Report of Independent Registered Public Accounting Firm
To the shareholders
and the board of directors of Nogales Resources Corp.
Opinion on the
Financial Statements
We have audited the
accompanying balance sheets of Nogales Resources Corp. (the "Company") as of April 30, 2020 and 2019, the related statements
of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively
referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of April 30, 2020 and 2019, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of
America.
Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company has not generated revenues since inception, expects to incur further losses from
operations, and requires additional funds to meet its obligations and repay its liabilities arising from normal business operations.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans
in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty
Basis for Opinion
These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance
with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/
Dale Matheson Carr-Hilton Labonte LLP
DALE MATHESON CARR-HILTON
LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
We have served as the Company’s
auditor since 2017
Vancouver, Canada
June 26, 2020
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES THAT ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2020 and 2019
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
These 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 $233,399 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 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.
Uncertainty due to Global Outbreak
of COVID-19
In March of 2020, the World Health
Organization declared an outbreak of COVID-19 a global pandemic. The COVID-19 has impacted vast array of businesses through the
restrictions put in place by most governments internationally, including the USA and Canadian governments, as well as provincial
and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown to
what extent the impact of the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly
uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic
spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions,
and quarantine/isolation measures that are currently, or may be put, in place world-wide to fight the virus. While the extent of
the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for exploration or operating
costs due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors,
all of which may also negatively impact the Company’s business and financial condition.
Note 2 Summary
of Significant Accounting Policies
Use of Estimates
The 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.
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.
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
and reporting currency is the United States dollar.
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.
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.
Loss 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.
Note 2 Summary
of Significant Accounting Policies – (cont’d)
Fair value measurements
The book value of cash, accounts
payable, accrued liabilities and due to related parties approximate their fair values due to the short term maturity of those instruments.
The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value which are the following:
Level 1 - quoted
prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - observable
inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant
value drivers are observable; and
Level 3 - assets
and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the
fair value of the assets or liabilities.
Certain assets and liabilities
are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis
but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There
were no assets or liabilities measured at fair value on a nonrecurring basis during the years ended April 30, 2019 and 2020.
Recent
Accounting Pronouncements
The Company has implemented
all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there
are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or
results of operations.
Note 3 Financial Instruments
The carrying value of the Company’s
financial assets and liabilities which consist of cash, notes payable, 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.
Note 4 Related Party
Transactions
During the year
ended April 30, 2020 the Company’s president advanced the Company $57,303 (2019 - $38,416), for a total amount advanced of
$200,909. The advances are unsecured, bear no interest and have no terms of repayment.
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.
Note 6 Income
Taxes
A reconciliation of the income tax
provision computed at statutory rates to the reported tax provision is as follows:
|
Year Ended
April 30, 2020
|
|
Year Ended
April 30, 2019
|
Basic statutory and state income tax rate
|
|
21
|
%
|
|
|
21
|
%
|
Income (loss) before income taxes
|
$
|
(46,683
|
)
|
|
$
|
(44,924
|
)
|
Expected approximate tax recovery on net loss, before income tax
|
|
(10,000)
|
|
|
|
(9,000)
|
|
Change in tax rate
|
|
—
|
|
|
|
—
|
|
Changes in valuation allowance
|
|
10,000
|
|
|
|
9,000
|
|
Deferred income tax recovery
|
$
|
—
|
|
|
$
|
—
|
|
Significant components of the Company’s
deferred tax assets and liabilities are as follows:
|
Year Ended
|
|
Year Ended
|
|
April 30, 2020
|
|
April 30, 2019
|
Deferred income tax assets
|
|
|
|
|
|
|
|
Non-capital losses carried forward
|
$
|
49,000
|
|
|
$
|
39,000
|
|
Less: valuation allowance
|
|
(49,000
|
)
|
|
|
(39,000
|
)
|
Deferred income tax assets
|
$
|
—
|
|
|
$
|
—
|
|
At April 30, 2020, the Company
has incurred accumulated net operating losses in the United States of America totaling approximately $235,000 which are available
to reduce taxable income in future taxation years. These losses may be carried forward indefinitely.