Item 1. Financial
Statements.
Our unaudited interim financial statements
are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
It is the opinion of management that the
unaudited interim financial statements for the quarter ended March 31, 2018 include all adjustments necessary in order to ensure
that the unaudited interim financial statements are not misleading.
Can-Cal Resources Ltd.
(An Exploration Company)
Balance Sheets
(Unaudited)
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,752
|
|
|
$
|
769
|
|
Other current assets
|
|
|
5,790
|
|
|
|
5,790
|
|
Total Current Assets
|
|
|
9,542
|
|
|
|
6,559
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,542
|
|
|
$
|
6,559
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
315,344
|
|
|
$
|
310,817
|
|
Accounts payable, related party
|
|
|
506
|
|
|
|
506
|
|
Accrued expenses
|
|
|
6,999
|
|
|
|
8,679
|
|
Accrued expenses, related party
|
|
|
96,071
|
|
|
|
117,913
|
|
Unearned revenues, related party
|
|
|
450,000
|
|
|
|
402,438
|
|
Notes payable, related parties
|
|
|
191,136
|
|
|
|
139,871
|
|
Total Current Liabilities
|
|
|
1,060,056
|
|
|
|
980,224
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,060,056
|
|
|
|
980,224
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding
|
|
|
–
|
|
|
|
–
|
|
Common stock, $0.001 par value, 100,000,000 shares authorized; 43,667,060 shares issued and outstanding as at March 31, 2018 and December 31, 2017
|
|
|
43,667
|
|
|
|
43,667
|
|
Additional paid-in-capital
|
|
|
10,595,697
|
|
|
|
10,595,697
|
|
Accumulated deficit
|
|
|
(11,689,878
|
)
|
|
|
(11,613,029
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
|
(1,050,514
|
)
|
|
|
(973,665
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
9,542
|
|
|
$
|
6,559
|
|
The accompanying notes are an integral part
of these unaudited interim financial statements.
Can-Cal Resources Ltd.
(An Exploration Company)
Statement of Operations
(Unaudited)
|
|
Three Months Ended
March 31, 2018
|
|
|
Three Months Ended
March 31, 2017
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
76,160
|
|
|
$
|
7,515
|
|
Director fees
|
|
|
18,750
|
|
|
|
–
|
|
Total operating expenses
|
|
|
94,910
|
|
|
|
7,515
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
|
(94,910
|
)
|
|
|
(7,515
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest expense, related party
|
|
|
18,022
|
|
|
|
(2,828
|
)
|
Foreign exchange gain (loss)
|
|
|
39
|
|
|
|
(188
|
)
|
Total other income (expense)
|
|
|
18,061
|
|
|
|
(3,016
|
)
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(76,849
|
)
|
|
|
(10,531
|
)
|
Provision for taxes
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(76,849
|
)
|
|
$
|
(10,531
|
)
|
|
|
|
|
|
|
|
|
|
Loss per common share – Basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted
|
|
|
43,667,060
|
|
|
|
42,867,060
|
|
The accompanying notes are an integral part
of these unaudited interim financial statements.
Can-Cal Resources Ltd.
(An Exploration Company)
Statements of Cash Flows
(Unaudited)
|
|
Three Months Ended
March 31, 2018
|
|
|
Three Months Ended
March 31, 2017
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
$
|
(76,849
|
)
|
|
$
|
(10,531
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
2,847
|
|
|
|
6,050
|
|
Accounts payable and accrued expenses, related party
|
|
|
(21,842
|
)
|
|
|
2,828
|
|
Unearned revenues, related party
|
|
|
47,562
|
|
|
|
–
|
|
Net cash (used in) operating activities
|
|
|
(48,282
|
)
|
|
|
(1,653
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of loans payable
|
|
|
51,265
|
|
|
|
1,653
|
|
Proceeds from issuance of convertible notes payable
|
|
|
–
|
|
|
|
–
|
|
Net cash provided by financing activities
|
|
|
51,265
|
|
|
|
1,653
|
|
|
|
|
|
|
|
|
|
|
Net changes in cash and equivalents
|
|
|
2,983
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at beginning of the period
|
|
|
769
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of the period
|
|
$
|
3,752
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid in interest
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash paid for income taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
The accompanying notes are an integral part
of these unaudited interim financial statements.
Can-Cal Resources Ltd.
(An Exploration Company)
Notes to Unaudited Financial Statements
For the three months ended March 31,
2018 and 2017
1. NATURE OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Can-Cal Resources Ltd. (“Can-Cal”
or the “Company”) is a Nevada corporation incorporated on March 22, 1995.
The Company is an exploration company engaged
in the exploration for precious metals, specifically focused on mineral exploration projects. We have examined various prospective
mineral properties for precious metals and acquired those deemed promising. We currently own, lease or have mining interest in
two mineral properties in the southwestern United States (California and Arizona, as follows: Cerbat, Arizona and Pisgah, California).
The Company previously had mineral rights in Owl Canyon, California and Wikieup, Arizona, which have now been abandoned.
As an exploration stage enterprise, the
Company discloses the deficit accumulated during the exploration stage. An entity remains in the exploration stage until such time
as proven or probable reserves have been established for its deposits. Upon the location of commercially mineable reserves, the
Company plans to prepare for mineral extraction and enter the development stage. To date, the exploration stage of the Company’s
operations consists of contracting with geologists who sample and assess the mining viability of the Company’s claims.
Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited interim financial
statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States
Securities and Exchange Commission set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements
furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative
of the results for the full fiscal year. These financial statements should be read in conjunction with the financial statements
of the Company for the fiscal year ended December 31, 2017 and notes thereto contained in the Company’s Annual Report on
Form 10-K.
The Company’s functional and reporting
currency is the United States dollar (USD). Monetary assets and liabilities denominated in foreign currencies are translated in
accordance with ASC 820, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of
foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions
are primarily undertaken in the Canadian dollar (CDN). The Company has not, to the date of these financial statements, entered
into derivative instruments to offset the impact of foreign currency fluctuations.
Certain amounts in the prior periods presented
have been reclassified to conform to the current period financial statement presentation.
Exploration Stage Company
The Company is currently an exploration
stage company. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and
the cumulative statements of operations and cash flows from inception to the current balance sheet date. The Company has incurred
an accumulated deficit of $11,638,879 for the period from inception (March 22, 1995) through December 31, 2017. An entity remains
in the exploration stage until such time as proven or probable reserves have been established for its deposits. Upon the location
of commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage. To date,
the exploration stage of the Company’s operations consists of contracting with geologists who sample and assess the mining
viability of the Company’s claims.
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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basic and Diluted Loss per Share
The basic net loss per common share is
computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common
shares outstanding plus potential dilutive securities. For 2017 and 2016 potential dilutive securities had an anti-dilutive effect
and were not included in the calculation of diluted net loss per common share.
2. GOING CONCERN
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company
had a net loss of $76,849 for the three months ended March 31, 2018, has used net cash in operating activities of $8,117,100 from
inception and had a working capital deficit of $1,050,514 at March 31, 2018. The future of the Company is dependent upon its ability
to obtain financing and upon future profitable operations from the development of its new business opportunities. Management has
plans to seek additional capital through private placements and public offerings of its common stock. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification
of liabilities that might be necessary in the event the Company cannot continue in existence.
The ability of the Company to continue
as a going concern is dependent on securing additional sources of capital and the success of the Company’s plan. The financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3. RELATED
PARTY TRANSACTIONS
Material Supply Agreement
On April 9, 2013, the Company entered into
a material supply agreement (the “the Original MSA”) with Candeo Lava Products Inc. (“Candeo”), which was
amended on March 3, 2014 (the “Amended MSA”). Pursuant to the Amended MSA, Candeo is entitled to purchase material
(“Material”) from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin per ton
removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii)
50% of the net sales margins for the subsequent years during the term of the Amended MSA. Under the Amended MSA, Candeo has the
right to remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah Property and Additional Amounts of 1,000,000
tons each, upon the successful removal of the Initial Amount from the Pisgah Property. Candeo’s right to remove the Additional
Amounts from the Pisgah Property is on the basis that once Candeo has removed the first Additional Amount of the Material from
the Pisgah Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as
it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely
based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.
Under the Amended MSA, Candeo is required
to purchase a minimum of ten thousand (10,000) tons of Material during each of the first three years of the term of the agreement,
all at a purchase price of $15.00 per ton, for a total payment of $150,000 per year in each of the first three years of the Term,
with credit being given by the Company to Candeo for all pre-paid tons of Material that have already been purchased and paid for
under the Original MSA. The Pre-Purchased Material will remain on the Pisgah Property until Candeo commences its production operations
or engages the Company to mine and remove Material on Candeo’s behalf. In the event that Candeo engages the Company to mine
and remove any of the Material, Candeo shall pay all of the Company’s reasonable costs and expenses in conducting such mining
and removal operations plus a fee of 15%. All mining and removal operations on the Pisgah Property will be subject to all necessary
regulatory and other third-party approvals being obtained. The Pre-Purchased Payments will not be refundable to Candeo but shall
be credited against the first Production Payments.
The term of the Amended MSA has been extended
from an initial term of ten (10) years to twenty (20) years (the “Primary Term”) and Candeo has the option to extend
the term for an additional thirty (30) years exercisable at any time with no less than three (3) months written notice prior to
the expiration of the Primary Term, provided that Candeo is not in default under any of the provisions of the Amended MSA and that
the whole of the Initial Amount has been removed from the Property.
Unearned revenues as reflected on the Balance
Sheet are a reflection of amounts received from Candeo based on the Amended MSA.
Compensation
On June 30, 2010, the Company entered into
a consulting agreement, with a Board of Director’s consulting firm, FutureWorth Capital Corp. The terms of the agreement
include annual compensation of $60,000, payable monthly. The Company may elect to satisfy payment in shares of common stock in
lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five
(5) days from the date of such election. No payments have been made in cash or stock to date. As of December 31, 2017, the Company
owed FutureWorth Capital Corp. $506 (2016 - $506) as included in accounts payable, related parties, for service prior to, and during
the service period under the consulting agreement. The consulting agreement was terminated on February 27, 2013 with Mr. William
Hogan’s resignation from the Board of Directors.
On June 10, 2016, the Company entered into
a consulting agreement, with a Board of Director’s consulting firm, For Life Financial. The terms of the agreement include
monthly compensation of $2,100 CAD for managing the Company. On September 10, 2016, the Company amended the agreement to include
additional annual compensation $50,000 USD, payable monthly as the scope of work increased.
Stock-Based Compensation
All warrants previously issued by the Company
have expired as of the fiscal year ending December 31, 2014. No new warrants have been issued as of March 31, 2018.
On December 31, 2017, 650,000 Stock Options
and 800,000 shares were issued as compensation for work done by consultants and directors of the Company. (Note 9)
4. NOTES PAYABLE, RELATED PARTIES
Notes payable, related parties consisted
of the following as of March 31, 2018 and December 31, 2017, respectively:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Note payable
(1)
|
|
$
|
149,129
|
|
|
$
|
129,871
|
|
Promissory note payable
(2)
|
|
|
–
|
|
|
|
10,000
|
|
Promissory note payable
(3)
|
|
|
42,007
|
|
|
|
–
|
|
Total related party notes payable
|
|
$
|
191,136
|
|
|
$
|
139,871
|
|
|
(1)
|
Note payable to the former CEO, unsecured, bearing interest
at 10% and due on demand.
|
|
(2)
|
Promissory note payable originated on November 30, 2012 with FutureWorth Capital Corp., a consulting firm
owned by our former Chairman of the Board of Directors, unsecured, bearing interest at 10%, matures on November 29, 2013. In connection
with the promissory note, the Company granted warrants to purchase 20,000 shares of the Company’s common stock at an exercise
price of $0.10. The warrants expired on November 29, 2014.
|
|
(3)
|
Promissory note payable originated on February 1, 2018 with Candeo, a company in which the former CEO
is a director. The note bears an interest rate of 10% per annum and is payable on or before December 31, 2018.
|
The following presents components of interest
expense by instrument type as of March 31, 2018 and 2017, respectively:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Interest on notes payable, related parties
|
|
$
|
(18,022
|
)
|
|
$
|
2,828
|
|
Accounts payable related vendor finance charges
|
|
|
–
|
|
|
|
–
|
|
Finance Costs (Equity based)
|
|
|
–
|
|
|
|
–
|
|
Total interest expense
|
|
$
|
(18,022
|
)
|
|
$
|
2,828
|
|
The negative interest recognized in the
three months ended March 31, 2018 is due to a recalculation on the loan per revisions to the agreement from the lawyers of the
lawsuit. Previously omitted costs were added to the outstanding loan and the interest rate was left at 10% for legal expenses incurred
but adjusted to 5% for all other expenses.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This quarterly report contains “forward-looking
statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes
of federal and state securities laws, including, but not limited to, statements regarding: the plans, strategies and objections
of management for future operations; the future plans or business of our company; future economic conditions or performance; and
any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include
the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,”
“expect” or “anticipate” or other similar words. These forward-looking statements present our estimates
and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the dates on which they are made. Except as required by applicable law, we do not intend, and
undertake no obligation, to update any forward-looking statement.
Although we believe the expectations reflected
in the forward-looking statements in this report are reasonable, actual results could differ materially from those projected or
assumed in any forward-looking statements. All forward-looking statements are subject to change and inherent risks and uncertainties.
The factors impacting these risks and uncertainties include, but are not limited to:
|
●
|
our current lack of working capital;
|
|
|
|
|
●
|
a possible inability to raise additional financing;
|
|
|
|
|
●
|
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
|
|
|
|
|
●
|
deterioration in general or regional economic conditions;
|
|
|
|
|
●
|
adverse state or federal legislation or regulations that increase the costs of compliance;
|
|
|
|
|
●
|
inability to efficiently manage our operations; and
|
|
|
|
|
●
|
the unavailability of funds for capital expenditures.
|
All financial information contained herein
is shown in United States dollars unless otherwise stated. Our financial statements are prepared in accordance with United States
generally accepted accounting principles.
In this quarterly report, unless otherwise
specified, all references to “shares” refer to shares of common stock in the capital of our company.
As used in this quarterly report on Form
10-Q, the terms “we”, “us” “our” and “Can-Cal” refer to Can-Cal Resources Ltd.,
a Nevada corporation, unless otherwise specified.
Corporate Overview
Can-Cal Resources
Ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties.
As part of its growth strategy, the Company will focus its future activities in the USA, with an emphasis on the Pisgah Mountain,
California property and the Cerbat, Arizona property.
At March 31, 2018,
we had cash on hand of approximately $3,752 available to sustain operations. At December 31, 2017, cash on hand was $769. Accordingly,
we are uncertain as to whether the Company may continue as a going concern. While we may seek additional investment capital, or
possible funding or joint venture arrangements with other mining companies, we have no assurance that such investment capital or
additional funding and joint venture arrangements will be available to the Company.
We expect in the near
term to continue to rely on outside financing activities to finance our operations. We used investment proceeds realized during
2012 for (i) completion of work-up of two potential extraction processes to determine which process we will employ to potentially
prove up any precious metals, platinum groups elements and/or other base metals on the Pisgah, California property and the Cerbat,
Arizona property, if any; (ii) the development of a drill program to potentially prove up any tonnages and precious metals and/or
other base metals on the Cerbat, Arizona property, if any; (iii) the continued development a comprehensive research and development
program to ascertain the potential for any rare earth elements on the Owl Canyon, California property (subsequently abandoned);
(iv) strategic working capital reserve and (v) to finance our operations.
In addition to our
historic exploration activities, we are currently under taking alternative revenue producing opportunities at our Pisgah Property.
On January 23, 2012, the Company entered into a mineral lease agreement with a GoodCorp Inc. to purchase material from the property.
This mineral lease agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option
of the lessee. Sale prices of minerals are set at diminishing prices in $0.50 increments between $12 per ton and $10 per ton for
each 20,000 tons of material removed. As of the date hereof, no material has been sold under this agreement and no revenue has
been received by the Company.
On April 9, 2013, the
Company entered into the Original MSA with Candeo and the Amended MSA on March 3, 2014. Pursuant to the Amended MSA, Candeo is
entitled to purchase Material from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin
per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining;
and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA. Under the Amended MSA, Candeo
has the right to remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah Property and Additional Amounts of
1,000,000 tons each, upon the successful removal of the Initial Amount from the Pisgah Property. Candeo’s right to remove
the Additional Amounts from the Pisgah Property is on the basis that once Candeo has removed the first Additional Amount of the
Material from the Pisgah Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property,
so long as it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is
entirely based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.
Under the Amended MSA,
Candeo is required to purchase a minimum of ten thousand (10,000) tons of Material during each of the first three years of the
term of the agreement, all at a purchase price of $15.00 per ton, for a total payment of $150,000 per year in each of the first
three years of the Term, with credit being given by the Company to Candeo for all pre-paid tons of Material that have already been
purchased and paid for under the Original MSA. The Pre-Purchased Material will remain on the Pisgah Property until Candeo commences
its production operations or engages the Company to mine and remove Material on Candeo’s behalf. In the event that Candeo
engages the Company to mine and remove any of the Material, Candeo shall pay all of the Company’s reasonable costs and expenses
in conducting such mining and removal operations plus a fee of 15%. All mining and removal operations on the Pisgah Property will
be subject to all necessary regulatory and other third-party approvals being obtained. The Pre-Purchased Payments will not be refundable
to Candeo but shall be credited against the first Production Payments.
The term of the Amended
MSA has been extended from an initial term of ten (10) years to twenty (20) years (the “Primary Term”) and Candeo has
the option to extend the term for an additional thirty (30) years exercisable at any time with no less than three (3) months written
notice prior to the expiration of the Primary Term, provided that Candeo is not in default under any of the provisions of the Amended
MSA and that the whole of the Initial Amount has been removed from the Property.
Results of Operations
Three Months Ended March 31, 2018
Compared to the Three Months Ended March 31, 2017
Results of Operations for the Three
Months Ended March 31, 2018 and 2017:
|
|
Three Months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
76,160
|
|
|
$
|
7,515
|
|
Director fees
|
|
|
18,750
|
|
|
|
–
|
|
Total operating expenses
|
|
|
94,910
|
|
|
|
7,515
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(94,910
|
)
|
|
|
(7,515
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
18,022
|
|
|
|
(2,828
|
)
|
Foreign exchange gain (loss)
|
|
|
39
|
|
|
|
(188
|
)
|
Total other income (expense)
|
|
|
18,061
|
|
|
|
(3,016
|
)
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(76,849
|
)
|
|
|
(10,531
|
)
|
Provision for income taxes
|
|
|
–
|
|
|
|
–
|
|
Net loss
|
|
$
|
(76,849
|
)
|
|
$
|
(10,531
|
)
|
General and Administrative:
General and administrative
expenses were $76,160 for the three months ended March 31, 2018 and $7,515 for 2017. This increase in general and administrative
expense in 2018 was primarily due to management fees, legal fees, and filing fees.
Director Fees:
Director fees were
$18,750 for the three months ended March 31, 2018, and $Nil for the three months ended March 31, 2017. During the settlement of
the lawsuit from the shareholders, it was deemed that the three directors of the Company would each be compensated $25,000 per
year starting January 1, 2017, however, the entirety of the 2017 amounts were recorded in the fourth quarter of 2017.
Net Operating Gain or Loss:
Net operating loss
for the three months ended March 31, 2018 was $76,849 or $0.00 per share, there was a net operating loss of $10,531 or $0.00 per
share for the three months ended March 31, 2017. This operating loss increase is primarily due to higher General and Administrative
expense and Director fees as explained above.
Interest Expense:
Interest expense for
the three months ended March 31, 2018 was a recovery of $18,022 and a $2,828 expense for 2017. The reason for the recovery of $18,022
in the first quarter of 2018 was due to a recalculation of the related party loan outstanding with G. Michael Hogan. After being
reviewed by the lawyers involved in the lawsuit, it was determined that previously omitted expenses would be included and that
legal expenses would remain bearing an interest rate of 10%, but all other expenses would bear an interest rate of 5%.
Net Loss:
See the explanation
of Net Operating Loss above.
LIQUIDITY AND CAPITAL RESOURCES
The following table
summarizes total assets, accumulated deficit, stockholders’ equity (deficit) and working capital at March 31, 2018 and December
31, 2017.
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Total Assets
|
|
$
|
9,542
|
|
|
$
|
6,559
|
|
Accumulated (Deficit)
|
|
|
(11,689,878
|
)
|
|
|
(11,613,029
|
)
|
Stockholders’ Equity (Deficit)
|
|
|
(1,051,514
|
)
|
|
|
(973,665
|
)
|
Working Capital (Deficit)
|
|
$
|
(1,050,514
|
)
|
|
$
|
(973,665
|
)
|
At March 31, 2018,
we had total assets of $9,542, consisting of prepaid expenses and cash, compared to assets of $6,559 at December 31, 2017. We have
implemented financial controls in the business to ensure each expense is warranted and needed. Our cash on hand at March 31, 2018
was $3,752.
Off Balance Sheet Arrangements
We do not have any
off-balance sheet arrangements of any kind.
Contractual Obligations
An agreement was signed
effective June 10, 2016 with For Life Financial for the office administration of the Company and can be terminated by either party
with one month’s written notice. An agreement was signed effective September 10, 2016 to manage the Company. The contract
is effective until December 31, 2018 and will continue until the earlier of the completion of the services or the termination of
the agreement. Termination of the agreement may be for any or no reason upon four months written notice. The Company may, in its
sole discretion, request For Life Financial to cease performing services during the four-month period. For Life Financial may terminate
this agreement for any or no reason upon two months written notice.
On September 1, 2017,
an agreement was signed with Red to Black Inc. to perform the accounting for the Company. The contract is effective until December
31, 2017 and will automatically renew and can be terminated by either party with thirty days notice. No new contract has been signed
and the automatic renewal has been continuing.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain “disclosure
controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(f) under the Securities Exchange Act of 1934
(the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules
and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the
“Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”)
and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and
procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the
Exchange Act. Based on this Evaluation, our Chief Executive Officer has concluded that the Company’s disclosure controls
and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting
which is identified below in Management’s Annual Report on Internal Control over Financial Reporting, which we view as an
integral part of our disclosure controls and procedures.
Changes in Internal Control
We have also evaluated
our internal control over financial reporting, and there have been no significant changes in our internal controls or in other
factors that could significantly affect those controls as of March 31, 2018.
Limitations on the Effectiveness of
Controls
Our management, including
our CEO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management or board override of the control.
The design of any system
of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.