Form 10-Q for SILVERSTAR MINING CORP.
19-Aug-2011
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risk Factors".
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our", "Company", and "Silverstar" mean Silverstar Mining Corp., a Nevada corporation, unless otherwise indicated and the term "Silverdale" means Silverdale Mining Corp., our wholly owned subsidiary.
Corporate History
We were incorporated under the laws of the State of Nevada on December 5, 2003 under the name "Computer Maid, Inc.". On February 13, 2006, we changed our name from "Computer Maid, Inc." to "Rose Explorations Inc.".
In February 2006, we acquired the Rose Prospect Lode Mining Claim in Clark County Nevada and in June 2006, we staked the Rose Prospect II Lode Mining Claim adjacent to the west of the Rose Lode Claim to cover other indicated mineralized zones observed in that area. From February 2006, we have been an exploration stage company engaged in the exploration of mineral properties.
Effective March 4, 2008, we completed a merger with our subsidiary, Silverstar Mining Corp., a Nevada corporation. As a result, we changed our name from "Rose Explorations Inc." to "Silverstar Mining Corp." We changed the name of our company to better reflect the direction and business of our company.
In addition, effective March 4, 2008 we effected a three (3) for one (1) forward stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital increased from 75,000,000 shares of common stock with a par value of $0.001 to 225,000,000 shares of common stock with a par value of $0.001.
On March 31, 2008, we entered into a joint venture agreement with New Jersey Mining Co. to acquire a 50% interest in the Silver Strand silver mine located in the Coeur d'Alene Mining District. We were unable to close the joint venture agreement as expected before September 30, 2008. The Company is in default under the terms of the option agreement, and does not have any short term prospects for raising the funds needed to complete these projects and has written off its deferred mineral property costs related to the project.
Under the terms of the joint venture agreement, we have agreed to share equally in the production and further development and exploration of the property.
On June 13, 2008, we entered into a share exchange agreement with Silverdale Mining Corp., a Nevada corporation, and the shareholders of Silverdale Mining Corp. The closing of the transactions contemplated in the share exchange agreement and the acquisition of all of the issued and outstanding common stock in the capital of Silverdale Mining Corp. occurred on July 24, 2008. In accordance with the closing of the share exchange agreement, we issued 4,334,000 shares of our common stock to the former shareholders of Silverdale Mining Corp. in exchange for the acquisition, by our company, of all of the 4,334,000 issued and outstanding shares of Silverdale Mining Corp. Silverdale Mining Corp. is now a wholly owned subsidiary of our company.
On September 8, 2008, we entered into a letter of intent with Gold Canyon Partners, LLP pursuant to which we have agreed to purchase a 100% interest in a mining property commonly known as the Cobalt Canyon Gold Project, in the Chief District, located in Lincoln County, Nevada. The acquisition contemplated by the letter of intent is subject to the fulfillment of certain conditions precedent, due diligence and the negotiation of a definitive agreement. We have chosen not to complete the agreement and have forfeited the $15,000 initial payment.
On September 30, 2008, we entered into a share cancellation/return to treasury agreement with Greg Cowan, a former director and officer of our company. Pursuant to the agreement, Mr. Cowan agreed to the return and cancellation of 15,000,000 shares of our common stock that were held by him. We did not provide Mr. Cowan with any compensation for such cancellation.
Effective June 2, 2009, we entered into a share cancellation/return to treasury agreement with Jim MacKenzie wherein he agreed to the cancellation and return to treasury of 850,000 shares of our common stock. Subsequent to the stock cancellation, Mr. MacKenzie will hold 150,000 shares of our common stock.
On June 2, 2009, Mr. Greg Cowan, a former president, chief executive officer, secretary, treasurer and director of our company, transferred 5,000,000 restricted shares of our common stock to Mr. Lawrence Siccia, our current president, chief executive officer and director. Mr. Siccia purchased the shares from personal funds in the amount of $500.
In October 2010, Mr. Lawrence Siccia, a former president, chief executive officer, secretary, treasurer and director of our company, transferred 5,000,000 restricted shares of our common stock to Mr. Neil Kleinman, our current president, chief executive officer and director. Mr. Kleinman purchased the shares from personal funds in the amount of $2,500.
On May 16, 2011 our recently formed, wholly owned subsidiary, Silverstar Mining Canada, Inc., ("SMCI") acquired three mining claims encompassing approximately 1,006 hectares in British Columbia, Canada. In consideration for the transfer of the mining claims, we paid the transferor $10,000 and will issue the transferor two million shares of our common stock.
The mineral claims are located in the Caribou Mining District in east-central British Columbia, Canada.
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Property Location and Access
There is a growing infrastructure in the region as more of its resources are being exploited by various sized peers and competitors in the area.
The SMCI mineral tenures are located within 65 km northeast of Quesnel, British Columbia, in an area that in part has been logged and re-planted. Access is by forestry road to the vicinity of the Willow River: the tenures lie both east and west of that river. The bridge across Willow River is located approximately 1250 metres upstream from the south boundary and a logging branch road follows the east side of Willow River. The total area is 1006 hectares.
We have not conducted any feasibility studies on the mining claims. However, contiguous and other properties in the immediate vicinity indicate deposits of gold, silver and copper.
In order to determine the commercial viability of the mining claims and commence operations, a team of professionals is to be assembled to obtain further detail of potential yield. Independent consultants estimate that a work program should be done on its major fault structure and could be implemented for up to $150,000. Initial work would be studying historical information on the area, the trend line and sampling. The sampling analysis will direct management on subsequent investment of resources. The sampling program can be achieved with a projected investment of $25,000 up to $75,000 depending on the success of early stage sampling and the amount of samples ultimately taken and evaluated. A drilling program is estimated to cost roughly $500,000.
Employees
Neil Kleinman serves as our sole officer, director and employee. We presently conduct our business through agreements with consultants and arms-length third parties.
Results of Operations for the Three and Nine Months ended June 30, 2011 We have not generated any revenue since inception and are dependent upon obtaining financing to pursue our business activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Until we can identify an acquisition candidate or acquire assets, we have attempted to minimize our expenses. The single largest expense items are attributable to legal and accounting fees incurred in connection with our reporting obligations under the Securities Exchange Act.
For the three and nine months ended June 30, 2011 we incurred $8,288 and $11,347 in legal and accounting fees as compared to $11,143 and $30,092 during the corresponding periods in 2010. Legal and accounting fees since Inception totaled $205,942. These costs represent our single largest expense during these respective periods. These fees were incurred in connection with the preparation of required reports with the Securities and Exchange Commission and legal fees associated with the acquisition of our mining claims.
For the three months ended June 30, 2011 we incurred $2,288 in bank charges and interest, $4,500 in management fees, $1,500 in rental costs, $750 in transfer agent fees and $133 in travel and entertainment. For the three months ended June 30, 2010 we incurred $1,311 in bank charges and interest, $4,500 in management fees, $1,500 in transfer agent fees and $1,175 attributable to travel and entertainment. For the nine months ended June 30, 2011 legal and accounting fees totaled $11,347, rent $13,500, consulting $5,576 and $4,500 in transfer agent fees. During the nine months ended June 30, 2010 legal fees totaled $30,092, rent totaled $13,500 and management fees totaled $13,500.
Our expenses for the three and nine months ended June 30, 2011 were $17,459 and $38,819 as compared to $19,629 and $58,903 for the comparable period in 2010. Total costs since Inception were $1,503,609.
For the three and nine months ended June 30, 2011, we recorded a net loss of $17,512 and $38,872 as compared to $19,629 and $58,903 in 2010. Our Net Loss since Inception totaled $1,503,662.
Liquidity and Working Capital
Assets and Liabilities
At June 30, 2011, we had cash of $697 compared to $1,907 at September 30, 2010. At June 30,2011, we had current liabilities of $114,838 consisting of $18,240 in convertible debentures, $88,710 in demand notes and $7,888 in accounts payable. This compares to current liabilities totaling $95,176 at September 30, 2011 consisting of $20,374 in accounts payable, $17,118 in convertible debentures, $35,184 in demand notes and $22,500 due to a related party.
At June 30, 2011, we had a working capital deficit of $114,141 as compared to a working capital deficit of $93,269 at September 30, 2010. Unless we secure additional debt or equity financing, of which there can be no assurance, we will not be able to continue operations and you may lose your entire investment. We currently do not have any arrangements in place for any future debt or equity financing.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual consolidated financial statements for the year ended September 30, 2010, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern.
We anticipate that additional funding will be required in the form of debt or equity capital financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through debt to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.
Application of Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our consolidated financial statements.
We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Significant accounting policies used in the preparation of our consolidated financial statements are set forth in Note 2 to our consolidated financial statements.
Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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