VIRTUAL INTERACTIVE TECHNOLOGIES CORP. - Quarter Report: 2014 February (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended February 28, 2014
Commission File No. 333-190265
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MASCOTA RESOURCES CORP.
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(exact name of registrant as specified in its charter)
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Nevada
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36-4752858
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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29409 232nd Ave. SE
Black Diamond, WA 98010
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(Address of principal executive offices) (zip code)
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Registrant’s telephone number, including area code – (206) 818-4799
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PO Box 64, Calle Columbia 1014
Colonia 5 de Diciembre
Puerto Vallarta, CP48351
Jalisco, México
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(Former name, former address and former fiscal year, if changed since last report)
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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. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
As of July 29, 2014, the Company had 3,100,000 shares of common stock outstanding.
TABLE OF CONTENTS
Part I
FINANCIAL INFORMATION
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2014
(Stated in US Dollars)
(Unaudited)
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
(Unaudited)
| February 28, | November 30, | |||||||
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2014
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2013
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ASSETS
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Current assets
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Cash
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$ | 755 | $ | 1,504 | ||||
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Prepaid expenses
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98 | 1,178 | ||||||
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Total current assets
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853 | 2,682 | ||||||
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Mineral property – Note 5
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10,000 | 10,000 | ||||||
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Total assets
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$ | 10,853 | $ | 12,682 | ||||
| LIABILITIES | ||||||||
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Current liabilities
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Accounts payable and accrued liabilities
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$ | 13,470 | $ | 6,900 | ||||
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Total current liabilities
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13,470 | 6,900 | ||||||
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Long term liabilities
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Accrued interest, related party – Note 6
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2,782 | 1,975 | ||||||
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Note payable, related party – Note 6
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58,500 | 58,500 | ||||||
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Total long term liabilities
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61,282 | 60,475 | ||||||
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Total liabilities
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$ | 74,752 | $ | 67,375 | ||||
| STOCKHOLDERS’ DEFICIT | ||||||||
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Preferred stock, $0.001 par value
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| 10,000,000 shares authorized, none outstanding | - | - | ||||||
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Common stock, $0.001 par value
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| 90,000,000 shares authorized | ||||||||
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3,100,000 and 2,000,000 shares issued and outstanding respectively – Notes 6 and 7
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3,100 | 2,000 | ||||||
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Additional paid-in capital
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20,050 | 13,000 | ||||||
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Deficit accumulated during the exploration stage
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(87,049 | ) | (69,693 | ) | ||||
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Total stockholders’ deficit
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(63,899 | ) | (54,693 | ) | ||||
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Total liabilities & stockholders’ deficit
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$ | 10,853 | $ | 12,682 | ||||
SEE ACCOMPANYING NOTES THAT ARE INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in US Dollars)
(Unaudited)
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From Inception
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Three Months Ended
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(November 3, 2011) to
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February 28,
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February 28,
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2014
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2013
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2014
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Expenses
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Accounting and audit
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$ | 8,575 | $ | - | $ | 32,429 | ||||||
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Legal fees
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3,839 | - | 16,622 | |||||||||
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Mineral property – pre acquisition cost
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- | - | 10,150 | |||||||||
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General and administrative
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4,135 | 1,543 | 21,566 | |||||||||
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Operating loss
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(16,549 | ) | (1,543 | ) | (80,767 | ) | ||||||
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Interest expense – Note 6
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(807 | ) | (518 | ) | (6,282 | ) | ||||||
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Net loss
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$ | (17,356 | ) | $ | (2,061 | ) | $ | (87,049 | ) | |||
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Basic loss per share
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$ | (0.01 | ) | $ | (0.00 | ) | ||||||
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Weighted average number of shares outstanding - basic
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3,026,667 | 2,000,000 | ||||||||||
SEE ACCOMPANYING NOTES THAT ARE INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Period from Inception (November 3, 2011) to February 28, 2014
(Stated in US Dollars)
(Unaudited)
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Deficit
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Accumulated
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(Note 7)
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Additional
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During the
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Preferred Shares
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Common Shares
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Paid-in
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Exploration
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Number
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Amount
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Number
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Amount
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Capital | Stage | Total | ||||||||||||||||||||||
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Balance, inception (November 3, 2011)
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- | $ | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
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Capital stock issued to founder for cash
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- | - | 2,000,000 | 2,000 | 13,000 | - | 15,000 | |||||||||||||||||||||
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Net loss for the period
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- | - | - | - | - | (2,828 | ) | (2,828 | ) | |||||||||||||||||||
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Balance, November 30, 2011
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- | - | 2,000,000 | 2,000 | 13,000 | (2,828 | ) | 12,172 | ||||||||||||||||||||
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Net loss for the year
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- | - | - | - | - | (27,912 | ) | (27,912 | ) | |||||||||||||||||||
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Balance, November 30, 2012
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- | - | 2,000,000 | 2,000 | 13,000 | (30,740 | ) | (15,740 | ) | |||||||||||||||||||
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Net loss for the period
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- | - | - | - | - | (38,953 | ) | (38,953 | ) | |||||||||||||||||||
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Balance, November 30, 2013
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- | - | 2,000,000 | 2,000 | 13,000 | (69,693 | ) | (54,693 | ) | |||||||||||||||||||
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Capital stock issued net of commission
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- | - | 1,100,000 | 1,100 | 7,050 | - | 8,150 | |||||||||||||||||||||
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Net loss for the period
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- | - | - | - | - | (17,356 | ) | (17,356 | ) | |||||||||||||||||||
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Balance, February 28, 2014
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- | $ | - | 3,100,000 | $ | 3,100 | $ | 20,050 | $ | (87,049 | ) | $ | (63,899 | ) | ||||||||||||||
SEE ACCOMPANYING NOTES THAT ARE INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
(Unaudited)
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From Inception
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Three Months Ended
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(November 3, 2011) to
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February 28,
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February 28,
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2014
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2013
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2014
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Cash flows used in operating activities
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Net loss
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$ | (17,356 | ) | $ | (2,061 | ) | $ | (87,049 | ) | |||
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Changes in non-cash working capital items:
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Prepaid expenses
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1,080 | - | (98 | ) | ||||||||
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Accounts payable and accrued liabilities
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6,570 | - | 13,470 | |||||||||
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Accrued interest, related party
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807 | 518 | 6,282 | |||||||||
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Net cash used in operating activities
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(8,899 | ) | (1,543 | ) | (67,395 | ) | ||||||
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Cash flows from investing activities
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Acquisition of mineral property
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- | - | (10,000 | ) | ||||||||
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Net cash used by investing activities
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- | - | (10,000 | ) | ||||||||
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Cash flows from financing activities
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Capital stock issued, net of commission
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8,150 | - | 23,150 | |||||||||
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Notes payable, related party
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- | - | 55,000 | |||||||||
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Net cash provided by financing activities
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8,150 | - | 78,150 | |||||||||
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Net increase (decrease) in cash during the period
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(749 | ) | (1,543 | ) | 755 | |||||||
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Cash, beginning of the period
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1,504 | 19,877 | - | |||||||||
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Cash, end of the period
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$ | 755 | $ | 18,334 | $ | 755 | ||||||
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Supplemental information
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Non cash refinancing of debt
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$ | - | $ | - | $ | 3,500 | ||||||
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Interest and taxes paid in cash
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$ | - | $ | - | $ | - | ||||||
SEE ACCOMPANYING NOTES THAT ARE INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
MASCOTA RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
February 28, 2014
(Stated in US Dollars)
(Unaudited)
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Note 1
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Basis of Presentation
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While the information presented in the accompanying February 28, 2014 financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the period presented in accordance with the accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the Company’s November 30, 2013 audited financial statements (notes thereto) included in the Company’s Form 10K.
Operating results for the three months ended February 28, 2014, are not necessarily indicative of the results that can be expected for the year ending November 30, 2014.
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Note 2
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Nature of Operations and Ability to Continue as a Going Concern
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The Company was incorporated in the state of Nevada, United States of America on November 3, 2011. The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties. The Company’s year-end is November 30.
On November 9, 2011, the Company incorporated a wholly-owned subsidiary, MRC Exploration LLC (“MRC”) in the State of Nevada, United States of America (“USA”) for the purpose of mineral exploration. During May 2013, MRC acquired a Uranium mineral claim located in the Athabasca Basin, within the Province of Saskatchewan, Canada.
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has yet to achieve profitable operations, has accumulated losses of $87,049 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.
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The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the company cannot continue in existence.
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Note 3
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Summary of Significant Accounting Policies
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The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are stated in US dollars. The preparation of financial statements in conformity with U.S. 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 expense during the reporting period. Actual results could differ from those estimates.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Principles of Consolidation
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These consolidated financial statements include the accounts of the Company and MRC Exploration LLC., a wholly owned subsidiary incorporated in Nevada, USA on November 9, 2011. All significant inter-company transactions and balances have been eliminated.
Exploration Stage Company
The Company is an exploration stage company as defined by ASC 915. All losses accumulated since inception are considered part of the Company’s exploration stage activities.
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Cash and cash equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents at February 28, 2014 and November 30, 2013.
Mineral Property
The Company is primarily engaged in the acquisition, exploration and development of mineral properties.
Mineral property acquisition costs are capitalized in accordance with FASB ASC 930, “Extractive Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met.
In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.
Mineral property exploration costs are expensed as incurred.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
To date the Company has not established any proven or probable reserves on its mineral properties.
Asset Retirement Obligations
Asset retirement obligations (“ARO”) associated with the retirement of a tangible long-lived asset, are recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is amortized, such that the cost of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted fair value is accreted to the expected settlement value.
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The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate. As of February 28, 2014 , the Company has determined no provision for ARO’s is required.
Impairment of Long- Lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360- 0 through 15-5, Impairment or Disposal of Long- Lived Assets.
Foreign Currency Translation
The Company’s functional currency is the United States dollar as substantially all of the Company’s operations are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).
Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period.
Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholders’ Equity, if applicable.
Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations and Comprehensive Loss.
Earnings per share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. As there are no common stock equivalents outstanding, diluted and basic loss per share are the same.
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Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Stock-based Compensation
The Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption.
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Note 4
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Financial Instruments
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Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.
The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
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Level 1 –
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inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
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Level 2 –
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inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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Level 3 –
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inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
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The carrying value of the Company’s financial assets and liabilities which consist of cash, accounts payable and accrued liabilities, and notes payable in management’s opinion approximate fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
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Note 5
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Mineral Property
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On May 3, 2013, Company’s consulting geologist acquired a 100% legal and beneficial ownership interest in a Uranium mineral claim which he holds in trust for the Company pursuant to a Mineral Claim Trust Agreement, dated May 3, 2013. The Mineral Claim is located in the Northeast Athabasca Basin, in the Province of Saskatchewan, Canada. It is located on provincial lands administered by the Province of Saskatchewan.
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Note 6
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Related Party Transactions
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On November 22, 2011, the Company received and accepted a subscription to purchase 2,000,000 shares of common stock at $0.0075 per share for aggregate proceeds of $15,000 from the Company’s president.
On November 28, 2011, the Company President loaned $35,000 to the Company and the Company issued a promissory note in the amount of $35,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2013. On April 24, 2013, the Company entered into a debt refinancing arrangement with the President such that the original note plus accrued interest as of April 28, 2013, aggregating $38,500 matures on December 31, 2016. This revised note, is unsecured, and bears interest at 6%.
During the three month period ended February 28, 2014 the Company charged interest expense of $570 (three month period ended February 28, 2013 - $518) pursuant to the original and amended note payable. Total accrued interest on this note as of February 28, 2014 was $1,962 (November 30, 2013 - $1,392).
On May 8, 2013, the Company President loaned $5,000 to the Company and the Company issued a promissory note in the amount of $5,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2016. During the three month period ended February 28, 2014 the Company charged interest expense of $74 (three month period ended February 28, 2013 - $nil) pursuant to this note payable. Total accrued interest on this note as of February 28, 2014 was $244 (November 30, 2013 - $170).
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On June 4, 2013, the Company President loaned $10,000 to the Company and the Company issued a promissory note in the amount of $10,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2016. During the three month period ended February 28, 2014, the Company charged interest expense of $148 (February 28, 2013 - $nil) pursuant to this note payable. Total accrued interest on this note as of February 28, 2014 was $443 (November 30, 2013 was $295).
On September 19, 2013, the Company President loaned $5,000 to the Company and the Company issued a promissory note in the amount of $5,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2016. During the three month period ended February 28, 2014, the Company charged interest expense of $15 (three month period ended February 28, 2013 - $nil) pursuant to this note payable. Total accrued interest on this note as of February 28, 2014 was $133 (November 30, 2013 was $118).
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Note 7
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Capital Stock
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The authorized common stock of the Company consists of 90,00,000 shares of common stock with par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of February 28, 2014, the Company had 3,100,000 (November 30, 2013 – 2,000,000) common stock and zero (November 30, 2013 - zero) preferred stock outstanding.
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Issued:
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On November 22, 2011, the Company issued 2,000,000 shares of common stock to the Company’s president at $0.0075 per share for total proceeds of $15,000.
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On December 6, 2013, the Company issued 1,100,000 common shares at $0.0075 per share for total proceeds of $8,250 pursuant to a private placement. The Company paid commissions of $100 for net proceeds of $8,150.
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Note 8
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Subsequent Events
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Subsequent to the period end:
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i)
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On March 17, 2014, Mr Dale Rasmussen was appointed as a director and as the Company’s Chief Executive Officer, and the existing President resigned.
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ii)
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On March 18, 2014 the Chief Executive Officer loaned $13,000 to the Company. The loan was not memorialized in a Promissory Note. The loan is unsecured, bears interest at 6% per annum, and is due on demand.
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iii)
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On March 17, 2014 the Company signed a Letter of Intent with Canada Cannabis Corp., a Company incorporated in Ontario, Canada. Pursuant to the Letter of Intent, the Company will acquire all of the issued and outstanding shares of Canada Cannabis in exchange for 17,200,000 shares of the Company's common stock. On April 30, 2014, the Letter of Intent was terminated.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Business
We are an exploration stage mineral exploration company. On May 3, 2013, our consulting geologist acquired a 100% legal and beneficial ownership interest in the MC00000266 mining claim (hereafter the “Mineral Claim”) which he holds in trust for us. The Mineral Claim is located in the Northeast Athabasca Basin, in the Province of Saskatchewan, Canada. It is located on provincial lands administered by the Province of Saskatchewan. The legal and ownership rights on the claim are limited to the exploration and extraction of mineral deposits subject to applicable regulations. The Mineral Claim totals roughly 2,014 acres or 3.15 square miles in size and is located approximately 25 miles north of the community of Points North, Saskatchewan.
The Mineral Claim comprises an irregular shaped block approximately 3 miles long and 1 mile wide located approximately 6 miles east of a significant uranium occurrence known as Laroque Lake. Historic exploration work shows that the claims are located within an area that has potential for uranium mineralization.
Exploration of our Mineral Claim is required before a determination as to its viability can be made. We intend to conduct the first phase of our exploration program commencing in the late fall of 2014. Upon the completion of the first phase and any additional exploration phase, we intend to request that our geological consultant reviews the results of each exploration program and report back to us with recommendations, if any, with regard to further exploration programs. Each exploration phase of our exploration program will be dependent upon a number of factors such as our geological consultant’s recommendations and our available funds. We currently plan to have our consulting geologist, Carl von Einsiedel, and his firm, Ram Explorations Ltd., perform Phase I of our exploration program. Ram Explorations is in the business of doing geological explorations and has capable staff on-board, or available through sub-contracting.
Our consulting geologist has recommended that Phase I of exploration work on our Mineral Claim which consists of prospecting to determine if samples of the Athabasca sandstone exposed on the ground within our mineral claim area, exhibit alterations typical of those associated with known uranium deposits in the Athabasca Basin. The total estimated cost of the proposed Phase I program is $15,000. The initial prospecting will be collecting and assaying "grab samples". This is a process whereby the prospector (in our case Carl von Einsiedel, P Geol and owner of Ram Explorations Ltd.) will reconnoiter the property, making maps of areas of interest taking samples and recording each sample on his sketched map. He will chip away at sandstone outcroppings with his geological hand pick and visually analyze samples through a magnifying eyepiece looking for alterations in the sandstone typical of those associated with known uranium deposits in the Athabasca Basin. This type of alteration is known as the “Illite” alteration. He will take the best 50 or so samples and send them to an assay laboratory for geochemical analysis to determine the extent of Illite alteration, if any, in each of the samples. In the event that our geological consultant recommends a further exploration program and if approved by our management, we shall embark upon a Phase II mineral exploration program. The estimated cost of this Phase II exploration program is $140,000.
We have no proven, possible and implied reserves on our mineral claim. Depending upon the outcome of our mineral exploration programs an economic feasibility study would be undertaken to determine proven, possible and implied reserves prior to making any production decisions. We could expend many millions of dollars on exploration activities prior to determining if a feasibility study is warranted or not.
Our claim will remain in good standing until May 2015. The expenditure of $15,000 on that program shall extend the good standing date by one year. The minimum amount of exploration expenditure required to keep the mineral claim in good standing is either the payment of $15,000 annually to the Province of Saskatchewan for the first eight years or incurring at least $15,000 of exploration work on our claim each year for the first eight years. Amounts expended over $15,000 per year in the first eight years shall count as a credit for expenditures required in subsequent years.
Plan of Operation
Our business plan is to proceed with the exploration of our Mineral Claim to determine whether there are commercially exploitable reserves of uranium. We intend to proceed with an initial (Phase I) exploration program as recommended by our consulting geologist.
Our geological consulting firm is well experienced in the mineral exploration business and provided us with the expected costs of the Phase I and Phase II exploration programs. They can either provide all of the geological services which we will require or sub-contract out these services to others. We have a written agreement with our consulting geologist’s firm that requires them to review all of the results from the exploration work performed upon our mineral claim, to make recommendations based upon those results, and to conduct any exploration programs on the mineral claim that we may require. The principal of our geological consulting firm will be in charge of our exploration programs and shall visit the property in order to conduct our Phase I exploration project which is expected to commence in the late fall of 2014.
Our proposed Phase I exploration program will cause minimal ground disruption and consequently shall not require exploration permits. In order to carry out an exploration program within the Province of Saskatchewan where there is substantial ground disruption such as in line cutting, trenching, drilling, tunneling, and surface or underground bulk sampling, a provincial permit is required. A period of two to three months should be allowed between filing an application and the granting of a permit.
Proposed Phase 1 Exploration Program
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Engineering and supervision, geology
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$ | 5,000 | ||
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Crew mobilization
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2,500 | |||
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Camp and technical support
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2,500 | |||
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Aircraft support
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2,500 | |||
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Geochemical analysis(soil and rock)
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- 100 samples @ $25
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2,500 | |||
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Total estimated costs:
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$ | 15,000 |
Additional exploration activities are expected to commence in the Spring of 2015 and are estimated to cost approximately $140,000. We rely on outside contractors to assist us in the operation of our business. These arrangements are either verbal or contractual. We currently do not have any arrangements for financing and we may not be able to obtain financing when required.
Sampling for sandstone alteration zones and other data acquired during our initial exploration of our Mineral Claim will ultimately determine whether the project will proceed to the second phase of our exploration program.
Operating Budget for the Fiscal Year Beginning December 1, 2013
The operating budget for the fiscal year commencing December 1, 2013 consists of planned expenditures for Phase I of our mineral exploration program, as described above, and for necessary legal and accounting expenses. Management’s estimate of our planned expenditures by category for our current fiscal year is set forth below:
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Expense Category
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Amount
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Mining Exploration
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$ | 15,000 | ||
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Legal, Accounting
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$ | 20,000 | ||
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Totals
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$ | 35,000 | ||
Results of Operations for the Three Months Ended February 28, 2014 and 2013, the Period from Inception (November 3, 2011) to February 28, 2014.
We are currently in the exploration stage of our business and have generated no revenue to date. For the three months ended February 28, 2014 and February 28, 2013, we incurred expenses and net losses of $17,356 and $2,061 respectively. Our expenses for the three months ended February 28, 2014 (compared to February 28, 2013) consisted of accounting and audit fees of $8,575 ($0.00), legal fees of $3,839 ($0.00), general and administrative expenses of $4,135 ($1,543), and interest expense of $807 ($518). For the period from Inception (November 3, 2011) through February, we incurred total expenses and a net loss of $87,049.
We expect that our expenses and our net losses will continue to increase as we undertake the planned exploration of our Mineral Claim.
Liquidity and Capital Resources
As of February 28, 2014, we had total current assets of $853, consisting of cash and prepaid expenses. We had current liabilities of $13,470 as of February 28, 2014. Accordingly, we had working capital deficit of $12,617 as of February 28, 2014.
Through the date of this report, we have received loans totaling $58,500 from our former officer and director, Maria Ponce, plus $13,000 from our current sole officer and director, Dale Rasmussen. The loans were made under the following terms and conditions:
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1.
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On November 28, 2011, Ms. Ponce loaned us $35,000 which is evidenced by a Promissory Note in the amount of $35,000 with interest accruing on the principal amount of 6% per annum and due on December 31, 2013.
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2.
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On April 24, 3013, we entered into a Debt Refinancing Agreement with Ms. Ponce whereby the $35,000 Promissory note due on December 31, 2013 was marked paid and a new Promissory Note in the amount of $38,500 was issued with interest accruing on the principal amount of 6% per annum and due on December 31, 2016.
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3.
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On May 8, 2013, Ms. Ponce loaned us $5,000 which is evidenced by a Promissory Note in the amount of $5,000 plus interest accruing on the principal amount of 6% per annum and due on December 31, 2016.
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4.
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On June 4, 2013, Ms. Ponce loaned us $10,000 which is evidenced by a Promissory Note in the amount of $10,000 plus interest accruing on the principal amount of 6% per annum and due on December 31, 2016.
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5.
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On September 19, 2013 Ms. Ponce loaned us $5,000 which is evidenced by a Promissory Note in the amount of $5,000 plus interest accruing on the principal amount of 6% per annum and due on December 31, 2016.
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6.
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On March 19, 2014, Dale Rasmussen loaned us $13,000. The loan bears interest at the rate of 6 % per annum and is due on demand.
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Our sole officer and Director, Mr. Rasmussen, has offered to fund our basic legal and accounting compliance expenses through additional infusions of equity or debt capital on an as-needed basis, although he is under no legal obligation to provide funding. This offer is not the subject of a formal written agreement with us, and there are no specific limits as to time or dollar amount.
As outlined above, we expect to spend approximately $35,000 toward the initial implementation of our business during the current fiscal year. We will therefore require some additional financing in order to pursue the exploration activities we have planned for the immediate future. In addition, we will require significant additional capital in order to undertake commercial uranium production on our mineral claims following completion of our planned exploration activities. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Off Balance Sheet Arrangements
As of February 28, 2014, there were no off balance sheet arrangements.
Going Concern
We have yet to achieve profitable operations, have accumulated losses of $87,049 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. At this time, management does not believe that any of our accounting policies fit this definition.
Recently Issued Accounting Pronouncements
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
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
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, being February 28, 2014. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
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 chief executive officer and our chief financial officer (who is acting as our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
As of February 28, 2014, the end of the fiscal period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our chief financial officer, of the effectiveness of the design and the operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of April 30, 2014, our internal control over financial reporting was not effective as of the end of the period covered by this report due to identified material weaknesses. Inasmuch as we only have one individual serving as our officer, and employee we have determined that the Company has inadequate controls and procedures over financial reporting due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review,. Management recognizes that its controls and procedures would be substantially improved if there was a greater segregation of the duties of Chief Executive Officer and Chief Financial Officer and as such is actively seeking to remediate this issue. Management believes that the material weakness in its controls and procedures referenced did not have an effect on our financial results.
This quarterly report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only management’s report in this annual report.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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 or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period ended February 28, 2014 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Part II.
Other Information
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
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
On December 6, 2013, the Company issued 1,100,000 common shares at $0.0075 per share for total proceeds of $8,250 pursuant to a private placement. The Company paid commissions of $100 for net proceeds of $8,150. Proceeds were used to fund the Company’s day to day business operations.
Item 3. Defaults upon Senior Securities
N/A
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibit No.
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Description
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101
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The following materials from the Company’s Quarterly report for the period ended February 28, 2014 formatted in Extensible Business Reporting Language (XBRL).
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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.
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MASCOTA RESOURCES CORP.
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| Dated: July 29, 2014 |
/s/ Dale Rasmussen
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By:
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Dale Rasmussen, President, Principal Executive Officer, Principal Financial Officer, Secretary, Principal Accounting Officer, Director
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