Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects",
"plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risk
Factors".
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "CDN$" refer to Canadian dollars and all references to "common shares" refer to the common shares in our capital
stock.
As used in this quarterly report, the terms "we", "us", "our", the Company and "Wolverine" mean Wolverine Exploration Inc., unless otherwise indicated.
Corporate History
Our company was incorporated in the State of Nevada on February 23, 2006 and is quoted on the OTCQB under the symbol WOLV.
On February 28, 2007, we entered into a vend-in agreement with Shenin Resources Inc. (Shenin), a private Canadian corporation, for the purchase of a 90% interest certain mineral claims located in Labrador Canada. The purchase price paid
to Shenin was $374,000 satisfied by the issuance of 34,000,000 shares of our common stock at a fair value of $0.01 per share and a note payable of $34,000. Under the terms of the vend-in agreement we were required to incur the following
expenditures on the claims: (i) CDN $150,000 on or before March 1, 2008; (ii) CDN $200,000 on or before March 1, 2009, and (iii) CDN $250,000 on or before March 1, 2010; provided that (iv) any excess amount spent in one year may be
carried forward and applied towards fulfillment of the expenditure required in the later year. Shenin has also granted our company a first right of refusal to purchase a 90% interest in all further property in Labrador Canada that Shenin may obtain
an interest in from time to time.
On August 15, 2007, we registered our company as an extra-provincially registered company in the Province of Newfoundland and Labrador for the purpose of being able to register the Claims in the name of our company and for the purpose of being able
to conduct our business in the Province of Newfoundland and Labrador.
On August 27, 2009 we signed an amending agreement with Shenin. Which waives all of the remaining work commitments required under the vend-in agreement subject to us incurring sufficient exploration expenditures on the claims to keep them in good
standing with the Province of Newfoundland and Labrador.
Wolverine now holds a 90% interest and Shenin holds a 10% interest in a total of 25 claims.
On June 11, 2013, Wolverine entered into an Agreement (the Agreement) with 0969015 B.C. Ltd (0969015) to acquire the Eureka Project Claims located in the Cariboo Mining District of British Columbia. Under the terms of the
Agreement Wolverine issued 35,000,000 shares of common stock to 0969015 at a fair value of $402,500 as full consideration for the acquisition of the Eureka Project Claims.
On September 5, 2013, Wolverine entered into a Letter of Intent (LOI) with the cyber security corporation ENIGMAMobil Inc. (Enigma) to acquire a 25% interest in Enigma for a cash payment of $10,000,000. Under the terms of
the LOI Wolverine will have 120 days to raise the financing and enter into a formal purchase agreement with Enigma.
On January 22, 2014, Wolverine entered into an Amended Letter of Intent (LOI) with the cyber security corporation ENIGMAMobil Inc.(Enigma) Under the terms of the LOI Wolverine will acquire a 25% interest in Enigma for the
purchase price of $5,000,000 of which $3,000,000 is to be paid in shares of common stock of Wolverine at a deemed price of $0.01 per share and $2,000,000 in cash. The LOI has an expiry date of June 30, 2014.
Our Current Business
We are an exploration stage company engaged in the business of acquisition and exploration of base and precious metal mineral properties. Our current exploration is focused on mineral properties located in British Columbia and Labrador, Canada. We
have not yet determined whether the Labrador Claims or the Eureka Project Claims contain mineral reserves that are economically recoverable.
Cash Requirements
There is limited historical financial information about us upon which to base an evaluation of our performance. We are an exploration stage company and have not generated any revenues from activities. We cannot guarantee we will be successful in our
business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, 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 Plan of Operation and conduct exploration on our Labrador and Eureka Project 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 $228,556
as of February 28, 2014, we require additional funds of approximately $2,000,000 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, 2013. 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 at February 28, 2014 we had no cash and a working capital deficiency in the amount of $228,556. As of
February 28, 2014, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
The Plan of Operation for the next 12 months is to raise $2,000,000 to acquire a 25% interest in ENIGMAMobil Inc.
As at February 28, 2014, we had a cash balance of $nil. We will need to raise additional financing to fund any 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 do not intend to purchase any significant equipment over the twelve months ending February 28, 2015.
Corporate Offices
We do not own any real property. Our principal business office is located at 4055 McLean Road, Quesnel, British Columbia, Canada, V2J 6V5. The Company also maintains an office in Richmond, British Columbia at a cost of CDN$1,000 per month. We
believe that our current lease arrangements provide adequate space for our foreseeable future needs.
Employees
Currently we do not have any employees. The Company utilizes consultants for the management, regulatory, administration, investor relations and geological functions of the Company. We do not expect any material changes in the number of employees
over the next 12 month period. We will continue to retain consultants as required.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Mineral Property Costs
Our company has been in the exploration stage since inception and have not yet realized any revenues from its operations. We are primarily engaged in the acquisition and exploration of mineral exploration properties. We expense mineral property
exploration costs as they are incurred. Mineral property acquisition costs are initially capitalized, when incurred. Our company assesses the carrying costs for impairment under ASC 360, Property, Plant and Equipment
at each
fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the
mineral property over its estimated fair value. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are
capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to
operations.
Long-Lived Assets
In accordance with ASC 360, Property, Plant and Equipment,
the Company tests long-lived assets or asset groups for recoverability when
events or changes in circumstances indicate that their carrying amount may not
be recoverable. Circumstances which could trigger a review include, but are not
limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end of its estimated useful
life. Recoverability is assessed based on the carrying amount of the asset and
its fair value which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount is not recoverable and
exceeds fair value.
Stock-based Compensation
The Company records stock-based compensation in accordance with
ASC 718, Compensation - Stock Compensation, using the fair value method. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable.
Results of Operations
Three Months Ended February 28, 2014 and 2013
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended February
28, 2014 which are included herein.
Three month summary ending February 28, 2014 and
2013
|
|
Three
Months Ended
|
|
|
|
February 28, 2014
|
|
|
February 28, 2013
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
48,242
|
|
$
|
52,793
|
|
Other Income
|
$
|
36,000
|
|
$
|
Nil
|
|
Net Loss
|
$
|
(12,242
|
)
|
$
|
(52,793
|
)
|
Nine month summary ending February 28, 2014 and 2013
|
|
Nine Months
Ended
|
|
|
|
February 28, 2014
|
|
|
February 28, 2013
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating Expenses
|
$
|
208,884
|
|
$
|
250,683
|
|
Other Income
|
$
|
36,000
|
|
$
|
Nil
|
|
Net Loss
|
$
|
(172,884
|
)
|
$
|
(250,683
|
)
|
Expenses
Our operating expenses for the three month periods ended
February 28, 2014 and February 28, 2013 are outlined in the table below:
|
|
Three
Months Ended
|
|
|
|
February 28, 2014
|
|
|
February 28, 2013
|
|
Depreciation
|
$
|
41
|
|
$
|
477
|
|
Foreign exchange loss (gain)
|
$
|
(7,825
|
)
|
$
|
(11,392
|
)
|
General and administrative
|
$
|
51,308
|
|
$
|
63,708
|
|
Mineral exploration costs
|
$
|
4,718
|
|
$
|
-
|
|
Operating expenses for the three months ended February 28, 2014
decreased compared to the comparative period in 2013 primarily due to an
decrease in general and administrative costs offset by a decrease in foreign
exchange gain and an increase in mineral exploration costs.
Our operating expenses for the nine month periods ended
February 28, 2014 and 2013 are outlined in the table below:
|
|
Nine Months
Ended
|
|
|
|
February 28, 2014
|
|
|
February 28, 2013
|
|
Depreciation
|
$
|
330
|
|
$
|
1,431
|
|
Foreign exchange loss (gain)
|
$
|
(10,880
|
)
|
$
|
(2,706
|
)
|
General and administrative
|
$
|
214,716
|
|
$
|
210,810
|
|
Mineral exploration costs
|
$
|
4,718
|
|
$
|
41,148
|
|
Operating expenses for the nine months ended February 28, 2014
decreased compared to the comparative period in 2013 primarily due to an
decrease in mineral exploration costs and increase in foreign exchange gain
offset by an increase in general and administrative costs.
Revenue
We have not earned any revenues since our inception and we do
not anticipate earning revenues in the upcoming quarter.
Liquidity and Financial Condition
Working Capital
|
|
As
At
|
|
|
As
At
|
|
|
|
February 28,
|
|
|
May
31,
|
|
|
|
2014
|
|
|
2013
|
|
Current assets
|
$
|
4,822
|
|
$
|
3,024
|
|
Current liabilities
|
|
233,378
|
|
|
273,026
|
|
Working capital (deficit)
|
$
|
(228,556
|
)
|
$
|
(270,002
|
)
|
Cash Flows
|
|
Nine Months
Ended
|
|
|
|
February 28,
|
|
|
February 28,
|
|
|
|
2014
|
|
|
2013
|
|
Net Cash Used in Operating Activities
|
$
|
(150,091
|
)
|
$
|
(78,556
|
)
|
Net Cash Used in Investing
Activities
|
|
-
|
|
|
-
|
|
Net Cash Provided by Financing Activities
|
|
150,028
|
|
|
78,000
|
|
Net increase (decrease) in
cash during period
|
$
|
63
|
|
$
|
(556
|
)
|
Operating Activities
Net cash used in operating activities during the nine months ended February 28, 2014, was $150,091 compared to $78,556 during the nine months ended February 28, 2013.
Financing Activities
During the nine months ended February 28, 2014, we received $150,000 through the issuance of shares/shares subscribed in private placements. In the comparable period, the Company received $78,000 through the issuance of shares/shares
subscribed in private placements.
Contractual Obligations
As a smaller reporting company, we are not required to provide tabular disclosure obligations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to stockholders.
Recent Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.