Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended May 31, 2021 and 2020 that appear elsewhere in this annual 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 annual report, particularly in the section entitled "Risk Factors" beginning on page 12 of this annual report.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States generally accepted accounting principles.
Cash Requirements
There is limited historical financial information about us upon which to base an evaluation of our performance. We 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, possible delays in the exploration of our properties, 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 operations and conduct exploration on our Labrador Claims. We expect to review other potential exploration projects from time to time as they are presented to us.
Not accounting for our working capital deficit of $317,032 as of May 31, 2021, 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, 2021. 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 until we begin removing and selling minerals. As we had minimal cash and a working capital deficit in the amount of $317,032 as of May 31, 2021, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months. We plan to complete debt financings and/or private placement sales of our common stock in order to raise the funds necessary to pursue our plan of operation and to fund our working capital deficit in order to enable us to pay our accounts payable and accrued liabilities. We currently do not have any arrangements in place for the completion of any debt financings or private placement financings and there is no assurance that we will be successful in completing any debt financing or private placement financing. Our success or failure will be determined by what we find under the ground.
Plan of Operation
The Plan of Operation for the next 12 months is to raise $100,000 for the exploration program on the Cache River Property.
As at May 31, 2021, we cash of $9,111. We will need to raise additional financing to fund our exploration program over the next 12 months.
The continuation of our business is dependent upon obtaining further financing, a successful program of exploration and/or development, and, finally, 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 did not purchase any significant equipment over the twelve months ending May 31, 2021.
Results of Operations for the Years Ended May 31, 2021 and 2020
The following summary of our results of operations should be read in conjunction with our audited financial statements for the years ended May 31, 2021 and 2020.
Our operating results for the years ended May 31, 2021 and 2020 are summarized as follows:
|
|
Year Ended
May 31
|
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
Operating expenses
|
$
|
(161,390
|
)
|
$
|
(253,029
|
)
|
Other income (expenses)
|
$
|
(15,260
|
)
|
$
|
(39,138
|
)
|
Net loss
|
$
|
(176,650
|
)
|
$
|
(292,167
|
)
|
Revenues
We have not earned any revenues since our inception and we do not anticipate earning revenues in the near future.
Operating Expenses
Our operating expenses for the years ended May 31, 2021 and 2020 are outlined in the table below:
|
|
Year Ended
May 31
|
|
|
|
2021
|
|
|
2020
|
|
General and administrative
|
$
|
(158,722
|
)
|
$
|
(253,029
|
)
|
Mineral property exploration costs
|
$
|
(2,668
|
)
|
$
|
-
|
|
Gain on forgiveness of debt
|
$
|
2,261
|
|
$
|
2,747
|
|
Foreign exchange loss
|
$
|
(17,521
|
)
|
$
|
(556
|
)
|
Loss on settlement of debt
|
$
|
-
|
|
$
|
(41,329
|
)
|
Total expenses
|
$
|
(176,650
|
)
|
$
|
(292,167
|
)
|
The decrease in expenses for the year ended May 31, 2021 of $115,517, compared to the same period in fiscal 2020, was mainly due to a decrease in professional fees of $33,441, a decrease in transfer agent and filing fees of $30,214, a decrease in consulting fees of $30,061, a decrease on loss of settlement of debt of $41,329, offset by an increase in foreign exchange loss of $16,965.
Mineral property and exploration costs increased by $2,668 from $nil during the year ended May 31, 2020, to $2,668 during the year ended May 31, 2021. Mineral property exploration costs increased during the year as a result of the staking of additional 18 mineral claims in Labrador, Canada
Liquidity and Financial Condition
Working Capital
|
|
At
May 31,
2021
|
|
|
At
May 31,
2020
|
|
Current assets
|
$
|
18,424
|
|
$
|
7,123
|
|
Current liabilities
|
|
335,456
|
|
|
192,208
|
|
Working deficit
|
$
|
(317,032
|
)
|
$
|
(185,085
|
)
|
Cash Flows
|
|
Year Ended
May 31
|
|
|
|
2021
|
|
|
2020
|
|
Net Cash Used in Operating Activities
|
$
|
(38,769
|
)
|
$
|
(119,671
|
)
|
Net Cash Provided by (Used in) investing activities
|
|
-
|
|
|
-
|
|
Net Cash Provided by Financing Activities
|
|
44,703
|
|
|
122,848
|
|
Net change in cash during period
|
$
|
5,934
|
|
$
|
3,177
|
|
Operating Activities
Net cash used in operating activities during the year ended May 31, 2021 was $38,769 compared to $119,671 for the year ended May 31, 2020. The decrease was primarily a result of a decrease in net loss of $115,517, offset by a decrease in non-cash expenses of $40,843.
Investing Activities
Net cash provided by investing activities during the year ended May 31, 2021 was $Nil compared to net cash used in investing activities of $Nil for the year ended May 31, 2020.
Financing Activities
During the year ended May 31, 2021, we received proceeds of $44,703 from financing activities, which included share subscriptions of $44,703. During the year ended May 31, 2020, we received proceeds of $122,848 from financing activities, which included proceeds from the issuance of common shares of $9,736 and share subscriptions of $113,112.
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.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our audited 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 its inception on February 23, 2006 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as 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. 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 probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. No mineral costs were incurred in the current period.
Stock-based Compensation
Our company records stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" and ASC 505, "Equity Based Payments to Non-Employees", 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 grant date fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
NEW ACCOUNTING PRONOUNCEMENTS
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.
Item 8. Financial Statements and Supplementary Data
Our audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. The following audited financial statements are filed as part of this annual report:
WOLVERINE TECHNOLOGIES CORP.
May 31, 2021
(Expressed in U.S. dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Wolverine Technologies Corp.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Wolverine Technologies Corp. (“the Company”) as of May 31, 2021 and 2020, the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended May 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has never generated revenues, is unlikely to generate earnings in the immediate or foreseeable future, has suffered recurring losses from operations and has a net capital deficiency, all of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2018.
Draper, UT
November 17, 2021
F-1
WOLVERINE TECHNOLOGIES CORP.
Balance Sheets
(Expressed in U.S. dollars)
|
|
May 31,
2021
$
|
|
|
May 31,
2020
$
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
9,111
|
|
|
3,177
|
|
GST receivable
|
|
9,313
|
|
|
3,946
|
|
|
|
|
|
|
|
|
Total Assets
|
|
18,424
|
|
|
7,123
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
244,936
|
|
|
144,968
|
|
Short term debt - related parties (Note 3)
|
|
90,520
|
|
|
47,240
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
335,456
|
|
|
192,208
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 6)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, 2,000,000,000 shares authorized, $0.001 par value
635,626,548 and 630,626,548 shares issued and outstanding at May 31, 2021 and May 31, 2020, respectively
|
|
635,627
|
|
|
630,627
|
|
Subscriptions received
|
|
44,703
|
|
|
10,736
|
|
Additional paid-in capital
|
|
5,483,001
|
|
|
5,477,265
|
|
Accumulated deficit
|
|
(6,480,363
|
)
|
|
(6,303,713
|
)
|
|
|
|
|
|
|
|
Total Stockholders' Deficit
|
|
(317,032
|
)
|
|
(185,085
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Deficit
|
|
18,424
|
|
|
7,123
|
|
WOLVERINE TECHNOLOGIES CORP.
Statements of Operations
(Expressed in U.S. dollars)
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
May 31,
|
|
|
May 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
158,722
|
|
|
253,029
|
|
Mineral property exploration costs
|
|
2,668
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
161,390
|
|
|
253,029
|
|
|
|
|
|
|
|
|
Net Loss Before Other Expenses
|
|
(161,390
|
)
|
|
(253,029
|
)
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on forgiveness of debt
|
|
2,261
|
|
|
2,747
|
|
Foreign exchange loss
|
|
(17,521
|
)
|
|
(556
|
)
|
Loss on settlement of debt
|
|
-
|
|
|
(41,329
|
)
|
Total Other Income (Expense)
|
|
(15,260
|
)
|
|
(39,138
|
)
|
|
|
|
|
|
|
|
Net Loss
|
|
(176,650
|
)
|
|
(292,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share of Common Stock, Basic and Diluted
|
|
(0.00
|
)
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Stock Outstanding, Basic and Diluted
|
|
635,126,548
|
|
|
549,925,820
|
|
WOLVERINE TECHNOLOGIES CORP.
Statements of Changes in Stockholders' Deficit
For the year ended May 31, 2021 and 2020
(Expressed in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Received
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
#
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2019
|
|
477,270,993
|
|
|
477,271
|
|
|
60,862
|
|
|
5,238,347
|
|
|
(6,011,546
|
)
|
|
(235,066
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subscribed for cash
|
|
-
|
|
|
-
|
|
|
9,736
|
|
|
-
|
|
|
-
|
|
|
9,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle debt
|
|
58,266,666
|
|
|
58,267
|
|
|
1,000
|
|
|
100,033
|
|
|
-
|
|
|
159,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle related party debt
|
|
20,000,000
|
|
|
20,000
|
|
|
-
|
|
|
40,000
|
|
|
-
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subscribed for cash
|
|
58,888,889
|
|
|
58,889
|
|
|
-
|
|
|
54,223
|
|
|
-
|
|
|
113,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for subscription payable
|
|
16,200,000
|
|
|
16,200
|
|
|
(60,862
|
)
|
|
44,662
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(292,167
|
)
|
|
(292,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2020
|
|
630,626,548
|
|
|
630,627
|
|
|
10,736
|
|
|
5,477,265
|
|
|
(6,303,713
|
)
|
|
(185,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subscribed for cash
|
|
-
|
|
|
-
|
|
|
44,703
|
|
|
-
|
|
|
-
|
|
|
44,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle debt
|
|
500,000
|
|
|
500
|
|
|
(1,000
|
)
|
|
500
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for subscription payable
|
|
4,500,000
|
|
|
4,500
|
|
|
(9,736
|
)
|
|
5,236
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(176,650
|
)
|
|
(176,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2021
|
|
635,626,548
|
|
|
635,627
|
|
|
44,703
|
|
|
5,483,001
|
|
|
(6,480,363
|
)
|
|
(317,032
|
)
|
WOLVERINE TECHNOLOGIES CORP.
Statements of Cash Flows
(Expressed in U.S. dollars)
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
May 31,
|
|
|
May 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(176,650
|
)
|
|
(292,167
|
)
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Loss on settlement of debt
|
|
-
|
|
|
41,329
|
|
Gain on forgiveness of debt
|
|
(2,261
|
)
|
|
(2,747
|
)
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivable
|
|
(5,367
|
)
|
|
(354
|
)
|
Accounts payable
|
|
102,229
|
|
|
88,533
|
|
Accounts payable - related parties
|
|
43,280
|
|
|
45,735
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
(38,769
|
)
|
|
(119,671
|
)
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
-
|
|
|
9,736
|
|
Proceeds from common stock subscriptions
|
|
44,703
|
|
|
113,112
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
44,703
|
|
|
122,848
|
|
|
|
|
|
|
|
|
Increase in Cash
|
|
5,934
|
|
|
3,177
|
|
|
|
|
|
|
|
|
Cash, Beginning of Year
|
|
3,177
|
|
|
-
|
|
|
|
|
|
|
|
|
Cash, End of Year
|
|
9,111
|
|
|
3,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities:
|
|
|
|
|
|
|
Common stock issued to settle accounts payable
|
|
1,000
|
|
|
159,300
|
|
Common stock issued to settle related party accounts payable
|
|
-
|
|
|
60,000
|
|
Common stock issued for prior year subscriptions
|
|
9,736
|
|
|
60,862
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
1,232
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
1. Organization and basis of presentation
Wolverine Technologies Corp. (the "Company") was incorporated in the State of Nevada on February 23, 2006. The Company's principal business was the acquisition and exploration of mineral resources. The Company had not determined that its properties contain mineral reserves that were economically recoverable, financing had not yet become available, and commodity prices had not fully recovered. Therefore, management decided to change the focus of the Company to include cyber security. Effective August 12, 2015, the Company changed its name from Wolverine Exploration Inc. to Wolverine Technologies Corp. The Company has now refocused its efforts back to the exploration of mineral resources.
The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to the Company's operations. The COVID-19 pandemic has impacted and could further impact the Company's operations and the operations of the Company's suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company's business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company's suppliers and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its potential impact on the Company. Even after the COVID-19 pandemic has subsided, the Company may experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, the Company cannot reasonably estimate the impact at this time on its business, liquidity, capital resources and financial results.
Going Concern
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company plans to raise financing of debt or equity. There can be no assurance that additional financing will be available when needed or, if available, that it can be obtained on commercially reasonable terms. At May 31, 2021, the Company has a working capital deficiency of $317,032 and has accumulated losses of $6,480,363 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Pronouncements
a) Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company's fiscal year-end is May 31.
b) Use of Estimates
The preparation of financial statements in accordance 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 at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
d) Mineral Property Costs
The company has been in the exploration stage since its inception on February 23, 2006 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as 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. 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 probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. No mineral costs were incurred in the current period.
e) Income Taxes
The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision. There are currently no unrecognized tax benefits that if recognized would affect the tax rate. There was $0 of interest and penalties recognized for the years ended May 31, 2021 and 2020.
f) Foreign Currency Translation
The Company's functional and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars and management has adopted ASC 830, "Foreign Currency Translation Matters". Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
g) Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" and ASC 505, "Equity Based Payments to Non-Employees", 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 grant date fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
h) Earnings (Loss) Per Share
The Company computes earnings (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At May 31, 2021 and 2020, the Company had no dilutive shares outstanding.
i) Financial Instruments and Fair Value Measures
ASC 820, "Fair Value Measurements and Disclosures", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, other receivables, accounts payable and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
j) Comprehensive Income
ASC 220, "Comprehensive Income", establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at May 31, 2021 and 2020, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
3. Recent Accounting Pronouncements
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.
4. Related Party Transactions
(a) During the year ended May 31, 2021, the Company incurred consulting fees of $31,536 (2020 - $29,884) to a company controlled by the President of the Company.
(b) During the year ended May 31, 2021, the Company incurred consulting fees of $nil (2020 - $22,117) to a Director of the Company.
(c) As at May 31, 2021, the Company owes $57,292 (May 31, 2020 - $18,123) to a company controlled by the President of the Company, which is non-interest bearing, unsecured and due on demand.
(d) As at May 31, 2021, the Company owes $33,228 (May 31, 2020 - $29,117) to a Director of the Company, which is non-interest bearing, unsecured and due on demand.
5. Mineral Properties
In November 2020 and April 2021, the Company staked mineral claims located in Labrador, Canada for $2,668 (Cdn$3,448). As at May 31, 2021, the Company wrote off the mineral property acquisition costs of $2,668 due to the uncertainty of establishing proven and probable reserves.
6. Common Stock
Stock transactions during the year ended May 31, 2021:
(a) On September 25, 2020, the Company issued 4,500,000 shares of common stock pursuant to a private placement for cash proceeds of $9,736 (Cdn$13,500) received during the year ended May 31, 2020.
(b) On September 25, 2020, the Company issued 500,000 shares of common stock with a fair value of $1,000 to settle $1,085 (Cdn$1,500) in debt, resulting in a gain on settlement of $85 recognized during the year ended May 31, 2020.
(c) During the year ended May 31, 2021, the Company received cash proceeds of $40,953 (Cdn$50,000) for 20,000,000 shares of common stock to be issued subsequent to year end. The common stock was issued on July 26, 2021 (Note 10).
(d) During the year ended May 31, 2021, the Company received cash proceeds of $3,750 for 2,000,000 shares of common stock to be issued subsequent to year end. The common stock was issued on July 26, 2021 (Note 10).
Stock transactions during the year ended May 31, 2020:
(a) On August 23, 2019, the Company issued 16,200,000 shares of common stock pursuant to a private placement for cash proceeds of $60,862 (Cdn$81,000) received during the year ended May 31, 2019.
(b) On August 23, 2019, the Company issued 5,000,000 shares of common stock pursuant to a private placement for cash proceeds of $12,349 (Cdn$16,500).
(c) On August 23, 2019, the Company issued 1,500,000 shares of common stock with a fair value of $3,000 to settle accounts payable of $4,887 (Cdn$6,500), resulting in a gain on settlement of $1,887.
(d) On February 3, 2020, the Company agreed to issue 8,100,000 shares of common stock with a fair value of $24,300 to settle accounts payable of $18,225, resulting in a loss of $6,075. The common stock was issued on March 13, 2020.
(e) On February 13, 2020, the Company agreed to issue 33,666,666 shares of common stock with a fair value of $101,000 to settle accounts payable of $76,173, resulting in a loss on settlement of $24,827. The common stock was issued on March 13,2020.
(f) On February 13, 2020, the Company agreed to issue 20,000,000 shares of common stock with a fair value of $60,000 to settle related party accounts payable of $45,251, resulting in a loss on settlement of $14,749. The common stock was issued on March 13, 2020.
(g) On March 13, 2020, the Company issued 15,000,000 shares of common stock with a fair value of $30,000 to settle accounts payable of $32,348 (Cdn$45,000) resulting in a gain on settlement of $2,350.
(h) On March 13, 2020, the Company issued 53,888,889 shares of common stock pursuant to a private placement for cash proceeds of $121,250. The Company had also incurred share issuance costs of $20,488, resulting in net cash proceeds of$100,762.
(i) On May 29, 2020, the Company agreed to issue 500,000 shares of common stock with a fair value of $1,000 to settle $1,085 (Cdn$1,500) resulting in a gain on settlement of $85. These shares were issued on September 29, 2020.
(j) During the year ended May 31, 2020, the Company received cash proceeds of $9,736 for the issuance of 4,500,000 common shares. These shares were issued on September 25, 2020.
At May 31, 2021 and 2020, the Company had no dilutive shares, or common stock equivalents.
7. Stock-based Compensation
On May 28, 2010, the Board of Directors of the Company adopted the 2010 Stock Plan (the "Plan"). The maximum number of shares of the Company's common stock available for issuance under the Plan is 10,294,500 shares. An aggregate of 5,147,250 shares may be issued under stock options and an aggregate of 5,147,250 shares may be issued in the form of restricted shares. As at May 31, 2021, there were none issued.
At May 31, 2021 and 2020, the Company had no outstanding or exercisable stock options.
8. Commitments
(a) On January 31, 2007, the Company entered into a consulting agreement with a company whereby it has agreed to pay $7,702 (Cdn$10,000) per month. The Company is obligated to issue a bonus of 5% of the Company's issued and outstanding common shares as of the date of the payment of the bonus upon and only in the event of the discovery of a major commercially viable mineral resource deposit. As at May 31, 2021, the Company has not issued a bonus. During the year ended May 31, 2021, the Company recorded consulting fees of $94,517 (Cdn$120,000). During the year ended May 31, 2020, the Company recorded consulting fees of $89,286 (Cdn$120,000).
(b) On April 19, 2016, the Company signed a Share Purchase Agreement with a Director of the Company, whereby the Company will issue, in a private placement, 400,000,000 shares of common stock of the Company in consideration for one-third of the net proceeds that the Director will receive from the sale of the Director's 15% interest in Decision-Zone Inc. As of the date of this filing, the agreement has not yet closed.
9. Income Taxes
The Company has net operating losses carried forward of $4,548,600 available to offset taxable income in future years which expires beginning in fiscal 2027. Under section 382 of the Internal Revenue Code such a change in control negates much of the tax loss carry forward and deferred income tax. The Company is subject to examination by the IRS for tax years 2014 to 2021. The Company is also subject to income tax in Canada.
The Company was subject to United States federal and state income taxes at an approximate rate of 21% for the years ended May 31, 2021 and 2020.
The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company's income tax expense as reported is as follows:
|
|
2021
$
|
|
|
2020
$
|
|
|
|
|
|
|
|
|
Income tax recovery at statutory rate
|
|
(37,096
|
)
|
|
(61,355
|
)
|
|
|
|
|
|
|
|
Temporary differences
|
|
560
|
|
|
-
|
|
|
|
|
|
|
|
|
Valuation allowance change
|
|
36,536
|
|
|
61,355
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
The significant components of deferred income tax assets and liabilities at May 31, 2021 and 2020, are as follows:
|
|
2021
$
|
|
|
2020
$
|
|
|
|
|
|
|
|
|
Mineral property costs
|
|
300,531
|
|
|
299,971
|
|
Net operating losses carried forward
|
|
955,211
|
|
|
918,675
|
|
|
|
|
|
|
|
|
Gross deferred income tax assets
|
|
1,255,742
|
|
|
1,218,646
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(1,255,742
|
)
|
|
(1,218,646
|
)
|
|
|
|
|
|
|
|
Net deferred income tax asset
|
|
-
|
|
|
-
|
|
10. Subsequent events
On July 26, 2021, the Company issued 3,000,000 shares of common stock pursuant to a private placement for cash proceeds of $5,625, of which $3,750 was received at May 31, 2021 (Note 6).
On July 26, 2021, the Company issued 37,000,000 shares of common stock pursuant to a private placement for cash proceeds of $75,295 (Cdn$92,500), of which $40,953 (Cdn$50,000) was received at May 31, 2021 (Note 6).
Subsequent to May 31, 2021, the Company received cash proceeds of $25,715 (Cdn$32,500) for the subscription of 13,000,000 shares of common stock pursuant to a private placement. As of the date of these financial statements the shares had yet to be issued.
Subsequent to May 31, 2021, the Company received cash proceeds of $18,750 for the subscription of 10,000,000 shares of common stock pursuant to a private placement. As of the date of these financial statements the shares had yet to be issued.
The Company has evaluated subsequent events through the date which the financial statements were available to be issued. All subsequent events requiring recognition as of May 31, 2021, have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC