U.S. Lithium Corp. - Quarter Report: 2017 June (Form 10-Q)

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. [   ]'

 

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3. Mineral Property

(a)

On April 27, 2016, the Company acquired a 100% interest in four mineral claims located in Esmeralda County, Nevada in exchange for $3,500 and the issuance of 200,000 common shares of the Company with a fair value of $10,000. Refer to Note 6(d). During the year ended December 31, 2016, the Company paid a further $945 for claim fees.

(b)

On February 23, 2017, the Company acquired a 100% interest in the Gochager Lake Nickel-Copper-Cobalt project in exchange for the issuance of 8,000,000 shares of common stock of the Company with a fair value of $361,600. As part of the agreement, the Company must incur exploration expenditures of not less than $50,000 on or before June 1, 2017 and $225,000 on or before July 12, 2018.  The claims are subject to a 2% net smelter return, subject to a right to repurchase 1% of the net smelter return in exchange for $1,250,000  During the six months ended June 30, 2017, the Company incurred $33,268 of exploration costs on the property.

4. Notes Payable

(a)

As at June 30, 2017, the Company owes $9,500 (December 31, 2016 - $9,500) of notes payable to shareholders of the Company.  The amounts owing are unsecured, due interest at 10% per annum, and is due on demand. As at June 30, 2017, accrued interest of $9,536 (December 31, 2016 - $9,065) has been recorded in accounts payable and accrued liabilities.

(b)

As at June 30, 2017, the Company owes $3,015 (December 31, 2016 - $3,015) of notes payable to a non-related party. The amount owing is unsecured, due interest at 10% per annum, is due on demand, and is convertible into shares of common stock of the Company at $0.005 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $nil (2016 - $67). As at June 30, 2017, accrued interest of $10,593 (December 31, 2016 - $10,444) has been recorded in accounts payable and accrued liabilities.

(c)

As at June 30, 2017, the Company owes $47,706 (December 31, 2016 - $47,706) of notes payable to non-related parties. The amounts owing are unsecured, due interest between 6-10% per annum, are due on demand, and are convertible into shares of common stock of the Company at $0.005 per share. As at June 30, 2017, accrued interest of $44,339 (December 31, 2016 - $42,130) has been recorded in accrued liabilities.

(d)

As at June 30, 2017, the Company owes $25,000 (December 31, 2016 - $25,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on demand, and is convertible into shares of common stock of the Company at $0.01 per share. As at June 30, 2017, accrued interest of $4,431 (December 31, 2016 - $3,192) has been recorded in accounts payable and accrued liabilities.

(e)

As at June 30, 2017, the Company owes $10,000 (December 31, 2016 - $10,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on April 8, 2017, and is convertible into shares of common stock of the Company at $0.0125 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $2,685 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $10,000 (2015 - $7,315) and accrued interest of $1,227 (December 31, 2016 - $731) has been recorded in accounts payable and accrued liabilities.

(f)

As at June 30, 2017, the Company owes $5,000 (December 31, 2016 - $5,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on April 21, 2017, and is convertible into shares of common stock of the Company at $0.015 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $1,521 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $5,000 (December 31, 2016 - $3,479) and accrued interest of $596 (December 31, 2016 - $348) has been recorded in accounts payable and accrued liabilities.

 

 

 

4. Notes Payable (continued)

(g)

As at June 30, 2017, the Company owes $50,000 (December 31, 2016 - $50,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on May 5, 2017, and is convertible into shares of common stock of the Company at $0.0275 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $17,123 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $50,000 (December 31, 2016 - $32,877) and accrued interest of $5,767 (December 31, 2016 - $3,287) has been recorded in accounts payable and accrued liabilities.

(h)

As at June 30, 2017, the Company owes $40,000 (December 31, 2016 - $40,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on May 11, 2017, and is convertible into shares of common stock of the Company at $0.035 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $14,356 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $40,000 (December 31, 2016 - $25,644) and accrued interest of $4,547 (December 31, 2016 - $2,564) has been recorded in accounts payable and accrued liabilities.

(i)

As at June 30, 2017, the Company owes $15,000 (December 31, 2016 - $15,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on November 7, 2017, and is convertible into shares of common stock of the Company at $0.019 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $4,306 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $11,907 (December 31, 2016 - $7,600) and accrued interest of $966 (December 31, 2016 - $222) has been recorded in accounts payable and accrued liabilities.

(j)

As at June 30, 2017, the Company owes $20,000 (December 31, 2016 - $20,000) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on December 1, 2017, and is convertible into shares of common stock of the Company at $0.03 per share. During the period ended June 30, 2017, the Company recorded accretion expense of $6,611 (2016 - $nil). As at June 30, 2017, the carrying value of the note payable is $14,374 (December 31, 2016 - $7,763) and accrued interest of $1,156 (December 31, 2016 - $123) has been recorded in accounts payable and accrued liabilities.

(k)

As at June 30, 2017, the Company owes $8,000 (December 31, 2016 - $nil) of notes payable to a non-related party.  The amount owing is unsecured, bears interest at 10% per annum, is due on March 3, 2018, and is convertible into shares of common stock of the Company at $0.03 per share. During the period ended June 30, 2017, the Company recorded a beneficial conversion feature of $5,333, and recorded accretion expense of $1,738.  As at June 30, 2017, the carrying value of the note payable is $4,405 and accrued interest of $260 has been recorded in accounts payable and accrued liabilities.

(l)

On May 23, 2017, the Company issued a convertible promissory note for proceeds of $25,000.  The amount owing is unsecured, bears interest at 10% per annum, is due on May 23, 2018, and is convertible into shares of common stock of the Company at $0.015 per share.  During the period ended June 30, 2017, the Company recorded a beneficial conversion feature of $23,333 and recorded accretion expense of $2,429.  As at June 30, 2017, the carrying value of the note payable is $4,096 and accrued interest of $83 has been recorded in accounts payable and accrued liabilities.

(m)

On June 15, 2017, the Company issued a convertible promissory note for proceeds of $40,000.  The amount owing is unsecured, bears interest at 10% per annum, is due on June 15, 2018, and is convertible into shares of common stock of the Company at $0.015 per share.  During the period ended June 30, 2017, the Company recorded a beneficial conversion feature of $26,667 and recorded accretion expense of $1,096.  As at June 30, 2017, the carrying value of the note payable is $14,429 and accrued interest of $164 has been recorded in accounts payable and accrued liabilities.

5. Related Party Transactions

At June 30, 2017, the Company owed $61,117 (December 31, 2016 - $68,864) to the President of the Company. The amount owing is unsecured, non-interest bearing, and due on demand. During the period ended June 30, 2017, the Company incurred $12,000 (2016 - $6,000) of management fees to the President of the Company.

6. Common Stock

(a)	On February 23, 2017, the Company issued 8,000,000 shares of common stock with a fair value of $361,600 for the acquisition of the Gochager Lake mineral claims.  Refer to Note 3(b).

7. Subsequent Events

(a)	On July 31, 2017, the Company and the note holders agreed to amend the conversion price to $0.015 per share and extend the maturity dates for an additional six months on the following convertible notes:

·

Convertible note dated May 5, 2016 for $50,000;

·

Convertible note dated May 11, 2016 for $40,000;

·

Convertible note dated November 7, 2016 for $15,000;

·

Convertible note dated December 1, 2016 for $20,000;

·

Convertible note dated March 3, 2017 for $8,000;

·

Convertible note dated May 23, 2017 for $25,000; and

·

Convertible noted dated June 15, 2017 for $40,000.

(b)

On August 1, 2017, the Company issued 1,280,827 shares of common stock upon the conversion of principal balance of $10,000 and accrued interest of $1,225 on the April 8, 2016 convertible debenture and principal balance of $5,000 and accrued interest of $594 on the April 21, 2016 convertible debenture.

 

 

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 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.

 

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean U.S. Lithium Corp., unless otherwise indicated.

 

Corporate History

 

We were incorporated on November 2, 2006, under the laws of the State of Nevada. The original business plan of our company was to engage in the acquisition and exploration of mineral properties. We are currently an exploration stage company.

 

On September 30, 2015, our board of directors and a majority of our stockholders approved an increase of our authorized capital from 100,000,000 shares of common stock, par value $0.0001 to 500,000,000 shares of common stock, par value $0.0001.

 

A Certificate of Amendment to effect the increase to our authorized capital was filed with the Nevada Secretary of State on October 20, 2015, with an effective date of October 20, 2015.

 

On April 25, 2016, our board of directors approved the change of our name to “U.S. Lithium Corp.”.  The change of name became effective with the Nevada Secretary of State on May 10, 2016 by way of a merger with our wholly-owned subsidiary, U.S. Lithium Corp., which was formed solely for the purpose of the change of name.  The change of name became effective with Financial Industry Regulatory Authority (“FINRA”), on June 13, 2016.  In connection with our change of name, our trading symbol was changed to "LITH". Our CUSIP number is 90351E 105.

 

 

Current Business

 

Effective March 12, 2014, we entered into a patent, technical information and trade mark license agreement with Windward International LLC pursuant to which our company acquired an exclusive license to use certain patents, technical information and trademarks for a term of 500 years, in exchange for 4,000,000 shares of our company’s common stock and a 2% royalty on all net sales derived from the use of the patents, technical information and trademark. The business focus was the operation of a technology platform designed to connect consumers with cannabis vendors.

 

Under the license agreement, our company acquired an exclusive license to make, use, sell and offer for sale licensed products during the term. The licensed products include the domain names www.iWeeds.com, and www.iWeedz.com, the platform that powers iWeedz.com, the Apple Developer license, Google Play license, iWeedz trademark, self-serve ad platform and augmented reality platform. Further, our company acquired an exclusive license to use the technical information during the term to make licensed products. The technical information  includes any and all  unpublished  research and development information,  the formulation of proprietary products, method, unpatented inventions, know-how, trade secrets, and technical data in the possession of Windward at the effective date of the license agreement, or generated or developed at any time prior to the termination or expiration of the license agreement.

 

We operate iWeedz.com, a technology platform that we acquired from Windward pursuant to the license agreement to connect consumers with cannabis vendors and promote local marijuana commerce. We will operate our technology platform through our website located at www.iWeedz.com and through our mobile application for Apple iOS and Android operating systems. We will strive for simplicity and ease of use in our iWeedz website and mobile application, which we believe will set us apart from our competition. As of the date of this report, our website is not fully functional and our application for Apple iOS and Android operating systems has not been released.

 

Our company has moved away from the technology sector and is actively searching for additional projects particularly in the exploration of mineral properties. These new areas have been narrowed down to graphite and lithium. With this in mind, on February 10, 2016, our company appointed Eric Allison as a member of our board of directors. Mr. Allison has over 35 years of experience in the natural resource industry working in various technical, business development and management roles.  He currently provides consulting services to a variety of companies, funds, project developers and individuals on a global basis. He formerly served, from 2012-2015, as CEO and COO of Brazahav Resources, a private entity developing a brownfield gold mine project in Mato Grosso, Brazil.  Prior to this, he was the Director of Research and Chief Geologist at Casimir Capital LP specializing in junior mining companies.  Previously, he was a Director at Sempra Commodities from 1999-2009 where his responsibilities included Metals & Concentrates and Energy.  Over his career, he has also served in various roles for Cyprus Amax Minerals, Amax Energy, SPG Exploration and Texaco.  Mr. Allison received a BS in Geology from Brown University (1978) and a MS in Marine Geology from the University of Georgia (1980).

 

On April 4, 2016, we entered into a letter of intent with Rangefront Consulting LLC.  Pursuant to the letter of intent, we are to enter into a definitive agreement with Rangefront whereby Rangefront will grant us the option to acquire 100% of the title, interest and right in and to four mineral claims, the ELON Claims, in Esmerelda County, Nevada.  In exchange for the grant of the option by Rangefront, we shall:

1.	pay $3,500 to Rangefront on signing of a definitive agreement; and

2.	issue an aggregate of 200,000 common shares of our company to Brian Goss as the authorized representative of Rangefront.

 

On April 25, 2016, we entered into a material definitive agreement and issued 200,000 restricted common shares as outlined in the letter of intent.   We now hold a 100% interest in the ELON claims in Clayton Valley, Nevada.

 

 

The ELON claim block consists of four 20-acre placer claims and is located in Esmerelda County, Nevada, and is contiguous to claims held by both PURE Energy and Lithium X in Clayton Valley. Clayton Valley is home to Albemarle’s Silver Peak Lithium Mine, the only mine producing lithium from brine in North America. Both PURE Energy and Lithium X are actively exploring their respective claim blocks in Clayton Valley. The Clayton Valley area has been the focus of significant levels of exploration and acreage acquisition in recent months and is considered to be one of the best places for lithium exploration in North America.

 

The company looks to capitalize on opportunities within the lithium sector including providing lithium to the ever expanding next generation battery market.  Lithium demand is projected to triple by the year 2025 according to a recent report by Goldman Sachs and for many analysts is considered the new gasoline of the future. Our current focus is in the Basin and Range province of Nevada where the only producing lithium brine mine in North America, Albemarle’s Silver Peak Project, is located.  Elon, our first project, is located in Clayton Valley and is in close proximity to Silver Peak and several other active explorers and developers.

 

On April 8, 2016, we entered into a securities purchase agreement with Robert Seeley, whereupon we agreed to sell to Mr. Seeley, for an aggregate of $10,000 in cash, a convertible promissory note for the aggregate principal sum of $10,000, which includes simple interest at a rate of 10% and is convertible in common shares of our company for $0.0125 per share. This note matures in one year from issuance.

 

Additionally, we entered into a securities purchase agreement dated April 21, 2016 with Mr. Seeley, whereupon we agreed to sell to Mr. Seeley, for an aggregate of $5,000 in cash, a convertible promissory note for the aggregate principal sum of $5,000, which includes simple interest at a rate of 10% and is convertible in common shares of our company for $0.015 per share. This note matures in one year from issuance.

 

On May 5, 2016, we entered into a securities purchase agreement with Robert Seeley, whereupon we agreed to sell to Mr. Seeley, for an aggregate of $50,000 in cash, a convertible promissory note for the aggregate principal sum of $50,000, which includes simple interest at a rate of 10% and is convertible into common share of our company at $0.0275 per share.  This note matures in one year from issuance.

 

On May 11, 2016, we entered into a securities purchase agreement with Robert Seeley, whereupon we agreed to sell to Mr. Seeley, for an aggregate of $40,000 in cash, a convertible promissory note for the aggregate principal sum of $40,000, which includes simple interest at a rate of 10% per annum and is convertible in common shares of our company for $0.035 per share. This note matures in one year from issuance.

 

On June 15, 2017, we entered into a Securities Purchase Agreement with Catanga International S.A. pursuant to which we sold and issued to Catanga International S.A., in consideration of $40,000 in cash, a convertible promissory note in the aggregate principal amount of $40,000.  The promissory note, which is payable on January 15, 2018, bears simple interest at a rate of 10% per annum, and is convertible in common shares of our company at the option of the holder, in whole or in part, at the price of $0.018 per share.

 

 

The above described notes continue to bear interest at the rate of ten percent (10.0%) per annum, with all unpaid principal and accrued interest being convertible, at the option of the holder, before and after maturity, into shares of our common stock at the prescribed conversion price.  In addition, the holders of the notes will be restricted from converting any outstanding balance payable pursuant to the notes if such conversion would result in them beneficially owning in excess of 9.99% of the Company’s issued and outstanding securities.

 

Results of Operations

 

Our operating expenses for the three and six month periods ended June 30, 2017 and 2016 are outlined in the table below:

 

 

Three months ended June 30, 2017 compared to the three months ended March 31, 2016

 

During the three months ended June 30, 2017, our company incurred operating expenses of $19,305 compared to $36,584 during the three months ended June 30, 2016.  The decrease in operating expenses was due to a decrease in general and administrative expense of $8,680, consulting fees of $6,769, and professional fees of $1,830 as the company was reviewing various potential investment and acquisition opportunities in fiscal 2016 that resulted in an increase in day-to-day operating costs.

 

Net loss for the three months ended June 30, 2017 was $45,446 compared to a net loss of $62,919 during the three months ended June 30, 2016.  In addition to operating expenses, the company incurred interest and accretion expense of $26,141 during the three months ended June 30, 2017 compared to interest and accretion expense of $26,335 during the three months ended June 30, 2016 relating to interest costs and the amortization of the beneficial conversion feature for the convertible notes that were issued by the company for funding of day-to-day operations.

 

 

For the three months ended June 30, 2017 and 2016, the company had a loss per share of $nil.

 

Six months ended June 30, 2017 compared to the six months ended June 30, 2016

 

During the six months ended June 30, 2017, our company incurred operating expenses of $44,032 compared to $53,142 during the six months ended June 30, 2016.  The decrease in operating expenses was due to a decrease in general and administrative expense of $8,096 as the company was reviewing various potential investment and acquisition opportunities in fiscal 2016 that resulted in an increase in day-to-day operating costs.

 

Net loss for the six months ended June 30, 2017 was $107,458 compared to a net loss of $87,826 during the six months ended June 30, 2016.  In addition to operating expenses, the company incurred interest and accretion expense of $63,426 compared to $34,684 during the six months ended June 30, 2016.  The increase in interest and accretion expense in fiscal 2017 is due to additional issuances of convertible notes that resulted in more interest expense and more accretion expense for the fair value of the beneficial conversion feature for the additional convertible notes issued subsequent to June 30, 2016.

 

For the six months ended June 30, 2017 and 2016, the company had a loss per share of $nil.

 

Operating Revenues

 

For the six months ended June 30, 2017 and 2016, our company did not record any revenues.

 

Liquidity and Capital Resources

 

 

 

 

 

As at June 30, 2017, our cash balance was $11,630 and total assets were $420,943 comprised of $409,313 of mineral properties.  As at December 31, 2016, our cash balance was $7,540 and total assets were $31,422, which included mineral properties of $14,445 and prepaid expenses of $9,437.  The increase in cash was due to additional cash funding of $73,000 for the issuance of convertible notes which has not been entirely spent on operating activities as of June 30, 2017.  The increase in total assets was due to the acquisition of the Gochager Lake claims which was acquired by the issuance of 8,000,000 shares of common stock which had a fair value of $361,600 and additional exploration costs of $33,268 during the six months ended June 30, 2017.

 

 

As at June 30, 2017, we had total liabilities of $401,769 compared with total liabilities of $321,723 as at December 31, 2016. The increase in total liabilities was due an increase in accounts payable and accrued liabilities of $18,259, and notes payable of $69,534 due to the issuance of new convertible notes of $73,000 during fiscal 2017 along with the amortization of debt discounts for beneficial conversion feature from the convertible notes.  The increase was offset by a decrease of amounts due to related parties of $7,747 for additional repayments for outstanding management fees.  During the period, we received $73,000 of notes payable which is unsecured, bears interest at 10% per annum, and is due within one year.

 

As at June 30, 2017, we had a working capital deficit of $390,139 compared with a working capital deficit of $304,746 as at December 31, 2016. The increase in working capital deficit is due to the fact that we incurred day-to-day operating costs at a higher rate than cash funding received.

 

Cashflow from Operating Activities

 

During the six months ended June 30, 2017, we used $35,642 of cash for operating activities compared to the use of $80,562 of cash for operating activities during the six months ended June 30, 2016. The decrease in the cash used for operating activities due to an overall decrease in cash received from financing activities which limited the amount of cash spent for operating activities in fiscal 2017.

 

Cashflow from Investing Activities

 

During the six months ended June 30, 2017, we used cash of $33,268 for mineral exploration costs compared to $3,500 during the six months ended June 30, 2016.  The increase in cash used for investing activities was due to the company using additional cash to perform exploration costs on the Gochager property that was acquired in February 2017.

 

Cashflow from Financing Activities

 

During the six months ended June 30, 2017, we received $73,000 from the issuance of convertible notes payable, which are unsecured, bears interest at 10% per annum, and due within one year.  Comparatively, we issued $105,000 in convertible notes payable during the six months ended June 30, 2016.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any 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.

 

Off-Balance Sheet Arrangements

 

We have no 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.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.  Our fiscal year end is December 31.

 

Use of Estimates

 

The preparation of financial statements in conformity with US 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. Our company regularly evaluates estimates and assumptions related to the recoverability of mineral properties, share based compensation, and deferred income tax asset valuation allowances. Our company bases our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Cash and Cash Equivalents

 

Our company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.  As of June 30, 2017 and December 31, 2016, there were no cash equivalents.

 

Asset Retirement Obligations

 

Our company follows the provisions of ASC 410, Asset Retirement and Environmental Obligations, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.

 

Basic and Diluted Net Loss per Share

 

Our company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

 

Foreign Currency Translation

 

Our company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign currency transactions are translated to United States dollars in accordance with ASC 830, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

 

Financial Instruments

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Our company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, note payables, and amounts due to related party. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

Impairment of Long-Lived Assets

 

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

 

Income Taxes

 

Our company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

 

Comprehensive Loss

 

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at March 31, 2017 and December 31, 2016, our company has no items representing comprehensive income or loss.

 

Stock-based Compensation

 

Our 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. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. As at March 31, 2017 and December 31, 2016, our company did not grant any stock options.

 

Recently Issued Accounting Pronouncements

 

Our company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and our company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

 

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1. 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 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no previously undisclosed unregistered sales of our equity securities during the period covered by this quarterly report.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

 

 

 

 

 

 

 

 

* Filed herewith

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.