Indicated 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 [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 3,000,000 common shares as of March 5, 2015.
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 (§ 229.405 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 [ ] No [X]
These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended January 31, 2015 are not necessarily indicative of the results that can be expected for the full year.
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 1 Basis of Presentation
While the information presented in the accompanying January 31, 2015 interim consolidated 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 interim 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 interim consolidated financial statements should be read in conjunction with the Company’s April 30, 2014 audited financial statements (notes thereto) included in the Company’s Form S-1.
Operating results for the nine months ended January 31, 2015 are not necessarily indicative of the results that can be expected for the year ending April 30, 2015.
Note 2 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 $46,134 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. 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.
F-4
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 3 Summary of Significant Accounting Policies
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 ORC Exploration LLC., a wholly owned subsidiary incorporated in Nevada, USA on May 8, 2014. All significant inter-company transactions and balances have been eliminated.
Cash
Cash consists of all highly liquid investments that are readily convertible to cash within 90 days when purchased.
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.
F-5
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 3 Summary of Significant Accounting Policies - (cont’d)
Mineral Property - (cont’d)
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.
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 January 31, 2015 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.
F-6
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 3 Summary of Significant Accounting Policies - (cont’d)
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 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.
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.
F-7
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 3 Summary of Significant Accounting Policies - (cont’d)
Newly Issued Accounting Pronouncements
In June 2014, the FASB issued Accounting Standards Update No 2014-10. This update eliminated the definition of an exploration stage Company from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between exploration stage entities and other reporting entities from US GAAP. The Company has adopted this new guidance retroactively to May 1, 2014 as permitted. As a result the Company no longer has the obligation to disclose an accounting policy for its exploration stage activities, nor is it required to present inception to date information in the statements of operations, statements of cash flows, and the statement of stockholders equity (deficit).
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 4 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.
F-8
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 4 Financial Instruments - (cont’d)
The carrying value of the Company’s financial assets and liabilities which consist of cash, 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 5 Mineral Property
On May 20, 2014, the Company’s wholly owned subsidiary, ORC Exploration Ltd (“ORC”) entered into a property option agreement whereby ORC was granted an option to earn up to an 100% interest in the Elizabeth mineral claim #1028302”. The Elizabeth claim is located in the Omineca mining district of the Province of British Columbia Canada, and comprises 518 hectares.
Consideration for the option consists of cash payments totalling US$11,150, of which US$1,150 is payable upon the execution of the agreement (paid) and US$10,000 is due on or before April 30, 2017.
Note 6 Related Party Transactions
On April 30, 2014, the Company received and accepted a subscription to purchase 1,800,000 common shares at $0.0075 per share for aggregate proceeds of $13,500 from the Company’s president. The subscription agreement permitted the Company to accept 180,000 Mexican Peso’s in full settlement of the share subscription. The share subscription was settled in Mexican Peso’s.
On April 28, 2014, the Company President loaned $22,000 to the Company and the Company issued a promissory note in the amount of $22,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on December 31, 2018. During the three and nine month periods ended January 31, 2015 the Company charged interest expense of $342 and $1,005 respectively pursuant to this note payable. Total accrued interest on this note as of January 31, 2015 was $1,005.
On October 28, 2014, 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, 2018. During the three and nine month periods ended January 31, 2015, the Company charged interest expense of $76 pursuant to this note payable. Total accrued interest on this note as of January 31, 2015 was $78.
F-9
Oaxaca Resources Corp.
Notes to the Consolidated Financial Statements
January 31, 2015
(Stated in US Dollars)
(Unaudited)
Note 7 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 January 31, 2015 the Company had 3,000,000 common stock and zero preferred stock outstanding.
On April 30, 2014, the Company issued 1,800,000 common shares to the Company’s president at $0.0075 per share for total proceeds of $13,500.
On September 4, 2014, pursuant to a Prospectus offering of up to 1,700,000 common shares at a price of US$0.0075, the Company issued 1,200,000 common shares for aggregate proceeds of US$9,000. 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 8 Subsequent Events
Subsequent events were evaluated through March 17, 2015 the date the financial statements were issued.
*This figure only represents the rental cost of the handheld unit; it does not include any charges related to interpretation of the data collected.
Our overall operating budget for the fiscal year ending April 30, 2015 consists of planned expenditures for our initial mineral exploration program, as described above, and for necessary legal and accounting expenses.
Management’s estimate of our planned expenditures by category and by quarter for the next fiscal year are set forth below:
Our initial mining exploration program, which was originally scheduled for the second quarter of the fiscal year ending April 15, 2015, has been delayed until the fourth quarter due to forest fire concerns.
We have not identified commercially exploitable reserves of minerals on our Mineral Claim to date. We are an exploration stage company and there is no assurance that commercially viable minerals quantities exist on our Mineral Claim.
We have not earned any revenues since the inception of our current business operations. We incurred expenses and a net loss in the amount of $5,534 for the three months ended January 31, 2015. Our expenses consisted of audit and accounting fees of $3,037, bank charges of $36, a $24 loss on foreign exchange, legal fees of $719, office expenses of $750, transfer and filing fees of $550, and interest expense of $418. We incurred expenses and a net loss in the amount of $44,646 for the nine months ended January 31, 2015. Our expenses for the nine month period consisted of audit and accounting fees of $12,590, bank charges of $362, consulting fees of $12,050, a $27 loss on foreign exchange, legal fees of $9,701, office expenses of $2,250, exploration costs of $2,000, transfer and filing fees of $4,583, and interest expense of $1,083.
Our losses are attributable to operating expenses together with a lack of any revenues. We anticipate that our exploration expenses will increase when we undertake our initial exploration plan for the Mineral Claim.
As of January 31, 2015, we had total current assets of $3,549, consisting of cash in the amount of $3,299 and prepaid expenses of $250. We had current liabilities of $250 as of January 31, 2015. Accordingly, we had working capital of $3,299 as of January 31, 2015.
On April 28, 2014 our sole officer and director loaned the Company $22,000 which is evidenced by a Promissory Note in the amount of $22,000 with interest accruing on the principal amount at 6% per annum and due on December 31, 2018.
On October 28, 2014 our sole officer and director loaned the Company $5,000 which is evidenced by a Promissory Note in the amount of $5,000 with interest accruing on the principal amount at 6% per annum and due on December 31, 2018.
Our sole officer and Director, Mr. Montes, 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 $19,825 toward the initial implementation of our business plan over the course of the fiscal year ending April 30, 2015. Consequently we will have to raise more money to complete our initial exploration program.
Beyond the current fiscal year, we will also require significant additional capital in order to conduct additional phases of exploration on the Mineral Claim and, if warranted by the geological results, to undertake commercial mineral production on our mineral claims following completion of 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.
As discussed in the notes to our financial statements, we have no established source of revenue. This has raised substantial doubt for our auditors about our ability to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as a going concern.
Our activities to date have been supported by equity financing. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
As of January 31, 2015, there were no off balance sheet arrangements.
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. Currently, we do not believe that any accounting policies fit this definition.
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended January 31, 2015 of Oaxaca Resources Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended January 31, 2015 of Oaxaca Resources Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
In connection with the quarterly Oaxaca Resources Corp. (the “Company”) on Form 10-Q for the quarter ended January 31, 2015 filed with the Securities and Exchange Commission (the “Report”), I, Jose Montes, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
