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Black Sea Minerals Inc – ‘SB-2’ on 10/31/03

On:  Friday, 10/31/03, at 4:39pm ET   ·   Accession #:  1145236-3-9   ·   File #:  333-110163

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10/31/03  Black Sea Minerals Inc            SB-2                  10:893K                                   Integreon Man… Solutions

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 1: SB-2        Registration of Securities by a Small-Business      HTML    448K 
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 3: EX-3.(II)   Articles of Incorporation/Organization or By-Laws   HTML     50K 
 8: EX-4        Instrument Defining the Rights of Security Holders  HTML     17K 
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10: EX-24       Power of Attorney                                   HTML      8K 

PAGES IN THIS REGISTRATION

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

BLACK SEA MINERALS, INC.

OFFERING:  1,150,000 common shares

525 Seymour Street, Suite 908
Vancouver, British Columbia V6B 3H7
(604) 685-1527
(Address of principal executive office
and place of business)

Charles Clayton
12 South Sixth Street
Minneapolis, MN 55402
(612) 338-3738
(Name and address of agent for service)

Approximate date of commencement of proposed sale to public:
As soon as practicable after effective date of this Registration Statement

If any of the securities being registered on this Form pursuant to Rule 462(b), check the following box. o

If any of the securities being registered on this Form pursuant to Rule 462(c), check the following box. o

If any of the securities being registered on this Form pursuant to Rule 462(d), check the following box. o

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. o

CALCULATION OF REGISTRATION FEE

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

1

PROSPECTUS

BLACK SEA MINERALS, INC.
#908 – 525 Seymour Street,
Vancouver, B.C. Canada V6B 3H7
Tel:  604.685.1527

1,150,000 Shares of Common Stock

This is our initial public offering. We are offering 200,000 treasury shares of the Company (“Primary Offering”) and 950,000 shares are offered by the selling shareholders (“Secondary Offering”). We will not receive any of the proceeds from the Secondary Offering. The share price is $1.00. No public market currently exists for our shares.

INVESTING IN OUR SHARES INVOLVES RISKS. SEE ITEM 3.4 “RISK FACTORS”.

Primary Offering

If the shares are sold directly by us, the net proceeds per share will be $1.00.
If the shares are sold directly by us, the aggregate proceeds of the minimum offering will be $100,000.
If the shares are sold directly by us, the aggregate proceeds of the maximum offering will be $200,000.

The primary offering of 200,000 shares is being offered on a “best effort” basis with a minimum offering of 100,000 shares and a maximum offering of 200,000 shares. We plan to sell the shares ourselves. We do not plan to use underwriters or pay any commissions. We do however, reserve the right to use brokers and or placement agents and could pay commissions equal to 10% of the gross proceeds. The Company has not made any agreements to sell the Shares using registered agents or underwriters. The primary offering will end on the earlier of (1) completion of the sale of the minimum offering of 100,000 shares or (2) the 90^th day after the date of this prospectus unless extended for 30 days by agreement between us, the escrow holder of the subscription funds and the subscribers. Pursuant to an agreement dated July 28, 2003 between us and a licensed lawyer residing in Vancouver, British Columbia, Canada, (the trustee) subscription funds will be deposit in a segregated company account established solely for the purpose of holding the subscription funds for the time periods described earlier in this paragraph. In the event the minimum offering of 100,000 shares is not sold within the 90 days or 120 days if extended, the subscription funds will be refunded promptly by the trustee, to the subscribers in full without interest or deductions.

Secondary Offering

The prospectus will not be used before the effective date of the registration statement.

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS A CRIME TO MAKE ANY REPRESENTATION TO THE CONTRARY.

Prospectus dated October 29, 2003

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Table of Contents

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4

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We are a Delaware corporation. Our principal executive offices are located at 525 Seymour Street, Suite 908, Vancouver, British Columbia, Canada. Our telephone number is (604) 685-1527.

We have:

(1) a 60% interest in the Ecogarnet Joint Venture which has an unlimited license to extract and sell abrasive garnet and quartz/feldspar for industrial purposes.(the Ecogarnet property); and

(2) a 49% interest in the Garnet Joint Venture which has a 20 year license expiring 2015 to purchase crushed rock from a quarry to extract abrasive garnet and quartz feldspar (the Garnet property).

Both properties are located in Ukraine.

Common stock offered by us: A Primary Offering of 100,000 shares minimum and 200,000 shares maximum.

If the shares are sold directly by us, the net proceeds per share will be $1.00.
If the shares are sold directly by us, the aggregate proceeds of the minimum offering will be $100,000.
If the shares are sold directly by us, the aggregate proceeds of the maximum offering will be $200,000.

The primary offering of 200,000 shares is being offered on a “best effort” basis with a minimum offering of 100,000 shares and a maximum offering of 200,000 shares. We plan to sell the shares ourselves. We do not plan to use underwriters or agents and therefore will not pay any commissions. We do however, reserve the right to use brokers and or placement agents and could pay commissions equal to 10% of the gross proceeds. The primary offering will end on the earlier of (1) completion of the sale of the minimum offering of 100,000 shares or (2) the 90^th day after the date of this prospectus unless extended for 30 days by agreement between us, the escrow holder of the subscription funds and the subscribers. Pursuant to a trust agreement dated March 25, 2003 between us and a licensed lawyer located in Vancouver, British Columbia, Canada (the “trustee”), subscription funds will be deposited in a segregated bank account established solely for the purpose of holding the subscription funds for the time periods described earlier in this paragraph. In the event the minimum offering of 100,000 shares is not sold within the 90 days or 120 days if extended, the subscription funds will be promptly refunded to the subscribers by the trustee, in full without interest or deductions.

The issued share capital upon completion of the minimum and maximum primary offering is:

6

Use of Proceeds if No Commissions are Paid

Use of Proceeds if Commissions are Paid

The Offering includes a secondary offering of 950,000 shares being offered by four shareholders of the Company. The Company will not receive any of the proceeds of the secondary offering. There are no arrangement between the Company and the selling shareholders for the sale of the primary or secondary offering.

As at June 30, 2003:

The liabilities of the Company were $166,866. Of this amount $155,523 is owed to related parties (Walter Stunder, the President of the Company and to companies owned by Mr. Stunder.) There are no terms of repayment and none of the proceeds of this offering will be used to repay the $155,523.

The loss was $116,388 and the deficit was $116,388. See Item 17.2 for further details.

You should carefully consider the risks described below before purchasing our common stock. Our most significant risks and uncertainties are described below; however, they are not the only risks we face. If any of the following risks actually occur, our business, financial condition, or results or operations could be materially adversely affected and you may lose all or part of your investment. You should acquire shares of our common stock only if you can afford to lose your entire investment.

7

We Have A Limited Operating History With Significant Losses And Expect Losses To Continue For The Foreseeable Future

We have yet to establish any history of profitable operations and there is no prospect of profitable operations in the immediate future as the primary offering of the Company’s shares does not provide adequate working capital to install a permanent plant at the Ecogarnet property. See Item 4 “Use of Proceeds”. We have incurred annual operating losses of $57,284 for the fiscal year ended June 30, 2002, and $8,068 for the fiscal year ended June 30, 2001. The loss for the fiscal year ended June 30, 2003 is $16,448. As a result, at June 30, 2003 we had an accumulated deficit of $116,388. Our revenues have not been sufficient to sustain our operations. We expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. Our profitability will require the successful commercialization of our garnet properties. No assurances can be given when this will occur or that we will ever be profitable. The proceeds of this offering are only adequate to install a pilot plant on the Ecogarnet property. Additional financing will be required for a preliminary feasibility and final feasibility report and to purchase the permanent plant.

Our independent auditors have added an explanatory paragraph to their audit opinion issued in connection with the financial statements for the year ended June 30, 2003, 2002 and 2001 relative to our ability to continue as a going concern set out in note 1(a) to the financial statements. Our ability to obtain additional funding will determine our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will require additional financing to sustain our operations and without it we will not be able to continue operations. Even if we are able to complete this offering, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences would be a material adverse effect on our business, operating results, financial condition and prospects.

Our shares are not listed on any exchange or trading system. We do not have a public trading market for our securities nor can we provide any assurance that a public market will ever develop in the future. The issued share capital of the Company of 3,992,315 shares is held by only 353 shareholders. Assuming the maximum offering of 200,000 shares is sold there is no assurance that the shares of the Company will be widely distributed or that a broad based regular trade in the shares of the Company will develop. Consequently, an investor may not be able to liquidate his investment in the event of an emergency or for any other reason. Therefore, an investor should consider his investment to be long term.

If the trading price of the Company’s shares is less than $5.00 per share, trading in the shares is subject to the requirement of Rule 15G-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction.

SEC regulations also require additional disclosure in connection with any trades involving a “penny stock”, including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. Such requirements severely limit the liquidity of the common stock in the secondary market because few brokers or dealers are likely to undertake such compliance activities. Generally the term penny stock refers to a stock with a market price of less than $5.00 per share. A market in the Company’s stock may never develop due to these restrictions.

8

Investors will suffer an immediate dilution respecting their investment in the common shares of the Company under this Offering. The financial risk of our future activities will be borne to a significant degree by purchasers of shares under the Offering who, upon its completion will incur immediate and substantial dilution in the net tangible book value of $.763 per share in the minimum offering and $.746 per share in the maximum offering. Future acquisitions or equity financing that cause the issuance of common shares in our capital could result in a change of control of the Company and may cause the shareholders’ interest in us to be further diluted. The financial risk of our future activities will be borne to a significant degree by purchasers of Shares under the Offering.

We indirectly own and hold our interest in our two properties pursuant to our interests in two joint ventures called “Ecogarnet Joint Venture” (“Ecogarnet”) and “Garnet Joint Venture” (“Garnet”). The Ecogarnet has a license issued in November, 1999 which has no expiry period. The Garnet has a 20-year license, expiring in October, 2015 to extract and produce garnet from the Ivanovka garnet deposit. See Item 15 “ Organization Within Last Five Years”. There is no work commitments associated with the two licenses, and therefore there is little risk of forfeiting title as a result of being deemed in default of commitments under the license. However there is a risk that the licenses may not withstand a challenge in the Ukraine courts. The practical risk of conducting business in Ukraine is that if the western company does not perform up to the level of its commitments, the project will find its way into other hands.

There is a risk that the expected quantities and grades of garnet cannot be extracted from the quarries. The quarries have been in operation for over 30 years. Much of the garnet resource has been exposed through the mining operations. However, no new processes or untested equipment is required to mine or process the garnet rock and therefore, there is little operational risk of recovering garnet from the Ecogarnet tailings pond and the Garnet quarry. A pilot plant is to be installed on the Ecogarnet tailings pond to establish the operating costs of extraction using modern methods. See Items 16.2.1 “Description of Business” and Item 18.1 “Description of Property”.

Our two properties are without known reserves, the viability of commercial production is not known and the pilot plant proposed for the Ecogarnet tailings pond is exploratory in nature.

Only small commercial quantities of garnet have been produced from the quarries and sold into Europe, and there is a risk that garnet produced from the project cannot be economically transported to the Company’s target markets which are located in Austria, Germany, Switzerland and Italy. However the two garnet sites have a significant amount of infrastructure in place, including all necessary facilities to transport garnet out of Ukraine and into European market. The sites are connected by paved highway to major trucking networks in Europe, in addition to being connected by railway to the major rail routes throughout Ukraine and into Europe. The project has direct connections by rail and highway to the port of Odesa to ship garnet by sea.

We do not have any operating history producing and selling garnet as do our competitors, Barton Mines Corporation “Barton” and Western Garnet International Ltd. (“Western Garnet”).

9

Ukraine is politically stable with no civil or political unrest. It gained independence in 1992 and has a good political record. It was part of the Soviet Union until the breakup of the Soviet Union in 1992. Since then it has held free elections every four years. President Kutchma was elected for a second term in 1999. President Kutchma is restricted from running for President for a third term. Elections are scheduled for 2004.

We see Political Risk in Ukraine potentially manifesting itself as either changes in fiscal and taxation policy, or restrictions on foreign companies operating in Ukraine.

The Ukraine is getting good cooperation from the IMF (International Monetary Fund) and the European Union. Ukraine has observer status with the European Union which means that integration is now beginning into the European union. In our opinion, the real political risk in Ukraine is the level and cost of corruption, which is not as prevalent as in Russia

There is a risk that the world price of garnet will drop with the introduction of sales volumes from our operation. By bringing on an additional 10,000 tons per year into market, there is a risk of garnet prices dropping near term. The price of garnet is currently around $480 - $600 per ton. We anticipate that when our garnet becomes commercially available with new production techniques, our competitors may drop the price of garnet to $280 - $300 a ton. However our freight charges are significantly lower than the competitors enabling us to sell at highly competitive prices. See Item 16 “Description of Business”.

There is a risk that we will experience slower than expected rates of penetration into our target markets. We are establishing Black Sea as a newcomer in a well established, tightly run marketplace for engineered applications of industrial garnet. We will have to break long standing customer relationships with Barton and Western Garnet in order to penetrate markets successfully. Non-price factors can be more difficult to compete with than simply price.

There is a risk of competitors bringing on low cost sources of comparable quality industrial garnet. While we believe that we will be one of the lowest cost producers of garnet in the world, other potential sources of garnet may exist which could be extracted and refined at lower costs than us.

Our business, even if successful, will be focused solely on the production and sale of industrial grade garnet. Our lack of diversification may subject us to economic fluctuations within the garnet industry and therefore increase the risks associated with our operations.

Our current directors and officers will control a majority of the outstanding shares upon completion of this offering.

After this offering, the officers and directors will control a minimum of 63% of the outstanding common stock. As a result, we may be able to exercise a controlling influence over matters requiring approval of our shareholders, including the election of directors, and over our business and affairs. Investors in this offering will not be able to exercise control. This would include determinations with respect to mergers and other business combinations, and the acquisition and disposition of our assets.

We will not be conducting any mining operations and therefore will not be subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as unusual or unexpected geological formations, environmental pollution, personal injuries, flooding, cave-ins, changes in technology or mining techniques, periodic interruptions because of inclement weather and industrial accidents.

10

We are dependent on the services of Walter Stunder, President and Chairman of the Board of Directors who speaks Russian, Ukrainian and English. Mr. Stunder is the Company’s chief operating officer. The loss of Mr. Stunder could have a material adverse effect on our business and operations as he is the sole person responsible for overseeing operations on the two garnet properties at this time. We currently do not have key man insurance. In the event of commercial operations, the Company cans resource many technically qualified people in Ukraine who are competent to carry out local management and operations.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stock generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Our securities will be subject to the penny stock rules, and investors in this offering may find it more difficult to sell their securities.

As a result of these factors, this Offering is only suitable for those investors who are willing to rely on management of the Company and who can afford to lose their entire investment in the Company’s Shares.

If we do not use selling agents or underwriters, we estimate that we will receive net proceeds from this offering of approximately $100,000 minimum and $200,000 maximum.         

If we use selling agents or underwriters, e estimate that we will receive net proceeds from this offering of approximately $90,000 minimum and $180,000 maximum We expect to use the net proceeds of this offering for the following purposes in the following order or priority:

Use of Proceeds if No Commissions are Paid:

Use of Proceeds if Commissions are Paid:

11

Use of Proceeds if 75% of the Maximum Offering is Sold: 150,000 Shares

The primary offering of 200,000 shares is being offered on a “best effort” basis with a minimum offering of 100,000 shares and a maximum offering of 200,000 shares. We plan to sell the shares ourselves. We do not plan to use underwriters or agents and therefore will not pay any commissions. We do however, reserve the right to use brokers and or placement agents and could pay commissions equal to 10% of the gross proceeds.

We will require further financing to pay for a preliminary or final feasibility study.

None of the proceeds of the offering will be used to repay debt due to related parties.

Pending use of the net proceeds of this offering, we intend to invest the net proceeds in short-term, interest-bearing investment grade securities.

The Offering Price of the Shares bears no relation to book value, assets, earnings or any other objective criteria of value. The Offering Price and number of Shares offered were arbitrarily determined by the Company. The Company’s shares have never traded. There can be no assurance that the shares of the Company will ever trade on a listed exchange. There is no assurance that if the shares to trade, that the trading price of the Company’s shares will attain the market value commensurate with the Offering Price.

“Dilution” is the difference between the public offering price of a security and its net tangible book value per Share immediately after the Offering, giving effect to the receipt of net proceeds of the Offering.

Future acquisitions or equity financings that cause the issuance of common shares in the capital of the Company could result in a change of control of the Company and may cause the shareholders’ interest in the Company to be further diluted. The financial risk of the Company’s future activities will be borne to a significant degree by purchasers of Shares under the Offering.

As of June 30, 2003, the net tangible book value was $938,418 or $.221 per common share. Net tangible book value per common share represents the amount of our total tangible assets less total liabilities, divided by the number of common shares outstanding.

After giving effect to the sale of the 100,000 minimum and 200,000 maximum shares of common stock offered at a initial public offering price of $1.00 per share, and after deducting the underwriting discounts and estimated offering expenses payable by us, our as adjusted net tangible book value at June 30, 2003 would have been $.237 per share minimum and $.254 per share maximum. This represents an immediate increase in the as adjusted net tangible book value of $.015 minimum and $.032 maximum, to existing stockholders and an immediate dilution in as adjusted net tangible book value of $.763 per share minimum and $.746 per share maximum, to purchasers of common stock in this offering. Dilution per share represents the difference between the price per share paid by public investors and the as adjusted net tangible book value per share at June 30, 2003. The following table illustrates this per share dilution as of June 30, 2003.

12

As adjusted net tangible book value per share after the offering

The following tables set forth, as of June 30, 2003, after giving effect to the sale of the number of common shares, and without adjustment for commissions and other expenses related to this offering, the number and percentage of shares of common stock purchased from the Company, the amount and percentage of cash consideration paid and the average price per share paid by the new investor pursuant to this offering and by existing shareholders.

SELLING SECURITY HOLDERS

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We are offering 100,000 shares as the minimum offering, and 200,000 shares as the maximum offering at a price of $1.00 per share on a “best efforts”, “minimum, maximum” basis.

We offer the shares on a best efforts basis. We have agreed to pay any participating brokers a commission of 10% of the price of the shares. There are no brokers participating in the primary offering or secondary offering at this time nor do we have any plans to retain brokers to sell the primary or secondary offerings.

The offering will be conducted in the States on New York and New Jersey. We will register the securities within the two states after receipt of this prospectus.

The primary offering will end on the earlier of (1) completion of the sale of the minimum offering of 100,000 shares or (2) the 90^th day after the date of this prospectus unless extended for 30 days by agreement between us, trustee of the subscription funds and the subscribers. Pursuant to a trust agreement dated March 24, 2003 between us and Joanne S. McClusky, a licensed lawyer located in Vancouver, British Columbia, Canada (the “trustee”), subscription funds will be deposited in a segregated bank account established solely for the purpose of holding the subscription funds for the time periods described earlier in this paragraph pursuant to an irrevocable direction from us to the trustee. In the event the minimum offering of 100,000 shares is not sold within the 90 days or 120 days if extended, the subscription funds will be promptly refunded to the subscribers by the trustee, in full without interest or deductions.

There is a secondary offering of 950,000 shares being offered by four shareholders of the Company. The Company will not receive any of the proceeds of the secondary offering. None of the secondary offering will be offered for sale until our primary offering of 200,000 shares is sold.

The selling shareholders are not subject a minimum subscription. Any commission expense incurred by the selling shareholders will be paid by them. In the event the Company’s maximum offering of 200,000 shares is not sold the registration as to the selling shareholders will be withdrawn. There are no arrangements to coordinate the two offerings.

The validity of the shares offered has been passed upon by Charles Clayton, Minneapolis, Minnesota.

The Company and its properties are not subject to any legal proceedings.

14

CONTROL PERSONS

The following are the directors and executive officers of the Company:

Walter Stunder – President, Director. Mr. Stunder has been President of Aurora Pacific Consulting and Development Corp. since 1976. He speaks, reads and writes Russian and Ukrainian as well as English. His knowledge of these languages and his extensive knowledge of Ukraine are used in his consulting business which is to advise businesses in the set up and operation of businesses in Ukraine since its independence in 1992. He has been to Ukraine approximately 50 times in the past ten years as a consultant to other businesses.

Mr. Stunder has significant practical experience in the operation and maintenance of machinery. He grew up on a farm and operated and maintained all of the farm machinery. In the mid 1960’s he managed and operated a gravel crushing plant for a year in Prince George, British Columbia, Canada. He was responsible for all of the daily operations. Thereafter he was a high school teacher teaching mathematics, physics and chemistry. His technical knowledge of these three subjects enables him to understand the technical reports on the properties. After teaching, he worked for United Geophysics as a seismic surveyor. Mr. Stunder’s practical experience with the operation of machinery enables him to understand and design the equipment necessary to extract the garnet from our two properties.

Mr. Stunder will be spending 50% of his business time on the business of the Company, which is more than adequate to oversee the Companies operations. Upon completion of this offering and delivery of the pilot plant to the Ecogarnet property, the Company will initially hire three employees in Ukraine to directly manage and carry out the daily operations of the Ecogarnet property as required.

Mr. Stunder is a director and the owner of 80% of the shares of Aurora Precious Metals Inc. which is listed on the OTC(NBQ) with the symbol ARPM. He is the President and managing director if Aurora Precious Metals, Inc.

Matthias Wuttke –Director. Mr. Wuttke is the owner and full time manger of a computer consulting and retail sales company in Switzerland, and has done so for more than the past 7 years. His business acumen is in marketing and sales. Mr. Wuttke has marketing and sales connections with the abrasive industry as he worked at one time for Swiss Industrial Abrasives, which is Europe’s largest independent abrasive company. He was responsible for that company’s computer programs. At this time Mr. Wuttke spends minimal time on our operations. When the pilot plant on the Ecogarnet property starts operations, Mr. Wuttke will assume responsible for the marketing of the recovered garnet and then will expend as much time as is required to carry out the marketing duties. The Company cannot estimate at this time what percentage of his business time will be spent on the business of the Company.

The directors serve until the next meeting of shareholders.

The statutes of the State of Delaware provide indemnification of any officer, director or affiliated person for acts or omissions if he acted in good faith and in what he believed to be the best interests of the company. The Company does not have indemnification agreements with its directors and officer.

15

We do not have any significant employees. There are no family relationships among the directors. Neither of the two directors have been involved in any legal proceedings in the past five years that are material of an evaluation of them as directors or officer, including: (1) any bankruptcy petitions (2) criminal proceedings (3) an order barring or limiting their involvement in any type of business, securities or banking activities and (4) being found by a court of competent jurisdiction (in a civil matter), the Commission or the Commodity Futures Trading Commission to be in violation or any federal or state securities or commodities law.

The following table shows information of the beneficial ownership of our common stock by:
Each stockholder that beneficially owns more than 5% of our common stock;
Each executive officer;
Each director; and
All directors and executive officers as a group.

(1)        owned by John Leo of Jersey City, New Jersey.

(2)        Mr. Stunder’s shares are held in the name of Aurora Pacific Consulting and Development Corp. a private company wholly owned by Mr. Stunder.

16

We have authorized 100,000,000 shares of common stock, with a par value of $.001 per share. Each holder of common stock has one vote per share on all matters voted upon by the shareholders. Such voting rights are not cumulative and as such shareholders holding more than 50% of the outstanding shares of common stock are able to and will be able to elect all members of the Board of Directors. There are no preemptive rights or other rights of subscription.

Each share of common stock is entitled to participate equally in dividends as and when declared by the Board of Directors out of funds legally available, and is entitled to participate equally in the distribution of assets in the event of liquidation. All shares, when issued and fully paid, are not assessable and are not subject to redemption or conversion and have no conversion rights.

We have authorized 50,000,000 shares of preferred stock with a par value of $.01 per share. We have not set any preferences on the preferred stock, and none have been issued.

The following table sets forth our capitalization as of June 30, 2003. Our capitalization is presented on an actual basis, and on an as-adjusted basis to reflect receipt of the estimated net proceeds from the sale of 100,000 minimum or 200,000 maximum shares of common stock at $1.00 per share, after deducting commissions and estimated offering expenses.

Upon completion of this offering, we will have 4,092,315 minimum and 4,192,315 maximum, shares of common stock outstanding. Of these shares, the 100,000 minimum, or 200,000 maximum sold in this offering and the 950,000 shares of the selling shareholders, will not be deemed to be restricted shares under the Securities Act of 1933. The remaining 3,042,315 shares were issued and sold in private transactions and in reliance on the private placement exemption of the Securities Act.

The 3,042,315 restricted shares are eligible for sale pursuant to Rule 144 of the Securities Act at the expiration of the one-year holding period from their date of acquisition. The one-year holding period for the shares has ended.

In general, under Rule 144 a person who has beneficially owned his restricted shares for at least one year, and persons who are affiliates are entitled to sell within any three month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of our common stock or the average weekly trading volume in our common stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us. However, a person who is not deemed to have been our affiliate at any time during the three months preceding a sale and who has beneficially owned his registered stock for at least two years would be entitled to sell his shares under Rule 144 without regard to the volume limitations, manner of sale provisions or notice requirements.

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Prior to this offering there has been no market for the common stock and no predictions can be made of the effect, if any, that market sales of restricted shares or the availability of restricted shares for sale will have on the market price of the shares if a market for the shares develops. Nevertheless, sales of substantial amounts of the restricted shares in the public market could adversely affect such market prices.

The validity of the shares offered has been passed upon by Charles Clayton, Minneapolis, Minnesota. Mr. Clayton is being paid cash for his services. He was not retained on a contingent basis and has not and will not receive direct or indirect interest in the Company. Further he is not a promoter, underwriter, officer or director of the Company.

The audited financial statements of the Company included in this prospectus and elsewhere in the registration statement have been audited by David J. Maxwell Ltd., independent public accountant, as indicated in his reports, and are included in reliance on the authority of the firm as experts giving reports. Mr. Maxwell received his Certified Public Accountant certificate on June 9, 2000 from the State of Illinois.

The statutes of the State of Delaware provide indemnification of any officer, director or affiliated person for acts or omissions if he acted in good faith and in what he believed to be the best interests of the company. The Company does not have indemnification agreements with its directors and officer.

The Company signed an agreement dated March 1, 1999 with Aurora Pacific Consulting and Development Corp. (“Aurora”) to purchase Aurora’s 60% interest in a Ukrainian privatized company called the Ecogarnet Joint Venture. The remaining 40% interest is owned by a government owned Ukraine company called “Turbiv Kaolin Plant” which is wholly owned by the Ukrainian government. A Ukrainian privatized company is a Ukrainian government company that has been sold to non government parties.

The Ecogarnet Joint Venture was given exclusive authority by the Ukraine government to extract, produce and sell garnet and quartz feldspar from the Turbiv tailings pond located on 12.4 hectares at Turbiv village located southwest of Kiev, Ukraine.

The license was issued to Turbiv in 1995 by the Ukraine’s Head of State Committee of Geology and Mineral Usage, and was approved by the Ministry of Eco-Safety and Worker Protection. The quarry has been in operation for more than 30 years producing kaolin clays from which the garnet is extracted. The license does not have any time restriction. The Company’s operations will result in a clean up of the former kaolin plant tailings pond located on the Ecogarnet property.

The purchase price was one million common shares of the Company to be issue to Aurora upon commencement of production of garnet. The March 1, 1999 agreement stated that ownership would remain with Aurora until the purchase price was fully paid. The property is not in production and requires the proceeds of the Company’s Primary Offering to install a test plant to determine production requirements. See Item 4 “Use of Proceeds” and Item 18 “Description of Property. Pursuant to an amending agreement dated March 6, 2003, Aurora agreed to the immediate transfer of beneficial and registered ownership of its 60% interest in the Ecogarnet Joint Venture to the Company. Aurora further agreed to defer receipt of the Shares until the pilot plant to be established on the property has produced 100 tons of abrasive garnet from the tailings pond.

Aurora is a private British Columbia corporation wholly owned by Walter Stunder, the President of the Company. See Item 11 “Security Ownership of Certain Beneficial Owners and Management”.

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The Company signed an agreement dated March 1, 1999 with Aurora to purchase Aurora’s 49% interest in a Ukrainian private company called the Garnet Joint Venture.

The Ivaniv garnet deposit is owned by Ivaniv Special Quarry (“ISQ”) a privatized Ukrainian company which holds a renewable exclusive license issued in 1995 to mine and produces abrasive garnet and quartz/feldspar from a 252 hectare area for a period of 20 years. ISQ is owned by Garnet Joint Venture as to 25% and by private residents of Ukraine as to 75%.

Garnet Joint Venture was formed to purchase the quarry rock for the purpose of extracting and selling garnet for industrial purposes. Garnet Joint Venture is owned 49% by the Company and 51% by ISQ.

The purchase price paid by the Company was 3 million common shares which have been issued and $300,000. $50,000 was paid on closing and $250,000 was to be paid in 12 equal monthly payments of $20,833.33 commencing April 1,1999 for a total purchase price of $300,000. Aurora has been paid a total of $108,000 leaving an outstanding balance of $192,000. The March 1, 1999 agreement stated that ownership would remain with Aurora until the purchase price was fully paid. Pursuant to an amending agreement dated March 6, 2003, Aurora agreed to the immediate transfer of beneficial and registered of its 49% interest in the Garnet Joint Venture to the Company and accepted a promissory note for the outstanding balance of $192,000. The promissory note states that the $192,000 is not due until March 31, 2005 provided however that until March 31, 2005, 50% of any funds raised by the Company through the sale of its common shares would be paid to Aurora.

As at June 30, 2003 the Company is indebted to Aurora and Walter Stunder (“creditors”) in the amount of $155,523 (the “debt”). There are no terms of repayment. The debt is comprised of out of pocket expenses paid by the creditors on behalf of the Company. None of the debt is comprised of management fees or salaries. Mr. Stunder has been and is working on behalf of the Company without remuneration. There are no terms of repayment of the debt. None of the proceeds of this offering will be used to repay the debt.

The Company signed a six month agreement dated May 30, 2002 with Venture Capital Partners LLC (“Venture”) of Jersey City, New Jersey, whereby Venture, as a consultant would provide financial advice, strategic financial planning and introductions to capital sources. The fees were 700,000 common shares issued to: Venture as to 400,000; 200,000 to Joerg Schweizer, Consultant and 100,000 to S.P.R. Venture Partners Inc. (“SPR”) (collectively the “consultants”). John Leo of Jersey City, New Jersey is the owner of Venture and Spiro Pappas of Fort Lauderdale is the owner of SPR. The consultants have physically inspected the two garnet properties in the Ukraine and have contacted potential investors to raise funds for the Company. To date no funds have been raised.

The Company was incorporated on December 2, 1998 by registration of its articles of incorporation and bylaws with the State of Delaware.

There has not been a material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of business other than the purchase of a 60% interest in the Ecogarnet Joint Venture and a 49% interest in the Garnet Joint Venture. See Item 15 “Organization Within the Past Five Years” and Item 19 “Certain Relationships and Related Transactions”.

The Company has an interest in two joint ventures for the extraction and sale of garnet for industrial uses. See Item 15 “Organization Within the Past Five Years”.

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The Company has a 60% interest in the Ecogarnet Joint Venture which has a perpetual license for the five hectare Turbiv tailings pond located at Turbiv village, Vinnitsia Oblast region of the Ukraine about 220 kilometers from the city of Kiev and accessible by paved road. The property has a large tailings pond left from a kaolin plant for the production of kaolin clays. $80,000 of the proceeds from the primary offering are allocated to install a pilot plant to determine the optimum means of recovery using modern methods

The pilot plant is a washing plant designed to operate in the open at the edge of the Turbiv tailing pond. The plant will be portable and will operate for approximately three months. There are three employees required to operate daily twelve-hour shifts. The employee costs are $75 per month per employee. Some of the equipment required to set up the plant is on site and in good working order.

Currently onsite there is a sand classifer, bulldozer, several small trucks and basic equipment such as wheelbarrows. Sand classifers come in different forms and use water and gravity to separate light material (sand [feldspar]) from the heavier material (garnet). The existing sand classifer will be used by the Company for initial separation. The form of sand classifer in the pilot plant to do the final separation will be the spirals recommended by Swallow Services Limited, Mining consulting and Operations Management (“Swallow”). See Item 17.2 Plan of Operation and Item 18.1 “Description of Property” - Ecogarnet.

The function of the pilot plant is to determine which separation process is the most efficient. The separation processes are: (1) mechanical by the use of a vibrating screen (2) water separation using a sand classifier which separates the sand from the garnet by gravity (See Item 18.1 for further details) and (3) magnetic separation. All three processes will be incorporated in the pilot plant. The equipment for the three processes is off the shelf, standard components that do not require custom design.

Shipping the pilot plant from England requires about two weeks, and two weeks will be required to assemble the pilot plant. A local engineer has been consulted and will operate the plant. The shipping costs of $3,000 are included in the estimated cost of $80,000. We will require further financing to finance the cost of a preliminary or final feasibility study.

The property is serviced with water, electricity and gas. The power source is the Vinnitsia oblast (provincial) government

We have a 49% interest in the Garnet Joint Venture which is located in Ivaniv village, Vinnitsia oblast (province), Kalynivka region, Ukraine. The property lies about 180 kilometers southwest of the city of Kiev and is accessible by paved road from the town of Kalynivka. The Garnet Joint Venture has a 20 year license for the extraction and sale of abrasive garnet and quartz feldspar from the crushed rock supplied by the Ivanovka garnet quarry. This project has been dormant since July 2002 and will remain dormant until we can fund the purchase of equipment in the amount of $1,000,000 particularly for separation and crushing equipment. There is present an infrastructure of buildings, power and water services and transportation. An additional $500,000 is budgeted for marketing. We plan to obtain the required financing from revenue from the Ecogarnet Joint Venture. We are the operator and there are no requirements for work on the project to keep the Garnet Joint venture agreement and the underlying license for the property in good standing until 2015.

The two properties produce industrial grade abrasive garnet for the expanding use of high-grade garnet in water jet cutting systems. These cutting systems are proving to be cleaner, safer and more cost efficient than conventional methods. For example large companies such as Boeing, Airbus and Chrysler Benz have turned to high-pressure water-jet cutting systems.

Garnet has been used as an abrasive material for at least 125 years. There is a company on the Eastern Seaboard of the United States, which has been producing garnets in excess of 125 years as an abrasive material for sandpaper, polishing, and basically abrasive uses in grinding wheels. Garnet has been used as an abrasive mainly in the wood industry because it has very good qualities to polish wood, as it is not too aggressive in its abrasive qualities.

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In the last 15 years garnet has been found to be well suited for high tech applications, namely high pressure water jet cutting. This is a process, which is used for cutting virtually all types of material, such as aluminum, copper, wood, plastic, glass, ceramics, and stone. It can be used for cutting virtually any material as it uses a cold cut; there is not heat required, as is the case of oxy-acetylene and also laser cutting. The process can be very easily described. The water is compressed to approximately. 60,000 lbs. per inch and a jet of water is formed traveling at approximately 3 times the speed of sound. Garnet is introduced into the water jet, and it forms an abrasive cutting stream, which can cut virtually any type of material. Garnet is a specially suited for this as it is very heavy, not too abrasive, and also it has very good cutting edges. This is the main purpose for which garnet from the joint ventures will be used.

The Company will be pursuing markets in Central Europe, which will include Germany, Austria, Switzerland and the Czech Republic. In 1999 these countries consumed over 44,000 metric tons of garnet. According to the international consulting firm Roskill Consulting Group of England, worldwide and European demand for garnet is growing at 10% per annum. The demand for the Central European Market in 2002 was estimated at 48,000 to 52,000 metric tons per annum. The properties are approximately 850 Km from Vienna, Austria which is the central distribution center for European garnet sales.

Garnet from the two properties can be moved by truck from the sites by purchasers. Garnet will be trucked by the Company from the sites to Vienna for delivery to distributors and end users on a 24 to 48 hour time line from receipt of orders. Vienna is well connected by rail to the rest of Europe.

The two properties are in close proximity to Vienna which is the central European distribution point for garnet. Europe accounts for approximately 25% of the market and that is efficient market size to absorb all the garnets produced by the Company. The proximity to Vienna gives the Company a significant advantage over other garnet suppliers from the U.S., Australia and India. These countries all face market barriers due to the additional cost and delivery time as they must ship up to 15,000 Km in order to supply the garnet to the Central European marketplace. This creates time lags of six to ten weeks to deliver compared to our delivery time of 24 to 48 hours. At this time there is no reliable garnet producers located in close proximity to the Central European market. Barton Garnet, the world’s largest garnet producer, sells its high-grade garnet at prices of US $480 to U.S. $700 per metric ton. In the years 2000 and 2001, open market prices for garnet were averaging U.S. $260 per metric ton FOB Vienna. Our costs, including production, packaging and marketing will average U.S. $70 per metric ton. The Company plans to sell its garnet to distributors in Vienna for an average of U.S. $234 per metric tons, which is 10%, less than average market process. This price will provide a 70% net pre-tax profit of U.S. $164 per metric ton.

A market study was completed for us by Roskill Consulting Group Ltd. of London, England. It mainly concentrated on the European market, and it showed that the European market is growing at a rate of approximately 10% per annum. The world market does not concern us since the primary market for the garnet abrasives will be in Europe.

Since all garnet is imported into Europe from Australia, United States, and India, we have a definite geographical advantage which will result in reasonable and very competitive transportation costs to deliver the garnet to the targeted central European market. Our delivery costs by freight to the European market are very advantageous when compared to the competitors. We have contacted most of the potential clients in Austria, Switzerland, and south-east Germany, as well as northern Italy, and many of them have shown a very definite interest. Approximately 3,000 tons of the Joint Venture garnet has already been pre-sold which amounts to 20% of its production. We plan to work with the manufacturers of high pressure water jet cutting machines to obtain repeat orders.

We will be running a non-cash business locally which allows the garnet to be moved directly out of the country eliminating local sales and intermediaries.

Shipments of garnet from the Ecogarnet tailings pond can commence within 120 days of completing the minimum primary offering.

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Our garnet production does not require any raw materials other than fuel and water which are in good supply.

We will not be dependant on any particularly distributor. Vienna, as the center for garnet distribution has a competitive market for the supply of garnet.

We do not own any intellectual property.

We do not require any government approvals in addition to the two licenses held by Ecogarnet and Garnet.

The Company does not anticipate any governmental regulations impacting on the business as the extraction of garnet does require chemicals and the only byproduct is sand. The area of Ukraine around the two properties is high in clay content. The sand from the garnet extraction operations will be sold as filler for roads, agriculture purposes and for concrete for construction products.

16.3.10  Amount Spent in Last 2 Fiscal Years on Research and Development

During the last two years we have carried out market research and reviewed and archived several published, independent market studies and articles in trade journals regarding garnet production and marketing. We have surveyed potential clients in Europe. The Montgomery report was also commissioned by us. The Swallow report was commissioned by us to study the separation methods of garnet from the tailings pond on the Ecogarnet property. A report dated July 11, 2001 called “Location Report” authored by Anja Wernecke, independent consultant was used to establish the best location for the distribution center and the comparative costs between train and rail.

16.3.11  Costs and Effects of Environmental Compliance

The Company has not planned for any costs of compliance with environmental compliance because no chemicals are produced and the sole by-product is sand.

16.3.12  Number of Total Employees and Full Time Employees

The Company currently does not have any employees. Employees will be hired for the installation and operation of the test plant for the Ecogarnet tailings pond. Full time Ukraine nationals will eventually be hired to manage and carry out the daily operations.

16.3.13  Business Combinations

The Company is not seeking or contemplating any business combinations within the next twelve months. At this time the Company does not plan any business combinations to take place at any time.

The Company is currently a private company. Upon completion of the primary offering, annual reports and audited financial statements will be sent to security holders and reports with be filed with the SEC.

We have filed, with the Securities and Exchange Commission, Washington, DC, a Registration Statement on Form SB-2 under the Securities Act with respect to the Common Stock offered. This Prospectus does not contain all of the information set forth in the Registration Statement, the exhibits and schedules. For further information, about our common stock and us, please refer to the Registration Statement, exhibits and schedules. Statements made in this Prospectus as to the contents of any contract, agreement or other documents referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved.

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The Registration Statement, exhibits and schedules may be inspected without charge and copied at the public reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549. Copies of such material may be obtained at prescribed rates from such offices upon the payment of the fees proscribed by the SEC. The phone number where information on the Public Reference Room may be obtained is: 1-800-SEC-0330.

The Securities and Exchange Commission maintains a web site that contains registration statements, reports, proxy and other information regarding registrants that file electronically with the Securities and Exchange Commission. The address for the web site is http://www.sec.gov.

We have had extremely limited income since the inception of the corporation. The Company cannot satisfy its cash requirements without raising additional capital in the next twelve months. The Company’s product research and development for the near future is limited to installation of a pilot plant on the Ecogarnet tailings pond at an approximate cost of $80,000 to be paid from the proceeds of the minimum offering. A pilot plant has been recommended by Swallow at an approximate cost of $80,000 to $100,000. The actual cost is budgeted at $80,000 because some of the required equipment is on site. See Item 18.2.1 for further details. Installation of the pilot plant would occur within four weeks of completion of the minimum offering of 100,000 shares. The pilot plant will operate for three months. At the end of three months we expect to have stockpiled 100 tons of different sized garnet products for trial marketing. When the pilot plant is installed, Matthias Wuttke, a director will commence marketing of the garnet to the abrasive industry in Europe. The pilot plant could be purchased for approximately $50,000.

The liabilities of the Company as at June 30, 2003 were $166.866, an increase of $16,460 from $150,406 as at June 30, 2002. Liabilities were $150,406 as at June 30, 2002, an increase of $34,036 from $116,370 as at June 30, 2001. The principal reason for the increase in liabilities is due to shareholder loans to the Company to pay for ongoing expenses.

There was a loss of $16,448 for the year ended June 30, 2003, a decrease in loss of $40,836 compared to a loss of $57,284 for the year ended June 30, 2002. The loss of $57,284 for the year ended June 30, 2002 was an increase in loss $49,216 compared of $8,086 as at June 30,2001. The main reason for the increase in the loss for the year ended June 30, 2003 compared to the year ended June 30, 2002 was a decrease in: advertising and promotion from $3,298 to $629, consulting fees from $13,206 to $956, legal and accounting expenses incurred with respect to this offering from $11,680 to $941, rent of $8,194 to $4,850 and decrease in travel from $10,059 as at June 30, 2002 to $1,507 as at June 30, 2003. An analysis of the loss is as follows: