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 Technologies Corp., unless
otherwise indicated.
Corporate History
Our company was incorporated in the State of Nevada on February
23, 2006 and is quoted on the OTC Pink under the symbol WOLV.
Since we began operations in 2006, the Company has been focused
primarily on the exploration for and development of base and precious metal
properties located in North America. In February, 2007, we acquired a right to
earn a 90% interest in approximately 520 claims through a combination of an
upfront cash payment of $34,000.00, an upfront share payment of 34,000,000
common shares of Wolverine, and by making exploration expenditure commitments
totaling $600,000.00 over three years. From 2007 to the present, we spent
approximately US$710,757 to earn our 90% interest in the Cache River Property;
Shenin Resources Inc. maintains a 10% carried interest in the project.
On June 11, 2013, we entered into an agreement with 0969015
B.C. Ltd to acquire the Eureka Project Claims located in the Cariboo Mining
District of British Columbia. We issued 35,000,000 shares of our common stock to
0969015 B.C. Ltd. at a fair value of $0.01 per share as full consideration for
the acquisition of the Eureka Project Claims. On August 9, 2014 a total of
17,500,000 common shares issued pursuant to the acquisition of the Eureka
Project Claims were cancelled. We have been unable to complete any exploration
on the Eureka Project Claims other than a prospecting program conducted in
August of 2013. As a result all of the claims have lapsed.
We have not yet determined whether the Cache River Property
contain mineral reserves that are economically recoverable.
Enigma Mobil Transaction
In the fall of 2013, due to ongoing stagnation in the
commodities sector, our management began identifying opportunities to increase
shareholder value through merger and acquisition. On September 5, 2013 Wolverine
entered into a Letter of Intent with the cyber security corporation ENIGMAMobil
Inc. (Enigma) to acquire a 25% interest in Enigma for a cash payment of
$10,000,000, however the transaction was not completed. On January 22, 2014, we
entered into an Amended Letter of Intent with Enigma to acquire a 25% interest
in Enigma for the purchase price of $5,000,000 to be paid with $3,000,000 shares
of our common stock at a deemed price of $0.01 per share and $2,000,000 in cash.
The LOI expired on June 30, 2014.
On April 14, 2015 Wolverine entered into a Share Exchange and
Royalty Agreement with Enigma. and Dr. David Chalk pursuant to which Wolverine
is seeking to acquire from Dr. Chalk 25% of the issued and outstanding
securities of Enigma for the purchase price of USD $3,000,000, to be paid by the
issuance of 300,000,000 common shares of Wolverine at a deemed price of USD$0.01
per share. Dr. Chalk is a Director of Enigma.
Enigma is a private corporation incorporated in the Province of
Alberta on September 6, 2013. Enigmas operations are based in Vancouver,
British Columbia. Enigma is engaged in the business of developing security
applications for cyber systems focusing on the mobile smartphone markets. Under
the terms of the Share Exchange and Royalty Agreement, Wolverine will also
receive a royalty equal to 25% of gross revenue received by Enigma from the
exploitation of Enigmas planned Enigma SECURE mobile security application for
the protection against unauthorized computer intrusion and fraud on wireless
devices and mobile smartphones.
The closing of the Share Exchange and Royalty Agreement is
subject to Enigma completing a financing of USD$2,500,000, and to Wolverine
increasing its authorized capital of common stock to allow for the issuance of
the 300,000,000 consideration shares. As at the date of this 10-Q, neither the
contemplated financing nor the authorized capital increase has been completed,
and the Share Exchange and Royalty Agreement has not closed. However, if the
agreement were to close, based on the number of the Companys current issued and
outstanding shares, Enigma would acquire in excess of 51% of the Companys
voting securities, resulting in Wolverine becoming a majority owned subsidiary
of Enigma.
The Enigma SECURE application is not yet commercially
available and remains in development. The application is built using
proprietary, patent protected fifth generation programming language (5GL) and is
compatible with Apple iOS, Android and Blackberry operating systems. As of the
date of this 10-Q, third party testing of the application has been completed and
Wolverine anticipates that the application will be available for commercial
download within 10 months following completion of the USD$2,500,000 private
placement contemplated by the Share Exchange and Royalty Agreement.
The Share Exchange and Royalty Agreement may be terminated if
the transaction does not close by June 30, 2017, unless extended by mutual
agreement of the parties.
Our Current Business
We are an exploration stage mining company engaged in the
identification, acquisition, and exploration of metals and minerals with a focus
on base and precious metals. Our current operational focus is to raise
sufficient funds to continue exploration activities on our property in Labrador,
Canada, known as the Cache River Property. We expect to review other potential
exploration projects from time to time as they are presented to us.
Concurrent with our exploration activities we will continue to
evaluate opportunities to diversify our business through merger or acquisition,
and to assist Enigma to raise the $2,500,000 in financing required to complete
our reverse acquisition pursuant to the Share Exchange and Royalty
Agreement.
On April 19, 2016, Wolverine entered into a Share Purchase
Agreement with our Director, David Chalk, pursuant to which we have agreed to
issue in a private placement 400,000,000 shares of our common stock of the in
consideration for one-third of the net proceeds that Mr. Chalk may realize from
the sale of Mr. Chalks 15% equity interest in Decision-Zone Inc., a privately held cyber-security
software company based in Ontario, Canada. The Agreement is subject to our
Company increasing its authorized capital to allow for the issuance of the
consideration shares. At April 21, 2017, the agreement has not yet closed.
Cash Requirements
There is limited historical financial information about us upon
which to base an evaluation of our performance. We are in the development stage
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, 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 Not accounting for our working
capital deficit of $231,799
as of February 28, 2017, we require
additional funds of approximately $100,000 at a minimum to proceed with our plan
of operation over the next twelve months. As we do not have the funds necessary
to cover our projected operating expenses for the next twelve month period, we
will be required to raise additional funds through the issuance of equity
securities, through loans or through debt financing. There can be no assurance
that we will be successful in raising the required capital or that actual cash
requirements will not exceed our estimates. We intend to fulfill any additional
cash requirement through the sale of our equity securities.
Our auditors have issued a going concern opinion for our year
ended May 31, 2016. 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. As at February 28, 2017 we had cash in
the amount of $5 and a working capital deficiency in the amount of $231,799. As
of February 28, 2017, we do not have sufficient working capital to enable us to
carry out our stated plan of operation for the next twelve months.
Plan of Operation
The Plan of Operation for the next 12 months is to raise
$100,000 for the Phase 1exploration program on the Cache River Property.
The work completed to date on the Cache River Property has
identified an area that could host significant copper and gold mineralization in
a previously unexplored area. A program of prospecting, followed by trenching
(if warranted) is recommended to field check all remaining IP anomalies prior to
undertaking additional diamond drill holes. A budget estimate of $100,000 should
suffice to complete the recommended prospecting and assaying of samples as well
as a limited trenching program if required. This budget would also cover costs
associated with the required site visit. Further diamond drilling will be
dependent on results of the recommended work program.
Phase 1 Program Proposed Expenditures
|
$
|
CDN
|
|
|
|
|
Project Management/Staff
Costs
|
$
|
7,500
|
|
|
|
|
Geologists/technicians (mapping, prospecting
compilation, reporting)
|
$
|
18,000
|
|
|
|
|
Geochemistry - Assaying
rock/core (approx. 200 samples)
|
$
|
6,000
|
|
|
|
|
Field Costs (transportation, accommodation,
fuel, etc.)
|
$
|
7,500
|
|
|
|
|
Trenching
|
$
|
7,500
|
|
|
|
|
Diamond Drilling 300 meters all inclusive
|
$
|
42,000
|
|
|
|
|
Subtotal:
|
|
|
|
$
|
88,500
|
|
|
Contingency ~ 15%
|
|
|
|
$
|
11,500
|
|
Phase 1 Total
|
|
|
|
$
|
100,000
|
|
As at February 28, 2017, we had a cash balance of $5. We will
need to raise additional financing to fund our plan of operation over the next
12 months.
The continuation of our business is dependent upon obtaining
further financing, and 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, 2018.
Corporate Offices
We do not own any real property. Our principal business office
is located at #55-11020 Williams Road, Richmond, British Columbia, Canada, V7A
1X8 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 has 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, 2017 and February 29,
2016
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended February
28, 2017 which are included herein.
Three month summary ending February 28, 2017 and February
29, 2016
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
|
Operating Expenses
|
$
|
73,819
|
|
$
|
46,666
|
|
|
Net Loss
|
$
|
(74,721
|
)
|
$
|
(46,948
|
)
|
Nine Months Ended February 28, 2017 and February 29, 2016
The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended February
28, 2017 which are included herein.
Nine month summary ending February 28, 2017 and February 29,
2016
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
|
Operating Expenses
|
$
|
244,200
|
|
$
|
274,604
|
|
|
Net Loss
|
$
|
(240,422
|
)
|
$
|
(280,645
|
)
|
Expenses
Our operating expenses for the three month periods ended
February 28, 2017 and February 29, 2016 are outlined in the table below:
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
|
General and administrative
|
$
|
57,826
|
|
$
|
46,666
|
|
|
Write-off of interest and loan receivables
|
$
|
15,993
|
|
$
|
-
|
|
|
Mineral exploration costs
|
$
|
-
|
|
$
|
-
|
|
Our operating expenses for the nine month periods ended
February 28, 2017 and February 29, 2016 are outlined in the table below:
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2017
|
|
|
February 29, 2016
|
|
|
General and administrative
|
$
|
228,207
|
|
$
|
272,594
|
|
|
Write-off of interest and loan receivables
|
$
|
15,993
|
|
$
|
-
|
|
|
Mineral exploration costs
|
$
|
-
|
|
$
|
2,010
|
|
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,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Current assets
|
$
|
4,637
|
|
$
|
33,315
|
|
|
Current liabilities
|
|
236,436
|
|
|
162,314
|
|
|
Working capital (deficit)
|
$
|
(231,799
|
)
|
$
|
(128,999
|
)
|
Cash Flows
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Net Cash Used in Operating
Activities
|
$
|
(83,682
|
)
|
$
|
(213,324
|
)
|
|
Net Cash Used in Investing Activities
|
|
-
|
|
|
(14,780
|
)
|
|
Net Cash Provided by
Financing Activities
|
|
80,997
|
|
|
138,309
|
|
|
Net increase (decrease) in cash during period
|
$
|
(2,589
|
)
|
$
|
(89,795
|
)
|
Operating Activities
Net cash used in operating activities during the nine months
ended February 28, 2017, was $83,682 compared to $213,324 during the nine months
ended February 29, 2016.
Financing Activities
During the nine months ended February 28, 2017, we received
$80,997 through the issuance of shares/shares subscribed in private placements.
In the comparable period, the Company received $138,309 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.