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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2012

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 000-30651

MINDESTA INC.
(Exact name of small business issuer as specified in its charter)

Delaware
11-3763974
(State or other jurisdiction
(IRS Employer of incorporation or
organization)
Identification No.)

Suite 201, 290 Picton Ave., Ottawa, Ontario, Canada K1Z 8P8
(Address of principal executive offices)

(613) 241-9959
(Issuer's telephone number)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]     No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [_]     No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a “smaller reporting company”. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer [_]                                                Accelerated Filer                  [_]     
Non-accelerated Filer    [_]                                                 Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [_]     No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS


Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes [_]    No [_]

Indicate the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:
March 7, 2013: 9,413,581 shares.

As of June 30, 2012, the aggregate market value was $753,086 based upon the closing sale price of the common stock as reported by the Over-the-Counter-Bulletin-Board (“OTCBB”) on that date.”

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This document contains “forward-looking statements” which reflect management’s expectations regarding the Company’s future growth, results of operations, performance and business prospects and opportunities. Such forward-looking statements may include, but are not limited to, statements with respect to the future financial or operating performance of the Company and its projects, the future price of graphite or other metal prices, the estimation of Mineral Resources, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of regulatory matters. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others: general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; conclusions of economic evaluations; fluctuations in currency exchange rates; changes in project parameters as plans continue to be refined; changes in labor costs or other costs of production; future prices of graphite or other industrial mineral prices; possible variations of mineral grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labor disputes and other risks of the mining industry, including but not limited to environmental hazards, cave-ins, pit-wall failures, flooding, rock bursts and other acts of God or unfavorable operating conditions and losses; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; actual results of reclamation activities, and other unspecified factors. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date hereof and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

CAUTIONARY STATEMENT REGARDING MINERAL RESOURCES

This Annual Report on Form 10-K and other information released by the Company uses the terms “resources”, “measured resources”, “indicated resources” and “inferred resources”. United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under United States standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Inferred resources are in addition to measured and indicated resources. Further, inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the inferred resources will ever be upgraded to a higher category. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist, or that they can be mined legally or economically. National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) is a rule developed by the Canadian Securities Administrators, which established standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all resource estimates contained in this Form 10-Q and in press releases by the Company in the past and in the future, have been or will be prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Classification System. The requirements of NI 43-101 are not the same as those of the SEC.

ITEM 1 - DESCRIPTION OF BUSINESS

BACKGROUND

Mindesta Inc. (“Mindesta” or "the Company"), a Delaware Corporation, was incorporated on November 6, 1996 under the name Winchester Mining Corp. The name of the Company was changed to PNW Capital, Inc. on May 16, 2000. In 2002, PNW Capital, Inc. acquired Industrial Minerals Incorporated, a private Nevada Corporation, and changed its name to Industrial Minerals, Inc.


Effective July 26, 2011, the Company adopted the new name of “Mindesta Inc.”. In conjunction with this action, the Company consolidated its stock on a 20:1 basis.

The Company is an exploration stage company. Prior to 2012, the Company’s sole asset and primary focus was its investment in Northern Graphite Corporation (“Northern”). Northern holds a 100% interest in a number of mineral claims and a mining lease covering a deposit of natural graphite located in Maria Township, approximately 180 miles northeast of Toronto, Ontario and between the towns of Deep River and Mattawa, Ontario (the “Bissett Creek Property”). The Bissett Creek Property was on care and maintenance from 2005 to 2010. In the latter part of 2009 and in the first quarter of 2010 Northern raised its own financing which had the effect of reducing the Company’s interest in Northern from 100% to approximately 51%. The Company’s interest was subsequently reduced to 26.2% as the result of it selling 2,000,000 Northern shares and of Northern completing an initial public offering of shares, becoming listed on the TSX Venture Exchange, and subsequent warrant exercises. As at December, 31, 2012, the Company owned less than 0.5% of Northern due to the distribution of its Northern shares to Mindesta shareholders. The Company currently no longer holds any shares of Northern. The 2010 and 2011 financing transactions enabled the Company and Northern to deal with the serious debt and creditor issues that existed in 2009 and to move the Bissett Creek Property forward.

From 2004 until late 2009 the Company experienced serious financial difficulties and went through many changes to the Board and management. Chris Crupi, CA and Gregory Bowes, MBA, were appointed directors of the Company and Mr. Robert Dinning, CA was appointed President and CEO on June 23, 2008. In May 2009, Gregory Bowes was appointed CEO of Northern. Robert Dinning resigned as a director and CFO of Northern effective April 1, 2010 and resigned as a director, CEO and CFO of the Company effective May 10, 2010. Miles Nagamatsu CA was appointed CFO of Northern on April 1, 2010 and Gregory Bowes was appointed CEO and CFO of the Company effective May 10, 2010. Cam Birge was appointed a director to replace Mr. Dinning, on June 3, 2010. Chris Crupi resigned as a director effective August 18, 2010. On April 19, 2011, Douglas Perkins joined the Board of Directors and was appointed Chairman of the Audit Committee. On December 15, 2011, Albert Zapanta joined the Board of Directors and was appointed to the Audit Committee, the Nominating Committee, and Compensation Committee.

On December 12, 2011, the Board of Directors declared a pro rata dividend-in-kind, payable January 25, 2012 to shareholders of record as at January 5, 2012, whereby most of the shares of Northern owned by the Company would be distributed to Mindesta shareholders. At the close of trading on January 25, 2012, Mindesta completed this distribution to Company shareholders of a majority of the shares of Northern common stock owned by the Company. The Distribution of 9,413,581 shares of Northern owned by the Company (approximately 25% of the Northern common shares outstanding) was made to Company shareholders on the basis of one share of Northern for each share of the Company. The U.S. Financial Industry Regulatory Authority (“FINRA”) established January 26, 2012 as the ex-dividend date (the “Ex-Dividend Date”) for this distribution. The Company’s interest in Northern has decreased to 0.5% primarily as a result of the distribution of Northern Shares.

Effective January 2, 2012, Mindesta entered into an option agreement with Nubian Gold Corporation (“Nubian”), a privately owned Ontario company, which holds title to two 2,000 km2 mineral exploration permits, Arapsyo and Qabri Bahar, which are the first two ever issued by the Republic of Somaliland. Nubian is a corporation incorporated under the laws of Ontario, Canada and Gregory Bowes, CEO, is its major shareholder. Mr. Bowes is also an officer and director of Mindesta. Under the option agreement, Mindesta can earn a 50% interest in both permits by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 per cent by completing a bankable feasibility study. Mindesta is required to make an upfront cash payment of $100,000 to Nubian as compensation for expenses incurred, and the first $750,000 of exploration expenditures represents a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value as determined by an independent valuator at any time after incurring the first $750,000 of exploration expenditures. On October 6, 2011, the Board of Directors approved a revolving loan agreement between Mindesta, as the lender, and Nubian, as the borrower, to fund the ongoing exploration activities of Nubian in anticipation of the companies negotiating and entering into the option agreement. Under the revolving loan agreement, all amounts due from Nubian to the Company were provided under a $100,000 credit facility which was repayable upon the earlier of one year from the date of the agreement or the signing of a property option agreement. The revolving loan agreement became repayable upon the signing of a property option agreement and all obligations of Nubian were applied against the expenditure requirements of the Company under the property option agreement. The obligations under the revolving loan agreement are now considered paid in full, and the revolving loan agreement has terminated and has no further force or effect. Advances under the facility bore interest from October 6, 2011 at an annual rate of 7.5 per cent, payable annually. On December 2, 2011, this facility was amended to increase the maximum of the revolving loan agreement to $150,000. In 2012, Mindesta is focusing its efforts on mineral exploration in East Africa, and in particular the Republic of Somaliland and Ethiopia, as it believes the region has very attractive geology and an improving political environment.

In 2012, Nubian was awarded a third permit, Abdul Qadir, which is approximately 2,000 km2 in size and is located in the northeast part of Somaliland adjacent to the borders with Djibouti and Ethiopia. Abdul Qadir is automatically included in the Option Agreement pursuant to its terms with no change in expenditure requirements. Nubian has agreed with the government of Somaliland to reduce the size of the Arapsyo and Qabri Bahar permits by 50% following completion of the first phase exploration program.

Mindesta has completed a stream and rock sampling program over the Arapsyo, Qabri Bahar and Abdul Qadir permits which involved taking over 3,000 samples. To date, Mindesta has incurred expenditures of approximately $758,694 on work on these permits which exceeds the initial $750,000 requirement. The Company will require additional financing to execute the second stage program.


Somaliland is an independent democratic republic which is not yet recognized by the international community. In order to attract investment and enhance the country’s reputation and standing in the international community, the government desired to update its antiquated mining code and attract foreign companies to explore and ultimately develop its mineral potential. Nubian signed a Memorandum of Understanding (“MOU”) with the government, effective June 10, 2010, whereby Nubian would assist the government in drafting a new, modern mining code and generally provide consulting services with respect to legal, financial and technical matters relating to the new mining code. In exchange, the government agreed to grant Nubian prospecting permits under the existing mining code and to automatically renew the prospecting permits for successive one year terms until such time as a new mining code is passed into law at which time the prospecting permits would become subject to the new mining code.

Following the election of a new government and the appointment of a new mines minister, Nubian signed an amendment to the MOU, effective June 14, 2011. Under the amendment the new government confirmed the validity of the MOU and granted Nubian the exclusive mineral exploration rights to two 2,000 km2 areas being Arapsyo (from 430 30’ 00” to 440 10’ 00” and from 90 40’ 00” to 90 55’ 00”) and Qabri Bahar (100 00’ 00” to 100 15’ 00” and from 430 20’ 00” to 440 00’ 00”).

Nubian retains the exclusive mineral rights to the above areas, provided that it meets certain expenditure commitments, until such time as the new mining code is enacted and becomes law at which time the exclusive mineral rights will convert into exploration permits according to the terms of the new mining code. The expenditure commitments consist of $50,000 to be spent on a literature review and remote sensing program, a minimum of $200,000 on a ground exploration and sampling program provided the government had made progress in establishing a new mining code, and that after the new mining code was passed Nubian would spend $1,250,000 on exploration within a two year period.

Nubian will be subject to the exploration period terms, fees, relinquishment requirements and expenditure requirements contained in the new mining code with respect to the areas for which it holds exclusive mineral exploration rights. In the interim, Nubian agreed to reduce the size of the areas of exclusive mineral rights by 50 per cent on the second anniversary from the date of the MOU amendment and will reduce the remaining area by a further 50 per cent on the fourth anniversary date (unless specified otherwise in the new mining code), and provided that the Government has made significant progress in passing the new mining code and Nubian has been able to carry out its exploration programs.

Effective September 1, 2011 Nubian was officially granted the two permits which are subject to a US$8,000 annual licensing fee. Effective March 28, 2012 Nubian signed a second MOU amendment with the government of Somaliland whereby Nubian was granted a third permit, Abdul Qadir, which is approximately 2,000km2 in size, is subject to the same $8,000 annual fee and has the following coordinates/corner posts:

1)

100 55’ N’ 420 58’ E (border)

2)

100 55’ N’ 430 00’ E

3)

100 38’ N’ 430 00’ E

4)

100 38’ N’ 430 28’ E

5)

100 24’ N’ 430 28’ E

6)

100 24’ N’ 420 32’ E (border).

7)

Somaliland – Ethiopia and Somaliland – Djibouti border between 1) and 6).

Nubian agreed to relinquish 50% of the Arapsyo and Qabri Bahar permits by July 31, 2012 as part of obtaining the new permit and is in the process of doing so. As the permits will fall under the terms of the new mining code when passed, it is not possible at this time to determine what conditions they will be subject to with respect to tenure, expenditure requirements, development, etc. However, it is anticipated that the new mining code will be based on, and competitive with, the mining codes in other African countries. Under the option agreement, Mindesta is responsible for all of Nubian’s obligations with respect to the MOU and the two amendments.

Due to weak equity markets and the inability of Mindesta to raise additional capital, especially for an early stage exploration program in Somaliland, Nubian and Bowes & Company have agreed to advance funds to the Company to fund ongoing exploration activities. Effective August 1, 2012, the Board of Directors approved a loan agreement between Nubian and Bowes & Company. Nubian and Bowes & Company are corporations incorporated under the laws of Ontario, Canada and Gregory Bowes is the CEO and major shareholder of both companies. Mr. Bowes is also an officer and director of Mindesta. Mr. Bowes declared his conflict of interest to the Board of Directors and abstained from voting on the consent resolution approving the revolving loan agreement. Under the loan agreement, all amounts due from Mindesta to Nubian and Bowes & Company are provided under a $250,000 credit facility which is repayable upon the termination date of December 31, 2012. Any obligation outstanding after the Termination Date shall accrue interest at a rate of 7.5% per annum. Under the terms of the loan agreement, Mindesta is required to sell its remaining shares of Northern as they are released from escrow and remit all proceeds to Bowes & Company, until all obligations to Bowes & Company are satisfied, and then shall remit any further proceeds to Nubian until all obligations to Nubian are satisfied. All advances under this facility bear interest from August 1, 2012 at an annual rate of 7.5 per cent, payable annually, or earlier at anytime that the advances are repaid in full. At any time, before or after the termination date, Bowes & Company and Nubian shall have the right to convert any part of, or all of, the obligations into common shares of Mindesta Inc. at a price of $0.075 per share.


On November 27, 2012, Mindesta announced that it received assay results from its first stage stream sediment and rock sampling program on the Arapsyo, Qabri Bahar and Abdul Qadir exploration permits in the Republic of Somaliland. Over the September, 2011 to April, 2012 period, 2,500km2 of the Arapsyio and Qabri Bahar permits were sampled at a density of one sample every 1-2 km2. A total of 1,659 stream sediment and 58 rock samples were submitted to the assay laboratory.

Encouraging regional anomalies have been identified, particularly for gold, and that future work will be centered on narrowing them down by infill stream sediment sampling and prospecting followed by soil sampling and/or geophysics. A Cu/Mo/Bi occurrence is already at a stage where soil sampling and that ground geophysics could be carried out. Future work would also include ground checking a significant number of secondary anomalies on a case by case basis.

Mindesta has made the first $750,000 of exploration expenditures as required as a firm commitment but has accumulated substantial payables to Bowes & Company and Nubian in doing so. The Company does not have the resources to repay these amounts or make ongoing commitments with respect to the permits. Options are currently being evaluated.

Item 1A RISK FACTORS

The Company's business is subject to numerous risk factors, and it has the following concerns:

1.      While Mindesta has undertaken mining exploration activities, they have no history of operations and must raise capital in order to continue exploration activities. The Company has no record of earnings or cash flow from mining operations. It is also subject to all the risks inherent in a developing business enterprise including lack of cash flow, and no assurance of recovery and sale of minerals resulting from its exploration activities.

2.      The Company is funding exploration activities in the Republic of Somaliland. While the Company believes that the government of the Republic has held three free, fair, and non-violent elections, it jails pirates and extremists, and it is one of the few functioning democracies in Africa and the Middle East, there is a significant potential for political and/or criminal risks to arise and impact the exploration activities in the Republic of Somaliland. At this point in time, no other countries have recognized the Republic of Somaliland’s independence. Somaliland does not have a modern mining code with all of the protections regarding rights and obligations that exist in many other countries. Nubian’s, and as an extension, the Company’s ability to carry on its business in the normal course may be adversely affected by political and economic considerations such as civil and tribal unrest, political instability, instability in the portion of Somalia external to the Republic of Somaliland spreading beyond its borders, Somalia attempting to reassert its control over Somaliland or challenging rights and titles awarded by Somaliland, changing government regulations with respect to mining including environmental requirements, taxation, land tenure, income repatriation and capital recovery, fluctuations in currency exchange and inflation rates, import and export restrictions, challenges to the Company’s title to properties, problems renewing licenses and permits, and the expropriation of property interests. Any of these events could result in conditions that delay or in fact prevent Nubian, and ultimately, the Company from exploring or ultimately developing its properties if economic quantities of minerals are found. The Company does not currently maintain “Political Risk” insurance.

3.      Mineral exploration is a highly subjective process that requires a very high degree of education, experience, expertise and luck. Furthermore, the Company will be subject to many risk factors that knowledge, expertise and perseverance are insufficient to overcome. The Company is also competing against a large number of companies that have substantially greater financial and technical resources. The probability of finding mineralization in economic quantities that can be profitably mined are very small and no assurances can be given that the Company will be successful.

4      The Company is wholly dependent at the present upon the personal efforts and abilities of its Officers and Directors, who exercise control over the day-to-day affairs of the Company.

5.      The Company does not have sufficient capital to continue exploration activities. There is no assurance that the Company will secure additional capital in order to undertake additional exploration activities.

There are no dividends anticipated by the Company.

ITEM 1B Unresolved Staff Comments

As a smaller reporting company, the Company is not required to include this Item.


ITEM 2 - DESCRIPTION OF PROPERTIES

Somaliland Project - Option Agreement

Effective January 2, 2012, Mindesta entered into an option agreement with Nubian Gold Corporation (“Nubian”), a privately owned Ontario company, which holds title to two 2,000 km2 mineral exploration permits, Arapsyo and Qabri Bahar, which are the first two ever issued by the Republic of Somaliland. Under the option agreement, Mindesta can earn a 50% interest in both permits by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 per cent by completing a bankable feasibility study. Mindesta is required to make an upfront cash payment of $100,000 to Nubian as compensation for expenses incurred, and the first $750,000 of exploration expenditures represents a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value as determined by an independent valuator at any time after incurring the first $750,000 of exploration expenditures. On October 6, 2011, the Board of Directors approved a revolving loan agreement between Mindesta, as the lender, and Nubian, as the borrower, to fund the ongoing exploration activities of Nubian in anticipation of the companies negotiating and entering into the option agreement. Under the revolving loan agreement, all amounts due from Nubian to the Company were provided under a $100,000 credit facility which was repayable upon the earlier of one year from the date of the agreement or the signing of a property option agreement. The revolving loan agreement became repayable upon the signing of a property option agreement and all obligations of Nubian were applied against the expenditure requirements of the Company under the property option agreement. The obligations under the revolving loan agreement are now considered paid in full, and the revolving loan agreement has terminated and has no further force or effect. Advances under the facility bore interest from October 6, 2011 at an annual rate of 7.5 per cent, payable annually. On December 2, 2011, this facility was amended to increase the maximum of the revolving loan agreement to $150,000.

Subsequent to the end of the first quarter, Nubian was awarded a third permit, Abdul Qadir, which is approximately 2,000 km2 in size and is located in the northeast part of Somaliland adjacent to the borders with Djibouti and Ethiopia. Abdul Qadir is automatically included in the Option Agreement pursuant to its terms with no change in expenditure requirements. Nubian has agreed with the government of Somaliland to reduce the size of the Arapsyo and Qabri Bahar permits by 50% following completion of the first phase exploration program.

Mindesta has completed a stream and rock sampling program over the Arapsyo, Qabri Bahar and Abdul Qadir permits which involved taking over 3,000 samples. To date, Mindesta has incurred expenditures of approximately $758,742 on work on these permits. The Company will require additional financing to execute the second stage program.

Somaliland is an independent democratic republic which is not yet recognized by the international community. In order to attract investment and enhance the country’s reputation and standing in the international community, the government desired to update its antiquated mining code and attract foreign companies to explore and ultimately develop its mineral potential. Nubian signed a Memorandum of Understanding (“MOU”) with the government, effective June 10, 2010, whereby Nubian would assist the government in drafting a new, modern mining code and generally provide consulting services with respect to legal, financial and technical matters relating to the new mining code. In exchange, the government agreed to grant Nubian prospecting permits under the existing mining code and to automatically renew the prospecting permits for successive one year terms until such time as a new mining code is passed into law at which time the prospecting permits would become subject to the new mining code.

Following the election of a new government and the appointment of a new mines minister, Nubian signed an amendment to the MOU, effective June 14, 2011. Under the amendment the new government confirmed the validity of the MOU and granted Nubian the exclusive mineral exploration rights to two 2,000 km2 areas being Arapsyo (from 430 30’ 00” to 440 10’ 00” and from 90 40’ 00” to 90 55’ 00”) and Qabri Bahar (100 00’ 00” to 100 15’ 00” and from 430 20’ 00” to 440 00’ 00”).

Nubian retains the exclusive mineral rights to the above areas, provided that it meets certain expenditure commitments, until such time as the new mining code is enacted and becomes law at which time the exclusive mineral rights will convert into exploration permits according to the terms of the new mining code. The expenditure commitments consist of $50,000 to be spent on a literature review and remote sensing program, a minimum of $200,000 on a ground exploration and sampling program provided the government had made progress in establishing a new mining code, and that after the new mining code was passed Nubian would spend $1,250,000 on exploration within a two year period.

Nubian will be subject to the exploration period terms, fees, relinquishment requirements and expenditure requirements contained in the new mining code with respect to the areas for which it holds exclusive mineral exploration rights. In the interim, Nubian agreed to reduce the size of the areas of exclusive mineral rights by 50 per cent on the second anniversary from the date of the MOU amendment and will reduce the remaining area by a further 50 per cent on the fourth anniversary date (unless specified otherwise in the new mining code), and provided that the Government has made significant progress in passing the new mining code and Nubian has been able to carry out its exploration programs.

Effective September 1, 2011 Nubian was officially granted the two permits which are subject to a US$8,000 annual licensing fee. Effective March 28, 2012 Nubian signed a second MOU amendment with the government of Somaliland whereby Nubian was granted a third permit, Abdul Qadir, which is approximately 2,000km2 in size, is subject to the same $8,000 annual fee and has the following coordinates/corner posts:



1)

100 55’ N’ 420 58’ E (border)

2)

100 55’ N’ 430 00’ E

3)

100 38’ N’ 430 00’ E

4)

100 38’ N’ 430 28’ E

5)

100 24’ N’ 430 28’ E

6)

100 24’ N’ 420 32’ E (border).

7)

Somaliland – Ethiopia and Somaliland – Djibouti border between 1) and 6).

Nubian agreed to relinquish 50% of the Arapsyo and Qabri Bahar permits by July 31, 2012 as part of obtaining the new permit and is in the process of doing so. As the permits will fall under the terms of the new mining code when passed, it is not possible at this time to determine what conditions they will be subject to with respect to tenure, expenditure requirements, development, etc. However, it is anticipated that the new mining code will be based on, and competitive with, the mining codes in other African countries. Under the option agreement, Mindesta is responsible for all of Nubian’s obligations with respect to the MOU and the two amendments.

On November 27, 2012, Mindesta announced that it has received assay results from its first stage stream sediment and rock sampling program on the Arapsyo, Qabri Bahar and Abdul Qadir exploration permits in the Republic of Somaliland.

Arapsyio and Qabri Bahar Permits

Over the September, 2011 to April, 2012 period, 2,500km2 of the Arapsyio and Qabri Bahar permits were sampled at a density of one sample every 1-2 km2. A total of 1,659 stream sediment and 58 rock samples were submitted to the assay laboratory. The following anomalies were identified:

(1) A large, well-structured and consistent platinum/palladium anomaly associated with an ultra-mafic intrusive, as well as three smaller anomalies in the same area;
(2) Numerous columbite (Ta–Nb oxide) occurrences and stream sediment anomalies, including several artisanal workings;
(3) A large, well defined Ni/Co/Cu/Ti/V/Cr anomaly associated with a series of gabbroic complexes. One rock sample assayed 3.9%Cu with background Ni.Co/Ti values and another 6%Cr, 0.02%Co, 0.1%Ni, 0.4%Ti, and 0.05%V;
(4) A large tungsten anomaly associated with a granitic intrusive;
(5) Molybdenum/bismuth and nearby copper occurrences associated with a large pegmatite zone (values up to 0.80% Mo and 0.49% Bi);
(6) Gold and silver anomalies were generally weaker and poorly structured although one returned rock samples that assayed 79 and 17 g/t silver in association with galena.

Abdul Qadir Permit

From March to July, 2012, approximately 1,400km2 were sampled and a total of 1,045 stream sediment and 98 rock samples were submitted to the assay laboratory. The following anomalies were identified:

(1) 16 contiguous gold anomalies in stream sediments, each averaging approximately 5 x 15 km2 in size;
(2) Four copper anomalies, largely associated with basalts;
(3) Three zinc anomalies associated with a syenite body and related to Au/Ag/Cu anomalies;
(4) A 70km2 syenite body with a series of Mo prospects over a six km strike length with a nearby interesting Zn/As/Au/Ta/Cd signature in stream sediments;
(5) Northern areas with epithermal vein potential were not sampled due to time/money/local issues.

Encouraging regional anomalies have been identified, particularly for gold, and that future work will be centered on narrowing them down by infill stream sediment sampling and prospecting followed by soil sampling and/or geophysics. A Cu/Mo/Bi occurrences is already at a stage where soil sampling and that ground geophysics could be carried out. Future work would also include ground checking a significant number of secondary anomalies on a case by case basis.

Mindesta has made the first $750,000 of exploration expenditures as required as a firm commitment but owes money both Nubian and Bowes & Company and is now faced with the challenge of financing a second stage program in a very difficult market for junior explorers. Options are currently being evaluated.

ITEM 3 - LEGAL PROCEEDINGS

The Company has been named in a lawsuit filed by Windale Properties in the amount of $19,781Cdn. The claim is the result of termination of leased premises in Oakville, Ontario prior to expiry of the lease.

ITEM 4 – REMOVED AND RESERVED


PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) The Registrant's common stock is traded in the over-the-counter market under the symbol MDST (OTC Bulletin Board Symbol). The table below sets forth the high and low bid prices of the Registrant's common stock for the periods indicated. Such prices are inter-dealer prices, without mark-up, mark-down or commissions and do not necessarily represent actual sales.

Fiscal Quarter Ending High Low
March 31, 2008 $1.60 $1.40
June 30, 2008 $1.60 $1.20
September 30, 2008 $0.80 $0.40
December 31, 2008 $0.20 $0.20
March 31, 2009 $1.00 $1.00
June 30, 2009 $0.40 $0.40
September 30, 2009 $0.80 $0.80
December 31, 2009 $0.40 $0.20
March 31, 2010 $0.60 $0.20
June 30, 2010 $0.40 $0.20
September 30, 2010 $0.40 $0.20
December 31, 2010 $0.80 $0.20
March 31, 2011 $2.00 $0.80
June 30, 2011 $1.60 $0.60
September 30, 2011 $1.50 $0.50
December 31, 2011 $0.85 $0.36
March 31, 2012 $1.20 $0.08
June 30, 2012 $0.20 $0.08
September 30, 2012 $0.09 $0.04
December 31, 2012 $0.05 $0.03

(b) As of December 31, 2012, there were 319 shareholders of record of the registrant's common stock.

(c) The Registrant has neither declared nor paid any cash dividends on its common stock, and it is not anticipated that any such dividend will be declared or paid in the foreseeable future.

Effective August 11, 1993, the Securities and Exchange Commission (the "Commission") adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form,(i)sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Equity Compensation Plan Information


Plan Category





(a) Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights




(b) Weighted average exercise
price of outstanding options,
warrants and rights
(c) Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a)
       
Equity compensation plans approved by security holders None n/a n/a
       
Equity compensation plans not approved by security holders 762,500 $0.29 None


Using the Black-Scholes option pricing model, the Company had stock compensation expense for the year of $42,268.

Dividends

The Company has not paid any cash dividends to date, and has no plans to do so in the immediate future.

On December 12, 2011, the Board of Directors declared a pro rata dividend-in-kind, payable January 25, 2012 to shareholders of record as at January 5, 2012, whereby most of the shares of Northern owned by the Company would be distributed to Mindesta shareholders. At the close of trading on January 25, 2012, Mindesta completed the distribution to Company shareholders of 9,413,581 shares of Northern owned by the Company (approximately 25% of the Northern common shares outstanding) on the basis of one share of Northern common stock for each share of Company common stock held. The U.S. Financial Industry Regulatory Authority (“FINRA”) established January 26, 2012 as the ex-dividend date (the “Ex-Dividend Date”) for this distribution.

ITEM 6 - SELECTED FINANCIAL DATA

As a smaller reporting company, the Company is not required to include this Item.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

Mindesta Inc. (“Mindesta” or "the Company"), a Delaware Corporation, was incorporated on November 6, 1996 under the name Winchester Mining Corp. The name of the Company was changed to PNW Capital, Inc. on May 16, 2000. In 2002, PNW Capital, Inc. acquired Industrial Minerals Incorporated, a private Nevada Corporation, and changed its name to Industrial Minerals, Inc. Effective July 26, 2011, the Company adopted the new name of “Mindesta Inc.”. In conjunction with this action, the Company consolidated its stock on a 20:1 basis.

The Company is an exploration stage company. Prior to 2012, the Company’s sole asset and primary focus was its investment in Northern Graphite Corporation (“Northern”). Northern holds a 100% interest in a number of mineral claims and a mining lease covering a deposit of natural graphite located in Maria Township, approximately 180 miles northeast of Toronto, Ontario and in between the towns of Deep River and Mattawa, Ontario (the “Bissett Creek Property”). The Bissett Creek Property was on care and maintenance from 2005 to 2010. In the latter part of 2009 and in the first quarter of 2010 Northern raised its own financing which had the effect of reducing the Company’s interest in Northern from 100% to approximately 51%. The Company’s interest was subsequently reduced to 26.2% as the result of it selling 2,000,000 Northern shares and of Northern completing an initial public offering of shares, becoming listed on the TSX Venture Exchange, and subsequent warrant exercises. The Company currently owns less than 1% of Northern due to the distribution of its Northern shares to Mindesta shareholders. The 2010 and 2011 financing transactions enabled the Company and Northern to deal with the serious debt and creditor issues that existed in 2009 and to move the Bissett Creek Property forward.

From 2004 until late 2009 the Company experienced serious financial difficulties and went through many changes to the Board and management. Chris Crupi, CA and Gregory Bowes, MBA, were appointed directors of the Company and Mr. Robert Dinning, CA was appointed President and CEO on June 23, 2008. In May 2009, Gregory Bowes was appointed CEO of Northern. Robert Dinning resigned as a director and CFO of Northern effective April 1, 2010 and resigned as a director, CEO and CFO of the Company effective May 10, 2010. Miles Nagamatsu CA was appointed CFO of Northern on April 1, 2010 and Gregory Bowes was appointed CEO and CFO of the Company effective May 10, 2010. Cam Birge was appointed a director to replace Mr. Dinning, on June 3, 2010. Chris Crupi resigned as a director effective August 18, 2010. On April 19, 2011, Douglas Perkins joined the Board of Directors and was appointed Chairman of the Audit Committee. On December 15, 2011, Albert Zapanta joined the Board of Directors and was appointed to the Audit Committee, the Nominating Committee, and Compensation Committee.

On December 12, 2011, the Board of Directors declared a pro rata dividend-in-kind, payable January 25, 2012 to shareholders of record as at January 5, 2012, whereby most of the shares of Northern owned by the Company would be distributed to Mindesta shareholders. At the close of trading on January 25, 2012, Mindesta completed this distribution to Company shareholders of a majority of the shares of Northern common stock owned by the Company. The Distribution of 9,413,581 shares of Northern owned by the Company (approximately 25% of the Northern common shares outstanding) was made to Company shareholders on the basis of one share of Northern for each share of the Company. The U.S. Financial Industry Regulatory Authority (“FINRA”) established January 26, 2012 as the ex-dividend date (the “Ex-Dividend Date”) for this distribution. The Company’s interest in Northern decreased to 0.5% as December 31, 2012 primarily as a result of the distribution of Northern Shares. Currently, the Company no longer holds an interest in Northern.

Effective January 2, 2012, Mindesta entered into an option agreement with Nubian Gold Corporation (“Nubian”), a privately owned Ontario company, which holds title to two 2,000 km2 mineral exploration permits, Arapsyo and Qabri Bahar, which are the first two ever issued by the Republic of Somaliland. Under the option agreement, Mindesta can earn a 50% interest in both permits by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 per cent by completing a bankable feasibility study. Mindesta is required to make an upfront cash payment of $100,000 to Nubian as compensation for expenses incurred, and the first $750,000 of exploration expenditures represents a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value as determined by an independent valuator at any time after incurring the first $750,000 of exploration expenditures. On October 6, 2011, the Board of Directors approved a revolving loan agreement between Mindesta, as the lender, and Nubian, as the borrower, to fund the ongoing exploration activities of Nubian in anticipation of the companies negotiating and entering into the option agreement. Under the revolving loan agreement, all amounts due from Nubian to the Company were provided under a $100,000 credit facility which was repayable upon the earlier of one year from the date of the agreement or the signing of a property option agreement. The revolving loan agreement became repayable upon the signing of a property option agreement and all obligations of Nubian were applied against the expenditure requirements of the Company under the property option agreement. The obligations under the revolving loan agreement are now considered paid in full, and the revolving loan agreement has terminated and has no further force or effect. Advances under the facility bore interest from October 6, 2011 at an annual rate of 7.5 per cent, payable annually. On December 2, 2011, this facility was amended to increase the maximum of the revolving loan agreement to $150,000. In 2012, Mindesta focused its efforts on mineral exploration in East Africa, and in particular the Republic of Somaliland and Ethiopia, as it believes the region has very attractive geology and an improving political environment.


In the second quarter, Nubian was awarded a third permit, Abdul Qadir, which is approximately 2,000 km2 in size and is located in the northeast part of Somaliland adjacent to the borders with Djibouti and Ethiopia. Abdul Qadir is automatically included in the Option Agreement pursuant to its terms with no change in expenditure requirements. Nubian has agreed with the government of Somaliland to reduce the size of the Arapsyo and Qabri Bahar permits by 50% following completion of the first phase exploration program and is in the process of doing so.

Somaliland is an independent democratic republic which is not yet recognized by the international community. In order to attract investment and enhance the country’s reputation and standing in the international community, the government desired to update its antiquated mining code and attracting foreign companies to explore and ultimately develop its mineral potential. Nubian signed a Memorandum of Understanding (“MOU”) with the government, effective June 10, 2010, whereby Nubian would assist the government in drafting a new, modern mining code and generally provide consulting services with respect to legal, financial and technical matters relating to the new mining code. In exchange, the government agreed to grant Nubian prospecting permits under the existing mining code and to automatically renew the prospecting permits for successive one year terms until such time as a new mining code is passed into law at which time the prospecting permits would become subject to the new mining code.

Following the election of a new government and the appointment of a new mines minister, Nubian signed an amendment to the MOU, effective June 14, 2011. Under the amendment the new government confirmed the validity of the MOU and granted Nubian the exclusive mineral exploration rights to two 2,000 km2 areas being Arapsyo (from 430 30’ 00” to 440 10’ 00” and from 90 40’ 00” to 90 55’ 00”) and Qabri Bahar (100 00’ 00” to 100 15’ 00” and from 430 20’ 00” to 440 00’ 00”).

Nubian retains the exclusive mineral rights to the above areas, provided that it meets certain expenditure commitments, until such time as the new mining code is enacted and becomes law at which time the exclusive mineral rights will convert into exploration permits according to the terms of the new mining code. The expenditure commitments consist of $50,000 to be spent on a literature review and remote sensing program, a minimum of $200,000 on a ground exploration and sampling program provided the government had made progress in establishing a new mining code, and that after the new mining code was passed Nubian would spend $1,250,000 on exploration within a two year period.

Nubian will be subject to the exploration period terms, fees, relinquishment requirements and expenditure requirements contained in the new mining code with respect to the areas for which it holds exclusive mineral exploration rights. In the interim, Nubian agreed to reduce the size of the areas of exclusive mineral rights by 50 per cent on the second anniversary from the date of the MOU amendment and will reduce the remaining area by a further 50 per cent on the fourth anniversary date (unless specified otherwise in the new mining code), and provided that the Government has made significant progress in passing the new mining code and Nubian has been able to carry out its exploration programs.

Effective September 1, 2011 Nubian was officially granted the two permits which are subject to a US$8,000 annual licensing fee. Effective March 28, 2012 Nubian signed a second MOU amendment with the government of Somaliland whereby Nubian was granted a third permit, Abdul Qadir, which is approximately 2,000km2 in size, is subject to the same $8,000 annual fee and has the following coordinates/corner posts:

1)

100 55’ N’ 420 58’ E (border)

2)

100 55’ N’ 430 00’ E

3)

100 38’ N’ 430 00’ E

4)

100 38’ N’ 430 28’ E

5)

100 24’ N’ 430 28’ E

6)

100 24’ N’ 420 32’ E (border).




7)

Somaliland – Ethiopia and Somaliland – Djibouti border between 1) and 6).

Nubian agreed to relinquish 50% of the Arapsyo and Qabri Bahar permits by July 31, 2012 as part of obtaining the new permit and is in the process of doing so. As the permits will fall under the terms of the new mining code when passed, it is not possible at this time to determine what conditions they will be subject to with respect to tenure, expenditure requirements, development, etc. However, it is anticipated that the new mining code will be based on, and competitive with, the mining codes in other African countries. Under the option agreement, Mindesta is responsible for all of Nubian’s obligations with respect to the MOU and the two amendments.

Due to weak equity markets and the inability of Mindesta to raise additional capital, especially for an early stage exploration program in Somaliland, Nubian and Bowes & Company have agreed to advance funds to the Company to fund ongoing exploration activities. Effective August 1, 2012, the Board of Directors approved a loan agreement between Nubian and Bowes & Company. Nubian and Bowes & Company are corporations incorporated under the laws of Ontario, Canada and Gregory Bowes is the CEO and major shareholder of both companies. Mr. Bowes is also an officer and director of Mindesta. Mr. Bowes declared his conflict of interest to the Board of Directors and abstained from voting on the consent resolution approving the revolving loan agreement. Under the loan agreement, all amounts due from Mindesta to Nubian and Bowes & Company are provided under a $250,000 credit facility which is repayable upon the termination date of December 31, 2012. The obligations which are still outstanding after the Termination Date now accrues interest at a rate of 7.5% per annum. Under the terms of the loan agreement, Mindesta is required to sell its remaining shares of Northern as they are released from escrow and remit all proceeds to Bowes & Company, until all obligations to Bowes & Company are satisfied, and then shall remit any further proceeds to Nubian until all obligations to Nubian are satisfied. All advances under this facility bear interest from August 1, 2012 at an annual rate of 7.5 per cent, payable annually, or earlier at anytime that the advances are repaid in full. At any time, before or after the termination date, Bowes & Company and Nubian shall have the right to convert any part of, or all of, the obligations into common shares of Mindesta Inc. at a price of $0.075 per share.

On November 27, 2012, Mindesta announced that it has received assay results from its first stage stream sediment and rock sampling program on the Arapsyo, Qabri Bahar and Abdul Qadir exploration permits in the Republic of Somaliland. Over the September, 2011 to April, 2012 period, 2,500km2 of the Arapsyio and Qabri Bahar permits were sampled at a density of one sample every 1-2 km2. A total of 1,659 stream sediment and 58 rock samples were submitted to the assay laboratory.

Encouraging regional anomalies have been identified, particularly for gold, and future work will be centered on narrowing them down by infill stream sediment sampling and prospecting followed by soil sampling and/or geophysics. Cu/Mo/Bi occurrences are already at a stage where soil sampling and ground geophysics could be carried out. Future work would also include ground checking a significant number of secondary anomalies on a case by case basis.

Mindesta has made the first $750,000 of exploration expenditures as required as a firm commitment but has incurred substantial payables to Bowes & Company and Nubian in doing so. The Company is now faced with the challenge financing a second stage program in a very difficult market for junior explorers. Options are currently being evaluated.

RESULTS OF OPERATIONS
For the year ended December 31, 2012, the Company recorded a loss of $1,003,188, or $0.11 per share, compared to a net gain of $3,738,515 for the year ended December 31, 2011, or $0.42 per share. The net gain during the year ended December 31, 2011 resulted from the Company recognizing a gain of $6,035,839 on the deconsolidation of its investment holdings in Northern due to the sale of 2,000,000 shares of Northern and the resultant decline in the Company’s interest below 50% which made it necessary for the Company to change its accounting treatment for the investment. The Company had no revenues for the years ended December 31, 2012 and 2011. The Company is an exploration stage company and will not have revenues unless its exploration efforts are successful and one of the properties in which it is earning an interest is eventually brought into production. For the year ended December 31, 2012, expenses amounted to $1,194,907 compared to $757,935 for the year ended December 31, 2011. There were higher expenses for the year ended December 31, 2012 as a result of exploration expenses incurred in relation to the option agreement with Nubian Gold. Management fees and salaries decreased to $32,514 for the year ended December 31, 2012 compared to $179,469 for the year ended December 31, 2011. Lower fees in 2012 were incurred as management received no compensation in cash or shares. Included in expenses for the year ended December 31, 2012 were $42,268 in stock compensation expense compared to $155,396 in 2011. Professional fees decreased to $145,298 in the year ended December 31, 2012 from $262,058 in 2011.

The Company currently has no full time employees. It contracts with a number of consultants for management, engineering, technical, administrative and financial services.

LIQUIDITY AND CAPITAL RESOURCES
The Company had cash as at December 31, 2012 of $12,091 versus $569,378 as at December 31, 2011 due to exploration expenditures incurred under the property option agreement with Nubian Gold and expenses related to the payment of the share dividend. During the year ended December 31, 2012 the Company recorded an impairment of acquisition costs of $100,000 due to uncertainty with respect to the Company’s ability to expend the required $2 million within two years to earn its interest. On January 2, 2011, the Company sold 2,000,000 common shares of Northern for CDN $0.50 per share and realized total proceeds of CDN$1,000,000. The Company used these funds to support Northern and keep work going on the Bissett Creek Property pending the completion of Northern’s IPO.


As at December 31, 2012, the Company has access to additional financing through the possible sale of marketable securities, which had a market value at December 31, 2012 of $164,333. Since December 31, 2012, the Company realized $197,182 of proceeds on the sale of the remaining 151,388 common shares of Northern Graphite Corporation that it held. The Company received proceeds of $263,076 from the sale of 185,031 shares of Northern Graphite Corporation during the year ended December 31, 2012. During the year ending December 31, 2012, the Company drew an additional $149,529 of funds from the loan agreement with Bowes & Company in addition to the $100,000 it owed Nubian for upfront fees on the option agreement between Nubian and the Company. Although the Company currently has no revenue sources, the funding raised by the Company and through the sale of shares of Northern, is sufficient to pay operating and administrative costs for the time being. In the future, the Company will require additional funding to continue operations and there is no assurance that such financing will be available or will be available on terms acceptable to the Company.

CRITICAL ACCOUNTING ESTIMATES

The consolidated financial statements of Mindesta, Inc. are prepared in conformity with GAAP, which requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Mindesta, Inc.'s accounting policies are described in Note 2 to the consolidated financial statements. Critical accounting estimates are described in this section. An accounting estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made, different estimates reasonably could have been used, or if changes in the estimate that would have a material impact on the Company’s financial condition or results of operations are reasonably likely to occur from period to period. Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable. However, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The Company has discussed the development, selection and disclosures of these critical accounting estimates with the Audit Committee and the Board of Directors, and the Audit Committee has reviewed the Company's disclosures relating to these estimates.

GOING CONCERN
The Company's auditors in their report for the year ended December 31, 2012 have expressed a concern that the Company may not be able to continue as a going concern. The Company had a net loss from operations of $1,003,188 for the year ended December 31, 2012 and has had recurring losses and an accumulated deficit of $13,036,264 since inception. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital for operating and administrative costs. However, there is a high degree of risk and many inherent uncertainties in the natural resource development industry and management cannot provide assurances that it will be successful.

The Company no longer has ownership in Northern. The Company no longer raises capital for the support of Northern and operates as a distinct entity. As at December 31, 2012, the Company had $12,091 in cash and marketable securities with a fair value of $164,333. If the Company cannot continue as a going concern the value of the Company's assets may approach a level close to zero. Investors should be cautioned that should the Company cease to operate, the Company may only recover a small fraction of the original costs of its assets should a liquidation of the Company's assets occur. The accompanying financial statements do not include any adjustments that might result if the going concern assumption is not valid.

IMPAIRMENT OF LONG-LIVED ASSETS

Mindesta periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of when events and circumstances warrant such a review. This review is performed using estimates of future cash flows as well as industry and market conditions and the Company’s future development plans. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. During the year ended December 31, 2012 the Company recorded an impairment of acquisition costs of $100,000 due to uncertainty with respect to the Company’s ability to expend the required $2 million dollars within two years to earn its interest on the option agreement with Nubian.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Mindesta Inc.
(formerly Industrial Minerals Inc.)
(an exploration stage company)

Balance Sheets

    As at     As at  
    December 31     December 31  
    2012     2011  
             
    $     $  
             
Assets            
Current            
   Cash and cash equivalents   12,091     569,378  
   Marketable securities (note 3)   164,333     -  
   Receivables   8,716     151  
   Due from related parties (note 6)   -     145,113  
   Prepaid expenses and deposits   17,939     36,092  
Total current assets   203,079     750,734  
Investment in non-consolidated affiliate (note 3)   -     3,432,261  
Total assets   203,079     4,182,995  
             
Liabilities            
Current            
   Accounts payable and accrued liabilities   316,534     452,473  
   Due to related parties (note 6)   272,879     -  
   Dividend payable (note 4)   -     3,274,072  
Total current liabilities   589,413     3,726,545  
Total liabilities   589,413     3,726,545  
             
Stockholders’ equity (deficiency)            
Common stock 200,000,000 shares authorized, $0.0001 par            
value; 9,300,634 shares issued and outstanding (note 4)   18,817     18,592  
Additional paid-in capital   12,626,129     12,537,316  
Accumulated other comprehensive income   4,984     (105,985 )
Deficit accumulated during exploration stage   (13,036,264 )   (11,993,473 )
Total stockholders' equity (deficiency)   (386,334 )   456,450  
             
Total liabilities and stockholders' equity   203,079     4,182,995  
Nature of operations and going concern (note 2b)            
Commitments and contingencies (note 5)            
Subsequent event (note 9)            

See accompanying notes to financial statements

Approved by Board: (signed) Gregory Bowes (signed) Cam Birge
  Director Director

F14


Mindesta Inc.
(formerly Industrial Minerals Inc.)
(an exploration stage company)

Statements of Operations and Deficit

    Year ended December 31  
    2012     2011  
    $     $  
             
General and administrative expenses            
Professional fees   145,298     262,058  
Management fees and salaries (note 6)   32,514     179,469  
Exploration expense   758,742     -  
Impairment of mineral property (note 7)   100,000     -  
General and administration   158,353     316,408  
    1,194,907     757,935  
             
Loss from operations   (1,194,907 )   (757,935 )
Interest and other income   53     6,671  
Foreign exchange loss   (6,206 )   (19,021 )
Gain on partial disposal of subsidiary (note 3)   -     6,035,839  
Loss attributable to equity investee (note 3)   -     (1,518,789 )
Gain on sale of marketable securities (note 3)   197,872     -  
Gain (loss) on revaluation of debt   -     (8,250 )
Income (loss) for the year   (1,003,188 )   3,738,515  
             
Other comprehensive loss            
Unrealized gain on available for sale securities (note 3)   110,969     -  
Total comprehensive income (loss) for the year   (892,219 )   3,738,515  
             
Net income (loss) per share – basic   (0.11 )   0.42  
Weighted average number of common shares outstanding – basic (note 4)   9,412,659     8,920,635  
Net income (loss) per share – fully diluted   (0.11 )   0.40  
Weighted average number of common shares outstanding – fully diluted (note 4)   9,412,659     9,492,485  

See accompanying notes to financial statements

F15


Mindesta Inc.
(formerly Industrial Minerals Inc.)
(an exploration stage company)

Statements of Cash Flows

    Year ended December 31  
    2012     2011  
    $     $  
             
Cash provided by (used in)            
Operating activities            
Income (loss) for the year   (1,003,188 )   3,738,515  
Stock-based compensation   42,268     155,396  
Gain on deconsolidation   -     (6,035,839 )
Equity loss pick-up   -     1,518,789  
Gain on sale of marketable securities   (197,872 )   -  
Imputed interest on loan from related party   13,020     -  
Loss on amounts due to related party   -     8,250  
Write-down of mineral property   100,000     -  
Nubian option agreement   127,994     -  
Changes in non-cash operating working capital:            
   Receivables   (8,565 )   -  
   Due from affiliate   17,119     (16,147 )
   Prepaid expenses and deposits   18,153     (19,659 )
   Accounts payable and accrued liabilities   (135,940 )   334,563  
    (1,027,011 )   (316,132 )
Financing activities            
Change in notes payable   -     (138,938 )
Proceeds from the exercise of options   33,750     101,250  
    33,750     (37,688 )
Investing activities            
 Due to related party   172,879     (128,393 )
 Proceeds from the sale of marketable securities   263,076     -  
 Change in investments   19     -  
 Proceeds from the sale of shares of affiliate (Note 3)   -     1,005,400  
    435,974     877,007  
Net increase (decrease) in cash and cash equivalents   (557,287 )   523,187  
Cash and cash equivalents, beginning of period   569,378     46,191  
Cash and cash equivalents, end of period   12,091     569,378  
Non-cash transactions            
Shares issued for the settlement of amounts due to related parties   -     53,250  
             
Supplementary information            
 Interest paid   -     -  
 Income taxes paid   -     -  

See accompanying notes to financial statements

F16


Mindesta Inc.
(formerly Industrial Minerals Inc.)
(An exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from November 6, 1996 (Date of Inception of Exploration Stage) to December 31, 2012

                      Accumulated                          
    Common Stock           Deficit     Accumulated           Common     Total  
                Additional     During     Other     Non     Stock     Stockholders'  
    Number           Paid-in     Exploration     Comprehensive     Controlling     Subscriptions     Equity  
    of Shares     Amount     Capital     Stage     Income     Interest     Received     (Deficit)  
                                                 
Inception - November 6, 1996 - See Note A below   -   $  -   $  -   $  -   $  -     -   $  -     -  
Balance at December 31, 1998   40,928     76     505,092     (750,830 )   -     -     -     (245,662 )
Issuance of common stock for cash   4,500     9     146,612     -     -     -     -     146,621  
Issuance of common stock for services   8,250     17     274,983     -     -     -     -     275,000  
                                                 
Net Loss         -     -     (259,404 )   -     -     -     (259,404 )
                                                 
Balance at December 31, 1999   53,678     102     926,687     (1,010,234 )   -     -     -     (83,445 )
                                                 
Issuance of common stock for cash   12,735     25     413,045     -     -     -     -     413,070  
Issuance of common stock for services   10,500     21     349,979     -     -     -     -     350,000  
Issuance of common stock for Multiplex stock   450     1     29     -     -     -     -     30  
Issuance of common stock for acquisition   71,319     143     4,603     -     -     -     -     4,746  
                                                 
Net Loss         -     -     (694,758 )   -     -     -     (694,758 )
                                                 
Balance at December 31, 2000   148,682     292     1,694,343     (1,704,992 )   -     -     -     (10,357 )
                                                 
Issuance of common stock for compensation   4,500     9     59,991     -     -     -     -     60,000  
                                                 
Net Loss         -     -     (67,251 )   -     -     -     (67,251 )
                                                 
Balance at December 31, 2001   153,182     301     1,754,334     (1,772,243 )   -     -     -     (17,608 )
Issuance of common stock re acquisition of Industrial Minerals Incorporated   5,250,000     10,500     (1,747,393 )   1,696,982     -     -     -     (39,911 )
Minimum 50 shares post- split allocation   4,614     6     (6 )   -     -     -     -     -  
                                                 
Net Loss   -     -     -     (520,242 )   -     -     -     (520,242 )

See accompanying notes to financial statements

F17



                      Accumulated                          
    Common Stock           Deficit     Accumulated           Common     Total  
                Additional     During     Other     Non     Stock     Stockholders'  
    Number           Paid-in     Exploration     Comprehensive     Controlling     Subscriptions     Equity  
    of Shares     Amount     Capital     Stage     Income     Interest     Received     (Deficit)  
                                                 
Balance at December 31, 2002   5,407,796     10,807     6,935     (595,503 )   -     -     -     (577,761 )
                                                 
Minimum 50 shares post- split allocation   49     -     -     -     -     -     -     -  
                                                 
Net Loss       -     -     (1,133,197 )   -     -     -     (1,133,197 )
                                                 
Balance at December 31, 2003   5,407,845     10,807     6,935     (1,728,700 )   -     -     -     (1,710,958 )
                                                 
Allocation on round-up of shares   0     -     -     -     -     -     -     -  
Issuance of common stock in settlement of debt   174,606     349     4,190,189     -     -     -     -     4,190,538  
                                                 
Net Loss         -     -     (561,153 )   -     -     -     (561,153 )
                                                 
Balance at December 31, 2004   5,582,451     11,156     4,197,124     (2,289,853 )   -     -     -     1,918,427  
                                                 
Net Loss         -     -     (1,844,219 )   -     -     -     (1,844,219 )
                                                 
Balance at December 31, 2005   5,582,451     11,156     4,197,124     (4,134,072 )   -     -     -     74,208  
                                                 
Issuance of common stock for cash   10,000     20     69,640     -     -     -     -     69,660  
Issuance of common stock in settlement of debt   312,791     625     1,876,118     -     -     -     -     1,876,743  
                                                 
Net Loss         -     -     (1,255,584 )   -     -     -     (1,255,584 )
                                                 
Balance at December 31, 2006   5,905,242     11,801     6,142,882     (5,389,656 )   -     -     -     765,027  
                                                 
Issuance of common stock for cash   659,685     1,319     1,569,486     -     -     -     -     1,570,805  
Issuance of common stock for services   320,350     641     641,976     -     -     -     -     642,617  
Stock compensation expense       -     446,853     -     -     -     -     446,853  
Foreign Currency Translation       -     -     -     (105,985 )   -     -     (105,985 )
                                                 
Net Loss   5,407,796     -     -     (2,761,455 )   -     -     -     (2,761,455 )

See accompanying notes to financial statements

F18



                      Accumulated                          
    Common Stock           Deficit     Accumulated           Common     Total  
                Additional     During     Other     Non     Stock     Stockholders'  
    Number           Paid-in     Exploration     Comprehensive     Controlling     Subscriptions     Equity  
    of Shares     Amount     Capital     Stage     Income     Interest     Received     (Deficit)  
                                                 
Balance at December 31, 2007   6,885,277     13,761     8,801,197     (8,151,111 )   (105,985 )   -     -     557,862  
Issuance of common stock for cash   462,447     925     484,275     -     -     -     (265,000 )   220,200  
Issuance of common stock for services   630,250     1,261     445,439     -     -     -     -     446,700  
Stock compensation expense       -     176,427     -     -     -     -     176,427  
Common stock subscriptions received               -     -     -     265,000     265,000  
Issuance of common stock for settlement of debt   62,500     125     64,875     -     -     -     -     65,000  
                                                 
Net Loss         -     -     (1,579,801 )   -     -     -     (1,579,801 )
                                                 
Balance at December 31, 2008   8,040,474     16,072     9,972,214     (9,730,913 )   (105,985 )   -     -     151,388  
                                                 
Issuance of common stock for services   125,000     250     49,750     -     -     -     -     50,000  
Stock compensation expense       -     179,221     -     -     -     -     179,221  
                                                 
Net Loss         -     -     (1,629,281 )   -     -     -     (1,629,281 )
                                                 
Balance at December 31, 2009   8,165,474     16,322     10,201,185     (11,360,194 )   (105,985 )   -     -     (1,248,672 )
Issuance of common stock for services and debt settlement   722,660     1,445     215,353                     216,798  
Net Loss         -     -     (1,097,722 )   -     (495,451 )   -     (1,593,173 )
Gain in dilution in interest of subsidiary           1,657,299                     1,657,299  
NCI pickup on dilution in interest of subsidiary                       814,686     -     814,686  
Stock compensation expense       -     154,408         -         -     154,408  
Consolidated Balance at December 31, 2010   8,888,134     17,767     12,228,245     (12,457,916 )   (105,985 )   319,235     -     1,346  

See accompanying notes to financial statements

F19



                      Accumulated                          
    Common Stock           Deficit     Accumulated           Common     Total  
                Additional     During     Other     Non     Stock     Stockholders'  
    Number           Paid-in     Exploration     Comprehensive     Controlling     Subscriptions     Equity  
    of Shares     Amount     Capital     Stage     Income     Interest     Received     (Deficit)  
                                                 
Balance subsequent to 1:20 stock consolidation   8,888,134     17,767     12,228,245     (12,457,916 )   (105,985 )   319,235     -     1,346  
Issuance of common stock for debt   75,000     150     53,100     -     -     -     -     53,250  
Issuance of common stock pursuant to the exercise of stock options   337,500     675     100,575     -     -     -     -     101,250  
Stock compensation expense   -     -     155,396     -     -     -     -     155,396  
                                                 
Net Loss   -     -     -     (770,285 )   -     -     -     (770,285 )
Gain on deconsolidation   -     -     -     6,035,839     -     -     -     6,035,839  
Equity loss pickup   -     -     -     (1,518,789 )   -     -     -     (1,518,789 )
Loss on due to related party   -     -     -     (8,250 )   -     -     -     (8,250 )
NCI pickup on dilution in interest in subsidiary   -     -     -         -     (319,235 )   -     (319,235 )
Dividends   -     -     -     (3,274,072 )                     (3,274,072 )
Balance at December 31, 2011   9,301,081     18,592     12,537,316     (11,993,473 )   (105,985 )   -     -     456,450  
Issuance of common stock pursuant to the exercise of stock options   112,500     225     33,525     -     -     -     -     33,750  
Stock compensation expense   -     -     42,268     -     -     -     -     42,268  
Imputed interest on related party loan   -     -     13,020     -     -     -     -     13,020  
                                                 
Net Loss   -     -     -     (1,003,188 )   -     -     -     (1,003,188 )
Unrealized gains on sale of NGC shares   -     -     -     -     110,969     -     -     110,969  
Dividends   -     -     -     (39,603 )   -     -     -     (39,603 )
Balance at December 31, 2012   9,413,581     18,817     12,626,129     (13,036,264 )   4,984     -     -     (386,334 )

See accompanying notes to financial statements
The number of common shares used in this statement is accounted for after giving effect to the 20:1 stock consolidation on July 29, 2011 (note 6 B.)

F20


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

NOTE 1 - BASIS OF PRESENTATION

The financial statements of Mindesta Inc. (the “Company” and formerly “Industrial Minerals, Inc.”), for the year ended December 31, 2012 and the notes thereto (the “Financial Statements”) have been prepared in accordance accounting principles generally accepted in the United States of America and have been presented in US dollars.

The Company's fiscal year-end is December 31.

NOTE 2 –ORGANIZATION AND ACCOUNTING POLICIES

(a) Organization

Mindesta, Inc. was incorporated on November 6, 1996, as Winchester Mining Corporation in the State of Delaware. On May 13, 2000, in connection with its merger with Hi-Plains Energy Corp., the Company changed its name from Winchester Mining Corporation to PNW Capital, Inc. On January 31, 2002, the Company acquired 91% of the outstanding shares of Industrial Minerals, Inc. On May 2, 2002, the Company merged the remaining 9% of Industrial Minerals, Inc. into PNW Capital, Inc. and changed its name to Industrial Minerals, Inc. Operations have been historically carried out through the Company’s former subsidiary and principal asset, Northern Graphite Corporation (“Northern”), formerly Industrial Minerals Canada Inc. Northern owns a 100% interest in the Bissett Creek graphite property located in Renfrew County in the Province of Ontario, Canada (the “Bissett Creek Property”). As a result of a number of financings and other transactions, including an initial public offering by Northern, the Company’s interest in Northern was reduced from 100% to 26.1% as at December 31, 2011. On December 12, 2011, the Board of Directors declared a pro rata dividend-in-kind, payable January 25, 2012 to shareholders whereby most of the shares of Northern owned by the Company would be distributed to Mindesta shareholders. At the close of trading on January 25, 2012, Mindesta completed the distribution to Company shareholders of 9,413,581 shares of Northern owned by the Company on the basis of one share of Northern for each share of Company common stock held. As at December 31, 2012, the Company’s interest in Northern had decreased to less than 1%. Effective July 26, 2011, the Company changed its name to “Mindesta Inc.” and consolidated its stock on a 20:1 basis. The Company trades on the OTCBB under the symbol MDST.

(b) Nature of Operations and Going Concern

The Company is an exploration stage company. Effective January 2, 2012, Mindesta entered into an option agreement with Nubian Gold Corporation (“Nubian”), a privately owned Ontario company, which currently holds title to three mineral exploration permits, in the Republic of Somaliland. Under the option agreement, Mindesta can earn a 50% interest in the permits by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 percent by completing a bankable feasibility study. Mindesta has incurred the first $750,000 of exploration expenditures on this project which represented a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value as determined by an independent valuator agreed to by both Mindesta and Nubian at any time after incurring the first $750,000 of exploration expenditures.

The Company is an Exploration Stage Company that incurred a net loss of $892,219 for the year ended December 31, 2012 (2011 gain of $3,738,515) and has an accumulated deficit of $13,036,264 since the inception of the Company. Current liabilities exceed current assets by $386,334. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital to pay expenses and further planned exploration activities. The Company will require significant financing to continue its operations and fund planned exploration activities. There is a high degree of risk and many inherent uncertainties in mining operations and exploration activities and management cannot provide assurances that it will be successful in its endeavors.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital for operating and administrative costs. However, there is a high degree of risk and many inherent uncertainties in the natural resource development industry and management cannot provide assurances that it will be successful. The accompanying financial statements do not include any adjustments that might result from negative outcomes with respect to these uncertainties.

(c) Cash and Cash Equivalents

Cash and cash equivalents include bank balances, funds held in trust with lawyers, and short term investments that are readily convertible into cash with original maturities of three months or less.

F21


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

(d) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements, and revenues and expenses for the period. By their nature, these estimates and judgments are subject to management uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant estimates and judgments include those relating to the assessment of the Company’s ability to continue as a going concern, estimates to determine whether impairment of long lived assets is required, and the fair value of stock options, depreciation rates and estimated useful lives of buildings and equipment. Actual results may differ from those estimates and judgments.

(e) Marketable Securities

The Company classifies its marketable securities as available-for-sale securities. The securities are measured at fair market value in the financial statements with unrealized gains or losses recorded in other comprehensive income. At the time securities are sold, gains or losses are included in net income.

(f) Long-Lived Assets

The Company monitors the recoverability of long-lived assets based on factors such as current market value, future asset utilization, business climate and future undiscounted cash flows expected to result from the use of the related assets. The Company records an impairment loss in the period it is determined that the carrying amount of the asset may not be recoverable. The impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value.

(g) Comprehensive Income (Loss)

The Company adopted ASC 220 “Comprehensive Income”. ASC 220 establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of financial statements. Comprehensive income (loss) is presented in the statement of operations. ASC 220 requires only additional disclosures in the financial statements and does not affect the Company’s financial position or results of operations.

(h) Fair Value of Financial Instruments

FASB ASC 820, “Fair Value Measurement” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3

Inputs that are both significant to the fair value measurement and unobservable.

F22


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

The following table sets forth the Company’s financial assets and liabilities measured at fair value within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

    Fair Value at December 31,     December 31,  
    Total     2012           2011  
    $     $           $  
Assets         Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   12,091     12,091     -     -     569,378  
Marketable securities   164,333     164,333     -     -     -  

Cash and marketable securities are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices. Cash and cash equivalents that are valued based on quoted market prices in active markets are primarily composed of commercial paper, short-term certificates of deposit and US Treasury securities. Marketable securities are primarily composed of common shares of Northern (note 3) and are valued based on publicly quoted market prices. Accounts receivable, accounts payable, and due to/from related parties are reflected in the balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.

(i) Income Taxes

Income taxes are determined using assets and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB ASC 740 as of its inception. Pursuant to FASB ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future periods; and accordingly is offset by a valuation allowance. FIN No.48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken into in tax returns.

To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts would be accrued and classified as a component of income tax expense in our Consolidated Statements of Operations and Comprehensive Loss. The Company elected this accounting policy, which is a continuation of our historical policy, in connection with our adoption of FIN 48.

(j) Translation of Foreign Currencies

The functional currency of the Company has been determined to be the U.S. dollar. Foreign currency transaction gains or losses are reflected in the results of operations. For the year ended December 31, 2012 and 2011, foreign currency losses of $6,206 and $19,021, respectively, were recognized.

(k) Mineral Properties

Mineral property acquisition costs are capitalized when incurred and will be amortized using the units –of – production method over the estimated life of the reserve following the commencement of production. If a mineral property is subsequently abandoned or impaired, any capitalized costs will be expensed in the period of abandonment or impairment.

Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties.

(l) Exploration Costs

Exploration costs, which include maintenance, development and exploration of mineral claims, are expensed as incurred. When it is determined that a mineral deposit can be economically developed as a result of establishing proven and probable reserves, the costs incurred after such determination will be capitalized and amortized over their useful lives. To date, the Company has not established the commercial feasibility of its exploration prospects; therefore, all exploration costs are being expensed.

F23


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

(m) Stock Based Compensation

The Company has adopted the provisions of FASB ASC 718, “Stock Compensation” (“ASC 718”), which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). New shares of the Company’s Common Stock will be issued for any options exercised or awards granted

(n) Basic and Diluted Loss Per Share

Basic loss per share was computed by dividing the amount of the loss for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated using the treasury stock method, whereby the weighted average number of shares outstanding used in the calculation assumes that the deemed proceeds received from the exercise of stock options that are “in the money” would be used to repurchase common shares of the Company at the average market price during the year. Existing stock options have not been included in the computation of diluted loss per share as they are anti-dilutive, and therefore, basic and diluted loss per share amounts are the same.

(o) Concentrations

The Company explored mineral concessions all of which are located in Somaliland. The Company uses primarily one supplier to supply the exploration licenses, manpower and technical expertise for mineral exploration in Somaliland (notes 6 and 7).

(p) Recently Adopted Pronouncements

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The Update amends fair value measurements and disclosures to (1) clarify the board’s intent in respect of existing measurement guidance, (2) revise certain measurement guidance that changes or modifies a principle, and (3) add disclosure requirements concerning the measurement uncertainty of level 3 measurements. This guidance is effective for the Company for the first interim or annual period beginning on or after December 15, 2011. Adoption of this guidance did not have a material effect on the Company’s financial condition, results of operation, or cash flows.

In September 2011, the FASB issued ASU 2011-08 “Intangibles – Goodwill and Other”. This new guidance on testing goodwill provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is not less than its carrying amount, the two-step goodwill impairment test is not required.ASU 2011-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with prospective application required. The adoption of this guidance did not have a material effect on the Company`s financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” This update amended the presentation options in Accounting Standards Codification (“ASC”) 220, “Comprehensive Income,” to provide an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with retrospective application required. The adoption of this guidance did not have a material effect on the Company`s financial position, results of operations or cash flows

(q) New Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our financial statements.

F24


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

NOTE 3 – MARKETABLE SECURITIES AND INVESTMENT IN NON-CONSOLIDATED AFFILIATE

On January 7, 2011, the Company sold 2,000,000 common shares of Northern for CDN $0.50 per share and realized total proceeds of CDN$1,000,000. Due to the reduction in the Company’s interest in Northern arising from this transaction, the results of Northern are no longer consolidated. The Company recognized a gain on deconsolidation of $6,035,839, of which $5,835,457 related to the remeasurement of the Company’s retained investment in the former subsidiary to its fair value. Subsequent to deconsolidation Northern remains a related party by way of directors and officers in common.

As at December 31, 2011, the Company owned 9,750,000 common shares of Northern which represented a 26.1% interest. The estimated fair value of this investment at December 31, 2011 was $8,872,500 based on the quoted trading price of these shares on the Toronto Stock Exchange. As at December 31, 2011, the Company recorded its investment in Northern, a non-consolidated affiliate, at cost.

The carrying value of this investment is as follows:

Investment   $  
Non-consolidated balance at December 31, 2010   11,069,565  
Proceeds from sale of investment   (1,005,400 )
Retained deficits of Northern Graphite   (11,148,954 )
Gain on deconsolidation   6,035,839  
Equity pickup for year ending December 31, 2011   (1,518,789 )
Non-consolidated balance at December 31, 2011   3,432,261  
Stock dividend paid on January 25, 2012   (3,313,675 )
Sale of marketable securities   (65,223 )
Balance at carrying value as at December 31, 2012   53,363  

Following the payment of the stock dividend on January 25, 2012, the Company’s investment in Northern was reclassified as an available-for-sale security and is reflected as marketable securities in the current asset section of the Balance Sheet. The following table summarizes the Company’s available-for sale securities as of December 31, 2012:

Equity securities   Cost     Gross unrealized gains     Fair value  
Outstanding   53,363     110,969     164,332  

During the year ended December 31, 2012, the Company recorded an unrealized gain on available-for-sale securities of $110,969. This gain is recorded as other comprehensive income.

NOTE 4 – STOCKHOLDER’S EQUITY

A. CAPITAL STOCK

The number of common shares outstanding at December 31, 2012 and December 31, 2011 was as follows:

          Par Value  
    Number      
Outstanding December 31, 2011   9,301,081     18,592  
Issued pursuant to the exercise of stock options   112,500     225  
Outstanding at December 31, 2012   9,413,581     18,817  

On July 26, 2011, the Company consolidated its common stock on a 20:1 basis. All common stock numbers and stock option numbers have been restated to reflect the consolidation.

There were 112,500 common shares of capital stock issued during 2012 (2011 – 337,500) as a result of the exercise of options. There were no common shares issued for settlement of debt (2011 – 75,000). The share issuances were recorded for total consideration of $33,750 (2011 - $154,500). The Company had 9,413,581 shares issued and outstanding at December 31, 2012 (2011- 9,301,081).

F25


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

B. DIVIDENDS

On December 12, 2011, the Board of Directors declared a pro rata dividend-in-kind on the basis of one share of Northern common stock for each share of Company common stock held, payable January 25, 2012 to shareholders of record as at January 5, 2012. The Company recorded $3,274,072 of dividends and dividends payable in the year ending December 31, 2011 related to the declared dividend-in-kind.

C. COMMON STOCK OPTIONS

On September 20, 2010, the Company granted stock options to purchase 450,000 common shares at a price of $0.30 per share until September 20, 2015. All options vested immediately. The fair value of the option grant was estimated using the Black-Scholes option-pricing model with the following assumptions: expected volatility of 220%; risk-free interest rate of 2.24%; and an expected term of 5 years.

On April 19, 2011, the Company granted stock options to purchase 112,500 common shares at a price of $1.40 per share until April 19, 2016. All options vested immediately. The fair value of the option grant was estimated using the Black-Scholes option-pricing model with the following assumptions: expected volatility of 220%; risk-free interest rate of 2.09%; and an expected term of 5 years.

On March 15, 2012, the Company granted stock options to purchase 650,000 common shares at a price of $0.10 per share until March 15, 2017. All options vested immediately. The fair value of the option grant was estimated using the Black-Scholes option-pricing model with the following assumptions: expected volatility of 122%; risk-free interest rate of 1.11%; and an expected term of 5 years.

The following table summarizes stock option activity for the year ended December 31, 2012:

    Number of securities to be        
Equity compensation plans not approved by security   issued upon exercise of     Weighted-average exercise  
holders   outstanding options     price of outstanding options  
Outstanding December 31, 2011   225,000   $0.85  
Issued   650,000   $0.10  
Exercised   (112,500 ) $0.30  
Outstanding at December 31, 2012   762,500   $0.29  

There were 762,500 options outstanding and exercisable at December 31, 2012 (December 31, 2011 – 225,000).

The intrinsic value of outstanding and exercisable options at December 31, 2012 was $Nil (December 31, 2011 - $Nil).

The weighted average remaining contractual term of options outstanding at December 31, 2012 was 4.07 years (2011 – 4.01 years)

During the year 112,500 stock options were exercised for proceeds of $33,750. These options had an intrinsic value of $60,750.

Using the Black-Scholes option pricing model, the Company had stock compensation expense for the year ending December 31, 2012 of $42,268 (2011-$155,396).

D. EARNINGS PER SHARE

The basic weighted average number of common shares outstanding was as follows:

For the year ended:      
December 31, 2012   9,412,659  
December 31, 2011   8,920,188  

F26


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

The fully-diluted weighted average number of common shares outstanding was as follows:

For the year ended:      
December 31, 2012   9,412,659  
December 31, 2011   9,492,038  

For the year ended December 31, 2012, the inclusion of common stock equivalents in the calculation of the weighted average number of shares is anti-dilutive.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company has been named in a lawsuit filed by Windale Properties in the amount of CAD $19,781. The claim is the result of termination of leased premises in Oakville, Ontario prior to expiry of the lease. No amount related to this contingency has been accrued as the outcome at this time is indeterminable.

NOTE 6 – RELATED PARTY TRANSACTIONS

During the year ended December 31, 2012:

a) The Company granted 650,000 options to directors and officers of the Company. Each option entitles the holder to purchase one common share at an exercise price of $0.10 until March 15, 2017. Stock-compensation expense of $42,268 was recognized during the period in connection with this option grant.

b) On October 6, 2011, the Board of Directors approved a revolving loan agreement between Mindesta Inc., as the lender, and Nubian Gold Corporation (“Nubian”), as the borrower, to fund the ongoing exploration activities of Nubian in anticipation of the companies negotiating and entering into a property option agreement with respect to Nubian’s two initial exploration licenses, Arapsyo and Qabri Bahar, located in the Republic of Somaliland. Nubian is a corporation incorporated under the laws of Ontario, Canada and Gregory Bowes, CEO, is its major shareholder. Mr. Bowes is also an officer and director of Mindesta. Mr. Bowes declared his conflict of interest to the Board of Directors and abstained from voting on the consent resolution approving the revolving loan agreement. On December 2, 2011, this facility was amended to increase the maximum of the revolving loan agreement credit facility. Under the revolving loan agreement, all amounts due from Nubian to the Company were provided under a $150,000 credit facility which was repayable upon the earlier of one year from the date of the agreement or the signing of a property option agreement. The terms stated that the revolving loan agreement becomes repayable upon the signing of a property option agreement and that all obligations of Nubian would be applied against the expenditure requirements of the Company under the property option agreement. Upon the inception of property option agreement, the obligations were considered paid in full, and the revolving loan agreement was terminated and had no further force or effect. Advances under the facility bore interest from October 6, 2011 at an annual rate of 7.5 per cent, payable annually, or earlier at anytime that the advances are repaid in full.

Mindesta entered into the option agreement with Nubian, effective January 2, 2012. As at January 2, 2012, Nubian had received advances of $127,994 under the revolving loan agreement and the Company had accrued $1,025 of interest receivable. As per the terms of the revolving loan agreement, Nubian applied these advances as expenditures under the option agreement and Mindesta recorded $127,944 of exploration expenses related to these expenses during 2012. In addition, Mindesta incurred $630,750 of exploration expenses during 2012 and accrued a payable of $100,000 for mineral properties under the option agreement, to Nubian. Mindesta can earn a 50% interest in the initial two permits and any other permits obtained in Somaliland during the option agreement by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 percent by completing a bankable feasibility study. Mindesta exceeded the first $750,000 of exploration expenditures which represented a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value at any time as it has incurred the first $750,000 of exploration expenditures.

c) On February 10, 2012, Mindesta approved the reimbursement of $47,686 in exploration expenses incurred by Nubian but paid by Bowes & Company, Management Ltd. (“Bowes & Company”) to keep exploration activities advancing in the Republic of Somaliland during the period that the revolving loan agreement was being finalized. Bowes & Company is a corporation incorporated under the laws of Ontario, Canada and Gregory Bowes, CEO, is its major shareholder. Mr. Bowes declared his conflict of interest with respect to authorizing these expenses and they were approved by the Audit Committee chairman.

F27


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

d) Effective August 1, 2012, the Board of Directors approved a loan agreement between Nubian and Bowes & Company, as the lenders, and Mindesta Inc., as the borrower, to fund the ongoing exploration activities of Mindesta Inc. Nubian and Bowes & Company are corporations incorporated under the laws of Ontario, Canada and Gregory Bowes is the CEO and major shareholder of both companies. Mr. Bowes is also an officer and director of Mindesta. Mr. Bowes declared his conflict of interest to the Board of Directors and abstained from voting on the consent resolution approving the revolving loan agreement. Under this loan agreement, all amounts due from Mindesta to Nubian and Bowes & Company are provided under a $250,000 credit facility which is repayable upon the termination date of December 31, 2012. Any obligation outstanding after the Termination Date shall accrue interest at a rate of 7.5% per annum. Under the terms of the loan agreement, Mindesta is required to sell its remaining shares of Northern as they are released from escrow and remit all proceeds to Bowes & Company, until all obligations to Bowes & Company are satisfied, and then shall remit any further proceeds to Nubian until all obligations to Nubian are satisfied. All advances under this facility bear interest from August 1, 2012 at an annual rate of 7.5 percent, payable annually, or earlier at anytime that the advances are repaid in full. At any time, before or after the termination date, Bowes & Company and Nubian shall have the right to convert any part of, or all of, the obligations into common shares of Mindesta Inc. at a price of $0.075 per share. As at December 31, 2012 $272,879 (2011 - $Nil) of principal and accrued interest was outstanding related to this credit facility, and is included in the amount listed as due to related parties in the table below. $7,428 of interest was accrued in respect of this obligation during the year ended December 31, 2012. Additional interest of $13,020 was imputed on this loan to approximate a market interest rate. This interest has been recognized in general and administration expense and additional paid-in capital, as the imputed interest is not payable.

    As at     As at  
Due from related parties   December 31, 2012     December 31, 2011  
  $     $  
Due from Northern   -     16,147  
Due from Nubian   -     128,966  
Total due from related parties   -     145,113  

    As at     As at  
Due to related parties   December 31, 2012     December 31, 2011  
        $  
Due to Nubian   119,251     -  
Due to Bowes & Company   153,628     -  
Total due to related parties   272,879     -  

As at December 31, 2012 and December 31, 2011, accounts payable and accrued liabilities did not include any amounts due to directors and to companies controlled by directors for professional management fees related to the services of the directors and officers.

NOTE 7 – MINERAL PROPERTIES

Although the Company has taken steps to verify title to mineral properties in which it has an interest in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

Mining Option Agreement – Nubian

Effective January 2, 2012, Mindesta entered into an option agreement with Nubian, a privately owned Ontario company, which initially held title to two mineral exploration permits, in the Republic of Somaliland (note 6). During 2012, Nubian obtained a third exploration permit in Somaliland. Under the option agreement, Mindesta can earn a 50% interest in the permits by incurring total exploration expenditures of $2 million within two years and can increase its interest to 80 percent by completing a bankable feasibility study. Mindesta has incurred the first $750,000 of exploration expenditures on this project which represents a firm commitment. Mindesta also has the option to acquire all of Nubian’s remaining interest in the permits at fair market value as determined by an independent valuator at any time after incurring the first $750,000 of exploration expenditures.

The Company recorded acquisition costs of $100,000 related to the option agreement with Nubian. During the year ended December 31, 2012 the Company recorded an impairment of acquisition costs of $100,000 due to uncertainty with respect to the Company’s ability to expend the required $2 million dollars within two years to earn its interest.

F28


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

NOTE 8 – INCOME TAXES

As at December 31, 2012, the Company's deferred tax asset attributable to its net operating loss carry forward is approximately $400,007 (2011 - $2,986,224). This benefit has been fully offset by a valuation allowance based on management's determination that it is not more likely than not that some or all of this benefit will be realized. These losses expire as follows:

    $  
       
2028   34,341  
2029   365,666  
Total   400,007  

As at December 31, 2012, the Company's deferred tax asset attributable to capital loss carry forward is approximately $596,705 (2011 - $596,705). This benefit has been fully offset by a valuation allowance based on management's determination that it is not more likely than not that some or all of this benefit will be realized. These losses expire as follows:

    $  
       
2026   596,705  
Total   596,705  

For the years ended December 31, 2011 and 2010, a reconciliation of income tax benefit at the U.S. federal statutory rate to income tax benefit at the Company's effective tax rates is as follows.

    2012     2011  
             
             
Income (Loss) for the year   (1,003,188 )   3,738,515  
             
Expected income tax (Recovery)   (339,528 )   1,271,095  
Deconsolidation of Northern   -     (1,227,231 )
Distribution of Northern shares   2,291,318     -  
Change in estimates   176,767     -  
Non-deductible items   8,214     59,627  
Change in valuation allowance   (2,136,771 )   (103,491 )
Total income tax payable         - -  

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets (liabilities) at December 31, 2012 and 2011 are comprised of the following:

    2012     2011  
             
Net operating loss carryforward   136,002     652,654  
Capital loss carryforward   202,880     202,880  
Investment in Northern Graphite   -     1,897,093  
Mineral Property Interest   276,974     -  
    615,856     2,752,627  
Valuation allowance   (615,856 )   (2,752,627 )
Deferred income tax asset   -     -  

F29


MINDESTA INC.
(formerly Industrial Minerals Inc.)
(An Exploration Stage Company)
Notes to Financial Statements
For the years ended December 31, 2012 and 2011

Accounting for uncertainty for Income Tax
Effective January 1, 2009, we adopted the interpretation for accounting for uncertainty in income taxes which was an interpretation of the accounting standard accounting for income taxes. This interpretation created a single model to address accounting for uncertainty in tax positions. This interpretation clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. During 2011, the Company filed all statutory income tax returns outstanding. The Company had $250,605 accrued for penalties as of December 31, 2012, and December 31, 2011, respectively related to statutory income tax returns that have now been filed. We do not have any unrecognized tax benefits or loss contingencies. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months. Interest and penalties are included in general and administrative costs.

NOTE 9 – SUBSEQUENT EVENTS

As at March 7, 2013, Mindesta has sold the remaining 151,388 of Northern shares for proceeds of $187,184.

F30


ITEM 9- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Effective October 1, 2009 Rotenberg and Company LLP merged with another CPA firm, EFP Group, to form a new firm. Rotenberg and Company, LLP resigned as the Company’s auditors in connection with such merger. All of the partners and employees of Rotenberg and Company LLP and EFP Group have joined the new firm, EFP Rotenberg LLP. EFP Rotenberg LLP succeeded Rotenberg and Company LLP as the Registrant’s independent registered public accounting firm.

On October 30, 2009, with the approval of the Audit Committee of the Company’s Board of Directors, EFP Rotenberg, LLP was engaged as the Company’s independent registered public accountant effective concurrent with the merger. Prior to such engagement, during the two most recent years, the Company has not consulted with EFP Rotenberg, LLP on any matter.

The audit reports of Rotenberg and Company LLP for the years ended December 31, 2008 and December 31, 2007, expressed an unqualified opinion and included an explanatory paragraph relating to the Registrant’s ability to continue as a going concern due to significant recurring losses and other matters. Such audit reports did not contain any other adverse opinion or disclaimer of opinion or qualification.

The Registrant and Rotenberg and Company LLP have not, during the Registrant’s two most recent fiscal years or any subsequent period through to the date of dismissal, had any disagreement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to Rotenberg and Company LLP’s satisfaction, would have caused Rotenberg and Company, LLP to make reference to the subject matter of the disagreement in connection with its reports.

The Registrant provided Rotenberg and Company LLP with a copy of the disclosures made in the Current Report on Form 8-K prior to filing. A copy of Rotenberg and Company LLP’s letter, dated November 4, 2009 was attached as Exhibit 16.1.

On March 1, 2010 the Registrant dismissed EFP Rotenberg LLP as the Registrant’s independent registered public accounting firm. Also on March 1, 2010, with the approval of the Audit Committee of the Registrant’s Board of Directors, Meyers Norris Penny LLP (“MNP”) was engaged as the Company’s independent registered public accountant.

The audit reports of MNP for the years ended December 31, 2012, December 31, 2011 and December 31, 2010, expressed an unqualified opinion and included an explanatory paragraph relating to the Registrant’s ability to continue as a going concern due to significant recurring losses and other matters. Such audit reports did not contain any other adverse opinion or disclaimer of opinion or qualification. The Registrant and MNP have not, during the Registrant’s two most recent fiscal years had any disagreement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to MNP’s satisfaction, would have caused MNP to make reference to the subject matter of the disagreement in connection with its reports. MNP has not advised the Company of any reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

MNP was not required or engaged to audit the Company’s internal control over financial reporting.

During the years ended December 31, 2008 and 2007, and through March 1, 2010, the Company did not consult with Meyer Norris Penny LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

ITEM 9A - CONTROLS AND PROCEDURES
At the end of the period covered by this report, an evaluation was carried out under the supervision of and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13(a) – 15(e) and Rule 15(d) – 15(e) under the Exchange Act). Based on that evaluation and in light of the discussion of the material weakness discussed below in the Management’s Report on Internal Control over Financial Reporting, the CEO/CFO has concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to management, including the CEO/CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

F31


Management's Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the CEO and implemented by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The evaluation of internal controls over financial reporting includes an analysis under the COSO framework, an integrated framework for the evaluation of internal controls issued to identify the risks and control objectives related to the evaluation of the control environment by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the evaluation described above, management has concluded that the Company’s internal control over financial reporting was not effective during the year ended December 31, 2012. Management has determined that (i) inadequate staffing and supervision, and the resulting ability of management to override internal control systems, and (ii) the significant amount of manual intervention required in the accounting and financial reporting process are material weaknesses in the Company’s internal control over financial reporting.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal period covered by this annual report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

On May 10, 2010 Robert Dinning resigned as CEO and CFO of the Company and Gregory Bowes was appointed CEO/CFO. On April 1, 2010 Miles Nagamatsu was appointed CFO of Northern and Tracy Albert was appointed Controller. On February 1, 2011 Stephen Thompson replaced Miles Nagamatsu as CFO of Northern

ITEM 9B - OTHER INFORMATION

Not applicable

PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The current Chief Executive Officer and Chief Financial Officer of Registrant at March 7, 2013 is Gregory Bowes.

The directors of the Registrant as at March 7, 2012 are Gregory Bowes, age 58, Campbell Birge, age 59, Douglas Perkins, age 59, and Albert Zapanta, age 71.

Mr. Bowes was granted stock awards of 100,000 common shares in 2008 and 25,000 common shares in 2009 for his services as a director, in lieu of fees.

Business Experience

The following is a brief account of the business experience during at least the past five years of the directors and officers of the Registrant, indicating the principal occupation and employment during that period by each, and the name and principal business of the organizations by which they were employed.

Gregory B. Bowes - Director - Appointed a director on June 23, 2008 and CEO/CFO on May 10, 2010, Mr. Bowes holds an MBA in Finance and Accounting from Queens University (1979) and an Honours BA in Earth Sciences (Geology) from the University of Waterloo (1977). Mr. Bowes has been CFO and Senior VP of Orezone Gold Corporation, a publicly traded mining company with projects in West Africa. From February of 2006 to March of 2008, Mr. Bowes was the President and CEO of San Anton Resource Corporation, an exploration company listed on the Toronto Stock Exchange. From January of 2004 to March of 2007, Mr. Bowes was the Vice President and then Chief Financial Officer of Orezone Resources Inc. which was listed on the Toronto Stock Exchange. Mr. Bowes is 58 years old. In May 2009, Mr. Bowes was appointed President and CEO of the Company’s wholly owned subsidiary, Northern Graphite.

32


Mr. Birge was Chief Financial Officer of Wind Works Power Corp (WWPW:OTC:BB) and Secretary/Treasurer beginning September of 2009. He remains Secretary/Treasurer of Wind Works Power Corp and finished his tenure as CFO as at November, 2011. He was previously the President, Chief Executive Officer and a Director of Ammex Gold Mining Corp., a publicly traded gold mining company, from December 2007 until September 2009. Prior to that, he was President, Chief Executive Officer and a Director of the Company from October 2006 until April 2007. He served on the Advisory Board and as Vice President of Operations of the Trust for Sustainable Development and was Business and Operations Analyst – Southern Ontario for Bell Canada Mobile. Mr. Birge was an Associate Professor at United States International University (Mexico City Campus) and was twice elected to serve on the Academic Counsel as the Head of Graduate Business Studies. He is a consultant to public and private companies doing business in Canada, the United States and Mexico and is also a partner in a Honda car dealership. Mr. Birge attended Simon Fraser University (BA), the University of Calgary (B.Ed) and the United States International University (M.Sc.). Mr. Birge is 60 years old.

Mr. Perkins was appointed to the Board of Directiors effective April 20, 2011 Mr. Perkins an experienced mining company executive who is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V). He is President & Director member of Jien Nunavik Mining Exploration Limited. Mr.Perkins is President and Director of 7264496 Canada Inc. through which he provided executive management services on a contract basis. These same services were previously provided through Perkins International. From November, 2005 until February, 2010 he was Chief Executive Officer and Executive Director of GMA Resources Plc, an AIM listed company in London, United Kingdom, which evolved from a junior explorer to a mid size gold producer through the successful development and construction of a heap leach gold mine in Algeria. Mr. Perkins was Vice President and Chief Financial Officer of Orezone Resources Inc. (ORZ:TSX) from January, 2003 to October, 2005. He earned a Bachelor of Commerce degree, majoring in accounting, from Concordia University in 1978 and is fluently bilingual in French and English. Mr. Perkins is 60 years old.

Mr. Zapanta was appointed to the Company’s Board of Directors on December 15, 2012. Mr. Zapanta was born in Los Angeles, CA and received an Associate of Arts degree from East Los Angeles College. He completed a Bachelor of Arts degree in Industrial Psychology, a Master of Arts in Public Administration and studies for a PhD in International Political Economics all at the University of Southern California. He also graduated from the Harvard Graduate School of Business and the Inter-American Defense College, National War College, in Washington, D.C.. Mr. Zapanta was the first U.S. senior officer appointed to lead a Peacekeeping Mission to the United Nations Referendum on the Western Sahara to serve with the USSR, People’s Republic of China, French and British military officers as the Chief of Staff. General Zapanta’s military record includes the award of the Silver Star, five Bronze Stars for Valor, the Purple Heart and thirty other awards during the Vietnam War. He was also recently awarded the Joint Service Commendation Medal for Desert Shield/Desert Storm, Restore Hope in Somalia and Restore Democracy in Haiti. Mr. Zapanta was appointed by the Governor of Virginia to the rank of Major General and achieved one of the highest ranks of any officer of Mexican descent in the US army. In the private sector, he worked as an industrial engineer for Bethlehem Steel, and as Director of Governmental Affairs for Atlantic Richfield Company (“ARCO”) until his retirement in 1993 after 18 years of service as a senior executive. During his time with ARCO, he was responsible for negotiations with PEMEX on oil and gas matters and the copper mines owned by Anaconda Copper Mining company, an acquisition of ARCO. He was the company’s representative to local, state and federal governments on oil and gas, environmental and transportation-related regulation and public affairs. Mr. Zapanta has held numerous Presidential appointments, including a White House fellow in 1973-74 and Assistant Secretary of the Interior for Management and Administration from 1976-77. He was appointed by President Ronald Reagan to the U.S. State Department Advisory Committee on International Trade Technology and Development from 1981-1987, and by President George W. Bush as a private sector delegate to the U.S.-Mexico Partnership for Prosperity from 2001 to the present. U.S. Secretary of Defense Donald H. Rumsfeld appointed him to serve as Chairman of the Reserve Forces Policy Board from 2002-2004. Mr, Zapanta retired from ARCO on January 2, 1993 and began work with the US-Mexico Chamber of Commerce on January 2, 1993. Mr. Zapanta owns 100% of a private coporation called Planning Inc. He is presently the President and CEO of the United States-Mexico Chamber of Commerce and is responsible for operations in eight regional offices in the United States and nine in Mexico. Mr. Zapanta is a Director of Tyson Foods Inc. (TSN:NYQ). Mr. Zapanta is 72 years old.

No appointee for a director position has been found guilty of any civil regulatory or criminal offense or is currently the subject of any civil regulatory proceeding or any criminal proceeding.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires that the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent stockholders are required by regulation to furnish to the Company copies of all Section 16(s) forms they file.

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During the past two fiscal years as required under Section 16(a) Greg Bowes did not timely file a Form 3, Initial Statement of Beneficial Ownership and Form 4, Statement of Changes in Beneficial Ownership and Albert Zapanta did not timely file a Form 3, Initial Statement of Beneficial Ownership.

Conflicts of Interest

Members of the Company's management are associated with other firms involved in a range of business activities, particularly in the mineral exploration industry. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, it may affect the amount of time they can devote to the Company's affairs.

The Company's Board of Directors reviews all transactions whereby the Company seeks a merger with, or acquisition of, any entity in which any officer or director serves as an officer or director or in which they or their family members own or hold a controlling ownership interest. Gregory Bowes, CEO and a director of Mindesta, is a major shareholder of Nubian Gold Corporation and therefore the option agreement with Nubian represents a related party transaction. The transaction was approved by all of the independent directors of the Company with Mr. Bowes abstaining from voting. The independent committee approved the transaction following a review of, among other things:

1. A geological report by Mr. Tucker Barrie who visited the permits and who is a Qualified Person under NI 43-101.

2. A budget and work program proposed by Mr. Remi Bosc who visited the permits and is a Qualified Person under NI 43-101.

3. Similar joint venture agreements relating to early stage exploration projects in Africa.

The potential acquisition of the balance of Nubian’s interest in the permits would be subject to a fairness opinion and to a shareholder vote.

There can be no assurance that management will resolve all actual or potential conflicts of interest in favor of the Company.

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ITEM 11- EXECUTIVE COMPENSATION

The following table discloses all compensation received by the Company's Chief Executive Officer and Chief Financial Officer during the fiscal years ending December 31, 2012; 2011; and 2010. During this period no executive officer received annual salary and bonus payments from the Company in excess of $100,000. During the year ending December 31, 2012, 200,000 stock options were granted to the President and Chief Executive Officer of the Company.

                            Non-  
                            Equity  
                            Incentive  
                      Stock     Plan  
Name and Principal               Bonus     Awards     Compensation  
position   Year     Salary($)     ($)     ($)     ($)  
Greg Bowes   2012     0     0     13,005     0  
Greg Bowes   2011     7,634     0     0     0  
Greg Bowes   2010     50,000           75,000     0  

Northern Graphite had a management contract with Gregory Bowes, its CEO, whereby Mr. Bowes was paid a monthly retainer of CDN$12,500 from November 2009 to January 2011. Effective February 1, 2011, Mr. Bowes was paid an annual salary of CDN$200,000 by Northern, and ten percent of his annual salary was expensed through Mindesta for the first quarter of 2011. During the year ended December 31, 2012, no portion of Mr. Bowes’ salary was allocated to Mindesta. In 2010 Mr. Bowes was paid a cash bonus of CDN $12,000 and was granted an additional stock award of 125,000 common shares for his success in raising financing and turning the Company around.

GRANTS OF PLAN-BASED AWARDS

On March 15, 2012, the Company granted 650,000 options to directors, officers, and consultants. Each option entitles the holder to purchase one common share at an exercise price of $0.10 until March 15, 2017. The fair value of option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model. The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected volatility of 122%, risk-free interest rate 1.11%; and an expected life of up to 5 years.

The Company did not grant any Plan Based Awards during the fiscal year ended December 31, 2011.

The Company adopted SFAS 123 "Accounting for Stock-Based Compensation", effective April 1, 2007. Compensation cost for the Company's stock options had been determined in accordance with the fair value based method prescribed as SFAS 123. The fair value of option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model. The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Expected volatility of 86.74%, risk-free interest rate 4%; and an expected life of up to 4 years.

Using the Black-Scholes option pricing model, the Company had stock compensation expense for the year of $155,396.

Other than as disclosed above, no director or officer has been or was previously paid separate annual fees, meeting fees or any other form of compensation. Fees as outlined above to the officer listed above are the sum total of compensation paid during the year.

COMMITTEES OF THE BOARD OF DIRECTORS (as of December 31, 2012)

  1)

Audit Committee - Members are Douglas Perkins who acts as chairman, Campbell Birge and Albert Zapanta. Mr. Birge, Mr. Perkins and Mr. Zapanta are independent Directors of the Company.

     
  2)

Compensation and Nominating Committee - Members are Campbell Birge, Douglas Perkins, and Albert Zapanta. Mr. Birge, Mr. Perkins and Mr. Zapanta are independent Directors of the Company.

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Compensation Discussion and Analysis

The following Compensation Discussion and Analysis (CD&A) provides information on the compensation programs established for our "Named Executive Officers" during our fiscal year ended December 31, 2012. All information provided herein should be read in conjunction with the tables provided below.

The Compensation and Nomination Committee is comprised of Messrs. Birge, Perkins, and Zapanta. Mr. Birge is independent within the meaning of National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”). Mr. Bowes is a director and CEO/CFO of the Company and is not independent.

The Compensation and Nomination Committee oversees the remuneration, nomination and appointment policies and practices of the Company. The principal responsibilities of the Compensation and Nomination Committee include: (i) considering the Company’s overall remuneration strategy and, where information is available, verifying the appropriateness of existing remuneration levels using external sources for comparison; (ii) comparing the nature and amount of the Company’s directors’ and executive officers’ compensation to performance against goals set for the year while considering relevant comparative information, independent expert advice and the financial position of the Company; (iii) making recommendations to the Board of Directors in respect of director and executive officer remuneration matters with the overall objective of ensuring maximum shareholder benefit from the retention of high quality board and executive team members; (iv) considering nominees for independent directors of the Company; and (v) planning for the succession of directors and executive officers of the Company, including appointing, training and monitoring senior management to ensure that the Board of Directors and management have appropriate skill and experience.

The Board of Directors and the Compensation and Nomination Committee are responsible for establishing, implementing and monitoring the policies governing compensation for executives. Officers may be members of the Board of Directors and are able to vote on matters of compensation. During the year ended December 31, 2011 neither the Board nor the Compensation and Nomination Committee employed any outside consultants to assist in carrying out their responsibilities with respect to executive compensation, although they have access to general executive compensation information regarding both local and national industry compensation practices. In future periods the Company may participate in regional and national surveys that benchmark executive compensation by peer group factors such as company size, annual revenues, market capitalization and geographical location.

The executive employment market in general is very competitive due to the number of companies with whom we compete to attract and retain executive and other staff with the requisite skills and experience to carry out our strategy and to maintain compliance with multiple Federal and State regulatory agencies. Many of these companies have significantly greater economic resources than our own. The Board has recognized that compensation packages must be able to attract and retain highly talented individuals that are committed to the Company’s goals and objectives, without at this time paying cash salaries that are competitive with some peers that have greater economic resources. The Company’s compensation structure is weighted towards equity compensation in the form of stock awards and options to acquire common stock, which the Board believes motivates and encourages executives to pursue strategic opportunities while managing the risks involved in our current business stage, and aligns compensation incentives with value creation for our shareholders.

Components of Our Executive Compensation Program

The Company’s executive compensation program incorporates components we believe are necessary in order for the Company to provide a competitive compensation package relative to its peers and to provide an appropriate mix between short-term and long-term cash and non-cash compensation. Elements of the Company’s executive compensation are listed below:

Base Salary
Stock Awards
Stock Options
Other benefits available to all employees
Items specific to our President and Chief Executive Officer per an employment agreement

Base Salary: At present we do not have a salary structure for employees and Executives, and amounts are based on skill set, knowledge and responsibilities. Base salaries are established as necessary. During the year ended December 31, 2012 none of our Named Executive Officers received a salary increase.

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Stock Awards: A portion of compensation paid to our executives is equity based. We believe equity compensation helps align the interests of our executives with the interests of our shareholders. In that regard, our executives' compensation is subject to downside risk in the event that our common stock price decreases. In addition, we believe stock awards provide incentives to aid in the retention of key executives.

Other Benefits: Executive Officers and employees receive no other benefits.

Audit Committee
The Audit Committee is comprised of Messrs. Birge, Perkins, and Zapanta. The Audit Committee is compliant with Canada’s Multilateral Instrument 52-110 - Audit Committees (“MI 52-110”) because the majority of the members are independent. Mr. Birge, Mr. Perkins, and Mr. Zapanta are independent. Each member of the Audit Committee is financially literate within the meaning of MI 52-110.

The Company has adopted a Charter for its Audit Committee. The Audit Committee is a committee of the Board of Directors which assists the Board in overseeing the Corporation’s financial controls and reporting and in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the Corporation. The Audit Committee’s primary duties and responsibilities are to:
• Oversee: (i) the integrity of the Corporation’s financial statements; (ii) the Corporation’s compliance with legal and regulatory requirements with respect to financial controls and reporting; and (iii) the auditors’ qualifications and independence.
• Serve as an independent and objective party to monitor the Corporation’s financial reporting processes and internal control systems.
• Review and appraise the audit activities of the Corporation’s independent auditors.
• Provide open lines of communication among the independent auditors, financial and senior management and the Board of Directors for financial reporting and control matters.

Each member of the Company’s Audit Committee has adequate education and experience that is relevant to their performance as an Audit Committee member and, in particular, education and experience that have provided the member with: (a) an understanding of the accounting principles used by the Company to prepare its financial statements and the ability to assess the general application of those principles in connection with estimates, accruals and reserves; (b) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements or experience actively supervising individuals engaged in such activities; and (c) an understanding of internal controls and procedures for financial reporting. Mr. Perkins an experienced mining company executive who is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V). He is President & Director member of Jien Nunavik Mining Exploration Limited. Mr.Perkins is President and Director of 7264496 Canada Inc. through which he provided executive management services on a contract basis. From November, 2005 until February, 2010 he was Chief Executive Officer and Executive Director of GMA Resources Plc, an AIM listed company in London, United Kingdom. Mr. Perkins was Vice President and Chief Financial Officer of Orezone Resources Inc. (ORZ:TSX) from January, 2003 to October, 2005. He earned a Bachelor of Commerce degree, majoring in accounting, from Concordia University in 1978. These CEO and CFO positions with other publicly listed companies have provided Mr. Perkins with experience with financial statements and reporting requirements of public companies. Mr. Birge was the Chief Financial Officer and is the Secretary/Treasurer of Wind Works Power Corp (WWPW – OTC:BB). He was previously the President, Chief Executive Officer and a Director of Ammex Gold Mining Corp. (AMXG - OTC:BB), a publicly traded gold mining company, from December 2007 until September 2009. Prior to that, he was President, Chief Executive Officer and a Director of the Company (IDSM – OTC:BB) from October 2006 until April 2007. He served on the Advisory Board and as Vice President of Operations of the Trust for Sustainable Development and was Business and Operations Analyst – Southern Ontario for Bell Canada Mobile. Mr. Birge was an Associate Professor at United States International University (Mexico City Campus) and was twice elected to serve on the Academic Counsel as the Head of Graduate Business Studies. He is a consultant to public and private companies doing business in Canada, the United States and Mexico and is also a partner in a Honda car dealership. Mr. Birge attended Simon Fraser University (BA), the University of Calgary (B.Ed) and the United States International University (M.Sc.). Mr. Zapanta is presently the President and CEO of the United States-Mexico Chamber of Commerce and is responsible for operations in eight regional offices in the United States and nine in Mexico.. Mr. Zapanta is is a Director of Tyson Foods Inc. (TSN:NYQ). In these capacities, they have had experience preparing, analyzing or evaluating financial statements for public companies or large complex organizations or actively supervising individuals engaged in such activities, and have developed an understanding of the accounting principles used by the Company to prepare its financial statements and an understanding of internal controls and procedures for financial reporting.

Directors’ and Officers’ Liability Insurance
The Company carries directors’ and officers’ liability insurance but does not maintain any key man insurance.

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Reliance on Certain Exemptions
The Company is not relying upon any exemptions under MI 52-110.

Pre-approval Policy
The Company has not yet adopted any specific policies or procedures for the engagement of non-audit services. Such matters are the subject of review and pre-approval by the Audit Committee.

CORPORATE GOVERNANCE

The Company does not currently have a Corporate Governance Committee and therefore is not in compliance with Canada’s NP 58-201. It is the Company’s intention to form a Corporate Governance Committee and to pass a written mandate of the Board of Directors in compliance with NP 58-201.

The Corporate Governance Committee will oversee the Company’s approach to corporate governance matters. The principal responsibilities of the Corporate Governance Committee will include: (i) monitoring and overseeing the quality and effectiveness of the corporate governance practices and policies of the Company; (ii) adopting and implementing corporate communications policies and ensuring the effectiveness and integrity of communication and reporting to the Company’s shareholders and the public generally; and (iii) administering the Board of Directors’ relationship with the management of the Company.

The Board of Directors of the Company is comprised of four members. Mr. Birge, Mr. Perkins and Mr. Zapanta are independent. Mr. Bowes is a director and CEO/CFO of the Company and is not independent. Mr. Bowes is also a director of Mazorro Resources Ltd (TSXV), Mr. Birge is the Chief Financial Officer of Wind Works Power Corp., Mr. Perkins is President & CEO and Director of Legend Gold Corp. ( LGN:TSX.V)and Mr. Zapanta is is a Director of Tyson Foods Inc. (TSN:NYQ).

The Board of Directors held a number of formal meetings in 2011, and all directors were in attendance, and a number of resolutions of the Board of Directors were passed through the use of unanimous written consent resolutions.

Position Descriptions

The Board of Directors has not developed written position descriptions for the chair of each committee of the Board of Directors, and the Board of Directors and its Chief Executive Officer have not developed a written position description for the Chief Executive Officer. The Board of Directors and the Chief Executive Officer will consider the development of written position descriptions in the future, taking into consideration the size of the Company and its Board of Directors, the stage of the Company’s development and enabling the Board of Directors and its committees to operate in an efficient and flexible manner. In the meantime, the Board of Directors expects the members of the Board of Directors to provide leadership and to manage the Board of Directors and ensure that it carries out its duties and responsibilities, and the Chief Executive Officer reports to the Board of Directors. Similarly, the Board of Directors expects the members of each committee to provide leadership and to manage the committee and ensure that the committee carries out its duties and responsibilities.

Orientation and Continuing Education

The Company does not have a formal orientation and education program for new directors. The Company has not held a formal orientation for the members of its Board of Directors, but the members of the Board of Directors are aware of the Company and its operations, activities and plans throughout the course of their meetings and discussions. The Company will make directors aware of current disclosure, governance and reporting guidelines and regulations and directors are also encouraged to keep informed of new developments individually. Board members are also encouraged to communicate with management, auditors and technical consultants as required.

Ethical Business Conduct

The Company is committed to conducting its business in accordance with applicable laws, rules and regulations, and in accordance with industry standards of business ethics, and to full and accurate disclosure in compliance with applicable securities laws. In furtherance of the foregoing, the Company has adopted a written Code of Business Conduct and Ethics (the “Code”) which applies to all directors, officers and employees of the Company and sets forth specific policies to guide such individuals in the performance of their duties. The Company has also instituted a whistle blower policy and an insider trading policy.

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Under applicable corporate laws, any director or executive officer that has a material interest in a transaction or agreement that is being considered by the Company is required to declare a conflict of interest and is excluded from voting and from the decision making process with respect to that issue.

Other Board Committees

The Company has no current or proposed standing committees other than the Audit Committee and Nominating and Compensation Committee.

Assessments

The Board of Directors has not conducted any assessment of the Board of Directors, its committees or individual directors. The Company will consider conducting such assessments as and when appropriate. The Company has a relatively small Board of Directors which provides the opportunity for all directors to actively interact and to become familiar with one another. It is expected that any issues with respect to effectiveness and contribution would readily become apparent in this environment.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table shows the share ownership of officers, directors and 5% or greater shareholders as of March 7, 2013. There were 9,413,581 shares outstanding as at March XX, 2013 as well as the date hereof.

Name and Address* of Beneficial Owner Amount of Beneficial Ownership Percent of Ownership of Class

Campbell Birge, Director   402,250     4.3%  
Gregory Bowes, Director   575,000     6.1%  
Albert Zapanta, Director   1,000     0.0%  
Directors and officers as a Group   978,250     10.4%  

*Suite 201, 290 Picton Avenue, Ottawa, Ontario, Canada K1Z 8P8

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not Applicable.

(1) Audit Fees 2012: $55,232 2011: $61,902
(2) Audit-Related Fees:   $37,875   $40,292
(3) Tax Fees:   $17,357   $21,610

(4) All Other Fees:
included with registration statement.
(5)

  None   None

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PART IV

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES

  (1)

See attached Financial Statements.

     
  (2)

Not applicable.

     
  (3)

Exhibits filed or incorporated by reference with this annual report.


EXHIBIT NO.   DESCRIPTION
3.1   Articles of Incorporation (1)
3.2   Bylaws (2)
14.1   Code of Ethics (3)
16.1   Rotenberg and Company, LLP letter dated November 4, 2009 (4)
16.2   EFP Rotenberg, LLP letter dated March 4, 2010 (5)
31.1   Section 302 Certification (CEO)
31.2   Section 302 Certification (CFO)
32.1   Section 906 Certification (CEO)
32.2   Section 906 Certification (CFO)

  (1)

Incorporated by reference from the exhibits included with the Company's prior Report on Form 8K filed with the Securities and Exchange Commission, dated March 16, 2004.

     
  (2)

Incorporated by reference from the exhibits included with the Company's prior Report on Form 8K filed with the Securities and Exchange Commission, dated January 6, 2004.

     
  (3)

Incorporated by reference from the exhibits included with the Company's 8-K filed with the Securities and Exchange Commission, January 6, 2004

     
  (4)

Incorporated by reference from the exhibits included with the Company's 8-K filed with the Securities and Exchange Commission, November 9, 2009.

     
  (5)

Incorporated by reference from the exhibits included with the Company's 8-K filed with the Securities and Exchange Commission, March 5, 2010.

ITEM 16 - EXHIBITS

31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

   
31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

40


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 7, 2013 MINDESTA INC.  
     
By: /s/ Gregory Bowes  
  ---------------------------------  
  President and CEO  

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: March 7, 2013 MINDESTA INC.  
     
  By: /s/ Gregory Bowes  
  -----------------------------------------  
  Gregory Bowes, Chief Financial Officer  

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