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 July 31, 2018 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)
|
July 31,
|
|
April 30,
|
|
2017
|
|
2018
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
|
$
|
1,129
|
|
|
$
|
143
|
|
Total assets
|
$
|
1,129
|
|
|
$
|
143
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
22,048
|
|
|
$
|
15,820
|
|
Due to related party
|
|
110,888
|
|
|
|
105,190
|
|
Total current liabilities
|
|
132,936
|
|
|
|
121,010
|
|
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 July 31, 2018 and April 30, 2018.
|
|
2,790
|
|
|
|
2,790
|
|
Additional paid in capital
|
|
18,135
|
|
|
|
18,135
|
|
Accumulated deficit
|
|
(152,732
|
)
|
|
|
(141,792
|
)
|
Total stockholders’ deficit
|
|
(131,807
|
)
|
|
|
(120,867
|
)
|
Total liabilities and stockholders’ deficit
|
$
|
1,129
|
|
|
$
|
143
|
|
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 July 31,
|
|
2018
|
|
2017
|
Operating expenses
|
|
|
|
|
|
|
|
Audit and accounting fees
|
$
|
3,400
|
|
|
$
|
3,500
|
|
Legal fees
|
|
665
|
|
|
|
1,160
|
|
Office expenses
|
|
6,047
|
|
|
|
6,014
|
|
Transfer and filing fees
|
|
828
|
|
|
|
2,267
|
|
Loss from operations
|
|
(10,940
|
)
|
|
|
(12,941
|
)
|
Gain on forgiveness of debt
|
|
—
|
|
|
|
96,870
|
|
Net and comprehensive income (loss) for the period
|
$
|
(10,940
|
)
|
|
$
|
83,929
|
|
Net income per common share – basic and diluted
|
$
|
0.00
|
|
|
$
|
0.03
|
|
Weighted average number of common shares outstanding – basic and diluted
|
|
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)
|
Three months ended July 31,
|
|
2018
|
|
2017
|
|
|
Operating activities
|
|
|
|
|
|
|
|
Net and comprehensive income (loss) for the period
|
$
|
(10,940
|
)
|
|
$
|
83,929
|
|
Non-cash items:
|
|
|
|
|
|
|
|
Gain on forgiveness of debt
|
|
—
|
|
|
|
(96,870
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
—
|
|
|
|
—
|
|
Accounts payable and accrued liabilities
|
|
6,228
|
|
|
|
(3,606
|
)
|
Net cash used in operating activities
|
|
(4,712
|
)
|
|
|
(16,547
|
)
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
Due to related party
|
|
5,698
|
|
|
|
16,519
|
|
Net cash provided by financing activities
|
|
5,698
|
|
|
|
16,519
|
|
|
|
|
|
|
|
|
|
Change in cash during the period
|
|
986
|
|
|
|
(28
|
)
|
Cash, beginning of the period
|
|
143
|
|
|
|
268
|
|
Cash, end of the period
|
$
|
1,129
|
|
|
$
|
240
|
|
|
|
|
|
|
|
|
|
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
July 31, 2018
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, 2018. 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 months ended July 31, 2018, 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, 2018, 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 $152,732 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
During the three months ended July
31, 2018, the Company’s President advanced the Company $5,698, for a total amount advanced of $110,888. The advances are
unsecured, bear no interest, and have no terms of repayment.
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 15, 2018, NRC Exploration LLC was dissolved.
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 at that time not to exercise our option on the Donald Property and that option expired. Management is currently
searching for other opportunities in the mineral exploration field.
Results of Operations for the three
months ended July 31, 2018.
For the three months ended July 31,
2018 we did not earn any revenues. For the three months ended July 31, 2018 we incurred total operating expenses of $10,940 (2017
– $12,941).
In the three months ended July 31, 2018
our net loss was $10,940. (2017 net income $83,929). The 2017 net income was a result of 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.
Our expenses during the three months
ended July 31, 2018 consisted of audit and accounting fees of $3,400 (2017 – $3,500), Office and miscellaneous expenses of
$6,047 (2017 – $6,014), legal fees of $665 (2017 – $1,160), transfer and filing fees of $828 (2017 – $2,267)
and a gain on forgiveness of debt of $nil (2017 – $96,870).
Liquidity and Capital Resources
As of July 31, 2018, we had total current
assets of $1,129 (April 30, 2018 – $143), consisting entirely of cash. We had current liabilities of $132,936 (April 30,
2018 – $121,010). Accordingly, we had a working capital deficit of $131,807 as of July 31, 2018 (April 30, 2018 –
$120,867).
To date, we have funded our operations
primarily through loans from related parties and from unrelated third parties. As of July 31, 2018, we owed our current CEO $110,888
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 July 31, 2018, 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 July 31, 2018. 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 July 31, 2018, our disclosure controls and procedures are not effective. There have been
no changes in our internal controls over financial reporting during the three months ended July 31, 2018.
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.