Item
1. Financial Statements
Our
consolidated financial statements included in this Form 10-Q are as follows:
These
unaudited consolidated 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, 2017 are not necessarily indicative of the results that can be expected for the full year.
NOGALES
RESOURCES CORP.
CONSOLIDATED
BALANCE SHEETS
(EXPRESSED
IN US DOLLARS)
|
January
31,
|
|
April
30,
|
|
2017
|
|
2016
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
|
$
|
6,220
|
|
|
$
|
20,403
|
|
Prepaid
expenses
|
|
—
|
|
|
|
5,000
|
|
Total
assets
|
$
|
6,220
|
|
|
$
|
25,403
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
$
|
22,064
|
|
|
$
|
—
|
|
Notes
payable
|
|
48,978
|
|
|
|
48,978
|
|
Accrued
interest on notes payable
|
|
2,317
|
|
|
|
—
|
|
Total
current liabilities
|
|
73,359
|
|
|
|
48,978
|
|
Long
term
|
|
|
|
|
|
|
|
Due
to related party
|
|
39,100
|
|
|
|
39,100
|
|
Accrued
interest – related party
|
|
5,187
|
|
|
|
3,413
|
|
Total
long term liabilities
|
|
44,287
|
|
|
|
42,513
|
|
Total
liabilities
|
|
117,646
|
|
|
|
91,491
|
|
STOCKHOLDER'S
DEFICIT
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value
|
|
|
|
|
|
|
|
10,000,000
shares authorized, none issued and outstanding
|
|
—
|
|
|
|
—
|
|
Common
stock, $0.001 par value
|
|
|
|
|
|
|
|
90,000,000
shares authorized 2,790,000 shares issued and
outstanding as of January 31, 2017 and April 30, 2016.
|
|
2,790
|
|
|
|
2,790
|
|
Additional
paid in capital
|
|
18,135
|
|
|
|
18,135
|
|
Accumulated
deficit
|
|
(132,351
|
)
|
|
|
(87,013
|
)
|
Total
stockholder's deficit
|
|
(111,426
|
)
|
|
|
(66,088
|
)
|
Total
liabilities and stockholder’s deficit
|
$
|
6,220
|
|
|
$
|
25,403
|
|
See
accompanying notes that are an integral part of these unaudited consolidated financial statements
NOGALES
RESOURCES CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(EXPRESSED
IN US DOLLARS)
(Unaudited)
|
Three
Months Ended January 31,
|
|
Nine
months Ended January 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
and accounting fees
|
$
|
2,000
|
|
|
$
|
2,840
|
|
|
$
|
10,000
|
|
|
$
|
13,175
|
|
Legal
fees
|
|
765
|
|
|
|
732
|
|
|
|
4,688
|
|
|
|
4,469
|
|
Office
expenses
|
|
6,418
|
|
|
|
794
|
|
|
|
18,789
|
|
|
|
2,385
|
|
Transfer
and filing fees
|
|
2,588
|
|
|
|
450
|
|
|
|
7,770
|
|
|
|
2,375
|
|
Loss
from operations
|
|
(11,771
|
)
|
|
|
(4,816
|
)
|
|
|
(41,247
|
)
|
|
|
(22,404
|
)
|
Interest
expense
|
|
1,332
|
|
|
|
570
|
|
|
|
4,091
|
|
|
|
1,450
|
|
Net
Loss
|
$
|
(13,103
|
)
|
|
$
|
(5,386
|
)
|
|
$
|
(45,338
|
)
|
|
$
|
(23,854
|
)
|
Net
loss per common share – basic and diluted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
Weighted
average number of common shares outstanding – basic and diluted
|
|
2,790,000
|
|
|
|
2,790,000
|
|
|
|
2,790,000
|
|
|
|
2,790,000
|
|
See
accompanying notes that are an integral part of these unaudited consolidated financial statements
NOGALES
RESOURCES CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(EXPRESSED
IN US DOLLARS)
(Unaudited)
|
|
Nine
months Ended
January 31,
|
|
2017
|
|
2016
|
Operating
activities
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(45,338
|
)
|
|
$
|
(23,854
|
)
|
Non-cash
items:
|
|
|
|
|
|
|
|
Accrued
interest – related party
|
|
1,774
|
|
|
|
1,450
|
|
Accrued
interest – notes payable
|
|
2,317
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
5,000
|
|
|
|
1,250
|
|
Accounts
payable and accrued liabilities
|
|
22,064
|
|
|
|
6,313
|
|
Net
cash used in operating activities
|
|
(14,183
|
)
|
|
|
(14,841
|
)
|
Financing
activities
|
|
|
|
|
|
|
|
Proceeds
from related party notes payable
|
|
—
|
|
|
|
14,600
|
|
Net
cash provided by financing activities
|
|
—
|
|
|
|
14,600
|
|
Change
in cash during the period
|
|
(14,183
|
)
|
|
|
(241
|
)
|
Cash,
beginning of the period
|
|
20,403
|
|
|
|
663
|
|
Cash,
end of the period
|
$
|
6,220
|
|
|
$
|
422
|
|
Supplemental
information
|
|
|
|
|
|
|
|
Interest
and taxes paid in cash
|
$
|
—
|
|
|
$
|
—
|
|
See
accompanying notes that are an integral part of these unaudited consolidated financial statements
NOGALES
RESOURCES CORP.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine months Ended January 31, 2017 and 2016
(Expressed
in US Dollars)
(Unaudited)
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.
Basis
of presentation
The
unaudited interim consolidated financial statements included herein have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8
of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the
notes to the financial statements included in the Annual Report on Form 10-K of the Company for the year ended April 30, 2016.
In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine months ended January 31, 2017, are not necessarily indicative of
the results that may be expected for the year ending April 30, 2017. For further information, these unaudited interim consolidated
financial statements and the related notes should be read in conjunction with the Company’s audited consolidated financial
statements for the year ended April 30, 2016, included in the Company’s report on Form 10-K
Going
Concern
These
consolidated financial statements have been prepared assuming the Company will continue as a going concern and 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 $132,351 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 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.
Note
2
Mineral Property
On
May 20, 2014, the Company entered into a property option agreement whereby NRC Exploration LLC, a wholly owned subsidiary of the
Company, was granted an option to earn up to a 100% interest in the Donald mineral property. The Donald mineral property is located
in the Omineca mining district of the Province of British Columbia Canada.
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 January 31, 2017 and April 30, 2016.
Note
3
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.
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 January 31, 2017 and April 30, 2016
is $39,100.
During
the three months ended January 31, 2017 the Company recorded interest expense of $592 (January 31, 2016 - $570) pursuant to these
promissory notes.
During
the nine months ended January 31, 2017 the Company recorded interest expense of $1,774 (January 31, 2016 - $1,450) pursuant to
these promissory notes. Total accrued interest on these note as of January 31, 2017 and April 30, 2016 was $5,187 and $3,413,
respectively.
Note
4
Notes Payable
On
April 6, 2016, $23,978 was loaned to the Company by an unrelated third party (“Lender”). 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 the Lender. The loan carries an interest rate of 6% per annum, is unsecured
and is payable on demand.
During
the three months ended January 31, 2017, the Company accrued interest of $741 (January 31, 2016 - $Nil) pursuant to these notes
payable.
During
the nine months ended January 31, 2017, the Company accrued interest of $2,317 (January 31, 2016 - $Nil) pursuant to these notes
payable. Total accrued interest on these notes as of January 31, 2017 and April 30, 2016 was $2,317 and $Nil, respectively.
Note
5
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, 2017 the Company had 2,790,000 shares of common stock and no
shares of preferred stock outstanding.
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.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
We
are a mineral exploration company incorporated in Nevada on April 9, 2014. On May 8, 2014, we incorporated a wholly-owned
subsidiary, NRC Exploration LLC in the state of Nevada, for the purposes of mineral exploration. On May 20, 2014, our consulting
geologist introduced us to a mineral property and we acquired an option on that property whereupon we can acquire 100% legal and
beneficial ownership interest in a mineral claim known as the Donald mineral claim. The Donald mineral claim is located in the
Omineca Mining District located in the central part of the Province of British Columbia, Canada.
In
view of the current world wide depressed market for metals, we have chosen not to incur additional exploration cost on the Donald
Property at this time and are no longer pursuing exploration or development of the property. Management is currently searching
for other opportunities in the mineral exploration field.
Results
of Operations for the three and nine months ended January 31, 2017.
For
the three months ended January 31, 2017 we did not earned any revenues. For the three months ended January 31, 2017 we incurred
expenses and a net loss in the amount of $13,103 (2016 – $5,386). Our expenses during the quarter consisted of audit and
accounting fees of $2,000 (2016 – $2,840), Office and miscellaneous expenses of $6,418 (2016 – $794), legal fees of
$765 (2016 – $732), transfer and filing fees of $2,588 (2016 – $450) and interest expense of $1,332 (2016 –
$570).
Office
expenses increased during the period due to the hiring of an outside contractor to handle our office and administration work.
Our losses are attributable to operating expenses together with a lack of any revenues.
For
the nine months ended January 31, 2017 we did not earned any revenues. For the nine months ended January 31, 2017 we incurred
expenses and a net loss in the amount of $45,338 (2016 – $23,854). Our expenses during the nine months ended January 31,
2017 consisted of audit and accounting fees of $10,000 (2016 – $13,175), Office and miscellaneous expenses of $18,789 (2016
– $2,385), legal fees of $4,688 (2016 – $4,469), transfer and filing fees of $7,770 (2016 – $2,375) and interest
expense of $4,091 (2016 – $1,450).
Office
expenses increased during the period due to the hiring of an outside contractor to handle our office and administration work.
Our losses are attributable to operating expenses together with a lack of any revenues.
Liquidity
and Capital Resources
As
of January 31, 2017, we had total current assets of $6,220, consisting entirely of cash. We had current liabilities of $73,359.
Accordingly, we had a working capital deficit of $67,139 as of January 31, 2017 (April 30, 2016 working capital deficit
of $23,575).
To
date, we have funded our operations primarily through loans from Misael Aguirre, our former sole executive officer, and director
and from unrelated third parties. As of January 31, 2017, we owed Mr. Aguirre at total of $39,100 in principal, plus accrued interest
of $5,187. The amounts loaned by Mr. Aguirre earn interest at a rate of 6% per annum, are unsecured and are due on December 31,
2018. As of January 31, 2017, we owed an additional $48,978 in principal plus accrued interest of $2,317 to a third party (“Lender”).
The amounts loaned by the Lender earn interest at a rate of 6% per annum, are unsecured and payable on demand.
We
do not currently have sufficient funds to repay our existing debts. If we are unable to secure additional financing, we could
fail and investors may lose some or all of their investment. In addition, we are no longer pursuing exploration or development
of the Donald Property and are currently searching for other opportunities in the mineral exploration field. As such, we are unable
to provide an accurate estimate of our financial requirements for the next twelve months. If we do identify a suitable business
opportunity that we wish to pursue, we will likely need substantial financing. If we fail to obtain sufficient financing, our
ability to pursue alternative business opportunities may be limited. We do not currently have any financing arrangements in place,
and there is no assurance that sufficient financing will be available to us when needed.
Going
Concern
As
discussed in the notes to our consolidated 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.
Off
Balance Sheet Arrangements
As
of January 31, 2017, there were no off balance sheet arrangements.
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.
Currently, we do not believe that any accounting policies fit this definition.
Recently
Issued Accounting Pronouncements
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.
Item
4. Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of January 31, 2017. This evaluation was carried out under the supervision and
with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Philip Kwan. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2017, our disclosure controls and procedures
are not effective. There have been no changes in our internal controls over financial reporting during the nine months ended January
31, 2017.
Management
determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and
number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation
and control procedures not regularly performed due to the lack of staff and resources.
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 Exchange Act are recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily
prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The
design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time,
control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate.