Item
1.
Business
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States generally accepted
accounting principles.
In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States Dollars and all references to common
shares refer to the common shares in our capital stock.
As used in this annual report, the terms we, us, our
company, Wolverine, mean Wolverine Exploration Inc., a Nevada corporation,
unless otherwise indicated.
Corporate History
Our company was incorporated in the State of Nevada on February
23, 2006 and is quoted on the OTCQB under the symbol WOLV.
On February 28, 2007, we entered into a vend-in agreement with
Shenin Resources Inc. (Shenin), a private Canadian corporation, for the
purchase of a 90% interest certain mineral claims located in Labrador Canada.
The purchase price paid to Shenin was $374,000 satisfied by the issuance of
34,000,000 shares of our common stock at a fair value of $0.01 per share and a
note payable of $34,000. Under the terms of the vend-in agreement we were
required to incur the following expenditures on the claims: (i) CDN $150,000 on
or before March 1, 2008; (ii) CDN $200,000 on or before March 1, 2009, and (iii)
CDN $250,000 on or before March 1, 2010; provided that (iv) any excess amount
spent in one year may be carried forward and applied towards fulfillment of the
expenditure required in the later year. Shenin has also granted our company a
first right of refusal to purchase a 90% interest in all further property in
Labrador Canada that Shenin may obtain an interest in from time to time.
On August 15, 2007, we registered our company as an
extra-provincially registered company in the Province of Newfoundland and
Labrador for the purpose of being able to register the Claims in the name of our
company and for the purpose of being able to conduct our business in the
Province of Newfoundland and Labrador.
On August 27, 2009 we signed an amending agreement with Shenin.
Which waives all of the remaining work commitments required under the vend-in
agreement subject to us incurring sufficient exploration expenditures on the
claims to keep them in good standing with the Province of Newfoundland and
Labrador.
Wolverine now holds a 90% interest and Shenin holds a 10%
interest in a total of 113 claims.
On June 11, 2013 Wolverine entered into an Agreement (the
Agreement) with 0969015 B.C. Ltd (0969015) to acquire the Eureka Project
Claims located in the Cariboo Mining District of British Columbia. Under the
terms of the Agreement Wolverine issued 35,000,000 shares of common stock to
0969015 at a fair value of $0.01 per share as full consideration for the
acquisition of the Eureka Project Claims.
4
On September 5, 2013 Wolverine entered into a Letter of Intent
(LOI) with the cyber security corporation ENIGMAMobil Inc.(Enigma) to
acquire a 25% interest in Enigma for a cash payment of $10,000,000. Under the
terms of the LOI Wolverine will have 120 days to raise the financing and enter
into a formal purchase agreement with Enigma.
Our Current Business
We are an exploration stage company engaged in the business of
acquisition and exploration of base and precious metal mineral properties. Our
current exploration is focused on mineral properties located in British Columbia
and Labrador, Canada. We have not yet determined whether the Labrador Claims or
the Eureka Project Claims contain mineral reserves that are economically
recoverable.
Claims Located in Labrador, Canada
Location and Means of Access to the Claims
The Claims (the Labrador Claims) are located about 120
kilometres (75 miles) west of Goose Bay, Labrador, a small town of 9,000 people
on the Atlantic Coast of northern Canada. It takes approximately one and a half
to two hours to drive to the Labrador Claims from Goose Bay.
The Labrador Claims lie within NTS map sheets 13E/01 and 13F/04
and extends approximately from 53
o
11 08 N latitude and
62
o
11 56 W longitude to 53
o
06 34 N latitude and
61
o
57 02 W longitude.
Goose Bay features an international airport. From there, the
Labrador Claims can be accessed directly from the Trans-Labrador Highway. The
Labrador Claims are easily accessible by the Trans-Labrador Highway, which runs
through the central portion of the Labrador Claims. The Trans-Labrador Highway
is a well maintained Provincial Highway with a gravel surface. There are no gas
stations between Goose Bay and Churchill Falls, the next major community located
290 kilometres (180 miles) to the west of Goose Bay and 160 kilometres (105
miles) to the west of the Labrador Claims.
Access to the Labrador Claims is possible for most of the year
given the proximity to Goose Bay and the fact that the highway is well
maintained. Airborne geophysical surveys are best performed either in late
winter (March-April) or during the summer (June-August). Ground geophysical
surveys should be scheduled to avoid freeze-up (November-December) and breakup
(late April to early June). Ground geological surveys are best conducted with no
snow cover (mid June to mid November).
5
Figure 1. The Claims are located approximately 120
kilometers (75 miles) west of Goose Bay, Labrador.
Description of Labrador Claims
The Labrador Claims are unencumbered and in good standing and
there are no third party conditions which affect the Labrador Claims other than
conditions defined by the Province of Newfoundland and Labrador described below.
The Labrador Claims together make up an aggregate area of 2,825 hectares. We
have no insurance covering the Labrador Claims. Management believes that no
insurance is necessary since the Labrador Claims are unimproved and contain no
buildings or improvements.
The Labrador Claims consist of a total of 113 mineral claims
covering 5 separate licenses as described in Table 1 below. A layout of the
Labrador Claims is shown in Figure 2 below.
Table 1.
Summary of the Claims.
|
Number
|
# of Claims
|
NTS
|
Area
|
Good to Date
|
|
|
|
(hectares)
|
|
012425M
|
82
|
13E/01
|
2,050
|
08-18-2016
|
013472M
|
6
|
13F/04
|
150
|
05-17-2017
|
017119M
|
6
|
13E/01
|
150
|
01-28-2015
|
017355M
|
9
|
13E/01
|
225
|
03-01-2015
|
017584M
|
10
|
13F/04
|
250
|
05-03-2015
|
6
There is no assurance that a commercially viable mineral
deposit exists on the Labrador Claims. Further exploration will be required
before an evaluation as to the economic feasibility of the Labrador Claims is
determined. Our consulting geophysicist has written a report and provided us
with recommendations of how we should explore the Labrador Claims. Until
management can validate otherwise, the Labrador Claims are without known
reserves.
Conditions to Retain Title to the Labrador Claims
The Labrador Claims have varying expiry dates. In order to
maintain the Labrador Claims in good standing it will be necessary for us to
coordinate an agent to perform and record valid exploration work with value of
CDN$200 per claim in anniversary year 1, CDN$250 per claim in anniversary year
2, CDN$300 per claim in anniversary year 3, CDN$350 per claim in anniversary
year 4, CDN$400 per claim in anniversary year 5, CDN$600 per claim in
anniversary years six to ten inclusive, CDN$900 per claim in anniversary years
11 to 15 inclusive and CDN$1,200 per claim in anniversary years 16 to 20
inclusive. Failure to perform and record valid exploration work on the
anniversary dates will result in forfeiture of title to the Labrador Claims.
History of Labrador and the Labrador Claims
According to the report prepared by our consulting
geophysicist, the geologic setting is based on information available from the
Geological Survey of Canada (DNR Open File 013F/0055) and the Government of
Newfoundland and Labrador (Open File 013F/0061). The regional geology as
described by both Government Reports contains very little detail because the
Trans-Labrador Highway was under construction during much of the mapping
initiative, opening in 1992.
Also, the area has seen only limited geologic mapping on a
regional scale, in part due to the remoteness of the area and the timing of the
Federal and Provincial mapping initiatives that preceded construction of the
Trans-Labrador Highway. The mapped geology within the area is part of a regional
1:500,000 compilation undertaken by the Newfoundland and Labrador Provincial
Government during the early 1990s. The survey area is located outside of the
area of detailed mapping, in which case geologic mapping has been taken from
previous publications, most notably a Federal Government regional mapping program from
1990-1994. During the period 1990 to 1994 the area was regionally mapped by the
Geological Survey of Canada and by the Mines and Energy Branch of the
Newfoundland and Labrador Government. Geologic mapping was performed on a very
regional scale, due in part to the remoteness of the area (away from the
Trans-Labrador Highway) and the lack of outcrop. In summary there is very little
geological mapping within the survey area and there has never been a detailed
mapping program.
7
Exploration History
In the fall of 2007 Wolverine completed an airborne survey of
the Labrador Claims. The airborne survey identified 8 conductive targets that
warrant ground follow-up.
In the fall of 2009 Wolverine carried out geological
reconnaissance along with prospecting and sampling on three of its eleven
Labrador licenses. Some, but not all of the known mineralized zones were sampled
as this was more of a reconnaissance exercise until a more systematic program is
put in place. In addition, to the usual base metal sampling, scintillometer
surveys were done on the exposed rock cuts along the highway and selected areas
of the southern portions of the three licenses.
Work on the Property during June of 2010 consisted of
prospecting, sampling and geological reconnaissance on and around
electro-magnetic and radiometric anomalies that were identified during the 2007
airborne survey. Earlier sampling on rock cuts along the highway had shown
values in Cu and Au that warranted further exploration.
Continued prospecting during July 2010 on other areas of the
property has revealed additional outcrops containing malachite alteration on the
western end of the property near anomaly number one.
In August and September 2010 a follow up program of diamond
drilling was contracted to an Ontario Drilling Company and a total of 522.5
meters was drilled in 6 holes.
In November and December 2010 an induced polarization (IP)
Survey was completed on the Property. The survey was conducted on two grids
located on the Property. Grid 1 consisted of 19, 1.6 km lines oriented at 360
degrees. 5 of those lines were cut short (1.2 km) due to a large lake that was
not completely frozen at the time of the survey and was considered unsafe. A 1.8
km base line oriented at 090 Degrees crossed the centre of the grid. Grid 2
consisted of 13 lines that varied from ~750 m, in the south to 1500 m in the
north. The lines were oriented at 090 degrees with a baseline 1.2 km long,
oriented at 360 Degrees.
In June of 2011 Wolverine conducted a prospecting program which
marked the eleven drill locations in the anomalous areas which were identified
by the Induced Polarization Survey completed in late 2010.
In the fall of 2011 a follow up program of diamond drilling was
contracted to an Ontario Drilling Company and a total of 271 meters was drilled
in 4 holes.
In the fall of 2012 a follow up program of diamond drilling
consisting of two holes was drilled byInnu-Cartwright Drilling Limited
Partnership.
Exploration Results
Disseminated mineralization consisting mainly of pyrite,
pyrrhotite and chalcopyrite were detected in several areas of the property.
Mineralization was first noted in roadside rock cuts, samples were taken but the
GPS location was not recorded as none were available, only a generalized
location within several metres was given to the geologist.
After Wolverine acquired the property an airborne survey was
completed and several anomalies were detected. Wolverine then engaged a
geologist to supervise the prospecting, trenching and drilling program.
Prospecting revealed other zones of disseminated mineralization, mainly in rock
cuts along the highway which had the best exposure as most of the property is
covered by marsh and forested overburden.
Diamond drilling on two airborne anomalous areas revealed
disseminated mineralization in four of the six drill holes.
8
Wolverine then conducted an induced polarization (IP) survey on
two selected areas that detected 23 anomalous zones. Plans are underway to
conduct an additional drill program to test the strongest areas later this
spring.
Of the four holes drilled in the fall of 2011, two had minor
indications of sulphide mineralization with magnetite while one contained
disseminated mineralization consisting of blebs of chalcopyrite and pyrite for
approximately 37 metres (121 feet).
The two anomalies drilled in the fall of 2012 at approximately
50 degree angles did not intersect sufficient amounts of mineralization to
account for the magnitude of that picked up by the IP survey. There are very
minor amounts of pyrite and the rock is slightly magnetic with only background
radioactivity.
Quality Assurance/Quality Control
All drill core samples were cut lengthwise with a rock saw.
Half of the sample was retained for future reference and the other was sent by
Canada Post, insured and delivered to the Laboratory. Sample sections were
measured by depth markers in the core boxes and confirmed by the geologist.
Results were mailed back to the geologist and confirmed by the chief chemists
signature. A portion of the laboratory sample was retained at the laboratory for
a period of one year.
Surface bedrock sample sites were selected by geologists and
prospectors. GPS readings recorded the locations. Samples were stored in new
industrial plastic sample bags with the sample number which was also recorded in
note books. Samples were again sent by Canada Post with the same procedure noted
above.
Present Condition of the Labrador Claims
The mineralization found to date on the Labrador Claims
consists primarily of copper and gold mineralization in sulphide with associated
pyrite (a non-economic sulphide mineral). There are also a number of malachite
veins (and malachite stained outcrops).
The country rocks have been identified as meta-sedimentary
gneiss. Locally gabbros and diorites have been identified by surface
prospecting.
Based on the mineralization and the known geologic rock types,
there appear to be three possible deposit types that could host mineralization
within the Labrador Claims; 1) porphyry copper-gold in sulphide, 2) volcanogenic
(Cu-Pb-Zn) massive sulphide, or 3) magmatic nickel-copper sulphide.
Copper-gold (Cu-Au) deposits occur within sedimentary rocks
when a stock intrudes into the sediments and heats up the ground water. The
heated fluids pick up copper and other metals as they percolate through
fractures opened up within the sediments. Mineralization is mostly disseminated,
but significant veins of chalcopyrite, rich in gold, are also present. The
presence of chalcopyrite in meta-sediment and malachite staining are excellent
indicators for a copper-gold system.
VMS deposits are commonly formed by deposition of hot metals
into seawater from volcanic vents on the seafloor. The main metals include
copper, zinc, lead, gold and silver. Within the Labrador Claims there are no
mapped volcanic rocks, although the known mineralization has been found within
gabbro and diorite.
Magmatic nickel-copper sulphide deposits are hosted in mafic to
ultramafic rocks such as gabbro, norite, and troctolite. Other rock types
commonly associated with these host rocks are diorites and anorthosites. Within
the Labrador Claims chalcopyrite mineralization was identified in a gabbro and
separately associated with a diorite dyke.
The Labrador Claims are almost completely covered by overburden
and tree cover. Rock outcrops are best observed along the highway where they
have been uncovered.
The climate within the area is typically northern with short
hot summers and long cold winters. Winter temperatures can range from
-15
o
C to -35
o
C and occasionally fall to below
-42
o
C.
9
There is no equipment, infrastructure or electricity currently
on the Labrador Claims.
There have been no previous airborne surveys in this area that
are within 35 kilometers (22 miles) of the Labrador Claims. The area would have
been covered as part of the Federal Government regional airborne magnetic
survey, but this survey would not have the sufficient resolution to identify
magnetic units less than 1 kilometer in size and could not detect any conductive
mineralization.
Geology of the Labrador Claims
Geologically the area is mapped as early to late Proterozoic
meta-sediments that have been metamorphosed to gneisses. Major gabbroic and
anorthositic intrusives have intruded the gneisses several kilometers to the
east and local gabbros and diorites occur throughout the area along with several
quartz veins. Large tourmaline crystals have also been identified on the
Labrador Claims. The area has little outcrop and is covered by overburden,
generally sand and gravel. Spruces trees are abundant but are not very tall.
The presence of several copper showings and malachite staining
in the limited outcrop suggests that a mineralizing event of copper and gold has
intruded into the meta-sedimentary rocks. The nature of the mineralization is
likely to be copper veins and disseminations with associated gold. It is also
possible that magmatic nickel and copper mineralization could be present with
associated platinum group elements within gabbros.
The Eureka Project Claims
The Eureka Project Claims, with a total area of 3,910.67
hectares (9,663.5 acres), are immediately adjacent to the Wingdam Project. The
property is located along the north and south banks of Lightning Creek, spanning
south to Sovereign Creek at its confluence with Atis Creek. Highway 26 runs
along the northeastern boundary and the Swift River forest service road runs
through the property. All areas of the property are accessible by forest service
roads. The property is located 30 km east of Quesnel in Central British
Columbia. Access is via the all-weather Barkerville Highway No. 26, then by
logging and mining roads through the property.
Competition
The mining industry is intensely competitive. We compete with
numerous individuals and companies, including many major mining companies, which
have substantially greater technical, financial and operational resources and
staffs. Accordingly, there is a high degree of competition for access to funds.
There are other competitors that have operations in the area and the presence of
these competitors could adversely affect our ability to compete for financing
and obtain the service providers, staff or equipment necessary for the
exploration and exploitation of our properties.
Compliance with Government Regulation
Mining operations and exploration activities are subject to
various national, state, provincial and local laws and regulations in Canada and
the United States, as well as other jurisdictions, which govern prospecting,
development, mining, production, exports, taxes, labor standards, occupational
health, waste disposal, protection of the environment, mine safety, hazardous
substances and other matters.
Wolverine obtained a permit from the Government of Newfoundland
for the 2012 exploration program. The provisions of this permit included 24 hour
prior notification of mobilizing equipment to the project area; two day prior
notification of completion of the exploration activity; a brief update of the
progress of the exploration program when it is completed as well as complying
with the Mineral Regulations of the Province of Newfoundland and Labrador.
We believe that we are and will continue to be in compliance in
all material respects with applicable statutes and the regulations passed in
Canada and the United States. There are no current orders or directions relating
to our company with respect to the foregoing laws and regulations.
10
Employees
Currently we do not have any employees. The Company utilizes
consultants for the management, regulatory, administrative, investor relations
and geological functions of the Company. We do not expect any material changes
in the number of employees over the next 12 month period. We will continue to
retain consultants as required.
Going Concern
We anticipate that additional funding will be required in the
form of equity financing from the sale of our common stock. At this time, we
cannot provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock or through a loan from our
directors to meet our obligations over the next twelve months. We do not have
any arrangements in place for any future equity financing.
Subsidiaries
We do not have any subsidiaries.
Intellectual Property
We do not own, either legally or beneficially, any patent or
trademark.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our
stockholders but will voluntarily send an annual report, together with our
annual audited financial statements upon request. We are required to file
annual, quarterly and current reports, proxy statements, and other information
with the Securities and Exchange Commission. Our Securities and Exchange
Commission filings are available to the public over the Internet at the SECs
website at
http://www.sec.gov.
The public may read and copy any materials filed by us with the
SEC at the SECs Public Reference Room at 100 F Street, NE, Washington DC 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The Internet address of the site is
http://www.sec.gov.
Item
1A. Risk Factors
Much of the information included in this annual report includes
or is based upon estimates, projections or other forward looking statements.
Such forward looking statements include any projections and estimates made by us
and our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other forward looking
statements involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other forward looking statements.
If we do not obtain additional financing, the business plan
will fail.
Our current operating funds are insufficient to complete the
next phases of our proposed exploration program on our Labrador mineral claims.
We will need to obtain additional financing in order to complete our business
plan and our proposed exploration program. Our business plan calls for
significant expenses in connection with the exploration of the Labrador Claims.
We have not made arrangements to secure any additional financing.
11
Because we have only recently commenced business operations,
we face a high risk of business failure and this could result in a total loss of
your investment.
We recently begun the initial stages of exploration of the
Labrador Claims, and thus has no way to evaluate the likelihood whether our
company will be able to operate our business successfully. Our Company was
incorporated on February 23, 2006 and to date we have been involved primarily in
organizational activities, obtaining financing and preliminary exploration of
the Labrador Claims. We have not earned any revenues and we have never achieved
profitability as of the date of this annual report. Potential investors should
be aware of the difficulties normally encountered by new mineral exploration
companies and the high rate of failure of such enterprises. The likelihood of
success must be considered in the light of problems, expenses, difficulties,
complications and delays encountered in connection with the exploration of the
mineral properties that our company plans to undertake. These potential problems
include, but are not limited to, unanticipated problems relating to exploration
and additional costs and expenses that may exceed current estimates. We have no
history upon which to base any assumption as to the likelihood that its business
will prove successful, and we can provide no assurance to investors that our
company will generate any operating revenues or ever achieve profitable
operations. If our company is unsuccessful in addressing these risks its
business will likely fail and you will lose your entire investment in this
offering.
Because our company has only recently commenced business
operations, we expect to incur operating losses for the foreseeable future.
Our company has never earned any revenue and our company has
never been profitable. Prior to completing exploration on the Labrador Claims,
we may incur increased operating expenses without realizing any revenues from
the Labrador Claims, this could cause our company to fail and you will lose your
entire investment in this offering.
If we do not find a joint venture partner for the continued
development of our mineral claims, we may not be able to advance exploration
work.
If the results of the exploration program are successful, we
may try to enter into a joint venture agreement with a partner for the further
exploration and possible production of the Labrador Claims. Our company would
face competition from other junior mineral resource exploration companies who
have properties that they deem to be attractive in terms of potential return and
investment cost. In addition, if our company entered into a joint venture
agreement, our company would likely assign a percentage of our interest in the
Labrador Claims to the joint venture partner. If our company is unable to enter
into a joint venture agreement with a partner, our company may fail and you may
lose your entire investment in this offering.
Because of the speculative nature of mineral property
exploration, there is substantial risk that no commercially viable deposits will
be found and our business will fail.
Exploration for base and precious metals is a speculative
venture involving substantial risk. We can provide investors with no assurance
that the Labrador Claims contain commercially viable mineral deposits. The
exploration program that our company will conduct on the Labrador Claims may not
result in the discovery of commercial viable mineral deposits. Problems such as
unusual and unexpected rock formations and other conditions are involved in base
and precious metal exploration and often result in unsuccessful exploration
efforts. In such a case, we may be unable to complete our business plan and you
could lose your entire investment.
Because of the inherent dangers involved in base and
precious metal exploration, there is a risk that our company may incur liability
or damages as we conducts our business.
The search for base and precious metals involves numerous
hazards. As a result, our company may become subject to liability for such
hazards, including pollution, cave-ins and other hazards against which we cannot
insure or against which we may elect not to insure. Our company currently has no
such insurance nor do we expect to get such insurance in the foreseeable future.
If a hazard were to occur, the costs of rectifying the hazard may exceed our
asset value and cause our company to liquidate all of our assets resulting in
the loss of your entire investment.
12
Because access to our companys mineral claims is often
restricted by inclement weather, we will be delayed in exploration and any
future mining efforts.
Access to the Labrador mineral claims is restricted to the
period between May and November of each year due to snow in the area. As a
result, any attempts to visit, test, or explore the property are largely limited
to these few months of the year when weather permits such activities. These
limitations can result in significant delays in exploration efforts, as well as
mining and production in the event that commercial amounts of minerals are
found. Such delays can result in our companys inability to meet deadlines for
exploration expenditures as defined by the Province of Newfoundland and
Labrador. This could cause the business venture to fail and the loss of your
entire investment unless our company can meet the deadlines.
As our company undertakes exploration of the Labrador
Claims, we will be subject to compliance with government regulation that may
increase the anticipated time and cost of its exploration program.
There are several governmental regulations that materially
restrict the exploration of minerals. Our company will be subject to the mining
laws and regulations as contained in the Mineral Act of the Province of
Newfoundland and Labrador as we carry out our exploration program. We may be
required to obtain work permits, post bonds and perform remediation work for any
physical disturbance to the land in order to comply with these regulations.
While our companys planned exploration program budgets for regulatory
compliance, there is a risk that new regulations could increase our time and
costs of doing business and prevent our company from carrying out our
exploration program.
Because market factors in the mining business are out of our
control, our company may not be able to market any minerals that may be found.
The mining industry, in general, is intensely competitive and
we can provide no assurance to investors even if minerals are discovered that a
ready market will exist from the sale of any base or precious metals found.
Numerous factors beyond our control may affect the marketability of base or
precious metals. These factors include market fluctuations, the proximity and
capacity of natural resource markets and processing equipment, government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in our company not receiving an
adequate return on invested capital and you may lose your entire investment.
Because our company holds a significant portion of our cash
reserves in United States dollars, we may experience weakened purchasing power
in Canadian dollar terms.
Our company holds a significant portion of our cash reserves in
United States dollars. Due to foreign exchange rate fluctuations, the value of
these United States dollar reserves can result in both translation gains or
losses in Canadian dollar terms. If there was to be a significant decline in the
United States dollar versus the Canadian Dollar, our US dollar purchasing power
in Canadian dollars would also significantly decline. Our company has not
entered into derivative instruments to offset the impact of foreign exchange
fluctuations.
Our auditors have expressed substantial doubt about our
companys ability to continue as a going concern.
The accompanying financial statements have been prepared
assuming that our company will continue as a going concern. As discussed in Note
1 to the May 31, 2013 financial statements, our company was incorporated on
February 23, 2006, and has never generated any revenue, has a working capital
deficiency, and has incurred operating losses since inception. As a result, our
companys auditor has expressed substantial doubt about the ability of our
company to continue as a going concern. Continued operations are dependent on
our ability to complete equity or debt financings or generate profitable
operations. Such financings may not be available or may not be available on
reasonable terms. Our financial statements do not include any adjustments that
may result from the outcome of this uncertainty.
13
Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations which may limit a stockholders
ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.