NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
April
30, 2016 and 2015
Note
1
Nature of Operations and Ability to Continue as a Going Concern
The
Company was incorporated in the state of Nevada, United States of America on April 9, 2014. The Company was formed for the purpose
of acquiring and developing mineral properties. The Company’s year-end is April 30.
These
consolidated 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 $87,013 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. 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 consolidated 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.
Note
2
Summary of Significant Accounting Policies
Use
of Estimates
The
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates,
which may have been made using careful judgment. Actual results may vary from these 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
|
|
These
consolidated financial statements include the accounts of the Company and NRC Exploration
LLC., a wholly owned subsidiary incorporated in Nevada, USA on May 8, 2014. All significant
inter-company transactions and balances have been eliminated.
|
Note
2
Summary of Significant Accounting Policies
– (cont’d)
Cash
Cash
consists of all highly liquid investments that are readily convertible to cash within 90 days when purchased.
Related
party
The
Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party
transactions.
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.
Note
2
Summary of Significant Accounting Policies
– (cont’d)
Asset
Retirement Obligations (cont’d)
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.
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 April 30, 2016 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. 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 Stockholder’s 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.
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.
Note
2
Summary of Significant Accounting Policies
– (cont’d)
Income
Taxes
– (cont’d)
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.
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.
Newly
Issued Accounting Pronouncements
In
February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,”
which makes changes to both the variable interest model and the voting model. These changes will require re-evaluation of certain
entities for consolidation and will require us to revise our documentation regarding the consolidation or deconsolidation of such
entities. This ASU is effective for us on January 1, 2016 and is not expected to have a material impact on our consolidated results
of operations, financial position or cash flow.
In
November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Assets. This ASU
is intended to simplify the presentation of deferred taxes on the balance sheet and will require an entity to present all deferred
tax assets and deferred tax liabilities as non-current on the balance sheet. Under the current guidance, entities are required
to separately present deferred taxes as current or non-current. Netting deferred tax assets and deferred tax liabilities by tax
jurisdiction will still be required under the new guidance. This guidance will be effective for periods beginning in the first
quarter of fiscal 2018, with early adoption permitted. The Company does not believe this new accounting standard update will have
a material impact on its consolidated financial statements.
Note
2
Summary of Significant Accounting Policies
– (cont’d)
In
January 2016, the FASB issued ASU 2016-01, "Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities," This amendment intends to improve the recognition and measurement of financial
instruments under U.S. GAAP. The exit price notion will be used to measure the fair value of the financial instruments of public
business entities that are required to disclose the fair value of financial instruments measured at amortized cost on their balance
sheets. This amendment also requires separate presentation of financial assets and financial liabilities by measurement category
and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. ASU 2016-01 is effective
for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of ASU 2016-01
is not permitted. ASU 2016-01 requires the use of the modified retrospective method to all periods presented. The Company is evaluating
the potential impact of the adoption of ASU 2016-01 on its consolidated financial statements.
The
Company has reviewed all other pronouncements and does not expect any other pronouncements to have an impact on its results of
operations or financial position.
Note
3
Financial Instruments
|
|
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:
Level
1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level
2 – 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.
Level
3 – 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.
The
carrying value of the Company’s financial assets and liabilities which consist of cash, prepaid expenses, short term loans,
accounts payable and accrued liabilities, and due to related parties in management’s opinion approximate their 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.
Note
4
Mineral Property
On
May 20, 2014, the Company’s wholly owned subsidiary, NRC Exploration Ltd (“NRC”) entered into a property option
agreement whereby NRC was granted an option to earn up to an 100% interest in the Donald mineral claim #1028301”. The Donald
claim is located in the Omineca mining district of the Province of British Columbia Canada, and comprises 517 hectares.
Consideration
for the option consists of cash payments totalling $11,150, of which $1,150 is payable upon the execution of the agreement (paid)
and $ 10,000 is due on or before April 30, 2017.
In
May 2015, the underlying claims lapsed and the Company recorded an impairment of $1,150 during the year ended April 30, 2015,
resulting in the property being recorded at $nil at April 30, 2016 and 2015.
Note
5
Related Party Transactions
An
officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such
costs are immaterial to the financial statements and accordingly are not reflected herein.
On
April 28, 2014, the Company’s former president loaned $23,000 to the Company and the Company issued a promissory note in
the amount of $23,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018.
On
June 29, 2015, the Company’s former president loaned $7,000 to the Company and the Company issued a promissory note in the
amount of $7,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018.
On
August 26, 2015, the Company’s former president loaned $3,600 to the Company and the Company issued a promissory note in
the amount of $3,600. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018.
On
October 26, 2015, the Company’s former president loaned $4,000 to the Company and the Company issued a promissory note in
the amount of $4,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018.
Note
5
Related Party Transactions
– (cont’d)
On
February 9, 2016, the Company’s former president loaned $1,500 to the Company and the Company issued a promissory note in
the amount of $1,500. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018.
No
payments have been made on the above notes, and the total principal due on these notes at April 30, 2016 and 2015 is $39,100 and
$23,000, respectively.
During
the year ended April 30, 2016 the Company accrued interest expense of $2,025 (year ended April 30, 2015 - $1,388) pursuant to
these notes payable. Total accrued interest on these note as of April 30, 2016 and 2015 was $3,413 and $1,388, respectively.
Note
6
Capital Stock
The
authorized common stock of the Company consists of 90,000,000 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 April 30, 2016 the Company had 2,790,000 common stock and zero preferred
stock outstanding.
On
December 18, 2014, pursuant to a Prospectus offering of up to 1,500,000 common shares at a price of $0.0075, the Company issued
1,190,000 common shares for aggregate proceeds of $8,925. The subscription agreement allows for the Company to accept in full
settlement in either US$0.0075 or 0.1 Mexican Peso’s for each share acquired.
Note
7
Notes Payable
|
|
On
April 6, 2016, $23,978 was loaned to the Company by an unrelated party. The loan carries
an interest rate of 6 % per annum, is unsecured and is payable on demand.
|
|
|
On
April 30, 2016, $25,000 was loaned to the Company by an unrelated party. The loan carries
an interest rate of 6 % per annum, is unsecured and is payable on demand.
|
Note
8
Income Taxes
|
|
A
reconciliation of the income tax provision computed at statutory rates to the reported
tax provision is as follows:
|
|
|
Year
Ended
|
|
|
|
Year
Ended
|
|
|
|
April
30, 2016
|
|
|
|
April
30, 2015
|
|
Basic
statutory and state income tax rate
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Approximate
loss before income taxes
|
$
|
43,532
|
|
|
$
|
41,999
|
|
Expected
approximate tax recovery on net loss, before income tax
|
$
|
15,236
|
|
|
$
|
14,700
|
|
Changes
in valuation allowance
|
|
(15,326
|
)
|
|
|
(14,700
|
)
|
Deferred
income tax recovery
|
$
|
—
|
|
|
$
|
—
|
|
Note
8
Income Taxes
– (cont’d)
Significant
components of the Company’s deferred tax assets and liabilities are as follows:
|
Year Ended
|
|
Year Ended
|
|
April 30, 2016
|
|
April 30, 2015
|
|
|
|
|
Deferred income tax assets
|
|
|
|
Non-capital losses carried forward
|
$
|
30,455
|
|
|
$
|
15,219
|
|
Mineral properties
|
|
—
|
|
|
|
750
|
|
Less: valuation allowance
|
|
(30,455
|
)
|
|
|
(15,969
|
)
|
|
|
|
|
|
|
|
|
Deferred income tax assets
|
$
|
—
|
|
|
$
|
—
|
|
At
April 30, 2016, the Company has incurred accumulated net operating losses in the United States of America totalling approximately
$87,013 which are available to reduce taxable income in future taxation years.
Section
382 of the Internal Revenue Code of 1986, as amended (the "Code"). Ownership changes may limit the amount of the NOL
carry forwards that can be utilized annually to offset future taxable income and tax, respectively.
These
losses expire as follows:
Year of Expiry
|
|
Amount
|
|
|
|
|
2034
|
|
|
$
|
41,999
|
|
|
2035
|
|
|
$
|
43,532
|
|
The
amount taken into income as deferred tax assets must reflect that portion of the income tax loss carryforwards that is more-likely-than-not
to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax
loss carryforwards, regardless of their time of expiry.