NOTES TO AUDITED FINANCIAL STATEMENTS
APRIL 30, 2021
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Boxxy Inc. (the “Company”) was incorporated in Nevada on April 19, 2018. We were a development stage company that intended to develop an online beauty sample subscription service.
On November 26, 2020, the Company completed an acquisition of working interests in certain mining properties as discussed in Note 4 below.
We are currently focusing on mining business.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s year-end is April 30.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
Level 1: defined as observable inputs such as quoted prices in active markets;
Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The carrying value of accounts payable and accrued liabilities, accrued interest, current portion of long-term debt, other party loan and loan from director approximates its fair value due to their short-term maturity.
Mining Property
Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.
ASC 930-805, “Extractive Activities-Mining: Business Combinations” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
(a) The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining the fair value of the assets.
(b) The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants.
For the year ended April 30, 2021, the Company has capitalized a total of $125,000 in mining property rights.
Impairment
The Company assesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of long-lived assets”, and evaluates its carrying value under ASC 930-360, “Extractive Activities - Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.
Based on the Company’s evaluation, no impairment has been recorded on the unproven mining property for the year ended April 30, 2021.
Revenue Recognition
The Company recognized revenue from the sales of mineral products produced from mining operations in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties or when the invoice has been generated and provided to the customer
Step 2: The performance obligations are stated or implied in the contract or invoice
Step 3: The transaction price has been identified in the contract or invoice
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract or invoice
Step 5: The Company satisfied the performance obligations when the mineral products delivered to the purchaser
The Company recognized revenue from the royalty revenue in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties for royalty fees
Step 2: The performance obligations are stated or implied in the contract
Step 3: The transaction price has been identified in the contract
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract
Step 5: The Company has satisfied the performance obligations at the same period as the sales that generate the royalty payment
Asset Retirement Obligations
The Company records a liability for asset retirement obligations (“ARO”) associated with its mining properties when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of mining properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the mining property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (See Note 5)
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740 “Income Taxes”. Pursuant to ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At April 30, 2021, there were no unrecognized tax benefits. (See Note 8)
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of April 30, 2021 and 2020, the Company has no dilutive instruments.
Recent accounting pronouncements
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 – GOING CONCERN
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements, the Company had an accumulated deficit of $103,886, and working capital deficit of $195,113 at April 30, 2021.
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – MINING PROPERTY
On November 26, 2020, the Company entered into an Asset Purchase Agreement with a vendor to acquire undivided 100% right, title and interest in and to unpatented mining claims located in the “Territoire d'Eeyou Istchee Baie-James” Québec, for a purchase price of $125,000. (Note 5)
NOTE 5 – RELATED PARTY TRANSACTIONS
The Company has received capital from the former director and current director of the Company to pay for the Company expenses. The advance is unsecured non-interest bearing, and due on demand. During the year ended April 30, 2021 and 2020, the director advanced $153,913 of which $125,000 was paid for claims on an mining property rights, and $28,913 to the Company for paying operating expenses, respectively.
As of April 30, 2021 and April 30, 2020, the loan from director was $153,913 and $22,482, respectively. Loan from former director in the amount of $22,482 was forgiven as of September 28, 2020.
NOTE 6 – LOAN PAYABLE
The Company has outstanding loans payable of $nil and $6,336 as of April 30, 2021 and April 30, 2020, respectively. The loans payable is unsecured with annual interest rate of 6%. On July 1, 2020, the loan of $3,736 and accrued interest of $448 was forgiven. On September 15, 2020, the loan of $2,600 and accrued interest of $312 was forgiven.
The Company has outstanding other party loan of $nil and $4,050 as of April 30, 2021 and April 30, 2020, respectively. The loan payable is unsecured with annual interest rate of 6%. On November 10, 2020, other party loan of $4,050 and accrued interest of $486 was forgiven.
The Company has outstanding long-term loan payable of $6,973 and $6,973 as of April 30, 2021 and April 30, 2020, respectively. The loan payable is unsecured with annual interest rate of 6% and had an original maturity date of April 20, 2020. The maturity date is extended through April 20, 2025.
Interest expenses were $665 and $1,044 for the year ended April 30, 2021 and 2020, respectively. As of April 30, 2021 and April 30, 2020, accrued interest was $1,279 and $1,860, respectively.
NOTE 7 – STOCKHOLDER’S EQUITY
The Company has 75,000,000, $0.001 par value shares of common stock authorized.
As of April 30, 2021 and April 30, 2020, the Company had 4,190,000 shares issued and outstanding.
NOTE 8 – INCOME TAX
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of April 30, 2021 and 2020, are as follows:
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2021
|
|
|
2020
|
|
Net operating loss carryforward
|
|
$
|
(94,888
|
)
|
|
$
|
(100,690
|
)
|
Statutory tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Deferred tax asset
|
|
|
(19,926
|
)
|
|
|
(21,145
|
)
|
Less: Valuation allowance
|
|
|
19,926
|
|
|
|
21,145
|
|
Net deferred asset
|
|
$
|
-
|
|
|
$
|
-
|
|
As of April 30, 2021, the Company had $94,888 in net operating losses (“NOLs”) that may be available to offset future taxable income, which begin to expire between 2036 and 2038. NOLs generated in tax years prior to April 30, 2018, can be carryforward for twenty years, whereas NOLs generated after April 30, 2018 can be carryforward indefinitely. In accordance with Section 382 of the U.S. Internal Revenue Code, the usage of the Company’s net operating loss carry forwards is subject to annual limitations following greater than 50% ownership changes. Tax returns for the years ended 2016 through 2021 are subject to review by the tax authorities.
NOTE 9 – RISK AND UNCERTAINTIES
In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no retroactive material adverse impacts on the Company’s results of operations and financial position at April 30, 2021. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional information is obtained.
NOTE 10 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to April 30, 2021 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.