Item 2. Management’s 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 OTC Pink under the symbol WOLV.
Since we began operations in 2006, the Company has been focused primarily on the exploration for and development of base and precious metal properties located in North America. In February, 2007, we acquired a right to earn a 90% interest in
approximately 520 claims through a combination of an upfront cash payment of $34,000.00, an upfront share payment of 34,000,000 common shares of Wolverine, and by making exploration expenditure commitments totaling $600,000.00 over three
years. From 2007 to the present, we spent approximately US$710,757 to earn our 90% interest in the Cache River Property; Shenin Resources Inc. maintains a 10% carried interest in the project.
On June 11, 2013, we entered into an agreement with 0969015 B.C. Ltd to acquire the Eureka Project Claims located in the Cariboo Mining District of British Columbia. We issued 35,000,000 shares of our common stock to 0969015 B.C. Ltd. at a fair
value of $0.01 per share as full consideration for the acquisition of the Eureka Project Claims. On August 9, 2014 a total of 17,500,000 common shares issued pursuant to the acquisition of the Eureka Project Claims were cancelled. We have been
unable to complete any exploration on the Eureka Project Claims other than a prospecting program conducted in August of 2013. As a result all of the claims have lapsed.
We have not yet determined whether the Cache River Property contain mineral reserves that are economically recoverable.
Enigma Mobil Transaction
In the fall of 2013, due to ongoing stagnation in the commodities sector, our management began identifying opportunities to increase shareholder value through merger and acquisition. On September 5, 2013 Wolverine entered into a Letter of Intent
with the cyber security corporation ENIGMAMobil Inc. (“Enigma”) to acquire a 25% interest in Enigma for a cash payment of $10,000,000, however the transaction was not completed. On January 22, 2014, we entered into an Amended Letter
of Intent with Enigma to acquire a 25% interest in Enigma for the purchase price of $5,000,000 to be paid with $3,000,000 shares of our common stock at a deemed price of $0.01 per share and $2,000,000 in cash. The LOI expired on June
30, 2014.
On April 14, 2015 Wolverine entered into a Share Exchange and Royalty Agreement with Enigma. and Dr. David Chalk pursuant to which Wolverine is seeking to acquire from Dr. Chalk 25% of the issued and outstanding securities of Enigma for the purchase
price of USD $3,000,000, to be paid by the issuance of 300,000,000 common shares of Wolverine at a deemed price of USD$0.01 per share. Dr. Chalk is a Director of Enigma.
Enigma is a private corporation incorporated in the Province of Alberta on September 6, 2013. Enigma’s operations are based in Vancouver, British Columbia. Enigma is engaged in the business of developing security applications for cyber systems
focusing on the mobile smartphone markets. Under the terms of the Share Exchange and Royalty Agreement, Wolverine will also receive a royalty equal to 25% of gross revenue received by Enigma from the exploitation of Enigma’s planned
Enigma™ SECURE mobile security application for the protection against unauthorized computer intrusion and fraud on wireless devices and mobile smartphones.
The closing of the Share Exchange and Royalty Agreement is subject to Enigma completing a financing of USD$2,500,000, and to Wolverine increasing its authorized capital of common stock to allow for the issuance of the 300,000,000 consideration
shares. As at the date of this 10-Q, neither the contemplated financing nor the authorized capital increase has been completed, and the Share Exchange and Royalty Agreement has not closed. However, if the agreement were to close, based on the number
of the Company’s current issued and outstanding shares, Enigma would acquire in excess of 51% of the Company’s voting securities, resulting in Wolverine becoming a majority owned subsidiary of Enigma.
The Enigma™ SECURE application is not yet commercially available and remains in development. The application is built using proprietary, patent protected fifth generation programming language (5GL) and is compatible with Apple iOS, Android and
Blackberry operating systems. As of the date of this 10-Q, third party testing of the application has been completed and Wolverine anticipates that the application will be available for commercial download within 10 months following completion of
the USD$2,500,000 private placement contemplated by the Share Exchange and Royalty Agreement.
The Share Exchange and Royalty Agreement may be terminated if the transaction does not close by June 30, 2017, unless extended by mutual agreement of the parties.
Our Current Business
We are an exploration stage mining company engaged in the identification, acquisition, and exploration of metals and minerals with a focus on base and precious metals. Our current operational focus is to raise sufficient funds to continue
exploration activities on our property in Labrador, Canada, known as the Cache River Property. We expect to review other potential exploration projects from time to time as they are presented to us.
Concurrent with our exploration activities we will continue to evaluate opportunities to diversify our business through merger or acquisition, and to assist Enigma to raise the $2,500,000 in financing required to complete our reverse acquisition
pursuant to the Share Exchange and Royalty Agreement.
On April 19, 2016, Wolverine entered into a Share Purchase Agreement with our Director, David Chalk, pursuant to which we have agreed to issue in a private placement 400,000,000 shares of our common stock of the in consideration for one-third of the
net proceeds that Mr. Chalk may realize from the sale of Mr. Chalk’s 15% equity interest in Decision-Zone Inc., a privately held cyber-security
software company based in Ontario, Canada. The Agreement is subject to our
Company increasing its authorized capital to allow for the issuance of the
consideration shares. At January 30, 2017, the agreement has not yet closed.
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 $163,256
as of November 30, 2016, we require
additional funds of approximately $100,000 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, 2016. 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 November 30, 2016 we had cash in
the amount of $62 and a working capital deficiency in the amount of $163,256. As
of November 30, 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
$100,000 for the Phase 1exploration program on the Cache River Property.
The work completed to date on the Cache River Property has
identified an area that could host significant copper and gold mineralization in
a previously unexplored area. A program of prospecting, followed by trenching
(if warranted) is recommended to field check all remaining IP anomalies prior to
undertaking additional diamond drill holes. A budget estimate of $100,000 should
suffice to complete the recommended prospecting and assaying of samples as well
as a limited trenching program if required. This budget would also cover costs
associated with the required site visit. Further diamond drilling will be
dependent on results of the recommended work program.
Phase 1 Program Proposed Expenditures
|
|
$CDN
|
|
Project Management/Staff
Costs
|
$
|
7,500
|
|
|
|
|
Geologists/technicians (mapping, prospecting
compilation, reporting)
|
$
|
18,000
|
|
|
|
|
Geochemistry - Assaying
rock/core (approx. 200 samples)
|
$
|
6,000
|
|
|
|
|
Field Costs (transportation, accommodation,
fuel, etc.)
|
$
|
7,500
|
|
|
|
|
Trenching
|
$
|
7,500
|
|
|
|
|
Diamond Drilling 300 meters all inclusive
|
$
|
42,000
|
|
|
|
|
Subtotal:
|
|
|
|
$
|
88,500
|
|
Contingency
|
|
~ 15%
|
|
$
|
11,500
|
|
Phase 1 Total
|
|
|
|
$
|
100,000
|
|
As at November 30, 2016, we had a cash balance of $62. 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 November 30, 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 November 30, 2016 and November 30,
2015
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended November
30, 2016 which are included herein.
Three month summary ending November 30, 2016 and November
30, 2015
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
November 30, 2016
|
|
|
November 30, 2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
73,167
|
|
$
|
85,187
|
|
Net Loss
|
$
|
(68,455
|
)
|
$
|
(88,789
|
)
|
Six Months Ended November 30, 2016 and November 30, 2015
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended November
30, 2016 which are included herein.
Six month summary ending November 30, 2016 and November 30,
2015
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
November 30, 2016
|
|
|
November 30, 2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
170,381
|
|
$
|
227,938
|
|
Net Loss
|
$
|
(166,181
|
)
|
$
|
(233,697
|
)
|
Expenses
Our operating expenses for the three month periods ended
November 30, 2016 and November 30, 2015 are outlined in the table below:
|
|
Three Months Ended
|
|
|
|
November 30, 2016
|
|
|
November 30, 2015
|
|
General and administrative
|
$
|
73,167
|
|
$
|
85,187
|
|
Mineral exploration costs
|
$
|
-
|
|
$
|
2,010
|
|
Our operating expenses for the six month periods ended November
30, 2016 and November 30, 2015 are outlined in the table below:
|
|
Six Months Ended
|
|
|
|
November 30, 2016
|
|
|
November 30, 2015
|
|
General and administrative
|
$
|
170,381
|
|
$
|
225,928
|
|
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
|
|
|
|
November 30,
|
|
|
May 31,
|
|
|
|
2016
|
|
|
2016
|
|
Current assets
|
$
|
23,038
|
|
$
|
33,315
|
|
Current liabilities
|
|
186,294
|
|
|
162,314
|
|
Working capital (deficit)
|
$
|
(163,256
|
)
|
$
|
(128,999
|
)
|
Cash Flows
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
November 301,
|
|
|
|
2016
|
|
|
2015
|
|
Net Cash Used in Operating
Activities
|
$
|
(78,193
|
)
|
$
|
(197,003
|
)
|
Net Cash Used in Investing Activities
|
|
362
|
|
|
(14,978
|
)
|
Net Cash Provided by
Financing Activities
|
|
75,299
|
|
|
132,554
|
|
Net increase (decrease) in cash during period
|
$
|
(619
|
)
|
$
|
(76,912
|
)
|
Operating Activities
Net cash used in operating activities during the six months
ended November 30, 2016, was $78,193 compared to $197,003 during the six months
ended November 30, 2015.
Financing Activities
During the six months ended November 30, 2016, we received
$75,299 through the issuance of shares/shares subscribed in private placements.
In the comparable period, the Company received $132,554 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.