Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This quarterly report contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States generally
accepted accounting principles. The following discussion should be read in
conjunction with our financial statements and the related notes that appear
elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
quarterly report, particularly in the section entitled "Risk Factors".
In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to "CDN$"
refer to Canadian dollars and all references to "common shares" refer to the
common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our",
the Company and "Wolverine" mean Wolverine Technologies Corp., unless
otherwise indicated.
Corporate History
Our company was incorporated in the State of Nevada on February
23, 2006 and is quoted on the OTQB under the symbol WOLV.
Our Current Business
On April 14, 2015 Wolverine entered into a Share Exchange and
Royalty Agreement (the Agreement) with Dr. David Chalk, hd.Tech (Chalk).
Under the terms of the Agreement, Wolverine will acquire a 25% interest in
ENIGMAMobil Inc.(Enigma) from Chalk for the purchase price of USD $3,000,000,
to be paid in shares of common stock of Wolverine at a deemed price of USD$0.01
per share (the Shares). Wolverine will also receive a 25% royalty of all gross
revenue received by Enigma from the sale of licenses of the ENIGMAMobil mobile
security app. The Agreement is subject to Enigma completing a financing of
USD$2,500,000 and Wolverine increasing its authorized capital of common stock to
allow for the issuance of the Shares. This agreement has not closed.
The purchase price is a negotiated value determined by
Wolverine and Enigma. Dr. David Chalk is a director of Wolverine and Enigma.
Wolverine and Enigma are currently working on arranging
financing in the amount of USD $2,500,000 that is required for the building of
the Enigma fully secure mobile wireless software application.
Information regarding Enigma
Enigma is a private corporation incorporated in the Province of
Alberta on September 6, 2013. Enigmas operations are based in Vancouver,
British Columbia.
Enigma will be designing and completing computer systems
security focused on mobile and transaction security markets. All third party
testing on the technology has been completed using the proprietary fully
patented fifth generation programming language (5GL) providing the only
real-time data in motion with cybersecurity capability and further adding
tremendous efficiency in Digital Process Management (DPM).
The Key for Enigma is the deployment of its fully secure mobile
smartphone software application for Apple iOS, Android and Blackberry operating
systems developed with the patented 5GL language capable of protecting against
unauthorized computer intrusion and fraud on wireless devices and mobile
smartphones. When complete, Enigma will be able to protect, the wireless
marketplace currently in excess of 7 billion devices. Overall mobile data
traffic is expected to grow to 24.3 exabytes per month by 2019, nearly a tenfold
increase over 2014. Mobil data traffic will grow at a CAGR of 57% from 2014 to
2019. (Figure 1 of the link below). The Enigma mobile security application will
be available to the marketplace for download within 10 months of receipt of
funding.
http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html
.
Risks and Uncertainties
Enigma has a limited operating history and has had no revenues
derived from its operations. Significant expenditures are required to complete
the development of its mobile wireless software application. There is no
assurance that Enigma will be able to raise the capital required for these
expenditures.
Enigma operates in a competitive environment where software is
subject to rapid technological changes and evolving industry standards. There is
no assurance that Enigma will be able to become and remain competitive in this
competitive environment.
The success of Enigma will be largely dependent upon the
performance of its management and key employees. Failure by Enigma to attract
and retain key employees with the necessary skills could have a materially
adverse effect on Enigmas growth and profitability. Currently Dr. David Chalk
is the only key employee.
Cash Requirements
There is limited historical financial information about us upon
which to base an evaluation of our performance. We are in the development stage
and have not generated any revenues from activities. We cannot guarantee we will
be successful in our business activities. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources, and possible cost overruns due to price and cost increases in
services.
Over the next twelve months we intend to use any funds that we
may have available to fund our Plan of Operation Not accounting for our working
capital deficit of $119,188
as of February 29, 2016, we require
additional funds of approximately $2,500,000 at a minimum to proceed with our
plan of operation over the next twelve months. As we do not have the funds
necessary to cover our projected operating expenses for the next twelve month
period, we will be required to raise additional funds through the issuance of
equity securities, through loans or through debt financing. There can be no
assurance that we will be successful in raising the required capital or that
actual cash requirements will not exceed our estimates. We intend to fulfill any
additional cash requirement through the sale of our equity securities.
Our auditors have issued a going concern opinion for our year
ended May 31, 2015. This means that there is substantial doubt that we can
continue as an on-going business for the next twelve months unless we obtain
additional capital to pay our bills. This is because we have not generated any
revenues and no revenues are anticipated. As at February 29, 2016 we had cash in
the amount of $139 and a working capital deficiency in the amount of $119,188. As of February 29, 2016, we do not have
sufficient working capital to enable us to carry out our stated plan of
operation for the next twelve months.
Plan of Operation
The Plan of Operation for the next 12 months is to raise
$2,500,000 for the building of Enigmas fully secure mobile wireless software
application for Apple iOS, Android and Blackberry developed through a full
patented language technology with the capability to protect against unauthorized
computer intrusion and fraud.
As at February 29, 2016, we had a cash balance of $139. We will
need to raise additional financing to fund our plan of operation over the next
12 months.
The continuation of our business is dependent upon obtaining
further financing, and achieving a profitable level of operations. The issuance
of additional equity securities by us could result in a significant dilution in
the equity interests of our current stockholders. Obtaining commercial loans,
assuming those loans would be available, will increase our liabilities and
future cash commitments.
There are no assurances that we will be able to obtain further
funds required for our continued operations. As noted herein, we are pursuing
various financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligations as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the
twelve months ending February 28, 2017.
Corporate Offices
We do not own any real property. Our principal business office
is located at #55-11020 Williams Road, Richmond, British Columbia, Canada, V7A
1X8 at a cost of CDN$1,000 per month. We believe that our current lease
arrangements provide adequate space for our foreseeable future needs.
Employees
Currently we do not have any employees. The Company utilizes
consultants for the management, regulatory, administration, 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.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles used in the United
States. Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our financial statements is critical to an understanding of our financial
statements.
Mineral Property Costs
Our company has been in the exploration stage since inception
and has not yet realized any revenues from its operations. We are primarily
engaged in the acquisition and exploration of mineral exploration properties. We
expense mineral property exploration costs as they are incurred. Mineral
property acquisition costs are initially capitalized, when incurred. Our company
assesses the carrying costs for impairment under ASC 360, Property, Plant and
Equipment
at each fiscal quarter end. An impairment is recognized when
the sum of the expected undiscounted future cash flows is less than the carrying
amount of the mineral property. Impairment losses, if any, are measured as the
excess of the carrying amount of the mineral property over its estimated fair
value. When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves, the costs
then incurred to develop such property, are capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
proven and probable reserves. If mineral properties are subsequently abandoned
or impaired, any capitalized costs will be charged to operations.
Long-Lived Assets
In accordance with ASC 360, Property, Plant and Equipment,
the Company tests long-lived assets or asset groups for recoverability when
events or changes in circumstances indicate that their carrying amount may not
be recoverable. Circumstances which could trigger a review include, but are not
limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end of its estimated useful
life. Recoverability is assessed based on the carrying amount of the asset and
its fair value which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount is not recoverable and
exceeds fair value.
Stock-based Compensation
The Company records stock-based compensation in accordance with
ASC 718, Compensation - Stock Compensation, using the fair value method. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable.
Results of Operations
Three Months Ended February 29, 2016 and February 28,
2015
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended February
29, 2016 which are included herein.
Three month summary ending February 29, 2016 and February
28, 2015
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
47,174
|
|
$
|
39,424
|
|
Net Loss
|
$
|
(46,948
|
)
|
$
|
(39,424
|
)
|
Nine Months Ended February 29, 2016 and February 28, 2015
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended February
29, 2016 which are included herein.
Nine month summary ending February 29, 2016 and February 28,
2015
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
277,871
|
|
$
|
367,540
|
|
Net Loss
|
$
|
(280,645
|
)
|
$
|
(367,540
|
)
|
Expenses
Our operating expenses for the three month periods ended
February 29, 2016 and February 28, 2015 are outlined in the table below:
|
|
Three
Months Ended
|
|
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Foreign exchange loss (gain)
|
$
|
508
|
|
$
|
(21,904
|
)
|
General and administrative
|
$
|
46,666
|
|
$
|
61,328
|
|
Our operating expenses for the nine month periods ended
February 29, 2016 and February 28, 2015 are outlined in the table below:
|
|
Nine Months
Ended
|
|
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Foreign exchange loss (gain)
|
$
|
3,267
|
|
$
|
(1,854
|
)
|
General and administrative
|
$
|
272,594
|
|
$
|
168,144
|
|
Impairment of mineral rights
|
$
|
-
|
|
$
|
201,250
|
|
Mineral Exploration Costs
|
$
|
2,010
|
|
$
|
-
|
|
Revenue
We have not earned any revenues since our inception and we do
not anticipate earning revenues in the upcoming quarter.
Liquidity and Financial Condition
Working Capital
|
|
As At
|
|
|
As At
|
|
|
|
February 29,
|
|
|
May 31,
|
|
|
|
2016
|
|
|
2015
|
|
Current assets
|
$
|
19,829
|
|
$
|
98,920
|
|
Current liabilities
|
|
139,017
|
|
|
129,712
|
|
Working capital (deficit)
|
$
|
(119,188
|
)
|
$
|
(30,792
|
)
|
Cash Flows
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
February 29,
|
|
|
February 28, 2015
|
|
|
|
2016
|
|
|
|
|
Net Cash Used in Operating
Activities
|
$
|
(213,324
|
)
|
$
|
(13,563
|
)
|
Net Cash Used in Investing Activities
|
|
(14,780
|
)
|
|
-
|
|
Net Cash Provided by
Financing Activities
|
|
138,309
|
|
|
21,447
|
|
Net increase (decrease) in cash during period
|
$
|
(89,795
|
)
|
$
|
7,884
|
|
Operating Activities
Net cash used in operating activities during the nine months
ended February 29, 2016, was $213,324 compared to $13,563 during the nine months
ended February 28, 2015.
Investing Activities
During the nine months ended February 29, 2016, the Company
advanced as loans a total of $14,780 (Cdn$20,000) to Enigma, a company
controlled by a director of the Company and with whom the Company has entered
into a Share Exchange and Royalty Agreement. The loans bear interest at 5% per
annum commencing December 7, 2015, are unsecured and due on December 7, 2016.
Refer to Note 7(b).The loan was advanced in order to assist Enigma in securing
its rights to the underlying technology, and thereby allow it to fulfil its
obligations to Wolverine.
Financing Activities
During the nine months ended February 29, 2016, we received
$138,909 through the issuance of shares/shares subscribed in private placements.
In the comparable period, the Company received $21,447 through the issuance of
shares/shares subscribed in private placements.
Contractual Obligations
As a smaller reporting company, we are not required to
provide tabular disclosure obligations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.
Recent Accounting Standards
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.