The accompanying notes are an integral part of these interim condensed financial statements
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
1. ORGANIZATION
The Company, Gold Lakes Corp., was incorporated under the laws of the State of Nevada on January 18, 2007 with the authorized capital stock of 300,000,000 shares at $0.001 par value. On April 30, 2008, the Secretary of State for Nevada approved an amendment to the Articles of Incorporation where the total number of shares of common stock was increased to 500,000,000 shares of common stock with a par value of $0.001 per share. The Company was organized for the purpose of acquiring and developing mineral properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Basic and Diluted Net Income (loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes anti-dilutive and then the basic and diluted per share amounts are the same. As of April 30, 2016 and December 31, 2015, the Company has 80,287,932 and 115,225,525, respectively, of common stock equivalents outstanding, calculated using the if-converted method.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Foreign Currency Translations
Part of the transactions of the Company were completed in Canadian dollars and have been translated to US dollars as incurred, at the exchange rate in effect at the time, and therefore, no gain or loss from the translation is recognized. The functional currency is US dollars.
Revenue Recognition
Revenue is recognized on the sale and delivery of a product or the completion of a service provided.
Advertising and Market Development
The Company expenses advertising and market development costs as incurred.
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Instruments
The carrying amounts of financial instruments are considered by management to be their fair value due to their short term maturities.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with general accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Impairment of Long-lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Mineral Property Acquisition and Exploration Costs
Mineral property acquisition costs are initially capitalized when incurred. These costs are then assessed for impairment when factors are present to indicate the carrying costs may not be recoverable. Mineral exploration costs are expensed when incurred.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Environmental Requirements
At the report date environmental requirements related to the mineral claim acquired are unknown and therefore any estimate of any future cost cannot be made.
Reclassifications
Certain prior period amounts have been reclassified to conform with current period presentation.
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as "Development Stage Entities" (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard.
In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction-and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. Public entities are required to adopt the revenue recognition standard for reporting periods beginning after December 15, 2016, and interim and annual reporting periods thereafter. Early adoption is not permitted for public entities. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.
In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award's grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the consolidated financial statements.
We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
3. LOAN RECEIVABLE
On March 11, 2014, the Company agreed to a Loan document whereby it would lend $25,000 at no interest to an unrelated third party. As of April 30, 2016, $14,271 had been advanced under this loan agreement.
4. MINERAL PROPERTIES
On August 28, 2015, (amended March 21, 2016) the Company entered into an Equity Participation and Earn-In Agreement (the "Agreement") with Flex Mining Ltd., a Delaware Corporation ("Flex"). Pursuant to the Agreement, the Company has the right to acquire 100% of Flex by incurring expenditures of $1 million over the next three years. The initial phase is expected to cost $67,500; and if successful in Phase 1, Phase 2 is budgeted at$310,400. The balance, of $622,100 will be spent subject to the success of Phase 2. In addition, the Company issued 23,500,000 shares of restricted common stock to Flex. Although the Agreement stipulates a deemed value of $0.05 per share, the transaction has been recorded at the market value at the date the shares were issued which was $1.00 per share, and the value of the Agreement was determined to be $23,500,000.
The Company has incurred expenditures of $50,500 renewing the mining claims and planning the exploration during the last quarter.
Management determined that there was an impairment of the investment in the amount of $23,500,000 was warranted due to firstly that, no exploration being conducted on the property to date; and secondly that, no mineral resource having been identified on the property to date.
The Mining Claims are known as the "Big Monty Property" and are located in the Frecheville and Stoughton Townships, Ontario, Larder Lake District. The Claims currently in Big Monty are:
Claim #
|
# of hectares
|
Claim Start Date
|
Claim Expiry Date
|
4282128
|
16
|
February 16, 2016
|
February 16, 2019
|
4282129
|
16
|
February 16, 2016
|
February 16, 2019
|
4282130
|
6
|
February 16, 2016
|
February 16, 2019
|
4282131
|
9
|
February 16, 2016
|
February 16, 2019
|
4282132
|
11
|
February 16, 2016
|
February 16, 2019
|
4282133
|
13
|
February 16, 2016
|
February 16, 2019
|
4282134
|
2
|
February 16, 2016
|
February 16, 2019
|
Total
|
73 hectares (180.4 acres)
|
|
|
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
5. CONVERTIBLE NOTES PAYABLE
|
Issue Date
|
|
Expiry date
|
|
Amount of Loan
|
|
|
Interest rate
|
|
|
Unamortized Debt Discount
|
|
|
Net Carrying Amount
|
|
|
7/31/2012
|
|
7/31/2013
|
|
$
|
40,000
|
|
|
|
10
|
%
|
|
$
|
-
|
|
|
$
|
40,000
|
|
|
11/20/2015
|
|
11/20/2017
|
|
|
30,000
|
|
|
|
8
|
%
|
|
|
16,721
|
|
|
|
13,279
|
|
|
12/21/2015
|
|
12/21/2017
|
|
|
50,000
|
|
|
|
8
|
%
|
|
|
41,040
|
|
|
|
8,960
|
|
|
12/21/2015
|
|
12/21/2017
|
|
|
50,000
|
|
|
|
8
|
%
|
|
|
41,040
|
|
|
|
8,960
|
|
|
1/21/2016
|
|
1/22/2017
|
|
|
35,500
|
|
|
|
12
|
%
|
|
|
25,829
|
|
|
|
9,671
|
|
|
2/25/2016
|
|
2/25/2018
|
|
|
27,500
|
|
|
|
8
|
%
|
|
|
25,055
|
|
|
|
2,445
|
|
|
3/11/2016
|
|
3/11/2017
|
|
|
285,000
|
|
|
|
8
|
%
|
|
|
245,956
|
|
|
|
39,044
|
|
|
Total Loans
|
|
|
|
|
518,000
|
|
|
|
|
|
|
|
395,641
|
|
|
|
122,359
|
|
|
Less short term notes
|
|
|
|
|
(320,500
|
)
|
|
|
|
|
|
|
(271,785
|
)
|
|
|
(48,715
|
)
|
|
Total long term
|
|
|
|
$
|
197,500
|
|
|
|
|
|
|
$
|
123,856
|
|
|
$
|
73,644
|
|
On July 31, 2012, the Company converted $40,000 in accounts payable to a convertible promissory note. The note has a 10% per annum interest rate and a maturity date of July 31, 2013. The note is currently in arrears and is due and payable on demand. The note is convertible into shares of the Company's common stock at a conversion price of $0.001.
The Company is currently in default on this note.
Per ASC 470-50-40-10b, as this transaction added a substantive conversion feature to the debt, we have determined debt extinguishment accounting rules apply. However, as there was no difference between the reacquisition price and the net carrying amount of the old debt, no gain or loss was recorded. The Company amortized the discount on the debt equal to the face value, in the amount of $40,000 for the year ended July 31, 2013. This discount was amortized to interest expense. During the period ended April 30, 2016, $8,800 of debt was converted into 8,800,000 shares of common stock. Given that the market price of the shares on the date of conversion was $0.50 per share or $4,400,000, there was a conversion benefit of the difference between $4,400,000 market value of debt when converted into common shares and the $8,800 book value of the debt. This difference of $4,391,200 has been expensed as a loss on conversion of debt during the current period.
On July 31, 2012, the Company converted $76,000 in advances to a convertible promissory note. The note has a 10% per annum interest rate and a maturity date of July 31, 2013. The note is currently in arrears and is due and payable on demand.
The Company is currently in default on this note.
The note was convertible into shares of the Company's common stock at a conversion price of $0.001. Per ASC 470-50-40-10b, as this transaction added a substantive conversion feature to the debt, we have determined debt extinguishment accounting rules apply. However, as there was no difference between the reacquisition price and the net carrying amount of the old debt, no gain or loss was recorded. On December 23, 2015, The Company acquired the full face of the $76,000 promissory note and the $25,819 of accrued interest for $5,000 resulting in a gain on the settlement of debt of $96,819.
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
5. CONVERTIBLE NOTES PAYABLE (continued)
On October 16, 2015, the Company issued a $33,500 convertible promissory note. The note has an 10% per annum interest rate and a maturity date of October 16, 2016. Closing costs of $7,500 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $2,000 was recorded and is being amortized over the life of the loan. On March 14, 2016, the Company paid out the loan in full for $52,273. The conversion benefit recorded was reversed and the unamortized portion of the finder's fees and legal expenses deferred were expensed.
On October 16, 2015, the Company issued a $27,000 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of October 16, 2016. Closing costs of $4,500 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $11,250 has been recorded and is being amortized over the life of the loan. On March 14, 2016, the Company paid out the loan in full for $37,296. The conversion benefit recorded was reversed and the unamortized portion of the finder's fees and legal expenses deferred were expensed.
On November 20, 2015, the Company issued a $30,000 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of November 20, 2016. Closing costs of $3,500 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $30,000 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $52,276 at April 30, 2016.
On December 21, 2015, the Company issued a $50,000 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of December 21, 2017. Closing costs of $5,000 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $50,000 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $100,208 at April 30, 2016.
On December 21, 2015, the Company issued a $50,000 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of December 21, 2017. Closing costs of $5,000 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $50,000 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $100,207 at April 30, 2016.
On January 22, 2016, the Company issued a $35,500 convertible promissory note. The note has an 12% per annum interest rate and a maturity date of January 22, 2017. Closing costs of $9,050 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $35,500 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $61,860 at April 30, 2016.
GOLD LAKES CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 2016
5. CONVERTIBLE NOTES PAYABLE (continued)
On February 25, 2016, the Company issued a $27,500 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of February 25, 2017. Closing costs of $9,050 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $27,500 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $50,583 at April 30, 2016.
On March 14, 2016, the Company issued a $285,000 convertible promissory note. The note has an 8% per annum interest rate and a maturity date of March 11, 2017. Closing costs of $35,000 are being amortized over the life of the loan. The note is convertible into shares of common stock of the Company at any time at a rate of 50% of the lowest trading price of the shares over the previous 20-day trading period. A conversion benefit of $285,000 has been recorded and is being amortized over the life of the loan. A derivative liability has been calculated using Black Sholes and is estimated to be $496,620 at April 30, 2016.
6. RELATED PARTY TRANSACTIONS
During the period, the Company has paid its officer consulting fees of $5,000 (2015 - $nil) and rent of $3,000 (2015 - $nil). On October 15, 2015, the Company remunerated the officer of the Company 400,000 shares of the Company's common stock. The price of the stock was $0.43 and a charge of $172,000 has been expensed as Shares for Service.
7. SHARES FOR SERVICE
On November 1, 2015, there was 200,000 shares issued to a consultant. At the issue date, the fair market value of the shares was $0.50 and a charge of $100,000 has been expensed as Shares for Service.
On April 1, 2016, there was 10,000 shares issued to a consultant for services. At the issue date, the fair market value of the shares was $0.80 and a charge of $8,000 has been expensed.
8. NOTE PAYABLE
The Company has received $17,500 under a promissory note agreement with a third party in July 2012. An additional $4,000 was received under this Note in 2014. Interest and principal were due on September 15, 2012. The Company is currently in default on this Note. Per the note agreement, interest of $11,768 was accrued through April 30, 2016 and has been disclosed on the balance sheets as accounts payable and accrued interest.
9. GOING CONCERN
The Company will need additional working capital to service its debt and to develop the mineral claims acquired, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding, and long term financing, which will enable the Company to operate for the coming year.