Annual Report (10-k)

Date : 08/14/2019 @ 9:29PM
Source : Edgar (US Regulatory)
Stock : Discovery Gold Corp (PN) (DCGD)
Quote : 0.4851  -0.05715 (-10.54%) @ 9:09PM

Annual Report (10-k)



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended April 30, 2019

 

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________to __________

 

Commission file number: 000-54709

 

DISCOVERY GOLD CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   27-2616571

(State or other jurisdiction of

Incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1000 2 nd Avenue, Suite 3900

Seattle, WA

  98104
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:   (425) 830-1192

 

Securities registered pursuant to Section 12(b) of the Act:

None

(Title of each class)

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock

$0.001 Par Value

(Title of each class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  [_]  Yes   [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  [X]  Yes   [_] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

[X] Yes    [_]  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     [_] Yes   [X]  No

 

 
 

 

 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer  [_](Do not check if a smaller reporting company) Smaller reporting company [X]
 

 

Emerging growth company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    

[X] Yes    [_] No

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [X]

 

The aggregate market value of common equity held by non-affiliates of the Registrant as of October 31, 2018 was approximately $173,131.

 

As at August 14, 2019, 249,777,311 shares of common stock, par value $0.001, were issued and outstanding.

 

 

 
 

 

 

Table of Contents

 

      Page
       
PART I
         
Item 1.   Business. 5  
         
Item 1A.   Risk Factors. 6  
         
Item 1B.   Unresolved Staff Comments. 6  
         
Item 2.   Properties. 6  
         
Item 3.   Legal Proceedings. 6  
         
Item 4.   Mine Safety Disclosures. 6  
         
PART II
         
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 7  
         
Item 6.   Selected Financial Data. 8  
         
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations. 8  
         
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk. 11  
         
Item 8.   Financial Statements and Supplementary Data.  F-1  
         
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 12  
         
Item 9A.   Controls and Procedures. 12  
         
Item 9B.   Other Information. 13  
         
PART III
         
Item 10.   Directors, Executive Officers, and Corporate Governance. 13  
         
Item 11.   Executive Compensation. 17  
         
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 19  
         
Item 13.   Certain Relationships and Related Transactions, and Director Independence. 19  
         
Item 14.   Principal Accountant Fees and Services. 20  
         
PART IV
         
Item 15.   Exhibits, Financial Statement Schedules. 21  

 

3  
 

 

Cautionary Statement Regarding Forward Looking Statements

 

The discussion contained in this Annual Report on Form 10-K (“Annual Report”) contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “target,” “expects,” “management believes,” “we believe,” “we intend,” “we may,” “we will,” “we should,” “we seek,” “we plan,” the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Annual Report. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Annual Report describe factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in this Annual Report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this Annual Report or the date of documents incorporated by reference herein that include forward-looking statements.

 

 

4  
 

 

PART I

 

Item 1.                 Business.

 

Corporate History

 

We were incorporated in the State of Nevada on April 28, 2010 under the name Norman Cay Development, Inc. From inception until September 1, 2011, we were an Exploration Stage company that had not commenced any operations. It was our initial intention to be an authorized retailer of wireless telephones and service plans with our initial operation in Michigan or elsewhere in the Midwest. Due to lack of cell phone and service plan sales, in September 2011, we abandoned the original business plan and began seeking out potential acquisition candidates in the mining industry.

 

On July 12, 2012, we changed the name of the Company from Norman Cay Development, Inc. to Discovery Gold Corporation to better reflect the direction and business of the Company.

 

Except as otherwise indicated by the context, references in this Annual Report to “Company,” “DCGD,” “we,” “us” and “our” are to Discovery Gold Corporation.

 

On September 2, 2011,  the Company entered into a certain Share Exchange Agreement (the “Share Exchange Agreement”) by and among the Company, Discovery Gold Ghana Limited, a company organized under the laws of the country of Ghana (“DGG”), the stockholders of DGG (the “DGG Stockholders”), and the majority stockholder of the Company. Pursuant to the Share Exchange Agreement, the Company acquired one hundred percent (100%) of the issued and outstanding ordinary shares of DGG, and in exchange the Company: (i) made a one-time payment of one hundred thousand dollars ($100,000) to DGG and (ii) issued seventeen million five hundred thousand (17,500,000) newly-issued shares of restricted Common Stock of the Company to the DGG Stockholders resulting in the acquisition of DGG by the Company (the “Acquisition”). As a result of closing the Share Exchange Agreement, the Company has acquired DGG, as its wholly-owned subsidiary. The acquisition of DGG by the Company did not require Ghana government regulatory consent under the Mining Act or any other applicable legislation of Ghana. On February 23, 2015, the Company sold all issued and outstanding shares in DGG to James Clark, thereby disposing of the wholly owned subsidiary.

 

The Company operated as an Exploration Stage company in Ghana involved in the examination and investigation of land that it believed contained valuable minerals, with the primary focus on gold. The Company unsuccessfully tried to raise capital in order to implement its business plan, and subsequently failed to file its reports to the Commission in a timely fashion. The Company terminated its registration with the Commission on May 1, 2015 by filing Form 15 12g-4(a)(2). Thereafter, the Company stopped filing required reports pursuant to Rules 13 and 15d of the Securities Act of 1934 (“Exchange Act”) and ceased operations. 

 

On July 30, 2018, the Company filed Form 10-12g with the Commission disclosing that it was a shell company with no operations or assets seeking to acquire an interest in business opportunities presented to us by persons or firms which desire to seek the advantages of an issuer who has complied with the Exchange Act.

 

On June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Registrant’s common stock representing 55.65% of this issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The total purchase price of $300,000 was paid in cash by GRN Funds, LLC. As a condition to the closing of the transaction, the Registrant’s Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer and President, and Mr. Justin Costello was concurrently named Director of the Registrant, President and Chief Executive Officer. As of the date of this filing, the Company has not commenced operations and remains a shell company.

 

5  
 

 

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.W., Washington, DC 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC’s web site,  www.sec.gov .

 

Item 1A.        Risk Factors.

 

Not applicable.

           

Item 1B.       Unresolved Staff Comments.

 

Not applicable.

 

  Item 2.        Properties.

 

     The Company currently uses office space provided gratis by GRN Funds, LLC, located at 1000 2 nd Avenue, Suite 3900, Seattle, WA 98104 as our corporate headquarters. The office space is not subject to a lease. As of the date of this Annual Report, we have not sought to move or change our office site. Additional space may be required as we expand our operations. We currently do not own any real property.

 

Item 3.      Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 4.        Mine Safety Disclosures.

 

Not applicable. 

 

6  
 

 

PART II

 

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market for Common Equity and Related Stockholder Matters

 

Our Common Stock is not traded on a national securities exchange. Our common stock is listed on the OTC Markets Pink Sheet trading tier under the trading symbol “DCGD.”

 

    High     Low  
Year ended April 30, 2018            
1st Quarter   0.0026     $ 0.0001  
2nd Quarter     0.002       0.0015  
3rd Quarter   $ 0.0031     $ 0.0015  
4th Quarter   $ 0.0048     $ 0.0013  

 

Year ended April 30, 2019

               
1st Quarter   $ 0.0048     $ 0.0016  
2nd Quarter   $ 0.0075     $ 0.0018  
3rd Quarter   $ 0.0059     $ 0.003  
4th Quarter   $ 0.0059     $ 0.003  

 

Record Holder

 

As of August 13, 2019, we had 249,777,311 shares of Common Stock outstanding and held of record by 31 stockholders. Within the holders of record of our Common Stock are depositories such as Cede & Co. that hold shares of stock for brokerage firms, which, in turn, hold shares of stock for beneficial owners. On August 2, 2019, the closing price of our Common Stock on OTCQB was $0.5913 per share.

   

Dividends

 

We have not paid any cash dividends to shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

 

Securities Authorized for Issuance Under Equity Compensation Plans.

 

As of April 30, 2019, we did not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.

 

Stock Transfer Agent

 

Our stock transfer agent is Action Stock Transfer Company, 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121, telephone: (801) 274-1088.

  

Repurchase of Equity Securities by the Company and Affiliated Purchasers

 

None.

 

7  
 

 

 

Recent Sales of Unregistered Securities

 

On June 20, 2019, our director and officer Mr. Stephen Flechner, and former director David Cutler, sold a total of 139 million common shares to GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, in a private transaction. The sale of common stock represented 55.65% of this issued and outstanding shares. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The purchase was made pursuant to the exemption from registration including, but not limited to, Section 506 of Reg. D and Section 4.1.

 

 

Item 6.      Selected Financial Data.

 

Not applicable.

 

 

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto, and other financial information included elsewhere in this Annual Report. This report contains forward-looking statements that involve risks and uncertainties. Actual results in future periods may differ materially from those expressed or implied in such forward-looking statements as a result of a number of factors.

 

Overview

 

The Company was incorporated in the State of Nevada on April 28, 2010 with an intention to be an authorized retailer of wireless telephones and service plans with initial operation in Michigan or elsewhere in the Midwest. From 2011 to 2015, the Company operated as an exploratory stage mining company focused on developing operations in Ghana. The Company unsuccessfully tried to raise capital in order to implement its business plan, and subsequently failed to file its reports to the Commission in a timely fashion. The Company terminated its registration with the Commission on May 1, 2015 by filing Form 15 12g-4(a)(2). Thereafter, the Company stopped filing required reports pursuant to Rules 13 and 15d of the Securities Act of 1934 (“Exchange Act”). 

 

On July 30, 2018, the Company filed Form 10-12g with the Commission disclosing that it was a shell company seeking to acquire an interest in business opportunities presented to us by persons or firms which desire to seek the advantages of an issuer who has complied with the Exchange Act.

 

On June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Registrant’s common stock representing 55.65% of this issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The total purchase price of $300,000 was paid in cash by GRN Funds, LLC. As a condition to the closing of the transaction, the Registrant’s Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer and President, and Mr. Justin Costello was concurrently named Director of the Registrant, President and Chief Executive Officer. As of the date of this filing, the Company has no current business operations.

 

8  
 

 

 

Critical Accounting Policies, Estimates and New Accounting Pronouncements

 

Management's discussion and analysis of its financial condition and plan of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  At each balance sheet date, management evaluates its estimates.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations include those stated in our financial statements and those listed below:

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $9,297 for the twelve months ended April 30, 2019 and $884 in 2018.  These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.  Management intends to finance these deficits by making additional shareholder notes and seeking additional outside financing through either debt or sales of its Common Stock.

 

Recently Adopted Accounting Standards

 

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard.

 

In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company determined that it has no leases subject to treatment under ASC 842-20-50-3.

 

The adoption of this guidance resulted in no significant impact to our results of operations or cash flows.

 

Revenue Recognition

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. As we have no operations at this time that generate revenue, we determined that upon adoption of ASC 606 there were no adjustments converting from ASC 605 to ASC 606.

 

9  
 

 

 

Income Taxes

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended April 30, 2019 and April 30, 2018, due to cumulative losses, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of April 30, 2019 and April 30, 2018, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero.

 

Loss Contingencies

Consistent with ASC 450-20-50-1C, if the Company determines that there is a reasonable possibility that a material loss may have been incurred, or is reasonably estimable, regardless of whether the Company accrued for such a loss (or any portion of that loss), the Company will confer with its legal counsel, consistent with ASC 450. If the material loss is determinable or reasonably estimable, the Company will record it in its accounts and as a liability on the balance sheet. If the Company determines that such an estimate cannot be made, the Company's policy is to disclose a demonstration of its attempt to estimate the loss or range of losses before concluding that an estimate cannot be made, and to disclose it in the notes to the financial statements under Contingent Liabilities.

 

Net Income (Loss) Per Common Share

We report net income (loss) per common share in accordance with ASC 260, “Earnings per Share.” This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.

 

Related Party Transactions

We follow ASC subtopic 850-10, “Related Party Transactions,” for the identification of related parties and disclosure of related party transactions.

 

Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

10  
 

 

 

Material related party transactions are required to be disclosed in the financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Result of Operations – Comparison of Years Ended April 30, 2019 versus 2018

 

General and administrative expenses

 

Our general and administrative expenses were $125,164 for the twelve months ended April 30, 2019, versus just $1,421 for the same period in 2018.  The principal difference for the increase is due to the accounting, professional and legal fees incurred in filing the Form 10 on July 30, 2019 along with the director fees and executive compensation incurred during year ended April 30, 2019 totaling approximately $70,000.

 

Liquidity and Capital Resources

 

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have no ongoing business or income and for the year ended April 30, 2019, we reported a net loss of $125,164 and an accumulated deficit of $8,647,096 as of April 30, 2019. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity funding to meet our ongoing operating expenses and ultimately in merging with another entity with experienced management and profitable operations. No assurances can be given that we will be successful in achieving these objectives.

 

We have not established operations and will be dependent upon obtaining financing to pursue any future extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

 

N/A

 

 

11  
 

 

Item 8.  Financial Statements and Supplementary Data.

 

 

 

DISCOVERY GOLD CORPORATION

 

AUDITED FINANCIAL STATEMENTS

 

FOR THE YEARS ENDED APRIL 30, 2019 AND 2018 

 

 

 

 

 
 

 

 

 

 

DISCOVERY GOLD CORPORATION

 

FINANCIAL STATEMENTS

 

C O N T E N T S

 

 

 
  PAGE
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
   
BALANCE SHEETS AS OF APRIL 30, 2019 AND 2018 F-3
   
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED APRIL 30, 2019 AND 2018 F-4
   

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT FOR THE YEARS ENDED

APRIL 30, 2019 AND 2018

F-5
   
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 2019 AND 2018 F-6
   
NOTES TO AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED APRIL 30, 2019 AND 2018 F-7 – F-13

 

 

 

 

F- 1  
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders

Discovery Gold Corporation

1000 2 nd Avenue, Suite 3900

Seattle, WA, 98104

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Discovery Gold Corporation (the “Company”) as of April 30, 2019 and 2018, the related statements of operations, shareholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.   

 

  Consideration of the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred losses since inception, has accumulated a significant deficit, has negative cash flows from operations, and currently has no revenues. These factors 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 2. 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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.

 

/s/ Pinnacle Accountancy Group of Utah, a DBA of Heaton & Co., PLLC

We have served as the Company’s auditor since 2018.

 Farmington, UT

August 14, 2019

 

 

F- 2  
 

 

 

DISCOVERY GOLD CORPORATION

BALANCE SHEETS

As of April 30, 2019 and 2018

         
    APRIL 30,
    2019   2018
         
ASSETS                
                 
Current Assets                
Cash and Cash Equivalents   $ —       $ 1,589  
                 
Total Current Assets     —         1,589  
                 
Total Assets   $ —       $ 1,589  
                 
LIABILITIES AND SHAREHOLDERS' DEFICIT                
                 
Current Liabilities                
Fees Drawn in Excess of Bank Balance   $ 11     $ —    
Accounts Payable     129,360       83,258  
Accruals - Related Parties     77,218       7,453  
Loans – Related Parties     7,697       —    
                 
Total Current Liabilities     214,286       90,711  
                 
Total Liabilities     214,286       90,711  
                 
Shareholders' Deficit                
Preferred Stock, $0.001 par value, 10,000,000 shares                
authorized, none issued or outstanding     —         —    
Common  Stock, $0.001 par value, 250,000,000 shares                
authorized, 249,777,311 issued and                
outstanding     249,777       249,777  
Additional Paid-In Capital     8,183,033       8,183,033  
Accumulated Deficit     (8,647,096 )     (8,521,932 )
                 
Total Shareholders' Deficit     (214,286 )     (89,122 )
                 
Total Liabilities and Shareholders' Deficit   $ —       $ 1,589  

 

 

The accompanying notes are an integral part of these audited financial statements

 

 

F- 3  
 

 

DISCOVERY GOLD CORPORATION

STATEMENTS OF OPERATIONS

Years Ended April 30, 2019 and 2018

 

         
    APRIL 30,
    2019   2018
         
REVENUE   $ —       $ —    
                 

EXPENSES

 

               
General and administrative expenses     125,164       1,421  
                 
Total Expenses     125,164       1,421  
                 
OPERATING LOSS     (125,164 )     (1,521 )
                 
OTHER INCOME                
Gain on settlement of liabilities     —         846  
                 
INCOME (LOSS) BEFORE TAXES     (125,164 )     (575 )
                 
TAXES     —         —    
                 
NET INCOME (LOSS)   $ (125,164 )   $ (575 )
                 
Net Income (Loss) per Common Share: Basic and Diluted   $ (0.00 )   $ (0.00 )
                 
Weighted Average Common Shares Outstanding: Basic and Diluted     247,777,311       114,210,736  

 

The accompanying notes are an integral part of these audited financial statements

 

F- 4  
 

 

 

DISCOVERY GOLD CORPORATION

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

Years Ended April 30, 2019 and 2018

 

                 
             
                     
                      Additional                  
      Common               Paid-In       Accumulated          
      Shares       Amount       Capital       Deficit       Total  
                                         
 Balance at April 30, 2017     107,677,311     $ 107,677     $ 8,139,783     $ (8,521,357 )   $ (273,897 )
                                         
Shares issued in settlement of                                        
accruals - related parties     139,000,000       139,000       41,700       —         180,700  
                                         
Shares issued in settlement of                                        
accounts payable and accruals     3,100,000       3,100       1,550       —         4,650  
                                         
Net loss for the year     —         —         —         (575 )     (575 )
                                         
Balance at April 30, 2018     249,777,311       249,777       8,183,033       (8,521,932 )     (89,122 )
                                         
Net loss for the year     —         —         —         (125,164 )     (125,164 )
                                         
Balance at April 30, 2019     249,777,311     $ 249,777     $ 8,183,033     $ (8,647,096 )   $ (214,286 )
                                         

 

The accompanying notes are an integral part of these audited financial statements

 

 

F- 5  
 

 

 

DISCOVERY GOLD CORPORATION

STATEMENTS OF CASHFLOWS

Years Ended April 30, 2019 and 2018

 

         
    APRIL 30,
    2019   2018
         
Cash Flows from Operating Activities:                
                 
Net Income (Loss)   $ (125,164 )   $ (575 )
 Adjustments to reconcile net income (loss) to                
net cash used in operating activities:                
Gain on settlement of liabilities     —         (846 )
                 
Changes in working capital items:                
Accounts payable and accruals     46,102       259  
Accruals - related parties     69,765       278  
                 
Net Cash Flows Used in Operating Activities     (9,297 )     (884 )
                 
Net Cash Flows from Investing Activities     —         —    
                 
Net Cash Flows from Financing Activities                
Fees drawn in excess of bank balance     11       —    
Advances under loans – related parties     7,697       —    
                 
New Cash Flows from Financing Activities     7,708       —    
                 
Net Change in Cash:     (1,589 )     (884 )
                 
Beginning cash:     1,589       2,473  
                 
Ending Cash:   $ —       $ 1,589  
                 
Supplemental Disclosures of Cash Flow Information:                
Cash paid for interest   $ —       $ —    
Cash paid for tax   $ —       $ —    
                 
Supplemental Disclosures of Non-Cash Financing Activities                
Shares issued to settle accounts payable   $ —       $ 4,650  
Shares issued to settle accruals - related parties   $ —       $ 180,700  

 

The accompanying notes are an integral part of these audited financial statements

 

 

 

F- 6  
 

 

DISCOVERY GOLD CORPORATION

NOTES TO AUDITED FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2019 AND 2018

 

 

NOTE 1. NATURE OF OPERATIONS

 

Nature of Business

 

Discovery Gold Corporation., a Nevada corporation, (“Discovery Gold,” “the Company,” “We," "Us" or “Our’) is a publicly quoted shell company seeking to create value for its shareholders by merging with another entity with experienced management and opportunities for growth in return for shares of its common stock.  No potential merger candidate has been identified at this time.

 

As further discussed below in Note 10. Subsequent Events below, on June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Company’s common stock representing 55.65% of its issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The total purchase price of $300,000 was paid in cash by GRN Funds, LLC. As a condition to the closing of the transaction, the Company’s Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer and President, and Mr. Justin Costello was concurrently named Director of the Company, President and Chief Executive Officer. As a term and condition of the transaction, Messrs. Flechner and Cutler agreed to satisfy Company accounting, professional and legal fees totaling approximately $70,000.

 

NOTE 2. GOING CONCERN

 

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have no ongoing business or income and for the year ended April 30, 2019, we reported a net loss of $125,164 and an accumulated deficit of $8,647,096 as of April 30, 2019. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity funding to meet our ongoing operating expenses and ultimately in merging with another entity with experienced management and profitable operations. No assurances can be given that we will be successful in achieving these objectives.

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied. The Company has elected an April 30 year-end.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

F- 7  
 

 

 

Cash and Cash Equivalents

 

We maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. As of April 30, 2019 and 2018, we did not maintain any balance of cash equivalents.

 

Financial Instruments

 

The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amount of the our accounts payable and accruals, our accruals- related parties and loans – related parties approximate their fair values because of the short-term maturities of these instruments.

 

Fair Value Measurements: 

 

ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements.  Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs.  ASC 820 defines the hierarchy as follows:

 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.

 

Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date.  The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.

 

Level 3 – Significant inputs to pricing that are unobservable as of the reporting date.  The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

 

Our financial instruments consist of accounts payable and accruals and our accruals- related parties. The carrying amount of the out accounts payable and accruals, accruals- related parties and loans – related parties approximates their fair values because of the short-term maturities of these instruments.

 

F- 8  
 

 

 

Related Party Transactions:

 

A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person's immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

Income Taxes:

 

The provision for income taxes is computed using the asset and liability method, under which 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 losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Uncertain Tax Positions:

 

We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long term liabilities in the financial statements.

 

Revenue Recognition:

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . Since that date, the FASB has issued additional ASUs providing further revenue recognition guidance (collectively, “Topic 606”). Topic 606 clarifies the principles for recognizing revenues and costs related to obtaining and fulfilling customer contracts, with the objective of improving financial reporting. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Topic 606 defines a five-step process to achieve this core principle, and more judgment and estimates are required under Topic 606 than were required under the prior generally accepted accounting principles of Topic 605, Revenue Recognition (“Topic 605”) .

 

During the years ended April 30, 2019 and 2018, we did not recognize any revenue.

 

Advertising Costs:

 

We expense advertising costs when advertisements occur.  No advertising costs were incurred during the year ended April 30, 2019 or 2018.

 

Stock Based Compensation:

 

The cost of equity instruments issued to non-employees in return in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. Measurement date for non-employees is the earlier of performance commitment date or the completion of services. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued in accordance with ASC 718 “Compensation - Stock Compensation.”

 

F- 9  
 

 

 

Net Loss per Share Calculation:

 

Basic net loss per common share ("EPS") is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

 

No potentially dilutive debt or equity instruments were issued or outstanding during the years ended April 30, 2019 and 2018.

 

Subsequent Events:

 

We have evaluated all transactions from April 30, 2019 through the date these financial statements were issued for subsequent event disclosure consideration. See Note 10. Subsequent Events.

 

Recently Accounting Pronouncements: 

 

We have reviewed all the recently issued, but not yet effective, accounting pronouncements and do not believe any of these pronouncements will have a material impact on our financial statements .

 

NOTE 4. ACCOUNTS PAYABLE AND ACCRUALS

 

On April 23, 2018, we issued 3,100,000 shares of our common stock valued at $4,650 to a creditor of ours in settlement of the balance of consulting fees due to him.

 

As of April 30, 2019 and 2018, $83,000 of the accounts payable and accruals balance related to legal fees owed to a single creditor. Effective May 2, 2018, we entered into an agreement with the creditor and the two shareholders controlling the majority of our outstanding shares of common stock pursuant to which all parties agreed that in the event that the two controlling shareholders were to sell their shares, the outstanding liability to the creditor will be satisfied in full out of the sales proceeds received by the two controlling shareholders. The original term of the agreement expired at December 31, 2018. However, effective December 31, 2018 the term of the agreement was extended to April 30, 2019, and effective April 30, 2019, the term of the agreement was further extended to August 31, 2019.

 

As further discussed in Note 10. Subsequent Events below, effective June 25, 2019, the entire balance of accounts payable and accruals outstanding at April 30, 2019 was satisfied in full out of the sales proceeds received by the two controlling shareholders on the sale of their shares to GRN Funds, LLC.

 

NOTE 5. ACCRUALS - RELATED PARTIES

 

On April 13, 2018, we issued 139,000,000 shares of our common stock valued at $180,700 in settlement of the substantial majority of accrued compensation to a current and a former director and officer of the Company.

 

As of April 30, 2019 and 2018, a balance of $77,218 and $7,453, respectively, represented accrued compensation due to a current officer and director, our current non-executive director and a former director and officer of the Company who is now a greater than 10% shareholder in the Company.

 

F- 10  
 

 

 

As further discussed in Note 10. Subsequent Events below, effective June 25, 2019, the entire balance of accruals – related parties outstanding at April 30, 2019 was satisfied in full out of the sales proceeds received by the two controlling shareholders on the sale of their shares to GRN Funds, LLC.

 

NOTE 6. LOANS- RELATED PARTIES

 

During the year ended April 30, 2019, our two principal shareholders advanced to us a total of $7,697 as working capital to meet our operating expenses. The loans were unsecured, interest free and due on demand.

 

As further discussed in Note 10. Subsequent Events below, effective June 25, 2019, the entire balance of loans – related parties outstanding at April 30, 2019 was satisfied in full out of the sales proceeds received by the two controlling shareholders on the sale of their shares to GRN Funds, LLC.

 

NOTE 7. INCOME TAXES

 

We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have accumulated substantial operating losses since inception.  When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any future potential future tax benefit.  We have provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.

 

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended April 30, 2019 and 2018 as defined under ASC 740, "Accounting for Income Taxes."  We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of the accumulated deficit on the balance sheet.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes.

 

The sources and tax effects of the differences for the periods presented are as follows:

 

    Year ended April 30,
    2019   2018
         
Statutory U.S. Federal Income Tax Rate     21 %     21 %
State Income Taxes     5 %     5 %
Change in Valuation Allowance     (26 )%     (26 )%
                 
Effective Income Tax Rate     0 %     0 %

 

 

F- 11  
 

 

 

A reconciliation of the income taxes computed at the statutory rate is as follows:

 

    Year ended April 30,
    2019   2018
         
Tax credit (expense) at statutory rate (26%)   $ 32,543     $ 150  
Increase in valuation allowance     (32,543 )     (150 )
                 
Net deferred tax assets   $ —       $ —    

 

The change in valuation allowance for the years ended April 30, 2019 and 2018 was $32,393 and $150, respectively.

 

As of April 30, 2019, the Company had a federal net operating loss carryforward of approximately $8,286,000. The annual offset of this carryforward loss against any future taxable profits will be substantially limited under the provisions of Internal Revenue Code Section 381 due to the change in control that took place in the year ended April 30, 2018 and the further change of control as described in Note 10. Subsequent Events below.

 

NOTE 8. COMMITMENTS & CONTINGENCIES

 

Legal Proceedings

 

We were not subject to any legal proceedings the years ended April 30, 2019 and 2018, and, to the best of our knowledge, no legal proceedings are pending or threatened.

 

Contractual Obligations

 

We were not subject to any contractual obligations during the years ended April 30, 2019 and 2018.

 

NOTE 9. SHAREHOLDERS’ DEFICIT

 

Preferred Stock

 

As of April 30, 2019, we were authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001.

 

No shares of preferred stock were issued and outstanding during the years ended April 30, 2019 and 2018.

 

Common Stock

 

As of April 30, 2019, we were authorized to issue 250,000,000 shares of common stock with a par value of $0.001.

 

Year ended April 30, 2018

 

On April 13, 2018, we issued 139,000,000 shares of our common stock valued at $180,700 to a current and former director and officer of ours in settlement of the substantial majority of their accrued compensation.

 

On April 23, 2018, we issued 3,100,000 shares of our common stock valued at $4,650 to a creditor of ours in settlement of the balance due to him.

 

As of April 30, 2018, 249,777,311 shares of common stock were issued and outstanding.

 

F- 12  
 

 

 

Year ended April 30, 2019

 

No shares of common stock were issued during the year ended April 30, 2019.

 

As of April 30, 2019, 249,777,311 shares of common stock were issued and outstanding.

 

Warrants

 

No warrants were issued or outstanding during the years ended April 30, 2019 and 2018.

 

Stock Options

 

The Company has never adopted a stock option plan and has never issued any stock options.

 

NOTE 10. SUBSEQUENT EVENTS

 

The Company evaluated subsequent events after April 30, 2019 through the date these financial statements were issued and has determined there have been no subsequent events for which disclosure is required, other than as disclosed below.

 

On June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Company’s common stock representing 55.65% of its issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The total purchase price of $300,000 was paid in cash by GRN Funds, LLC. As a condition to the closing of the transaction, the Registrant’s Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer and President, and Mr. Justin Costello was concurrently named Director of the Company, President and Chief Executive Officer.

 

Effective June 25, 2019, all outstanding balances of accounts payable and accruals, accruals-related parties and loan-related parties were satisfied in full out of the sales proceeds received by the two controlling shareholders on the sale of their shares to GRN Funds, LLC.

 

 

F- 13  
 

 

 

 

 

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that information is accumulated and communicated to the Company's management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including Stephen E. Flechner, the Company’s Chief Executive Officer, and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the fiscal year ended April 30, 2019. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting identified below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of the Company’s financial statements and that receipts and expenditures of company assets are made in accordance with management authorization; and (iii) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2019. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). This evaluation was conducted by Stephen E. Flechner, the Company’s chief executive officer, and chief financial officer. Based on its assessment, the Company’s management believes that, as of April 30, 2019, the Company’s internal control over financial reporting was not effective based on those criteria, due to material weaknesses resulting from not having an Audit Committee or financial expert on our Board of Directors and our failure to maintain appropriate cash controls and implement appropriate information technology controls.

 

12  
 

 

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of April 30, 2019, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

 

i.   We do not have an Audit Committee – While not being legally obligated to have an Audit Committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.

 

ii.   We did not maintain appropriate cash controls – As of April 30, 2019, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts.  Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.

 

iii.   We did not implement appropriate information technology controls – As at April 30, 2019, the Company retains copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors.

 

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. Notwithstanding the weakness, the management does not believe that the weakness had any effect on the accuracy of the Company’s financial statements for the current reporting period.

 

In order to mitigate this material weakness to the fullest extent possible, the Company’s Chief Executive Officer and Chief Financial Officer have been holding regular Board meetings to keep the Board members current on all issues.

 

We believe that the foregoing steps will remediate the significant deficiency identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

 

This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. The management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.

 

Changes in Internal Control over Financial Reporting

 

No changes in the Company's internal control over financial reporting have come to management's attention during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.

 

13  
 

 

 

Item 9B.   Other Information.

 

None.

 

 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.

 

The following table sets forth the names and ages of our directors and executive officers:

 

Name   Age   Position with the Company   Term
Stephen E. Flechner (1)   75   Chief Executive Officer, President and Director   April 19, 2012 - June 25, 2019
Ralph Shearing (1)   61   Director   February 23, 2017 - June 25, 2019
Justin Costello (2)   38   Chief Executive Officer, President and Director   June 25, 2019 - present

 

The board of directors has no nominating, audit or compensation committee at this time.

 

(1) On June 25, 2019, directors Stephen Flechner and Ralph Shearing resigned as Directors. Neither Mr. Flechner nor Mr. Shearing held positions on any committee of the Board of Directors at the time of their respective resignations. Their respective resignations were not the result of any disagreement with the Registrant on any matter relating to the Registrant’s operations, policies or practices.

 

(2) On June 25, 2019, the Registrant appointed Justin Costello, age 38, Director, President and Chief Executive Officer.

 

Term of Office

 

Each of our directors is appointed to hold office until the next annual meeting of our shareholders or until his respective successor is elected and qualified, or until she resigns or is removed in accordance with the provisions of the Nevada Revised Statues.  Our officers are appointed by our board of directors and hold office until removed by the board of directors or until their resignation.

 

Background and Business Experience

 

The business experience during the past five years of the persons listed above as an Officer or Director of the Company either presently or during the year ended April 30, 2019 is as follows:

 

STEPHEN FLECHNER was appointed as President, Chief Executive Officer and director of the Company on April 19, 2012, and as Chief Financial Officer effective February 23, 2017. Mr. Flechner resigned from his positions with the Company effective June 25, 2019. During the last five years, in addition to work for the Company, Mr. Flechner has been President of Centennial Mining since October 2015; Centennial is a Nevada corporation that put together the Corcoran silver project (consisting of 253 mining claims in Nye County, Nevada), and sold it in December 2017 to an Australian company. Mr. Flechner has also consulted since March 2017 with E-79 Media, LLC, a California company engaged in digital media and music lifestyle. Previously, he served various private and publicly traded companies in senior management or consulting roles. From 1979 to 1993 he was vice president/general counsel of Gold Fields Mining Company, the U.S. operating subsidiary of the former South African mining giant, Consolidated Gold Fields of London. During his tenure with Gold Fields U.S., the organization grew from 20 to 1200 people while developing three highly profitable gold mines, two of which were subsequently acquired by Newmont Mining. Mr. Flechner is a graduate of the Yale Law School; formerly practiced corporate, M&A and securities law for New York law firms and NYSE-traded conglomerates; and has lectured at the Rocky Mountain Mineral Law Institute on “Environmental Laws & Regulations Governing Gold Mining.”

 

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RALPH SHEARING was appointed as director of the Company on February 13, 2012 and resigned from his position with the Company effective June 25, 2019. Mr. Shearing is a professional geologist with extensive experience throughout North America and internationally.  He is a graduate of the University of British Columbia, earning a B.Sc. Geology degree.  Since graduating in 1981, he has been directly involved in several world class exploration and development projects and has gained hands-on experience in all aspects of mineral exploration, including geophysics, geochemistry, geology, and diamond core drilling.  In 1986, Mr. Shearing founded and is currently the CEO and President of Soho Resources Corp., a TSX Venture Exchange listed mining company developing the Tahuehueto Project, a gold and silver deposit in Mexico.  The Company appointed Mr. Shearing as a Director and Geological Consultant on account of his 25 years of active involvement with the management and directing of publicly traded companies, combined with his practical mining experience, which have given him unique insight into the industry and allowed him to develop a well-rounded business approach for junior resource companies.  

 

JUSTIN COSTELLO was appointed as director and President and Chief Executive Officer on June 25, 2019. Mr. Costello manages and is the Chief Executive Officer of GRN Funds, LLC, a private equity and hedge fund.

 

Identification of Significant Employees

 

We currently have no other significant employees other than our sole executive officer and director, Mr. Justin Costello.

 

Family Relationship

 

We currently do not have any officers or directors who are related to each other.   

 

Directors

 

Each director serves until our next annual meeting of the stockholders or unless they resign earlier. The board of directors elects officers and their terms of office are at the discretion of the board of directors. Each of our officers is elected by the board of directors to a term of one year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office.

 

Audit Committee

 

The Company intends to establish an audit committee of the board of directors, which will consist of soon-to-be-nominated independent directors. The audit committee’s duties would be to recommend to the Company’s board of directors the engagement of an independent registered public accounting firm to audit the Company’s financial statements and to review the Company’s accounting and auditing principles. The audit committee would review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee would at all times be composed exclusively of directors who are, in the opinion of the Company’s board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.

 

 

15  
 

 

Compensation Committee

 

The Company intends to establish a compensation committee of the board of directors. The compensation committee would review and approve the Company’s salary and benefits policies, including compensation of executive officers.

 

Security Holders Recommendations to Board of Directors

 

We do not currently have a process for security holders to send communications to the board of directors. However, we welcome comments and questions from our shareholders. Shareholders can direct communications to the Company at our executive offices.

 

Involvement in Certain Legal Proceedings

 

To our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) has:

 

Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

 

Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.

 

Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.

 

Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

 

16  
 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our Common Stock and other equity securities, on Form 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish our company with copies of all Section 16(a) reports they file.

 

For the fiscal year ended April 30, 2012, our officers and directors, and all of the persons known to us to own more than 10% of our Common Stock, were not required to file the reports under Section 16(a).

 


Item 11.  Executive Compensation.

 

The following table sets forth information with respect to the compensation of each of the named executive officers for services provided to the Company in the fiscal years ended April 30, 2019 and 2018 in their capacity as such officers.

 

Summary Compensation Table

 

Name and principal position   Year   Salary ($)     Bonus ($)     Stock awards ($)     Option awards ($)     Nonequity incentive plan compensation ($)     Nonqualified deferred compensation earnings($)    

All other

compensation ($)

    Total ($)  
                                                     
Stephen Flechner   2018     -       -       -       -       -       -       -       -  
President, Chief Executive Officer and director (1)   2019     60,000       -       -       -       -       -       -       $60,000  
                                                                     
                                                                     

Justin Costello (2)

Director, Chief Executive Officer and Chief Financial Officer

  2019     -       -       -       -       -       -       -       -  

 

(1)  Stephen Flechner resigned as director, President, Chief Executive Officer, Treasurer and Secretary of the Company on June 25, 2019.

 

(2) Justin Costello was appointed director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Company on June 25, 2019.

 

17  
 

 

 

Narrative Disclosure to Summary Compensation Table

 

There are no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.

 

Outstanding Equity Awards at Fiscal Year End

 

There were no unexercised options, unvested stock awards or equity incentive plan awards for any of the above-named executive officers outstanding as of April 30, 2019.

 

Director Compensation

 

The following table sets forth the compensation received by our directors in the fiscal year ended April 30, 2019 and 2018 in their capacity as directors:

 

Director Compensation

 

Name  

Fees earned or paid in cash

($)

   

Stock awards

($)

   

Option awards

($)

   

Non-equity incentive plan

compensation

($)

   

Nonqualified deferred

compensation earnings

($)

   

All other compensation

($)

   

Total

($)

 
Stephen Flechner 2019     0       0       0       0       0       0       0  
2018     77,218       0       0       0       0       0       77,218  
Ralph Shearing 2019     $10,000       0       0       0       0       0       $10,000  
2018     0       0       0       0       0       0       0  

 

 

 

18  
 

 

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information concerning the number of shares of our Common Stock owned beneficially as of April 30, 2019, by: (i) our directors; (ii) our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of Common Stock.  Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.

 

Name and Address of Beneficial Owner   Title of Class  

Amount and Nature

of Beneficial

Ownership (1)

(#)

   

Percent of Class (2)

(%)

 

Stephen E. Flechner

1337 S. Fillmore Street

Denver, Colorado 80210

  Common Stock     71,350,000       28.56%  

Ralph Shearing

1780 Arbor Lynn Dr.

N. Vancouver, B.C.

Canada V75ZV8

  Common Stock     -       -  
All Officers and Directors as a Group (2 Persons) (3)   Common Stock     71,350,000       28.56%  

David Cutler

9605 W 49 th Ave. #200

Wheat Ridge, CO 80033

  Common Stock     70,150,000       28.08%  

Steven Ross

2275 NW 150 th St. Unit D

Opa Locka, FL 33054

  Common Stock     24,688,481       9.88%  
Total of All Beneficial Owners   Common Stock     94,838,481       37.96%  

  

(1) The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

 

(2) Based on 249,777,311 issued and outstanding shares of Common Stock as of April 30, 2019.

 

(3) On June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Company’s common stock representing 55.65% of its issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a condition to the closing of the transaction, Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer, President, Secretary and Treasurer, and Mr. Justin Costello was concurrently named Director of the Company, President and Chief Executive Officer, Secretary and Treasurer.

  

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

 

Related Party Transactions

 

None.

 

 

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Procedures for Approval of Related Party Transactions

 

Our Board of Directors is charged with reviewing and approving all potential related party transactions.  All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.

 

Director Independence

 

None of our directors qualifies as independent director as defined under the NASDAQ Listing Rules.

 

 

Item 14.  Principal Accounting Fees and Services.

 

   

Year Ended

April 30, 2019

 

Year Ended

April 30, 2018

Audit fees   $ 2,000     $ 6,500  
Audit-related fees   $ 0     $ 4,500  
Tax fees   $ 0     $ 0  
All other fees   $ 0     $ 0  
Total   $ 2,000     $ 11,000  

 

Audit Fees

 

During the fiscal year ended April 30, 2019, we incurred approximately $2,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal year ended April 30, 2019.

 

During the fiscal years ended April 30, 2019, we incurred approximately $11,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal years ended April 30, 2018.

 

Tax Fees

 

The aggregate fees billed during the fiscal years ended April 30, 2019 and 2018 for professional services rendered by our principal accountant tax compliance, tax advice and tax planning were $0.

 

All Other Fees

 

The aggregate fees billed during the fiscal years ended April 30, 2019 for products and services provided by our principal independent accountants was $0.

 

Pre-Approval Policies and Procedures

 

Our board of directors pre-approves all audit and non-audit services performed by the Company's auditor and the fees to be paid in connection with such services.

 

 

20  
 

 

Item 15.               Exhibits, Financial Statement Schedules.

 

Exhibit        
Number   Description of Exhibit   Filing
3.01   Articles of Incorporation   Filed with the SEC on June 3, 2010 as part of our Registration Statement on Form S-1 and incorporated herein by reference.
3.02   Articles of Merger   Filed with the SEC on July 16, 2012 as part of the current report on Form 8-K and incorporated herein by reference.
3.03   Bylaws   Filed with the SEC on June 3, 2010 as part of our Registration Statement on Form S-1 and incorporated herein by reference.
10.1   Stock Purchase Agreement dated June 20, 2019 by and between Stephen Flechner, David Cutler, and GRN Funds, LLC.   Filed with the SEC on July 1, 2019 on Form 8-K.
31.1   Certification of Principal Executive Officer Pursuant to Rule 13a-14   Filed herewith.
31.2   Certification of Principal Financial Officer Pursuant to Rule 13a-14   Filed herewith.
32.1   CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act   Furnished herewith.
101.INS   XBRL Instance Document   Filed herewith.
101.SCH   XBRL Taxonomy Extension Schema Document   Filed herewith.
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith.
101.LAB   XBRL Taxonomy Extension Labels Linkbase Document   Filed herewith.
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document   Filed herewith.
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document   Filed herewith.

 

 

21  
 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  DISCOVERY GOLD CORPORATION
     
Date: August 14, 2019     By:   /s/Justin Costello
  Justin Costello
  President and Chief Executive Officer
     (Principal Executive Officer)

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

 

Signature   Title   Date
         
/s/ Justin Costello   Chief Executive Officer, Chief Financial Officer, President, Director   August 14, 2019
Justin Costello  

(Principal Executive Officer)

(Principal Financial Officer)

   
         

 

 

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