdiction of (Employer Identification No.)
incorporation or organization)
1040 West Georgia Street
Suite 1160
Vancouver, British Columbia
Canada V6E 4H1
(Address of principal executive offices, including zip code.)
(604) 605-0885
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year.
June 30, 2000 - $-0-.
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The aggregate market value of the voting stock held by non-affiliates
on October 11, 2000 was $-0-. There are approximately 1,059,420 shares
of common voting stock of the Registrant held by non-affiliates.
Issuers involved in Bankruptcy Proceedings during the past Five Years.
Not Applicable.
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date: October 11, 2000 -
6,059,420 shares of Common Stock
Documents Incorporated by Reference
1. Our Form SB-2 Registration Statement (SEC File #333-94631), which
was filed on January 13, 2000 with the Securities and Exchange
Commission and all amendments thereto.
2. All reports filed with the Securities and Exchange Commission
after January 13, 2000.
.
Transitional Small Business Issuer Format
YES [ ] NO [ x ]
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PART I
ITEM 1. BUSINESS.
General
We were incorporated in the State of Nevada on September 2, 1999.
We are engaged in the acquisition and exploration of mining
properties. We maintain our statutory registered agent's office at 5844
South Pecos Road, Suite D, Las Vegas, Nevada 89120 and our business
office is located at 1160 - 1040 West Georgia Street, Vancouver,
British Columbia, Canada V6E 4H1. Our telephone number is (604)
605-0885. Our offices are leased from Callinan Mines Ltd. on a month
to month basis and our monthly rental is $-0-.
Background
In September 1999, Hugh Grenfal our President and a member of the
board of directors, acquired one mineral property containing ten
mining claims in British Columbia, Canada by arranging the staking of
the same through a third party. Mr. Grenfal paid $2,644 to stake the
claims. The claims are recorded in Mr. Grenfal's name to a avoid paying
additional fees, however, title to the claims has been conveyed to us
by an unrecorded deed. An unrecorded deed is one which title to the
property has been transferred to us, but the deed has not been filed
with the British Columbia office of records. Title to the property is
superior to all other unrecorded deeds. Should Mr. Grenfal transfer
title to another person and that deed is recorded before recording our
deed, that person will have superior title and we will have none. If
that event occurs, however, Mr. Grenfal will be liable to us for
monetary damages for breach of his warranty of title. Under British
Columbia provincial law, if the deed is recorded in our name, we will
have to pay a minimum of $500.00 and file other documents since we are
a foreign corporation in Canada. We have decided that if gold is
discovered on the property and it is economical to remove the gold, we
will record the deed, pay the additional tax, and file as a foreign
corporation. We are in possession of the unrecorded deed and the
decision to record or not record the deed is solely within our
province.
To date we have not performed any work on our property. We are
presently in the exploration stage and there is no assurance that a
commercially viable mineral deposit, a reserve, exists in our property
until further exploration is done and a comprehensive evaluation
concludes economic and legal feasibility.
Location and Access
The Mak Sikker property consists of 10 claims totaling
approximately 625 acres. The claims are on the western slope of Mt.
Kobau, northwest from the village of Creston, in south-central British
Columbia. Highway 3 runs immediately south of the property and there
is good road access to the top of Mt. Kobau.
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Physiography
The property is situated in the Similkameen Valley within the
southern central interior of British Columbia. Elevations range from
1,800 feet in the southwest to 6,000 feet on Mt. Kobau. The relatively
flat summit of Mt. Kobau is at the southern end of a north ridge. The
west side of this ridge falls steeply toward the Similkameen Valley.
The slope drained by Manery Creek is fairly steep and rugged.
Vegetation consists mainly of open grasslands with some Ponderosa
Pine and fir. The Similkameen bottomland is cultivated and used for
grazing. The climate features warm summers and mild winters. Water is
not plentiful, as the flow in Manery Creek is intermittent. Water for
exploration purposes would have to be brought from the Similkameen
River or one of the small ponds northwest of the peak of Mount Kobau.
Property Geology
The major type of rock found on the property is quartz. Gold,
silver and copper are found in quartz veins. We have determined that
there are quartz veins on the property. We have not determined if
there is any gold, silver or copper in the quartz veins.
Our Proposed Exploration Program
We must conduct exploration to determine what amount of minerals,
if any, exist on our properties and if any minerals which are found can
be economically extracted and profitably processed.
Our exploration program is designed to economically explore and
evaluate our properties.
We do not claim to have any minerals or reserves whatsoever at
this time on any of our properties.
We intend to implement an exploration program and intend to
proceed in the following three phases:
Phase 1 will begin with research of the available geologic
literature, personal interviews with geologists, mining engineers and
others familiar with the prospect sites. We have recently begun this
phase of the exploration process on our properties.
When the research is completed, our initial work will be augmented
with geologic mapping, geophysical testing and geochemical testing of
our claims. When available, existing workings, like trenches,
prospect pits, shafts or tunnels will be examined. If an apparent
mineralized zone is identified and narrowed down to a specific area by
the studies, we will to begin trenching the area.
Trenches are generally approximately 150 ft. in length and 10-20
ft. wide. These dimensions allow for a thorough examination of the
surface of the vein structure types generally encountered in the area.
They also allow easier restoration of the land to its pre-exploration
condition when we conclude our operations. Once excavation of a trench
is completed, samples are taken and then analyzed for economically
potential minerals that are known to have occurred in the area. Careful
interpretation of this available data collected from the various tests
aid in determining whether or not the prospect has current economic
potential and whether further exploration is warranted.
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Phase 1 will take about 3 months and cost up to $20,000.
Phase 2 involves an initial examination of the underground
characteristics of the vein structure that was identified by Phase 1 of
exploration. Phase 2 is aimed at identifying any mineral deposits of
potential economic importance. The methods employed are
* more extensive trenching
* more advanced geophysical work
* drift driving
Drift driving is the process of constructing a tunnel to take samples
of minerals for testing. Later, the tunnel can be used for mining
minerals . The geophysical work gives a general understanding of the
location and extent of mineralization at depths that are unreachable by
surface excavations and provides a target for more extensive trenching
and core drilling. Trenching identifies the continuity and extent of
mineralization, if any, below the surface. After a thorough analysis of
the data collected in Phase 2, we will decide if the property warrants
a Phase 3 study.
Phase 2 will take about 3 months and cost up to $20,000.
Phase 3 is aimed at precisely defining the depth, the width, the
length, the tonnage and the value per ton of any mineral body. This
is accomplished through extensive drift driving. Phase 3 will take
about 6 months and cost up to $80,000.
We do not intend to interest other companies in the property if we
find mineralized materials. We intend to try to develop the reserves
ourselves.
Competitive Factors
The gold mining industry is fragmented. We compete with other
exploration companies looking for gold. We are one of the smallest
exploration companies in existence. We are an infinitely small
participant in the gold mining market. While we compete with other
exploration companies, there is no competition for the exploration or
removal or mineral from out property. Readily available gold
markets exist in Canada and around the world for the sale of gold.
Therefore, we will be able to sell any gold that we are able to
recover.
Regulations
Our mineral exploration program is subject to the Canadian Mineral
Tenure Act Regulation. This act sets forth rules for
* locating claims
* posting claims
* working claims
* reporting work performed
We are also subject to the British Columbia Mineral Exploration
Code which tells us how and where we can explore for minerals. We must
comply with these laws to operate our business. Compliance with these
rules and regulations will not adversely affect our operations.
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Environmental Law
We are also subject to the Health, Safety and Reclamation Code for
Mines in British Columbia. This code deals with environmental matters
relating to the exploration and development of mining properties. Its
goals are to protect the environment through a series of regulations
affecting:
1. Health and Safety
2. Archaeological Sites
3. Exploration Access
We are responsible to provide a safe working environment, not
disrupt archaeological sites, and conduct our activities to prevent
unnecessary damage to the property.
We will secure all necessary permits for exploration and, if
development is warranted on the property, will file final plans of
operation before we start any mining operations. We anticipate no
discharge of water into active stream, creek, river, lake or any other
body of water regulated by environmental law or regulation. No
endangered species will be disturbed. Restoration of the disturbed
land will be completed according to law. All holes, pits and shafts
will be sealed upon abandonment of the property. It is difficult to
estimate the cost of compliance with the environmental law since the
full nature and extent of our proposed activities cannot be determined
until we start our operations and know what that will involve from an
environmental standpoint.
We are in compliance with the act and will continue to comply
with the act in the future. We believe that compliance with the act
will not adversely affect our business operations in the future.
Employees
Initially, we intend to use the services of subcontractors for
manual labor exploration work on our properties. Our only technical
employees will be Hugh Grenfal and Sergei Stetsenko, our officers and
directors.
Employees and Employment Agreements
At present, we have no employees, other than Messrs. Grenfal and
Stetsenko, our officers and directors, who were compensated for
their services. Messrs. Grenfal and Stetsenko do not have employment
agreements with us. We presently do not have pension, health, annuity,
insurance, stock options, profit sharing or similar benefit plans;
however, we may adopt plans in the future. There are presently no
personal benefits available to any employees.
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Risk Factors
Please consider the following risk factors before deciding to
invest in our common stock
Risks Associated with Our Company:
1. We expect losses to continue, and the failure to generate
revenues could cause us to go out of business.
We were incorporated in September 1999 and we have not started our
proposed business operations or realized any revenues. We have no
operating history upon which an evaluation of our future success or
failure can be made. Our net loss since inception is $292,824. Our
ability to achieve and maintain profitability and positive cash flow is
dependent upon
* our ability to locate a profitable mineral property
* our ability to generate revenues
* our ability to reduce exploration stage costs.
Based upon current plans, we expect to incur operating losses in future
periods. This will happen because there are expenses associated with
the research and exploration of our mineral properties. We cannot
guarantee that we will be successful in generating revenues in the
future. Failure to generate revenues will cause us to go out of
business.
2. We are subject to risks inherent in the establishment of a
new business enterprise.
We are subject to risks inherent in the establishment of a new
business enterprise including limited capital resources, possible
delays in the exploration of our properties, and possible cost
overruns. If we are not able to address these events, should they
occur, we may have to curtail or suspend our operations.
3. We have no known mineral reserves and if cannot find any we
will have to cease operations.
We have no mineral reserves. If we do not find a mineral reserve
containing gold or if we cannot develop the mineral reserve, either
because we do not have money to do it or because it will not be
economically feasible to do it, we will have to cease operations an you
will loose your investment.
4. Weather interruptions in the province of British Columbia may
affect and delay our proposed exploration operations.
Our proposed exploration work can only be performed approximately
five to six months out of the year. This is because rain and snow
cause roads leading to our claims to be impassible during four months
of the year. When roads are impassible, we are unable to work and
generate income.
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5. Because we are small and do not have much capital, we must
limit our exploration.
Because we are small and do not have much capital, we must limit
our exploration. There are other larger exploration companies that
could and probably would spend more time and money exploring our
property.
6. We will have to suspend our exploration plans if we do not
have access to all of the supplies and materials we need.
Competition and unforeseen limited sources of supplies in the
industry could result in occasional spot shortages of supplies, like
dynamite, and equipment like bulldozers and excavators that we might
need to conduct exploration. We have not attempted to locate or
negotiate with any suppliers of products, equipment or materials. We
will attempt to locates products, equipment and materials during the
next fiscal year. If we cannot find the products and equipment we need,
we will have to suspend our exploration plans until we do find the
products and equipment we need.
7. People we do business with may not be year 2000 compliant.
We are year 2000 compliant. We do not know if people we will be
doing business with in the future are year 2000 compliant. If someone
we do business with is not year 2000 compliant, the services or
products he furnishes to us could be interrupted. If the services or
products are interrupted, we may have to suspend operations while he
corrects his year 2000 compliance.
8. We may not have enough money to complete our exploration .
We may not have enough money to complete the exploration of our
property. If it turns our that we have not raised enough money to
complete our exploration program, we will try to raise additional funds
from a second public offering, a private placement or loans. At the
present time, we have not made any plans to raise additional money and
there is no assurance that we would be able to raise additional money
in the future. In we need additional money and can't raise it, we will
have to suspend or cease operations.
9. Our officers and directors have conflicts of interest in that
they are officers and directors of other mining companies.
Our officers and directors have conflicts of interest in that they
are officers and directors of other mining companies. In the future,
if we decide to acquire a mining property which is also sought by one
of the companies which Mr. Grenfal or Mr. Stetsenko are officers or
directors, a direct conflict of interest could result.
10. Because we are a penny stock, you may not be able to resell
our shares.
Our common stock is defined as a "penny stock" under the
Securities and Exchange Act of 1934, and its rules. Because we are a
penny stock, you may be unable to resell our shares. This is because
the Exchange Act and the penny stock rules impose additional sales
practice and disclosure requirements on broker-dealers who sell our
securities to persons other than accredited investors. As a result,
fewer broker/dealers are willing to make a market in our stock.
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11. Messrs. Grenfal and Stetsenko's control can have a depressive
effect on the market price of stock.
Because Messrs. Grenfal and Stetsenko will control us, the value
attributable to the right to vote is gone. This could result in a
reduction in the market value to the shares you own because of the
ineffective voting power.
12. Because there is no public trading market for our common
stock, you may not be able to resell your shares.
There is currently no public trading market for our common stock.
Therefore there is no central place, like a stock exchange or
electronic trading system, to resell your shares. If you do want to
resell your shares, you will have to locate a buyer and negotiate your
own sale. Therefore, you may not be able to resell your shares.
13. Sales of common by our officers and directors will likely
cause the market price for the common stock to drop.
A total of 5,000,000 shares of stock were issued to our two
officers and directors. They paid an average price of $0.055. They
will likely sell a portion of their stock if the market price goes
above $0.10. If they do sell there stock into the market, the sales
may cause the market price of the stock to drop.
ITEM 2. DESCRIPTION OF PROPERTIES.
We own no real property, other than our mining claim.
Our administrative office is located at 1160-1040 West Georgia
Street, Vancouver, British Columbia, Canada V6E 4H1 , telephone (604)
605-0885 and our registered statutory office is located at 5844 South
Pecos Road, Suite D, Las Vegas, Nevada 89120.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the Company is
subject to or which are anticipated or threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the shareholders during the
fourth quarter which ended June 30, 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS.
No market exists for our securities and there is no assurance that
a regular trading market will develop, or if developed, that it will be
sustained. A shareholder in all likelihood, therefore, will be unable
to resell the securities referred to herein should he or she desire to
do so. Furthermore, it is unlikely that a lending institution will
accept our securities as pledged collateral for loans unless a regular
trading market develops.
There are no plans, proposals, arrangements or understandings with
any person with regard to the development of a trading market in any of
the Company's securities.
We have no outstanding options or warrants, or other securities
convertible into, common equity. Of the 6,059,420 shares of common
stock outstanding as of October 11, 2000, 5,000,000 shares were issued
to our officers and directors and may only be resold in compliance with
Rule 144 of the Securities Act of 1933.
At October 11, 2000, there were 89 holders of record.
We have not declared any cash dividends, nor do we intend to do
so. We are not subject to any legal restrictions respecting the payment
of dividends, except that they may not be paid to render us insolvent.
Dividend policy will be based on our cash resources and needs and it is
anticipated that all available cash will be needed for for our
operations in the foreseeable future.
SEC Rule 15g
Our shares are covered by Section 15g of the Securities Act of
1933, as amended that imposes additional sales practice requirements on
broker/dealers who sell such securities to persons other than
established customers and accredited investors (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 or $300,000
jointly with their spouses). For transactions covered by the Rule, the
broker/dealer must make a special suitability determination for the
purchase and have received the purchaser's written agreement to the
transaction prior to the sale. Consequently, the Rule may affect the
ability of broker/dealers to sell our securities and also may affect
your ability to sell your shares in the secondary market.
Section 15g also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one
page summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary
marketing; terms important to in understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a dealers
"spread" and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers duties to its customers, including the
disclosures required by any other penny stock disclosure rules; the
customers rights and remedies in causes of fraud in penny stock
transactions; and, the NASD's toll free telephone number and the
central number of the North American Administrators Association, for
information on the disciplinary history of broker/dealers and their
associated persons.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS.
This section of the prospectus includes a number of forward-
looking statements that reflect our current views with respect to
future events and financial performance. Forward-looking statements
are often identified by words like: believe, expect, estimate,
anticipate, intend, project and similar expressions, or words which, by
their nature, refer to future events. You should not place undue
certainty on these forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results or
out predictions.
We are a start-up, exploration stage company and have not yet
generated or realized any revenues from our business operations.
Our auditors have issued a going concern opinion. This means that
our auditors believe there is doubt that we can continue as an on-going
business for the next twelve months unless we obtain additional capital
to pay our bills. This is because we have not generated any revenues
and no revenues are anticipated until we begin removing and selling
minerals. Accordingly, we must raise cash from sources other than the
sale of minerals found on our property. That cash must be raised from
other sources. Our only other source for cash at this time is
investments by others in our company. We must raise cash to implement
our project and stay in business.
To meet our need for cash we are attempting to raise money from
a public offering. There is no assurance that we will be able to raise
enough money through any offering to stay in business. What ever money
we do raise, will be applied first to exploration and then to
development, if development is warranted. If we do not raise all of
the money we need, we will have to find alternative sources, like a
second public offering, a private placement of securities, or loans
from our officers or others. We have discussed this matter with our
officers, however, our officers are unwilling to make any commitment
to loan us any money at this time. At the present time, we have not
made any arrangements to raise additional. If we need additional cash
and can't raise it we will either have to suspend operations until we
do raise the cash, or cease operations entirely.
We will be conducting research in connection with the exploration
of our property. We are not going to buy or sell any plant or
significant equipment. We do not expect a change in our number of
employees.
Limited Operating History; Need for Additional Capital
There is no historical financial information about our company
upon which to base an evaluation of our performance. We are an
exploration stage company and have not generated any revenues from
operations. We cannot guarantee we will be successful in our business
operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital
resources, possible delays in the exploration of our properties, and
possible cost overruns due to price and cost increases in services.
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To become profitable and competitive, we conduct into the research
and exploration of our properties before we start production of any
minerals we may find. We are seeking equity financing to provide for
the capital required to implement our research and exploration phases.
We have no assurance that future financing will be available to us
on acceptable terms. If financing is not available on satisfactory
terms, we may be unable to continue, develop or expand our operations.
Equity financing could result in additional dilution to existing
shareholders.
Results of Operations
From Inception on September 2, 1999
We just recently acquired our first property and are commencing
the research and exploration stage of our mining operations on that
property at this time.
Since inception, we have used our common stock to raise money for
our property acquisition, for corporate expenses and to repay
outstanding indebtedness. Net cash provided by financing activities
from inception on September 2, 1999 to March 31, 2000 was $132, as a
result of proceeds received from advances. In addition a related
party paid expenses in the amount of $17,684 directly to providers, and
must be paid back.
Liquidity and Capital Resources
As of the date of this Form 10-KSB, we have yet to generate any
revenues from our business operations.
We issued 5,000,000 shares of common stock through a Section 4(2)
offering in September 1999. This was accounted for as a compensation
expense of $273,586 and advances and reimbursement expenses of $1,414.
Since June 30, 2000, we sold 1,059,420 shares of common stock to 87
persons and received $105,942.
Since our inception, Mr. Grenfal, has paid expenses from us in
the total sum of $17,684, which included organizational and start-up
costs and operating capital. The loans do not bear interest and have
not been paid as of the date hereof. There are no documents reflecting
the loan and they are not due on a specific date. Mr. Grenfal will
accept repayment from us when money is available.
As of June 30, 2000, our total assets were $531 and our total
liabilities were $23,794.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs using two
digits rather than four to define the applicable year. Date-sensitive
software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in system failures or miscalculations,
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices or engage in similar
normal business activities.
<PAGE> 13
Year 2000 State of Readiness
To address Year 2000 issues, we developed and implemented a plan
to become Year 2000 ready. The Year 2000 Plan covers the computers and
technology which we use in the research and exploration of our
properties. We have reviewed our technology consisting of computer
hardware and software systems and found them to be Year 2000 ready.
Since we do not have any vendors we cannot make any assessment of third
parties. In the future, we intend to evaluate and assess the systems
of any third party providers with whom we do business.
Year 2000 Costs
To date, we have incurred no historical costs associated with our
Year 2000 readiness and the magnitude of any future costs will depend
upon the nature and extent of any problems that are identified.
Year 2000 Risks
Our failure to correct a material Year 2000 problem could result
in a complete failure or degradation of the performance of our
computers which will interrupt our operations.
Presently, however, we believe that our most reasonably likely
worst case scenario related to the Year 2000 issue is associated with
potential concerns with third party providers' services or products.
In the future, we will be dependent on third-party vendors to provide
manual labor, research data and studies on our properties. A
significant Year 2000-related disruption to one of these vendor's
computer software and/or equipment could cause a delay in our proposed
research and explorations which in turn could materially and adversely
affect our results of operations, liquidity and financial condition.
Since we have not started business, we have not hired any third party
vendors. Therefore we are not presently aware of any vendor-related
Year 2000 issues that are likely to result in a disruption. There is
no assurance that Year 2000 third party vendors will not occur in the
future.
Year 2000 Contingency Plans
Since our equipment is Year 2000 ready, we have not adopted any
Year 2000 contingency plans.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity
(Deficit) F-4
Statement of Cash Flows F-5
NOTES TO THE FINANCIAL STATEMENTS F-6
<PAGE> 14
Board of Directors
Palal Mining Corporation
Vancouver, BC
CANADA
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Palal Mining
Corporation, (an exploration stage enterprise), as of June 30, 2000,
and the related statements of operations, stockholders' equity
(deficit) and cash flows for the period from September 2, 1999
(inception) to June 30, 2000. 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 generally accepted auditing
standards. 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 Palal
Mining Corporation, as of June 30, 2000, and the results of its
operations and its cash flows for the period from September 2, 1999
(inception) to June 30, 2000, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2, the Company has been in the exploration stage since its
inception on September 2, 1999. Realization of a major portion of
the assets is dependent upon the Company's ability to meet its future
financing requirements, and the success of future operations. These
factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding those
matters also are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
July 31, 2000
F-1
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PALAL MINING CORPORATION
(An Exploration Stage Company)
BALANCE SHEET
June 30, 2000
ASSETS
CURRENT ASSETS
Cash $ 56
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Total Current Assets 56
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OTHER ASSETS
Deposits 411
Mining claims 64
------------
Total Other Assets 475
------------
TOTAL ASSETS $ 531
============
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 2,570
Related party payable 21,224
------------
Total Current Liabilities 23,794
------------
COMMITMENTS AND CONTINGENCIES -
------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock,100,000,000 shares authorized,
$0.00001 par value; 5,000,000 shares issued
and outstanding 50
Additional paid-in-capital 274,950
Deficit accumulated during the exploration stage (298,263)
------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (23,263)
------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 531
============
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 16
PALAL MINING CORPORATION
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
For the Period from September 2, 1999 (Inception) to June 30, 2000
REVENUES $ -
EXPENSES
Consulting services provided by directors 273,586
Rent 821
General and administrative expense 616
Legal and accounting 21,874
Miscellaneous 125
Mining exploration 1,241
------------
TOTAL EXPENSES 298,263
------------
LOSS BEFORE INCOME TAXES (298,263)
INCOME TAXES -
------------
NET LOSS $ (298,263)
============
NET LOSS PER COMMON SHARE,
BASIC AND DILUTED $ (0.06)
============
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING,
BASIC AND DILUTED 5,000,000
============
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 17
PALAL MINING CORPORATION
(An Exploration Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Period from September 2, 1999 (Inception) to June 30, 2000
Deficit
Accumulated
Common Stock Additional during the Total
Number Paid-In Exploration Stockholders'
of Shares Amount Capital Stage Equity (Deficit)
Issuance of common stock
for mining claims and
executive compensation at
$0.055 per share 5,000,000 $ 50 $ 274,950 $ - $ 275,000
Net loss for the period
ending June 30, 2000 - - - (298,263) (298,263)
---------- ------ --------- ---------- -----------
Balance
June 30, 2000 5,000,000 $ 50 $ 274,950 $ (298,263) $ (23,263)
========== ====== ========= ========== ===========
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 18
PALAL MINING CORPORATION
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
For the Period from September 2, 1999 (Inception) to June 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (298,263)
Adjustments to reconcile net loss to net
cash used by operating activities:
Payment of expenses from issuance of stock 274,804
Increase in:
Deposits (411)
Accounts payable 2,570
Loan from related party 21,224
------------
Net cash provided by operating activities (76)
------------
CASH FLOWS FROM INVESTING ACTIVITIES -
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances 132
------------
Net cash provided by financing activities 132
------------
Increase in cash 56
Cash, beginning of period -
------------
Cash, end of period $ 56
============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -
============
Income taxes paid $ -
============
NON-CASH TRANSACTIONS:
Stock issued in payment of expenses $ 274,804
Stock issued in payment of advances $ 132
Stock issued in payment of mining claims $ 64
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE> 19
PALAL MINING CORPORATION
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30,2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Palal Mining Corporation (hereinafter "the Company") filed for
incorporation on September 2, 1999 under the laws of the state of
Nevada primarily for the purpose of acquiring, exploring, and
developing mineral properties. The Company's fiscal year end is June
30.
The Company is actively seeking additional capital and management
believes that the Company can develop mineral properties, which it
has acquired in British Columbia. 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 exploration stage, as it has not realized any
significant revenues from its planned operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to
assist in understanding the financial statements. The financial
statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of
the financial statements.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
Exploration Stage Activities
The Company has been in the exploration stage since its formation in
September 1999 and has not yet realized any revenues from its planned
operations. It is primarily engaged in the acquisition, exploration
and development of mining properties. Upon location of a commercial
minable reserve, the Company expects to actively prepare the site for
its extraction and enter a development stage.
F-6
<PAGE> 20
PALAL MINING CORPORATION
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30,2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Valuation
Management has elected to value foreign currency transactions on the
date the transaction concludes. The conversion is calculated by
multiplying the foreign currency value by the exchange rate at the
close of the nearest trading day.
Foreign Currency Translation
The Company has adopted Financial Accounting Standard No. 52. There
were no foreign currency translation adjustments required at June 30,
2000. The Company will record future foreign currency translation
results as a separate component of stockholders' equity.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers
all short-term debt securities purchased with a maturity of three
months or less to be cash equivalents.
Concentration of Risk
The Company maintains its cash accounts in primarily one commercial
bank in Vancouver, British Columbia, Canada. The Company's cash
account is a business checking account maintained in U.S. dollars,
which totaled $56 as of June 30, 2000. This amount is not insured.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.
At June 30, 2000, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-lived Assets." In
complying with this standard, 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 June 30, 2000.
F-7
<PAGE> 21
PALAL MINING CORPORATION
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30,2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Exploration Costs
In accordance with generally accepted accounting principles, the
Company expenses exploration costs as incurred.
Compensated Absences
Currently, the Company has no employees; therefore it is
impracticable to estimate the amount of compensation for future
absences and no liability has been recorded in the accompanying
financial statements. The Company's policy is to recognize the costs
of compensated absences when actually paid to employees.
Provision for Taxes
At June 30, 2000, the Company had a net operating loss of
approximately $298,000. No provision for taxes or tax benefit has
been reported in the financial statements, as there is not a
measurable means of assessing future profits or losses.
Basic and Diluted Loss Per Share
Loss per share was computed by dividing the net loss 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 that they
were outstanding. Basic and diluted loss per share was the same, as
there were no common stock equivalents outstanding.
Going Concern
The Company's financial statements have been presented on a going
concern basis that contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As
shown in the accompanying financial statements, the Company incurred
a net loss of $298,263 for the period ended June 30, 2000, and had no
sales. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management has plans to seek
additional capital through a private placement and public offering of
its common stock. The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classifications of liabilities
that might be necessary in the event the Company cannot continue in
existence.
F-8
<PAGE> 22
PALAL MINING CORPORATION
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30,2000
NOTE 3 - COMMON STOCK
On September 2, 1999, 5,000,000 shares of common stock were issued to
officers and directors only. There was no public offering of any
securities. The above referenced shares were issued in payment of
consulting services in the amount of $273,586 and repayment of mining
claim recording fees of $64, expenses of $1,218 and advances of $132.
These shares were issued pursuant to exemption from registration
contained in Section 4(2) of the Securities Act of 1933.
In September 1999, the Company, through Mr. Hugh Grenfal, president
and a member of the board of directors, acquired ten Mak mining
claims located in the Osoyoos Mining Division of British Columbia,
Canada.
NOTE 4 - LEASES
On March 31, 2000, the Company entered into an office lease agreement
with Callinan Mines Limited for a period of approximately three years
for $607 Canadian dollars per month (the exchange rate to the US
dollar on June 30, 2000 was $0.676). The lease expires on June 29,
2003. The minimum future lease payments as of June 30, 2000 for the
remaining life of the lease are:
Fiscal Year Ended June 30: Amount
2001 $ 4,926
2002 4,926
2003 4,926
----------
Total minimum lease payments $ 14,778
==========
NOTE 5 - RELATED PARTIES
An officer of the Company has advanced monies to the Company for the
payment of legal fees. This amount is uncollateralized and has been
recorded as a short-term loan, bearing no interest and having no
specific due date.
The Company occupies office space provided by Mr. Grenfal, its
president, in his capacity as vice president and director of Callinan
Mines Limited. On May 1, 2000, the Company entered into a lease
agreement with Callinan for a period of approximately three years.
See Note 4.
F-9
<PAGE> 23
PALAL MINING CORPORATION
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30,2000
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company is engaged in the exploration and development of mineral
properties. At present there are no feasibility studies establishing
proven and probable reserves.
Although the minerals exploration and mining industries are inherently
speculative and subject to complex environmental regulations, the
Company is unaware of any pending litigation or of any specific past or
prospective matters which could impair the value of its mining claims.
The Company is presently undertaking the required steps to register as
a publicly traded company. In this regard, the Company has signed a
contract with a securities attorney to assist in this matter. The
total fees to be paid to the attorney amount to $25,000. Of this
amount, $12,500 has been paid and is recorded as professional fees.
The remaining $12,500 will be due when the Company's registration
statement is declared effective by the Securities and Exchange
Commission.
F-10
<PAGE> 24
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Form 10-KSB.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Officers and Directors
Each of our directors is elected by the stockholders to a term of
one (1) year and serves until his or her successor is elected and
qualified. Each of our officers is elected by the board of directors to
a term of one (1) year and serves until his or her successor is duly
elected and qualified, or until he or she is removed from office. The
board of directors has no nominating, auditing or compensation
committees.
The name, age and position of our present officers and directors
are set forth below:
Name Age Position
Hugh Grenfal 30 President, Treasurer, Principal
Accounting Officer and a member of
the Board of Directors
Sergei Stetsenko 29 Secretary and a member of the
Board of Directors
All directors hold office until the next annual meeting of
shareholders and until their successors have been elected and
qualified. Our officers are elected by the Board of Directors after
each annual meeting of shareholders and hold office until their death,
or until they resign or have been removed from office.
Hugh Grenfal has been our President, Treasurer, Principal
Accounting Officer and a member of our board of directors since
inception. From January 1991 to June 1996 , Mr. Grenfal was
President of Booker Gold Explorations Ltd., a mining and exploration
corporation located in Vancouver, British Columbia. Since October
1996, Mr. Grenfal has been a Director of Callinan Mines Ltd., a mining
and exploration corporation located in Vancouver, British Columbia with
revenue producing copper and zinc properties located in Manitoba,
Canada. Since June 1999, Mr. Grenfal has been President of Paxton
Mining Corporation located in Vancouver, British Columbia. Paxton
Mining Corporation is a mining company. Since September 1999, Mr.
Grenfal has been President of Ancona Mining Corporation located in
Vancouver, British Columbia. Ancona Mining is a mining company. Since
September 1999, Mr. Grenfal has been President of Camden Mining
Corporation located in Vancouver, British Columbia. Camden Mining is
a mining company. Mr. Grenfal is currently not a full-time employee
with another entity.
<PAGE> 25
Sergei Stetsenko has been our Secretary and a member of our board
of directors since inception. From December 1994 to June 1996, Mr.
Stetsenko was the operations manager of Booker Gold Explorations Ltd.
His responsibilities included overseeing and implementation of
exploration programs and a member of the Hearne Hill copper deposit
discovery team. From October 1996 to the present, Mr. Stetsenko was
the operations manager of exploration for Callinan Mines Limited.
Since September 1999, Mr. Stetsenko has been Secretary of Ancona Mining
Corporation located in Vancouver, British Columbia. Ancona Mining
Corporation is a mining company. Since September 1999, Mr. Stetsenko
has been Secretary of Camden Mining Corporation located in Vancouver,
British Columbia. Camden Mining Corporation is a mining company. Mr.
Stetsenko is currently not a full-time employee with another entity.
All of our officers and directors are engaged in other business.
As such, they will not be devoting time exclusively to our operations.
Our officers and directors intend to devote approximately 80% of their
time to the operation of our business.
None of the individuals listed above are subject to any
anticipated or threatened legal proceedings of a material nature.
We have not held an annual meeting of shareholders since
inception.
Compliance with Section 16(a) of the Exchange Act.
The Company's directors, executive officers and ten percent
shareholders made all required filings pursuant to Section 16(a) of the
Securities Exchange Act of 1934.
ITEM 10. EXECUTIVE COMPENSATION.
Summary Compensation
The following table sets forth the compensation paid to our
officers during fiscal 2000. This information includes the dollar
value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
Sergei Stetsenko
SUMMARY COMPENSATION TABLE [1]
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compen
Position Year Salary Bonus sation Award(s) SARs Payouts sation
Hugh Grenfal 2000 - - - - - - -
President/ 1999 - - - - - - -
Treasurer 1998 - - - - - - -
Sergei 2000 - - - - - - -
Stetsenko 1999 - - - - - - -
Secretary 1998 - - - - - - -
[1] All compensation received by the officers and directors has been
disclosed.
<PAGE> 26
There are no stock option, retirement, pension, or profit sharing
plans for the benefit of our officers and directors.
Option/SAR Grants
No individual grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to any executive officer or any director since our inception,
accordingly, no stock options have been exercised by any of the
officers or directors in fiscal 2000.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance to occur
over a period longer than one fiscal year, whether such performance is
measured by reference to our financial performance, our stock price, or
any other measure.
Compensation of Directors
Each member of the Board of Directors received 50,000 shares of
common stock to serve on the Board of Directors during fiscal 1999. The
directors did not receive any other compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options. There are no contractual arrangements with any member of
the Board of Directors.
We do not expect to pay salaries to any of our officers until such
time as we generate sufficient revenues to do so any compensation
earned prior to this is expected to be waived. We do not anticipate
paying any salaries to our officers until fiscal 2002. We do not intend
to pay any additional compensation to our directors. As of the date
hereof, we have not entered into employment contracts with any of our
officers and we do not intend to enter into any employment contracts
until such time as it profitable to do so.
Indemnification
Pursuant to the Articles of Incorporation and Bylaws of the
corporation, we may indemnify an officer or director who is made a
party to any proceeding, including a law suit, 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 Washington.
Regarding indemnification for liabilities arising under the
Securities Act of 1933, as amended, which may be permitted to directors
or officers pursuant to the foregoing provisions, we are informed 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.
<PAGE> 27
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of October 11, 2000, the total
number of shares owned beneficially by each of our directors, officers
and key employees, individually and as a group, and the present owners
of 5% or more of our total outstanding shares. Each of the stockholders
listed below has direct ownership of his shares and possesses sole
voting and dispositive power with respect to the shares.
Name of
Beneficial Shares Percentage
owner [1] Owned of Ownership
Hugh Grenfal 2,500,000 41.26%
Sergei Stetsenko 2,500,000 41.26%
---------------------
All Officers and
Directors as a
Group (2 persons) 5,000,000 82.50%
[1] The persons named above may be deemed to be a parent and promoter
of our company by virtue of his/its direct and indirect stock
holdings. Messrs. Grenfal and Stetsenko are the only promoters of
our company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In September 1999, we issued a total of 5,000,000 shares of
restricted common stock to Hugh Grenfal and Sergei Stetsenko, officers
and directors of our company. This was accounted for as a compensation
expense of $273,586 and advances and reimbursement expenses of $1,414.
Since our inception, Mr. Grenfal, advanced loans to us in the
total sum of $12,500, which were used for organizational and start-up
costs and operating capital. The loans do not bear interest and have
not been paid as of the date hereof. There are no documents reflecting
the loan and they are not due on a specific date. Mr. Grenfal will
accept repayment from us when money is available.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the
period ended June 30, 2000.
<PAGE> 28
(b) Exhibits
The following Exhibits are incorporated herein by reference from
the Registrant's Form SB-2 Registration Statement filed with the
Securities and Exchange Commission, SEC file #333-94631 on January 13,
2000. Such exhibits are incorporated herein by reference pursuant too
Rule 12b-32:
Exhibit No. Document Description
------------ -------------------
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Stock Certificate.
5.1 Opinion of Conrad C. Lysiak, Esq. regarding the legality
of the Securities being registered.
10.1 Mak 1 Claim.
10.2 Mak 2 Claim.
10.3 Mak 3 Claim.
10.4 Mak 4 Claim.
10.5 Mak 5 Claim.
10.6 Mak 6 Claim.
10.7 Mak 7 Claim.
10.8 Mak 8 Claim.
10.9 Mak 9 Claim.
10.10 Mak 10 Claim.
10.11 Statement of Trustee.
10.12 Deed.
99.1 Subscription Agreement.
The following documents are incorporated herein:
27 Financial Data Schedule
<PAGE> 29
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 11th day of October
2000.
PALAL MINING CORPORATION
(Registrant)
BY: /s/ Hugh Grenfal
Hugh Grenfal, President
In accordance with the Exchange Act, this report has been signed
below by the following person on behalf of the Registrant and in the
capacities and on this 11th day of October, 2000.
SIGNATURES TITLE DATE
/s/ Hugh Grenfal President, Chief Executive 10/11/2000
Hugh Grenfal Officer, Treasurer, Principal
Accounting Officer, Principal
Financial Officer, and a member
of the Board of Directors
/s/ Sergei Stetsenko Secretary and a member 10/11/2000
Sergei Stetsenko of the Board of Directors
