NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MAY
31, 2013
NOTE 1 - ORGANIZATION
AND BASIS OF PRESENTATION
Portage Resources Inc. (the
“Company”) was incorporated under the laws of the State of Nevada on July 20, 2006 with authorized common stock of
5,000,000,000 shares at $0.001 par value.
The
Company was organized for the purpose of acquiring and developing mineral properties.
On
June 22, 2011, the Company incorporated two subsidiaries to undertake mineral acquisition and exploration activities in Peru known
as Portage Resources Peru S.A. and Portage Minerals Peru Sociedad Anonima. Under Peruvian regulation each Company must have one
Peruvian shareholder to be validly incorporated; therefore, the Company has incorporated each entity with 99 shares held by the
Company and 1 share held by a Peruvian resident.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the
years ended May 31, 2013 or 2012.
Principles
of Consolidation
These
financial statements include the accounts of the Company and its two subsidiaries (Portage Resources Peru S.A. and Portage Minerals
Peru Sociedad Anomina) on a consolidated basis. All inter-company accounts have been eliminated.
Income taxes
The Company follows Section 740-10-30 of
the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal 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 Statements of Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of
the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section
740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded
in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial statements from such a position should be
measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.
Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting
in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized
income tax benefits according to the provisions of Section 740-10-25.
Fair
Value Measurements
Fair
value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritize
the inputs used to measure fair value into three levels and bases the categorization with the hierarchy upon the lowest level of
input that is available and significant to the fair value measurement.
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.
The
Company’s cash and cash equivalents and short-term investments are classified within Level 1 of the fair value hierarchy
because they are valued using quoted market prices. The carrying amounts of accounts payable, advances payable and short-term
loans approximate their fair value due to short term maturities.
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 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.
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.
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.
Net income (loss) per common share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares
of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common
shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first
period presented.
The Company’s diluted loss per share
is the same as the basic loss per share for the years ended May 31, 2013 and 2012, as the inclusion of any potential shares would
have had an anti-dilutive effect due to the Company generating a loss.
Recently issued accounting pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet
and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December
15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company
has adopted this accounting standard update.
On June 20, 2018, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve
financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers,
etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards.
Meaning that companies will value all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after
this date. The guidance is effective for interim and annual periods beginning after December 15, 2018.
In November 2019, the FASB issued ASU 2019-10,
Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This
new guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within
those annual reporting periods. While the Company is continuing to assess the potential impacts of ASU 2019-10, it does
not expect ASU 2019-10 to have a material effect on its financial statements.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company 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.
NOTE
3 - ACQUISITION OF MINERAL CLAIMS
WUAKAKUY
On
June 25, 2011, Portage Resources Peru S.A. (“Portage Peru”) entered into an assignment agreement with Airon Peru S.A.C.
(“Airon”) whereby Airon assigned all rights and interest in a joint venture (the “Joint Venture”) to the
mining concession Wuakakuy to Portage Peru. Under the terms of the assignment agreement Portage Peru agreed to explore the concession
pursuant to the terms of the Joint Venture. The Company has agreed to spend a minimum of $150,000 on drilling and /or exploration
costs and to drill a minimum of 1000 meters within 18 months from the date of the agreement. Should the Company fail to meet its
obligations under the agreement then the property will revert back to Airon. Portage Resources Inc. (the “Company”)
issued to Airon a total of 20,000,000 common shares of the Company valued at $0.06 per share based on the closing price of the
shares on June 24, 2011. Also, Airon was to receive a retainer of $2,000 per month for consulting services commencing June 25,
2011. The retainer payment was verbally agreed between the Company and Airon to be extended until such time as the Company has
raised sufficient funding to pay the payments required. During the year ended May 31, 2012, a total of $18,000 was remitted
for services provided.
The
acquisition costs related to the Wuakakuy property have been impaired and expensed because there has been no exploration activity
nor has there been any reserves established and we cannot currently project any future cash flows or salvage value for the coming
year and the acquisition costs will not be recoverable.
LINDEROS
On
June 27, 2011, Portage Minerals Peru S.A. (“Portage Minerals”) entered into a purchase and sale agreement to acquire
all rights, title and interest to the Linderos 4 mining concession in Tabaconas District, San Ignacio Province, Department of Cajamarca,
and Peru with Nilam Resources Inc. (“Nilam”). As consideration for the acquisition of the mining concession the
Company issued to Nilam a total of 10,000,000 common shares of the Company valued at $0.07 per share based on the closing price
of the Company’s common stock on June 27, 2011.
On
July 4, 2011, Portage Minerals entered into a purchase and sale agreement to acquire all rights, title and interest to the Linderos
5 mining concession in Tabaconas District, San Ignacio Province, Department of Cajamarca, and Peru with Nilam. As consideration
for the acquisition of the mining concession the Company issued to Nilam a total of 8,000,000 common shares of the Company valued
at $0.07 per share based on the closing price of the Company’s common stock on July 4, 2011.
The
acquisition costs related to the Linderos 4 and 5 properties have been impaired and expensed because there has been no exploration
activity nor has there been any reserves established and we cannot currently project any future cash flows or salvage value for
the coming year and the acquisition costs will not be recoverable.
CORDILLERA
NEGRA
On
July 22, 2011, Portage Peru entered into agreements to acquire certain mineral concessions known as A.Cordillera Negra located
approximately 13 kms from the great Antamina Mine. Portage Minerals entered into a purchase agreement with Claver Albert
Huerta Morales to acquire the concessions, consisting of two properties with a total of 1,200 hectares. The CORDILLERA NEGRA
EC property is 1,000 hectares, and the adjacent CORDILLERA NEGRA 2 EC property is 200 hectares. As Per the agreement between the
parties, Portage made a payment of $10,000 on signing of the agreement, and a further $10,000 on September 15, 2011, leaving total
additional outstanding payments of US$1,535,000 over the next 42 months. Following the initial payments, the Company will
pay $35,000 to obtain a 43-101 geological report within five months of receiving the public deed, and thereafter, if the report
is determined to be favorable, the Company will remit payments as follows:
|
·
|
US$ 250,000 after thirty (30) months of receipt of the public deed.
|
|
·
|
US$ 250,000 after thirty six (36) months of receipt of the public deed.
|
|
·
|
US$ 1,000,000 after forty two (42) months of receipt of the public deed.
|
The
acquisition costs related to the Cordillera Negra properties have been impaired and expensed because there has been no exploration
activity nor have there been any reserves established and we cannot currently project any future cash flows or salvage value for
the coming year and the acquisition costs will not be recoverable. The Company does not intend to pursue further exploration of
the concessions.
ROCAS
On
September 26th 2011, Portage Minerals Peru S.A. (Portage) entered into a sales and purchase agreement with Nilam Resources Inc.
(Nilam) to acquire 55% of the mining concession called Rocas#1, Reco 7 with Code 01046810, with 400 hectares, located in Chiquian
district, Department of Ancash. The terms of the acquisition include a minimum investment of $100,000 USD or 800 meters of drilling
within 24 months of all permits and registry of the 55% ownership of the project with Nilam retaining 45% of the project. Further,
the remaining 45% of the project can be acquired from Nilam by Portage at any time by the payment of $0.675 per each ounce of silver
on the total silver resources. Under the terms of the Agreement, Nilam is to receive 7,000,000 shares of the common stock of Portage
Resources Inc. These shares were valued at $0.20 based on the closing price of the Company’s common stock on September 26,
2011.
On
September 30th 2011, Portage Minerals Peru S.A. (Portage) entered into a sales and purchase agreement with Nilam Resources Inc.
(Nilam) to acquire 55% of the mining concession called Rocas#2, Ruth PB code 010516107, with 200 hectares, located in Chiquian
district, Department of Ancash. The terms of the acquisition include a minimum investment of $50,000 USD or 200 meters of
drilling within 24 months of all permits and registry of the 55% ownership of the project with Nilam retaining 45% of the project.
Further, the remaining 45% of the project can be acquired from Nilam by Portage at any time by the payment of $0.675 per
each ounce of silver on the total silver resources. Under the terms of the Agreement, Nilam is to receive 3,500,000 shares
of the common stock of Portage Resources Inc. These shares were valued at $0.30 based on the closing price of the Company’s
common stock on September 26, 2011.
The
acquisition costs related to the Rocas properties have been impaired and expensed because there has been no exploration activity
nor have there been any reserves established and we cannot currently project any future cash flows or salvage value for the coming
year and the acquisition costs will not be recoverable.
NOTE 4 - ADVANCES PAYABLE
During the fiscal year
ended May 31, 2011, a former director of the Company made advances of $12,381 to the Company for operations, and paid expenses
on behalf of the Company of $3,900. These advances are non-interest bearing and payable on demand. On May 30, 2011 the former director
resigned from the Board of Directors of the Company, and as at May 31, 2011 the entire amount advanced by this former director,
totaling $108,364, was reclassified to advances payable. On June 22, 2011, the former director made an additional advance
of $40 to the Company. As of May 31, 2013 and 2012, the balance due to this former director totaled $108,404 and $108,404, respectively.
NOTE 5 - RELATED PARTY
TRANSACTIONS
For year ended May 31,
2012, Portage Resource Inc. has paid $6,740 to Mr. Paul Luna Belfiore, a former director and officer of the Company for consulting
services.
NOTE 6 - COMMON STOCK
On
June 13, 2011, the Company entered into a private placement with one investor for the amount of $50,000 at $0.10 per common share,
for 500,000 shares of common stock.
On
June 25, 2011, the Company’s wholly owned subsidiary, Portage Resources Peru S.A. (“Portage Peru”) entered into
an assignment agreement with Airon Peru S.A.C. (“Airon”) whereby Airon assigned all rights and interest in a joint
venture (the “Joint Venture”) to the mining concession Wuakakuy to Portage Peru. In consideration for the assignment,
the Company issued a total of 20,000,000 common shares of the Company to Airon.
On
June 27, 2011, the Company’s wholly owned subsidiary, Portage Minerals Peru S.A. (“Portage Minerals”) entered
into a purchase and sale agreement to acquire all rights, title and interest to the Linderos 4 mining concession in Tabaconas District,
San Ignacio Province, Department of Cajamarca, and Peru with Nilam Resources Inc. (“Nilam”). As consideration
for the acquisition of the mining concession, the Company issued a total of 10,000,000 common shares of the Company to Nilam.
On
July 4, 2011, the Company’s wholly owned subsidiary, Portage Minerals entered into a purchase and sale agreement to acquire
all rights, title and interest to the Linderos 5 mining concession in Tabaconas District, San Ignacio Province, Department of Cajamarca,
and Peru with Nilam. As consideration for the acquisition of the mining concession, the Company issued a total of 8,000,000
common shares of the Company to Nilam.
On
August 10, 2011, the Company entered into a share purchase agreement with Nilam Resources S.A. Peru (“Nilam”), whereby
subscribed for a total of 194,500 shares of common stock of the Company at $0.10 per common share for proceeds of $19,540. During
the year ended May 31, 2012 the Company received further advances from Nilam totaling $9,450 under another share purchase agreement
for a total of 315,000 shares of common stock at a price of $0.03 per share. These shares were issued June 14, 2012.
On
September 26, 2011, Portage Minerals Peru S.A. entered into a sales and purchase agreement with Nilam to acquire 55% of the mining
concession called Rocas#1. Under the terms of the Agreement, Nilam is to receive 7,000,000 shares of the common stock of
Portage Resources Inc. These shares were valued at $0.20 based on the closing price of the Company’s common stock on
September 26, 2011 (Note 3). These shares were issued June 14, 2012.
On September 30, 2011,
Portage Minerals Peru S.A. entered into a sales and purchase agreement with Nilam Resources Inc. (Nilam) to acquire 55% of the
mining concession called Rocas#2. Under the terms of the Agreement, Nilam is to receive 3,500,000 shares of the common stock
of Portage Resources Inc. These shares were valued at $0.30 based on the closing price of the Company’s common stock
on September 26, 2011 (Note 3). These shares were issued June 14, 2012.
During the year ended May 31, 2013, the Company sold 50,400
shares of common stock for total cash proceeds of $20,000.
NOTE 7 - SHORT-TERM
LOANS
On November 30, 2011,
the Company received a loan from Nilam Resources Inc. of $5,520. The loan is due on demand and bears no interest for six months.
After six months the loan incurs a $100 per month non-compounded interest charge. As of May 31, 2013, there is $1,200 of interest
accrued on this loan.
On January 4, 2012, the
Company requested a loan from BTL Media Corp. of $20,000. The loan is due on demand and bears no interest for six months. After
six months the loan incurs a $100 per month non-compounded interest charge. As of May 31, 2013, there is $1,100 of interest accrued
on this loan.
NOTE 8 – GOING
CONCERN
As reflected in the accompanying financial
statements, the Company has no current operations from which to generate revenue, has an accumulated deficit of $5,288,111 at May
31, 2013 and had a net loss of $22,871 for the year ended May 31, 2013. These factors raise substantial doubt about our ability
to continue as a going concern. The financial statements have been prepared assuming that the Company will continue as a going
concern.
These financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
The Company’s ability to raise additional
capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing,
the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment
of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully
resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements
of the Company do not include any adjustments that may result from the outcome of these uncertainties.
NOTE 9 - INCOME TAXES
At May 31, 2013, the Company had net operating
loss carry forwards of approximately $3,840,000 that may be offset against future taxable income. No tax benefit has
been reported in the May 31, 2013 financial statements since the potential tax benefit is offset by a valuation allowance of the
same amount.
The provision for Federal income tax consists
of the following for the years ended May 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
|
|
Current operations
|
|
$
|
(7,776
|
)
|
|
$
|
95,744
|
|
Less: valuation allowance
|
|
|
7,776
|
|
|
|
(95,744
|
)
|
Net provision for Federal income taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
The cumulative tax effect at the expected
rate of 34% of significant items comprising our net deferred tax amount is as follows as of May 31, 2013 and 2012:
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Income (loss) before taxes
|
|
$
|
(22,871
|
)
|
|
$
|
(5,208,389
|
)
|
Statutory tax rate
|
|
|
34%
|
|
|
|
34%
|
|
Expected income tax (recovery)
|
|
$
|
(7,776
|
)
|
|
$
|
(1,770,767
|
)
|
Change in valuation allowance
|
|
$
|
7,776
|
|
|
$
|
1,567,031
|
|
Foreign tax rate difference
|
|
$
|
–
|
|
|
$
|
203,736
|
|
Total income taxes (recovery)
|
|
|
–
|
|
|
|
–
|
|
Due to the change in ownership
provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use
in future years.
ASC Topic 740 provides guidance on the
accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to
determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits
of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount
to recognize in the financial statements.
The Company includes interest and penalties arising from the
underpayment of income taxes in the statements of operations in the provision for income taxes. As of May 31, 2013, the Company
had no accrued interest or penalties related to uncertain tax positions.
NOTE 10 - SUBSEQUENT
EVENTS
Management has evaluated
subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statement
were available to be issued and has determined that there are no material subsequent events that require disclosure in these financial
statements.
On May 18, 2015 Portage acquired the controlling
interest of FG Fitness & Media Group. As part of this agreement Portage acquired over 70% of the ownership of FG Fitness and
included in the transaction FG’s management obtained board seats in Portage Resources, Inc. In connection with the acquisition
the Company, issued 1 billion shares of common stock to Anthony Miller, former Chairman.
On June 2, 2015, the Company filed a Form 15 terminating its
registration under section 12(g) of the Securities Exchange Act of 1934.
Subsequent to May 31,
2013, the Company issued 1,494,103,462 shares of common stock to various persons and entities for services, acquisitions and debt
conversion.
On July 9, 2020, the Company amended its Articles of Incorporation
and changed the name of the Company to OM Holdings International, Inc.; however, the change has not yet been approved by the
Financial Industry Regulatory Authority (FINRA).
On July 9, 2020, the Company amended its Articles of Incorporation
creating 10,000,000 million shares of preferred stock, par value $0.00001. 1,000,000 shares are designated Series A Preferred and
5,000,000 shares are designated Series B Preferred.
On July 9, 2020, the Company, issued 1,000,000 shares of Series
A preferred stock to OM Prime Holdings, Ltd. in exchange for payments made on behalf of the Company to revive and get current.