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
October 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)
|
October
31,
|
|
April
30,
|
|
2017
|
|
2017
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
|
$
|
207
|
|
|
$
|
268
|
|
Prepaid
expenses
|
|
5,000
|
|
|
|
—
|
|
Total
assets
|
$
|
5,207
|
|
|
$
|
268
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
$
|
14,317
|
|
|
$
|
14,163
|
|
Due to related
party
|
|
69,473
|
|
|
|
—
|
|
Notes payable
|
|
—
|
|
|
|
48,978
|
|
Accrued
interest on notes payable
|
|
—
|
|
|
|
3,033
|
|
Total current liabilities
|
|
83,790
|
|
|
|
66,174
|
|
|
|
|
|
|
|
|
|
Long term
|
|
|
|
|
|
|
|
Due to related
party
|
|
—
|
|
|
|
73,702
|
|
Accrued
interest – related party
|
|
—
|
|
|
|
5,759
|
|
Total long term
liabilities
|
|
—
|
|
|
|
79,461
|
|
Total
liabilities
|
|
83,790
|
|
|
|
145,635
|
|
STOCKHOLDERS’
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 October 31, 2017 and April 30, 2017.
|
|
2,790
|
|
|
|
2,790
|
|
Additional paid in capital
|
|
18,135
|
|
|
|
18,135
|
|
Accumulated deficit
|
|
(99,508
|
)
|
|
|
(166,292
|
)
|
Total
stockholders’ deficit
|
|
(78,583
|
)
|
|
|
(145,367
|
)
|
Total
liabilities and stockholders’ deficit
|
$
|
5,207
|
|
|
$
|
268
|
|
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 October 31,
|
|
Six
months ended October 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
and accounting fees
|
$
|
—
|
|
|
$
|
2,000
|
|
|
$
|
3,500
|
|
|
$
|
8,000
|
|
Legal
fees
|
|
385
|
|
|
|
1,268
|
|
|
|
1,545
|
|
|
|
3,923
|
|
Office
expenses
|
|
6,028
|
|
|
|
6,267
|
|
|
|
12,042
|
|
|
|
12,371
|
|
Transfer
and filing fees
|
|
10,732
|
|
|
|
1,290
|
|
|
|
12,999
|
|
|
|
5,182
|
|
Loss from operations
|
|
(17,145
|
)
|
|
|
(10,825
|
)
|
|
|
(30,086
|
)
|
|
|
(29,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
|
(1,332
|
)
|
|
|
—
|
|
|
|
(2,759
|
)
|
Gain
on forgiveness of debt
|
|
—
|
|
|
|
—
|
|
|
|
96,870
|
|
|
|
—
|
|
Net
and comprehensive income (loss) for the period
|
$
|
(17,145
|
)
|
|
$
|
(12,157
|
)
|
|
$
|
66,784
|
|
|
$
|
(32,235
|
)
|
Net
income (loss) per common share – basic and diluted
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
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)
|
Six months ended
October 31,
|
|
2017
|
|
2016
|
Operating activities
|
|
|
|
|
|
|
|
Net and comprehensive
income (loss) for the period
|
$
|
66,784
|
|
|
$
|
(32,235
|
)
|
Non-cash items:
|
|
|
|
|
|
|
|
Accrued
interest – related parties
|
|
—
|
|
|
|
1,183
|
|
Accrued
interest – notes payable
|
|
—
|
|
|
|
1,576
|
|
Gain on
forgiveness of debt
|
|
(96,870
|
)
|
|
|
—
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
(5,000
|
)
|
|
|
5,000
|
|
Accounts
payable and accrued liabilities
|
|
154
|
|
|
|
10,322
|
|
Net
cash used in operating activities
|
|
(34,932
|
)
|
|
|
(14,154
|
)
|
Financing activities
|
|
|
|
|
|
|
|
Due
to related party
|
|
34,871
|
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
34,871
|
|
|
|
—
|
|
Change in cash during the period
|
|
(61
|
)
|
|
|
(14,154
|
)
|
Cash, beginning of the period
|
|
268
|
|
|
|
20,403
|
|
Cash, end of the period
|
$
|
207
|
|
|
$
|
6,249
|
|
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
October
31, 2017
Note
1
Nature of Operations and Ability to Continue as a Going Concern
The
Company was incorporated in the state of Nevada, USA on April 9, 2014. The Company was formed for the purpose of acquiring and
developing mineral properties.
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, 2017.
In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended October 31, 2017, are not necessarily indicative of the results
that may be expected for the year ending April 30, 2018. 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, 2017, 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 $99,508 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.
Note
2
Related Party Transactions
On
June 30, 2017 the Company’s former president forgave loans and interest totalling $44,859.
During
the six months ended October 31, 2017, the Company’s President advanced the Company $34,871, for a total amount advanced
of $69,473. The advances are unsecured, bear no interest, and have no terms of repayment.
Note
3
Notes Payable
On
April 6, 2016, an amount totaling $23,978 and on April 30, 2016 an amount totaling $25,000 were loaned to the Company. These loans
had an interest rate of 6 % per annum.
The
total interest due on these notes at April 30, 2017 was $3,033.
On
June 30, 2017 these loans, totalling $52,011, in principal and interest were forgiven.
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 could acquire 100% legal
and beneficial ownership interest in a mineral claim known as the Donald mineral claim.
In
view of the world wide depressed market for metals in 2015, we chose not to exercise our option on the Donald Property and that
option has now expired. Management is currently searching for other opportunities in the mineral exploration field.
Results
of Operations for the three and six months ended October 31, 2017.
For
the three months ended October 31, 2017 we did not earn any revenues. We incurred total operating expenses of $17,145 (2016 –
$10,825) and incurred a net loss in the amount of $17,145 (2016 –$12,157).
Our
expenses during the three months ended October 31, 2017 consisted of audit and accounting fees of $nil (2016 – $2,000),
Office and miscellaneous expenses of $6,028 (2016 – $6,267), legal fees of $385 (2016 – $1,268), transfer and filing
fees of $10,732 (2016 – $1,290) and interest expense of $nil (2016 – $1,332).
For
the six months ended October 31, 2017 we did not earn any revenues. On June 30, 2017 an unrelated third party forgave loans totaling
$52,011 in principal and interest and a former CEO and director forgave loans totaling $44,859 in principal and interest. For
the six months ended October 31, 2017 we incurred total operating expenses of $30,086 (2016 – $29,476) and earned net income
in the amount of $66,784 (2016 – net loss of $32,235).
Our
expenses during the six months ended October 31, 2017 consisted of audit and accounting fees of $3,500 (2016 – $8,000),
Office and miscellaneous expenses of $12,042 (2016 – $12,371), legal fees of $1,545 (2016 – $3,923), transfer and
filing fees of $12,999 (2016 – $5,182) and interest expense of $nil (2016 – $2,759). These were offset by a gain on
forgiveness of debt of $96,870 (2016 – $nil).
Liquidity
and Capital Resources
As
of October 31, 2017, we had total current assets of $5,207 (April 30, 2017 – $268), consisting entirely of cash. We had
current liabilities of $83,790 (April 30, 2017 – $66,174). Accordingly, we had a working capital deficit of
$78,583 as of October 31, 2017 (April 30, 2017 – $65,906).
To
date, we have funded our operations primarily through loans from related parties and from unrelated third parties. As of October
31, 2017, we owed our current CEO $69,473 for advances. Amounts loaned by our former CEO and an unrelated third party totaling
$96,870 in principal and interest were forgiven on June 30, 2017.
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 our option for that property has expired. We 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. 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 October 31, 2017, there were no off balance sheet arrangements.
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 October 31, 2017. This evaluation was carried out under the supervision and
with the participation of our Chief Executive Officer and Chief Financial Officer, Ms. Yang Liu. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2017, our disclosure controls and procedures
are not effective. There have been no changes in our internal controls over financial reporting during the six months ended October
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.
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.