Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Director of American Paramount Gold Corp.
We have audited the accompanying balance sheets of American Paramount Gold Corp. (the “Company”) as at August 31, 2017 and 2016 and the related statements of operations, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, these financial statements present fairly, in all material respects, the financial position of American Paramount Gold Corp. as of August 31, 2017 and 2016 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.
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 reported losses since inception from operations, has a working capital deficiency as at August 31, 2017 of $1,786,699, and requires additional funds to meet its obligations and fund the costs of its 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.
/s/ DMCL
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
December 11, 2017
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2017 AND 2016
(EXPRESSED IN US DOLLARS)
1. ORGANIZATION AND NATURE OF BUSINESS
American Paramount Gold Corp. (the "Company") was incorporated in the State of Nevada on July 20, 2006 and is listed on the OTC
Pink Sheets
under the symbol “APGA”. The Company was formed to engage in the acquisition, exploration and development of natural resource properties.
Going concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. At August 31, 2017 the Company had an accumulated deficit of $5,859,798 and a working capital deficiency of $1,786,699. Continuation as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet obligations and pay its liabilities arising from normal business operations when they come due and ultimately upon its ability to achieve profitable operations. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that the Company will be able to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Management intends to obtain additional funding by borrowing funds from its directors and officers, issuing promissory notes and/or a private placement of common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in US dollars.
Accounting estimates
The preparation of these financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis from making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Fair Value Measurements
The book value of cash, accounts receivable, accounts payable and convertible loan 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 I, 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.
The Company’s convertible loan is based on Level 2 inputs in the ASC 820 fair value hierarchy.
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 periods ended August 31, 2017 and 2016.
Income taxes
Income tax expense is based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, 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 on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Loss per share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted net income per common share includes the potential dilution that could occur upon exercise of the options, and convertible notes to acquire common stock computed using the treasury stock method which assumes that the increase in the number of shares is reduced by the number of shares which could have been repurchased by the Company with the proceeds from the exercise of the options, and convertible notes.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards Board or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
3. CONVERTIBLE LOAN - RELATED PARTY
On April 22, 2010, and as amended December 17, 2010, the Company entered into an agreement with Monaco Capital Inc., a majority shareholder, for a principal amount of up to $5,000,000. The loan is unsecured and bears interest at the rate of 10% per annum calculated on the principal balance. The Company may at any time during the term of the loan prepay any sum up to the full amount of the loan and accrued interest then outstanding at any time for the sum plus an additional 10% of such amount. The loan (including accrued interest) is convertible into securities of the Company at a conversion price calculated as the mean volume weighted average price for the Company’s common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. At any time after the advancement date, if the Company has not paid the loan and accrued interest in full, the Lender may, by providing written notice to the Company, exercise its rights of conversion in respect of either a portion of the total outstanding amount of the loan as of that date into shares of the Company. The amounts advanced plus accrued interest are due one year following the date advanced.
As at August 31, 2017, the Company owed $1,610,816 (2016 - $1,512,775) under this loan, including accrued interest as at August 31, 2017 of $630,403 (2016 - $532,362).
The loan is in default and due on demand.
4. STOCKHOLDERS’ DEFICIT
Shares Issuances
During the year ended August 31, 2017, the Company received $36,925 (2016 - $Nil) for subscriptions of 1,829,750 common shares.
On September 16, 2015, the Company issued 3,000,000 restricted common shares with a fair value of $126,000 to a former director and officer in return for performance of consulting services.
On December 4, 2015, the Company issued 3,000,000 restricted common shares with a fair value of $141,000 to a company owned by a former officer and director of the Company in return for performance of consulting services.
See Note 8.
Stock Options
The Company has adopted a stock option plan (the “2010 Plan”) which permits the Company to issue up to 6,500,000 shares of common stock to directors, officers, employees and consultants of the Company upon the exercise of stock options granted under the 2010 Plan. At the time of the grant of the option, the plan administrator shall designate the expiration date of the option, which date shall not be later than five (5) years from the date of grant. The vesting schedule for each option shall be specified by the plan administrator at the time of grant of the option. Effective
September 29, 2010 the 2010 Plan provides for an exercise price to be established based on the fair market value of a common share of the Company being the average of the high and low sales prices (or bid and ask prices, if sales prices are not reported) for the common stock for the last trading day immediately preceding the date with respect to which fair market value is being determined, as reported for the principal trading market for the common stock.
As at August 31, 2017 and 2016, the Company no stock options outstanding.
5. INCOME TAXES
The reported income taxes differ from the amounts obtained by applying statutory rates to the loss before income taxes as follows:
|
|
August 31, 2017
|
|
|
August 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(192,570
|
)
|
|
$
|
(165,330
|
)
|
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Expected income tax recovery
|
|
|
(67,000
|
)
|
|
|
(58,000
|
)
|
Adjustment to prior year provision versus statutory tax return
|
|
|
(46,000
|
)
|
|
|
46,000
|
|
Change in valuation allowance
|
|
|
113,000
|
|
|
|
12,000
|
|
Income tax recovery
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s tax-effected future tax assets and liabilities are estimated as follows:
|
|
August 31, 2017
|
|
|
August 31, 2016
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
796,000
|
|
|
$
|
683,000
|
|
Less: Valuation allowance
|
|
|
(796,000
|
)
|
|
|
(683,000
|
)
|
Net deferred income tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At August 31, 2017, the Company has a deferred tax asset. A full valuation allowance has been established as management believes it is more likely that not that the deferred tax asset will not be realized.
As at August 31, 2017, the Company has non-capital losses of approximately $2,275,000 that may be carried forward and applied against federal and state taxable income of future years. The non-capital losses may be carried forward and expire between 2027 and 2037.
Tax attributes are subject to review, and potential adjustment by tax authorities.
6. RELATED PARTIES TRANSACTIONS
As at August 31, 2017, the Company owed $60,000 (2016 - $Nil) to a Company owned by the President of the Company for services provided to the Company.
As at August 31, 2017, the Company owed $99,772 (2016 - $55,266) to the Controller of the Company for services provided to the Company.
7. REVERSAL OF DEBT
During the year ended August 31, 2017, certain payables became no longer enforceable as the Statute of Limitation period has expired. The Company reversed the payables of $37,612 (2016 - $236,657) which has been recognized in income.
8. SUBSEQUENT EVENTS
On September 25, 2017, the Company issued 125,000 common shares at a price of $ CDN 4.00 per share pursuant to share subscriptions previously received in the amount of $476,191.
On December 5, 2017, the Company issued 300,000 common shares at a price of $0.10 per share, for an aggregate price of $30,000.