GOLDEN MATRIX GROUP, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2015
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 000-54840
SOURCE GOLD CORP.
(Name of small business issuer in its charter)
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Nevada
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46-1814729
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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4264 Lady Burton Street
Las Vegas, NV 89129
(Address
of principal executive offices)
(432) 242-1897
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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[ ] (Do not check if a smaller reporting company)
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Smaller reporting company
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[X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 17, 2015, there were 57,180,570 shares of the registrant’s $0.00001 par value common stock issued and outstanding.
SOURCE GOLD CORP.*
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Page
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PART I. FINANCIAL INFORMATION
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FINANCIAL STATEMENTS
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3
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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4
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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6
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| ITEM 4. | CONTROLS AND PROCEDURES | 6 |
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PART II.
OTHER INFORMATION
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LEGAL PROCEEDINGS
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7
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RISK FACTORS
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7
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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8
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DEFAULTS UPON SENIOR SECURITIES
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8
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MINE SAFETY DISCLOSURES
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8
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OTHER INFORMATION
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8
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EXHIBITS
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9
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Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Source Gold Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*
Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we,"”SRGL,” "our," "us," the "Company," refers to Source Gold Corp.
SOURCE GOLD CORP.
(An Exploration Stage Company)
Condensed Consolidated Financial Statements
(Expressed in US dollars)
October 31, 2015 (unaudited)
Financial Statement Index
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Pages
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F-1
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F-2
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F-3
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F-4 to F-25
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SOURCE GOLD CORP.
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(An Exploration Stage Company)
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As of
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As of
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October 31, 2015
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July 31, 2015
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | - | $ | - | ||||
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Loan receivable
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56,034 | 63,115 | ||||||
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Prepaid expenses
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- | - | ||||||
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Total current assets
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56,034 | 63,115 | ||||||
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Computer equipment
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- | - | ||||||
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Mineral property
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85,000 | 85,000 | ||||||
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TOTAL ASSETS
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$ | 141,034 | $ | 148,115 | ||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable and accrued liabilities
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$ | 33,597 | $ | 35,441 | ||||
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Notes payable, net of discount
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2,304,945 | 2,361,905 | ||||||
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Notes payable interest
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298,107 | 209,187 | ||||||
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Notes payable, derivative liability
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1,670,714 | 322,029 | ||||||
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Due to related party
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48,820 | 42,820 | ||||||
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Total Current liabilities
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4,356,183 | 2,971,382 | ||||||
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Shareholder's equity:
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Preferred stock, Series A: $0.00001 par value; 19,999,000 shares authorized, none outstanding
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- | - | ||||||
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Preferred stock, Series B: $0.00001 par value; 1,000 shares authorized; 1,000 (July 31, 2015 - 0) issued and outstanding
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0 | - | ||||||
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Common stock: $0.00001 par value; 7,980,000,000 shares authorized; 1,737,260 (July 31, 2015 - 1,736,217) shares issued and outstanding (1)
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17 | 3,472,433 | ||||||
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Additional paid in capital
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16,101,504 | 12,389,088 | ||||||
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Accumulated other comprehensive loss
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(683 | ) | (683 | ) | ||||
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Retained earnings (accumulated deficit)
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(20,315,987 | ) | (18,684,105 | ) | ||||
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Total shareholders' equity
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(4,215,149 | ) | (2,823,267 | ) | ||||
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TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
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$ | 141,034 | $ | 148,115 | ||||
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(1) All common share amounts and per share amounts in these financial statements, reflect the two thousand-for-one
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reverse stock split of the issued and outstanding shares of the common stock of the Company, effective
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October 15, 2015, respectively, including retroactive adjustment of common share amounts. See Note 10.
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The accompanying notes are an integral part of these financial statements
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SOURCE GOLD CORP.
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(An Exploration Stage Company)
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Three months ended
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October 31,
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2015
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2014
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Sales
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$ | - | $ | - | ||||
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Cost of goods sold
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- | - | ||||||
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Gross profit
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- | - | ||||||
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Operating expenses
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Accounting and audit fees
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3,591 | 5,774 | ||||||
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G&A expenses
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216,000 | 18,678 | ||||||
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Management fees
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30,000 | 30,000 | ||||||
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Professional fees
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1,646 | 8,925 | ||||||
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Net loss from operations
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(251,237 | ) | (63,376 | ) | ||||
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Other income/ (expense)
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FV change of derivative liability
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194,922 | 186,900 | ||||||
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Interest on convertible notes
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(1,575,567 | ) | (138,680 | ) | ||||
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Net loss before income taxes
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(1,631,882 | ) | (15,156 | ) | ||||
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Income tax expense
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- | - | ||||||
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Net Loss
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$ | (1,631,882 | ) | $ | (15,156 | ) | ||
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Other comprehensive gain (loss)
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Foreign currency translation adjustments
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- | - | ||||||
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Comprehensive Loss
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(1,631,882 | ) | (15,156 | ) | ||||
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Per share information
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Basic, weighted number of common shares outstanding (1)
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1,736,273 | 1,396,930 | ||||||
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Net profit/(loss) per common share
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(0.9399 | ) | (0.01 | ) | ||||
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(1) All common share amounts and per share amounts in these financial statements, reflect the two thousand-for-one
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reverse stock split of the issued and outstanding shares of the common stock of the Company, effective
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October 15, 2015, respectively, including retroactive adjustment of common share amounts. See Note 10.
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The accompanying notes are an integral part of these financial statements
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SOURCE GOLD CORP.
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(An Exploration Stage Company)
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Three months ended
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October 31,
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2015
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2014
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Operating activities:
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Net loss
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(1,631,882 | ) | (15,156 | ) | ||||
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Adjustment to reconcile net loss to net cash in operating activities
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Convertible debt interest expense
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1,486,647 | 119,063 | ||||||
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Loss from change in fair value of derivative liability
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(194,922 | ) | (186,900 | ) | ||||
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Changes in assets and liabilities:
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(Increase) decrease in loans receivable
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7,081 | 5,150 | ||||||
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(Increase) decrease in prepaid expenses
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- | - | ||||||
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(Decrease) increase in accounts payable and accrued liabilities
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(1,844 | ) | 9,646 | |||||
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(Decrease) increase in notes payable, interest
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88,920 | 19,618 | ||||||
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Net cash used in operating activities
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(246,000 | ) | (48,581 | ) | ||||
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Investing activities:
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Purchase of computer equipment
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- | - | ||||||
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Mineral property option acquisition
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- | - | ||||||
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Net cash flows used in investing activities
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- | - | ||||||
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Financing activities:
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Proceeds from notes payable
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240,000 | 48,000 | ||||||
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Due to related party
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6,000 | - | ||||||
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Proceeds from loan payable
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- | - | ||||||
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Proceeds from issuance of common stock
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- | - | ||||||
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Net cash provided by financing activities
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246,000 | 48,000 | ||||||
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Effect of foreign exchange on cash
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- | - | ||||||
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Change in cash and cash equivalents
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- | (581 | ) | |||||
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Cash and cash equivalents at the beginning of the period
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- | 636 | ||||||
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Cash and cash equivalents at the end of the period
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- | 55 | ||||||
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Supplementary disclosure for non-cash investing and financing activities
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Shares issued for mineral property
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$ | - | $ | - | ||||
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The accompanying notes are an integral part of these financial statements
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Source Gold Corp.
(An Exploration Stage Company)
October 31, 2015
(Unaudited)
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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for financial information and with the instructions to Form 10-Q of Regulation S-K. They do not include all information and footnotes required by United States 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 for the year ended July 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the three months ended October 31, 2015 are not necessarily indicative of the results that may be expected for the year ending July 31, 2016.
The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are presented in United States dollars.
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary companies IRC Exploration Ltd., (‘IRC”) a company incorporated in Alberta, Canada on August 1, 2008; Northern Bonanza Inc, (‘NBI”) a company incorporated in Ontario, Canada on June 30, 2010; Source Bonanza LLC, (“SB”) a Limited Liability Company incorporated in Nevada, USA on June 18, 2010; and Vulture Gold LLC (“Vulture”), a Nevada Limited Liability Company which was acquired on August 7, 2010.
All significant inter-company transactions and balances have been eliminated.
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The Company was incorporated in the state of Nevada, United States of America on June 4, 2008. The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties. The Company’s year-end is July 31. On August 31, 2009, the Company changed its name to Source Gold Corp. in order to reflect the current focus of the Corporation.
During the year ended July 31, 2009, the Company acquired via its subsidiary company IRC Exploration Ltd. (“IRC”), a mineral claim located in British Columbia, Canada. During the year ended July 31, 2010, the mineral property option agreement for the claim in British Columbia was abandoned.
During the year ended July 31, 2010, the Company acquired two additional mineral properties located in Ontario, Canada. The Company also incorporated two new subsidiary companies, Northern Bonanza Inc. (“NBI”) to hold its mineral properties located in Ontario, Canada, and Source Bonanza LLC (“SB”) to hold its mineral properties located in the USA. The Company also transferred its Ontario mineral properties to NBI during the year ended July 31, 2010.
On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, (“Vulture”) a Nevada Limited Liability Company. (Note 8c)
On March 28, 2012, the Company entered into a property option agreement to acquire a 100% undivided right in three tenures comprising 2,785 acres in northern British Columbia, Canada. (Note 8d)
On July 25, 2014, the Company increased the number of authorized shares of the Company from 3,000,000,000 to 8,000,000,000 shares and par value was changed to $0.00001
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On October 15, 2015, the Company effectuated a 1 for 2,000 reverse stock split, thereby reducing the issued and outstanding shares of common stock from 3,472,433,130 prior to the reverse split to 1,736,217 following the reverse split.
The Company intends on exploring its mineral properties and has not yet determined the existence of economically recoverable reserves. The recoverability of amounts incurred on its mineral properties is dependent upon the existence of economically recoverable reserves in the property, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete their development, and the attainment and maintenance of future profitable production or disposition thereof.
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 $20,315,987 since inception, has working capital deficiency of $4,300,149, has no source of recurring revenues, 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
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Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
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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 have been made using careful judgment. Actual results may vary from these estimates.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary companies IRC Exploration Ltd., (‘IRC”) a company incorporated in Alberta, Canada on August 1, 2008; Northern Bonanza Inc., (‘NBI”) a company incorporated in Ontario, Canada on June 30, 2010; Source Bonanza LLC, (“SB”) a Limited Liability Company incorporated in Nevada, USA on June 18, 2010 and Vulture Gold LLC, (“Vulture”) a Nevada Limited Liability Company which was acquired on August 7, 2010.
All significant inter-company transactions and balances have been eliminated.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of six months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Exploration Stage Company
The Company has not commenced any significant operations and, in accordance with ASC Topic 915, the Company is considered an exploration stage company. All losses accumulated since inception have been considered as part of the Company’s exploration stage activities.
Mineral Properties
The Company is primarily engaged in the acquisition, exploration, and development of mineral properties.
Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.
Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
To date the Company has not established any proven or probable reserves on its mineral properties.
Computer equipment
Computer equipment is stated at the lower of cost or fair value. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of its office equipment or whether the remaining balance of office equipment should be evaluated for possible impairment.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Foreign Currency Translation
The Company’s functional currency is the US dollar as a substantial part of the Company’s operations is based in Arizona. IRC’s and NBI’s functional currency is the Canadian dollar. The functional currency of SB and Vulture is the US dollar as its activities are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).
Assets and liabilities denominated in a foreign currency are translated into US dollar reporting currency at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. 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 other comprehensive loss.
Diluted and Basic Loss per Share
Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed similar to basic income per share except that the denominator is increased to include the number of common stock equivalents. Common stock equivalents represent the dilutive effect of the assumed exercise of any outstanding stock equivalents, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
There are no common stock equivalents outstanding and, thus, diluted and basic loss per share is the same.
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.
Comprehensive Loss
The Company is required to report comprehensive loss, which includes net loss as well as changes in equity from non-owner sources.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 2015 and July 31, 2015. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Stock-Based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Stock based compensation for non-employees is accounted for using the Stock Based Compensation Topic of the FASB ASC 505. We use the fair value method for equity instruments granted to non-employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Newly Issued Accounting Pronouncements
On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation
removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted this amendment effective the current reporting period.
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
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October 31,
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July 31,
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2015
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2015
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Cost
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Computer equipment
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$ | 1,973 | $ | 1,973 | ||||
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Accumulated depreciation
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(1,973 | ) | (1,973 | ) | ||||
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Net book value
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$ | - | $ | - | ||||
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.
The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
The fair value hierarchy for valuation inputs prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels; the level is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Company’s financial assets and liabilities which consist of cash, and accounts payable and accrued liabilities, in management’s opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except
for cash which is at level 1. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
All related party transactions have been recorded at the exchange value which was the amount of consideration established and agreed to by the related parties.
On June 30, 2010, the Company purchased from the Company president 13 mineral property claims in the Thunder Bay mining division of Ontario, Canada. As consideration for the purchase the Company issued an unsecured, non-interest bearing promissory note for $20,000 due on November 30, 2010. During the year ended July 31, 2011 this promissory note was settled by payment of $20,000 cash to the president.
During the year ended July 31, 2010, the former president of the Company granted an option to the current president of the Company to acquire up to 20,000,000 common shares of the Company.
On November 1, 2009, the Company entered into a Corporate Management Services Agreement with the President of the Company for management services. Pursuant to the agreement the President would receive a signing bonus of $7,500 (paid November 1, 2009) and $5,000 per month beginning December 1, 2009 for services rendered plus reimbursement of the Company’s expenses. The agreement may be terminated by either party upon 30 days written notice.
On June 21, 2011, the Company amended the agreement by issuing a resolution to reflect a payment of $6,000 per month for services rendered.
On October 31, 2012, the Former President of the Company acquired 10,000,000 common shares of the Company in a private transaction. As of October 31, 2012 the President holds 16.4% interest in the common stock of the Company.
On May 15, 2013 the Company entered into an employment agreement with Dhugald Pinchin providing a signing bonus equivalent to $50,000 USD or stock and $7,500 per month salary.
On March 25, 2014, Dhugald Pinchin terminated his employment with the Company.
On April 1, 2014, the Company entered into a consulting contract with Edward Aruda. The Company will pay Mr. Aruda $2,000 per month, payable in duly authorized, validly issued, fully paid non assessable common shares of the Company.
During the three months ended October 31, 2015, the Company recorded consulting fees of $6,000 (three months ended October 31, 2014 - $0) owed to Edward Aruda.
As of October 31, 2015, due to related party includes $10,820 (October 31, 2014 - $10,820), owing to Grid Petroleum Corp.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
|
October 31,
|
July 31,
|
|||||||
|
2015
|
2015
|
|||||||
|
Promissory Note #2
|
30,000 | 30,000 | ||||||
|
Promissory Note #5
|
12,000 | 12,000 | ||||||
|
Promissory Note #6
|
11,774 | 11,774 | ||||||
|
Promissory Note #11
|
- | 57,500 | ||||||
|
Promissory Note #12
|
7,500 | 7,500 | ||||||
|
Promissory Note #13
|
7,500 | 7,500 | ||||||
|
Promissory Note #14
|
11,000 | 11,000 | ||||||
|
Promissory Note #15
|
7,500 | 7,500 | ||||||
|
Promissory Note #16
|
11,000 | 11,000 | ||||||
|
Promissory Note #17
|
7,500 | 7,500 | ||||||
|
Promissory Note #18
|
11,000 | 11,000 | ||||||
|
Promissory Note #19
|
7,500 | 7,500 | ||||||
|
Promissory Note #20
|
1,000 | 1,000 | ||||||
|
Promissory Note #21
|
11,000 | 11,000 | ||||||
|
Promissory Note #22
|
7,500 | 7,500 | ||||||
|
Promissory Note #23
|
16,000 | 16,000 | ||||||
|
Promissory Note #25
|
7,500 | 7,500 | ||||||
|
Promissory Note #26
|
7,000 | 7,000 | ||||||
|
Promissory Note #27
|
7,500 | 7,500 | ||||||
|
Promissory Note #28
|
16,000 | 16,000 | ||||||
|
Promissory Note #29
|
7,500 | 7,500 | ||||||
|
Promissory Note #30
|
16,000 | 16,000 | ||||||
|
Promissory Note #31
|
26,500 | 26,500 | ||||||
|
Promissory Note #34
|
7,500 | 7,500 | ||||||
|
Promissory Note #35
|
16,000 | 16,000 | ||||||
|
Promissory Note #36
|
7,500 | 7,500 | ||||||
|
Promissory Note #37
|
11,500 | 11,500 | ||||||
|
Promissory Note #39
|
23,995 | 23,995 | ||||||
|
Promissory Note #42
|
24,000 | 24,000 | ||||||
|
Promissory Note #44
|
25,000 | 25,000 | ||||||
|
Promissory Note #45
|
40,000 | 40,000 | ||||||
|
Promissory Note #46
|
33,000 | 33,000 | ||||||
|
Promissory Note #49
|
360,000 | 360,000 | ||||||
|
Promissory Note #50
|
360,000 | 360,000 | ||||||
|
Promissory Note #51
|
174,510 | 174,510 | ||||||
|
Promissory Note #52
|
240,000 | 240,000 | ||||||
|
Promissory Note #53
|
150,000 | 150,000 | ||||||
|
Promissory Note #54
|
75,000 | 75,000 | ||||||
|
Promissory Note #55
|
75,000 | 75,000 | ||||||
|
Promissory Note #56
|
75,000 | 75,000 | ||||||
|
Promissory Note #57
|
140,000 | 140,000 | ||||||
|
Promissory Note #58
|
140,000 | 140,000 | ||||||
|
Promissory Note #59
|
240,000 | 240,000 | ||||||
|
Promissory Note #60
|
57,500 | - | ||||||
|
Promissory Note #61
|
240,000 | - | ||||||
|
Notes payable, principal
|
$ | 2,763,279 | $ | 2,523,279 | ||||
|
Debt discount
|
(458,334 | ) | (161,374 | ) | ||||
|
Notes payable, net of discount
|
2,304,945 | 2,361,905 | ||||||
|
Accrued interest
|
298,107 | 209,187 | ||||||
|
Total notes payable
|
$ | 2,603,052 | $ | 2,571,092 | ||||
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #2
On March 19, 2012, the Company received $30,000 cash from the issuance of a convertible promissory note in the amount of $30,000. The promissory note is unsecured, interest free and repayable upon demand.
The note may be converted at the option of the holder into Common stock of the Company. The fixed conversion price is $0.01 per share. Accordingly the note may be converted into 3,000,000 common shares of the Company.
The Company determined that this Promissory note should be accounted for in accordance with FASB ASC 470-20 which addresses “Accounting for Convertible Securities with Beneficial Conversion Features". The beneficial conversion feature is calculated at its intrinsic value (that is, the difference between the conversion price $0.01 and the fair value of the common stock into which the debt is convertible at the commitment date (per share being $0.08), multiplied by the number of shares into which the debt is convertible. The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.
Promissory Note #5
On October 30, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $12,000. The promissory note is unsecured; bears interest at 8% per annum, and matured on October 30, 2012. Any principal amount not paid by the maturity date bears interest at 22% per annum. During the three months ended October 31, 2015, the Company accrued $665 (October 31, 2014 - $665) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $13,844 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a loss of $19,714 (October 31, 2014 – gain of $21,670) due to the change in value of the derivative liability during the period.
As of October 31, 2015, principal balance of $12,000 (October 31, 2014 - $12,000) accrued interest of $7,927 (October 31, 2014 - $5,287) and a derivative liability of $20,406 (October 31, 2014 - $18,042) was recorded.
Promissory Note #6
On December 18, 2012, the Company converted a loan payable of $11,774 to a convertible promissory note. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 18, 2013. Any principal amount not paid by the maturity date bears interest at 22% per annum. During the three months ended October 31, 2015, the Company accrued $653 (October 31, 2014 - $653) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $19,145 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a loss of $19,343 (October 31, 2014 – gain of $21,262) due to the change in value of the derivative liability during the period.
As of October 31, 2015, principal balance of $11,774 (October 31, 2014 - $11,774) accrued interest of $6,414 (October 31, 2014 - $3,824) and a derivative liability of $20,022 (October 31, 2014 - $17,702) was recorded.
Promissory Note #11
On May 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $57,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 30, 2013. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $347 (October 31, 2014 - $3,188) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On May 31, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $57,500 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
On August 10, 2015, the Company assigned the principal amount of the note of $57,500 to Santa Rosa Resources.
As of October 31, 2015, principal balance of $0 (October 31, 2014 - $57,500) and accrued interest of $23,725 (October 31, 2014 - $13,917) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #12
On June 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on December 31, 2013. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On June 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $7,500 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $3,327 (October 31, 2014 - $1,677) was recorded.
Promissory Note #13
On July 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on January 31, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On July 31, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $5,250 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $3,187 (October 31, 2014 - $1,537) was recorded.
Promissory Note #14
On August 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on February 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $610 (October 31, 2014 - $610) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On August 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $7,700 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $11,000 (October 31, 2014 - $11,000) and accrued interest of $4,667 (October 31, 2014 - $2,247) was recorded.
Promissory Note #15
On August 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 3, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On August 31, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $2,250 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $3,047 (October 31, 2014 - $1,397) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #16
On September 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $610 (October 31, 2014 - $610) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On September 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $3,300 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $11,000 (October 31, 2014 - $11,000) and accrued interest of $4,474 (October 31, 2014 - $2,054) was recorded.
Promissory Note #17
On September 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 31, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $461) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On September 30, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $3,000 (October 31, 2014 - $0) was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,917 (October 31, 2014 - $1,267) was recorded.
Promissory Note #18
On October 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on April 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $610 (October 31, 2014 - $610) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On October 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $5,500 (October 31, 2014 - $0) was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $11,000 (October 31, 2014 - $11,000) and accrued interest of $4,271 (October 31, 2014 - $1,851) was recorded.
Promissory Note #19
On October 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on April 30, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On January 31, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $750 (October 31, 2014 - $0) was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,779 (October 31, 2014 - $1,129) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #20
On November 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $176,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $55 (October 31, 2014 - $55) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On November 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
On May 19, 2014, a replacement note was issued and the principal balance of $50,000 and interest of $5,000 was transferred Gel Properties, LLC.
On June 6, 2014, a replacement note was issued and the principal balance of $25,000 was transferred Union Capital, LLC.
On July 2, 2014, a replacement note was issued and the principal balance of $25,000 was transferred Union Capital, LLC.
On July 9, 2014, a replacement note was issued and the principal balance of $25,000 was transferred LG Capital, LLC.
As of October 31, 2015, principal balance of $1,000 (October 31, 2014 - $176,000) and accrued interest of $11,569 (October 31, 2014 - $11,349) was recorded.
Promissory Note #21
On November 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $610 (October 31, 2014 - $610) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On November 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $11,000 (October 31, 2014 - $11,000) and accrued interest of $4,067 (October 31, 2014 - $1,647) was recorded.
Promissory Note #22
On November 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 30, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On November 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of 2,643 (October 31, 2014 - $993) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #23
On December 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $16,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $887 (October 31, 2014 - $887) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On December 1, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $16,000 (October 31, 2014 - $16,000) and accrued interest of $5,624 (October 31, 2014 - $2,104) was recorded.
Promissory Note #25
On December 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 30, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On December 31, 2013, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,504 (October 31, 2014 - $854) was recorded.
Promissory Note #26
On January 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $7,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $388 (October 31, 2014 - $388) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On January 1, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,000 (October 31, 2014 - $7,000) and accrued interest of $2,332 (October 31, 2014 - $792) was recorded.
Promissory Note #27
On January 31, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 31, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On January 31, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,363 (October 31, 2014 - $713) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #28
On February 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $16,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on August 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $887 (October 31, 2014 - $887) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On February 1, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $16,000 (October 31, 2014 - $16,000) and accrued interest of $5,029 (October 31, 2014 - $1,518) was recorded.
Promissory Note #29
On February 28, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on August 28, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On February 28, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,237 (October 31, 2014 - $667) was recorded.
Promissory Note #30
On March 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $16,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on September 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $887 (October 31, 2014 - $887) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On March 1, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $16,000 (October 31, 2014 - $16,000) and accrued interest of $4,743 (October 31, 2014 - $1,420) was recorded.
Promissory Note #31
On March 17, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $26,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 17, 2015. Any principal amount not paid by the maturity date bears interest at 24% per annum. During the three months ended October 31, 2015, the Company accrued $1,603 (October 31, 2014 - $534) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $42,329 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $12 (three months ended October 31, 2014 - $1,544) due to the change in value of the derivative liability during the period, and debt discount of $0 (three months ended October 31, 2014 - $9,947) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $26,500 (October 31, 2014 - $26,500), accrued interest of $6,093 (October 31, 2014 - $1,325), debt discount of $0 (October 31, 2014 - $16,553) and derivative liability of $52,988 (October 31, 2014 - $40,785) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #34
On March 31, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on September 30, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On March 31, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $2,091 (October 31, 2014 - $616) was recorded.
Promissory Note #35
On April 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC in the sum of $16,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $887 (October 31, 2014 - $887) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On April 1, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $16,000 (October 31, 2014 - $16,000) and accrued interest of $4,451 (October 31, 2014 - $1,312) was recorded.
Promissory Note #36
On April 30, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 30, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $416 (October 31, 2014 - $416) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On April 30, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $1,500 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
As of October 31, 2015, principal balance of $7,500 (October 31, 2014 - $7,500) and accrued interest of $1,952 (October 31, 2014 - $567) was recorded.
Promissory Note #37
On May 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital, LLC, in the sum of $16,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2014. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $638 (October 31, 2014 - $915) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On May 1, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $4,950 was recorded in the financial statements with a corresponding increase to additional paid in capital. During the life of the promissory note, the debt discount was accreted to the statement of operations.
On March 24, 2015, a replacement note was issued and $5,000 of the principal balance was transferred Direct Capital Group, Inc.
As of October 31, 2015, principal balance of $11,500 (October 31, 2014 - $16,500), accrued interest of $3,616 (October 31, 2014 - $1,244), and debt discount of $0 (October 31, 2014 - $13) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #39
On May 19, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 19, 2015. Any principal amount not paid by the maturity date bears interest at 16% per annum. During the three months ended October 31, 2015, the Company accrued $968 (October 31, 2014 - $504) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $32,007 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $10 (three months ended October 31, 2014 - $0) due to the change in value of the derivative liability during the period. During the life of the promissory note, the debt discount of $25,000 was accreted to the statement of operations.
As of October 31, 2015, principal balance of $23,995 (October 31, 2014 - $25,000), accrued interest of $3,699 (October 31, 2014 - $904), and derivative liability of $39,982 (October 31, 2014 - $0) was recorded.
Promissory Note #42
On June 6, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 6, 2015. Any principal amount not paid by the maturity date bears interest at 16% per annum. During the three months ended October 31, 2015, the Company accrued $968 (October 31, 2014 - $504) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $33,550 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $10 (three months ended October 31, 2014 - $0) due to the change in value of the derivative liability during the period. During the life of the promissory note, the debt discount of $25,000 was accreted to the statement of operations.
As of October 31, 2015, principal balance of $24,000 (October 31, 2014 - $25,000), accrued interest of $3,514 (October 31, 2014 - $805), and derivative liability of $39,991 (October 31, 2014 - $0) was recorded.
Promissory Note #44
On July 2, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 2, 2015. Any principal amount not paid by the maturity date bears interest at 16% per annum. During the three months ended October 31, 2015, the Company accrued $1,008 (October 31, 2014 - $504) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $40,725 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $11 (three months ended October 31, 2014 - $0) due to the change in value of the derivative liability during the period. During the life of the promissory note, the debt discount of $25,000 was accreted to the statement of operations.
As of October 31, 2015, principal balance of $25,000 (October 31, 2014 - $25,000), accrued interest of $3,326 (October 31, 2014 - $663), and derivative liability of $41,656 (October 31, 2014 - $0) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #45
On July 9, 2014, the Company arranged a debt swap under which Syndication Capital Note #20 for $75,000 was transferred to LG Capital Funding, LLC. The promissory note is unsecured, bears interest at 8% per annum and matures on July 9, 2015. Any principal amount not paid by the maturity date bears interest at 16% per annum. The note also contains customary events of default. During the three months ended October 31, 2015, the Company accrued $1,613 (three months ended October 31, 2014 - $852) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $202,937 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $18 (three months ended October 31, 2014 – $74,148) due to the change in value of the derivative liability during the period, and debt discount of $0 (three months ended October 31, 2014 - $34,307) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $40,000 (October 31, 2014 - $40,000)
accrued interest of $5,202 (October 31, 2014 - $1,002), debt discount of $0 (October 31, 2014 - $24,896) and a derivative liability of $79,982 (October 31, 2014 - $61,562) was recorded.
Promissory Note #46
On July 9, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $33,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 9, 2015. Any principal amount not paid by the maturity date bears interest at 16% per annum. During the three months ended October 31, 2015, the Company accrued $1,331 (October 31, 2014 - $665) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $130,556 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $15 (three months ended October 31, 2014 - $0) due to the change in value of the derivative liability during the period. During the life of the promissory note, the debt discount of $33,000 was accreted to the statement of operations.
As of October 31, 2015, principal balance of $33,000 (October 31, 2014 - $33,000), accrued interest of $4,289 (October 31, 2014 - $825), and derivative liability of $65,985 (October 31, 2014 - $0) was recorded.
Promissory Note #49
On December 31, 2014 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $360,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 1, 2015. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $19,963 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On December 31, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $360,000 (October 31, 2014 - $0) and accrued interest of $40,833 (October 31, 2014 - $0) was recorded.
Promissory Note #50
On December 31, 2014 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $360,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 1, 2015. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $19,963 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On December 31, 2014, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $360,000 (October 31, 2014 - $0) and accrued interest of $40,833 (October 31, 2014 - $0) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #51
On March 24, 2015, the Company arranged a debt swap under which four Syndication Capital notes totaling $176,000 were transferred to Direct Capital Group, Inc. The promissory note is unsecured, bears interest at 8% per annum, and matures on September 24, 2015. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $5,307 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On March 24, 2015, interest expense relating to the beneficial conversion feature of this convertible note of $176,000 was recorded in the financial statements, with a corresponding increase to additional paid in capital. During the three months ended October 31, 2015, debt discount of $42,030 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $174,510 (October 31, 2014 - $0), accrued interest of $10,255 (October 31, 2014 - $0), and debt discount of $0 (October 31, 2014 - $0) was recorded.
Promissory Note #52
On April 30, 2015 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $240,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 30, 2015. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $4,839 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On April 30, 2015, interest expense relating to the beneficial conversion feature of this convertible note of $240,000 was recorded in the financial statements, with a corresponding increase to additional paid in capital. During the three months ended October 31, 2015, debt discount of $119,344 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $240,000 (October 31, 2014 - $0), accrued interest of $9,679 (October 31, 2014 - $0), and debt discount of $0 (October 31, 2014 - $0) was recorded.
Promissory Note #53
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $150,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $3,025 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $353,498 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $53,566 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $100,000 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $150,000 (October 31, 2014 - $0), accrued interest of $6,016 (October 31, 2014 - $0), and debt discount of $50,000 (October 31, 2014 - $0) was recorded.
Promissory Note #54
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $75,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $1,512 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $176,749 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $26,783 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $50,000 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $75,000 (October 31, 2014 - $0), accrued interest of $3,008 (October 31, 2014 - $0) and debt discount of $25,000 (October 31, 2014 - $0) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
Promissory Note #55
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $75,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $1,512 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $176,749 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $26,783 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $50,000 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $75,000 (October 31, 2014 - $0), accrued interest of $3,008 (October 31, 2014 - $0) and debt discount of $25,000 (October 31, 2014 - $0) was recorded.
Promissory Note #56
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $75,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $1,512 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $176,749 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $26,783 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $50,000 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $75,000 (October 31, 2014 - $0), accrued interest of $3,008 (October 31, 2014 - $0) and debt discount of $25,000 (October 31, 2014 - $0) was recorded.
Promissory Note #57
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $140,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $2,823 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $329,931 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $49,994 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $93,333 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $140,000 (October 31, 2014 - $0), accrued interest of $5,615 (October 31, 2014 - $0), and debt discount of $46,667 (October 31, 2014 - $0) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
On May 1, 2015 the Company received funding pursuant to a convertible promissory note in the amount of $140,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2015. Any principal amount not paid by the maturity date bears interest at 12% per annum. During the three months ended October 31, 2015, the Company accrued $2,823 (October 31, 2014 - $0) in interest expense.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $329,931 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the three months ended October 31, 2015, the Company recorded a gain of $49,994 (October 31, 2014 – $0) due to the change in value of the derivative liability during the period, and debt discount of $93,333 (three months ended October 31, 2014 - $0) was accreted to the statement of operations.
As of October 31, 2015, principal balance of $140,000 (October 31, 2014 - $0), accrued interest of $5,615 (October 31, 2014 - $0), and debt discount of $46,667 (October 31, 2014 - $0) was recorded.
Promissory Note #59
On July 31, 2015 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $240,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on January 1, 2016. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $4,839 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On October 31, 2015, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $240,000 (October 31, 2014 - $0) and accrued interest of $4,839 (October 31, 2014 - $0) was recorded.
Promissory Note #60
On August 10, 2015, the Company reassigned the principal amount of a Dhugald Pinchin note to Santa Rosa Resources. The original note was issued on May 31, 2013 in the sum of $57,500 and matured on November 30, 2013. The Conversion Price shall mean par $.00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.
As of October 31, 2015, principal balance of $57,500 (October 31, 2014 - $0) respectively was recorded.
Promissory Note #61
On October 31, 2015 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $240,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 1, 2016. Any principal amount not paid by the maturity date bears interest at 22% per annum. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three months ended October 31, 2015, the Company accrued $0 (October 31, 2014 - $0) in interest expense.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On October 31, 2015, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
As of October 31, 2015, principal balance of $240,000 (October 31, 2014 - $0) was recorded.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
The Company issued financial instruments in the form of convertible notes with embedded conversion features. Some of the convertible notes payable have conversion rates, which are indexed to the market value of the Company’s stock price.
During the three months ended October 31, 2015 and 2014, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of face value $1,543,607 and $42,329 respectively. During the three months ended October 31, 2015 and 2014, $0 and $93,495 respectively of convertible notes payable principal and accrued interest was converted into common stock of the Company. For the three months ended October 31, 2015 and 2014, the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes of and the carrying amount of the derivative liability related to the conversion feature of $0 and $196,658 respectively, was re-classed to additional paid in capital on the date of conversion in the statement of shareholders’ deficit. During the three months ended October 31, 2015 and 2014, the Company recognized a gain of $194,922 and $186,900 respectively, based on the change in fair value (mark-to-market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations.
These derivative liabilities have been measured in accordance with fair value measurements, as defined by ASC 820. The valuation assumptions are classified within Level 1 and Level 2 inputs. The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above.
The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above
:
|
October 31,
|
October 31,
|
|||||||
|
2015
|
2014
|
|||||||
|
Balance, beginning of period
|
$ | 322,029 | $ | 479,320 | ||||
|
Initial recognition of derivative liability
|
1,543,607 | 42,329 | ||||||
|
Conversion of derivative instruments to Common Stock
|
- | (196,658 | ) | |||||
|
Mark-to-Market adjustment to fair value
|
(194,922 | ) | (186,900 | ) | ||||
|
Balance, end of period
|
$ | 1,670,714 | $ | 138,090 | ||||
|
|
The Company is authorized to issue 20,000,000 shares of it $0.
00
001 par value preferred stock
.
On August 10, 2015, the Company’s Board of Directors authorized the creation of 1,000 shares of Series B Voting Preferred Stock. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.
On August 10, 2015, the Company filed a Certificate of Designation with the Nevada Secretary of State creating the 1,000 shares of Series B Voting Preferred Stock
On August 14, 2015, the Company issued 1,000 shares of Series B Voting Preferred Stock to Santa Rosa Resources, representing 100% of the total issued and outstanding shares of the Company’s Series B Voting Preferred Stock.
As of October 31, 2015, 19,999,000 Series A preferred shares and 1,000 Series B preferred shares of par value $0.00001 were authorized, of which 0 Series A shares were issued and outstanding, (0 shares as of October 31, 2014) and 1,000 Series B shares were issued and outstanding (0 shares as of October 31, 2014)
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
|
|
The Company is authorized to issue 7,980,000,000 shares of its $0.
00
001 par value common stock.
On October 15, 2015, the Company effectuated a 1 for 2,000 reverse stock split, thereby reducing the issued and outstanding shares of common stock from 3,472,433,130 prior to the reverse split to 1,736,217 following the reverse split. An additional 1,043 shares were issued due to no fractional shares used as a result of the reverse stock split.
As of October 31, 2015, 7,980,000,000 common shares of par value $0.00001 were authorized, of which 1,737,260 shares were issued and outstanding, (1,523,217 shares as of October 31, 2014).
Warrants and Options
As of October 31, 2015 and July 31, 2015, there were no warrants or options outstanding to acquire any additional shares of the Company’s common stock.
a) On October 26, 2009, the Company entered into a property option agreement whereby the Company was granted an option to earn up to a 50% interest in 19 mineral claims (the “KRK West” claims) located in the Thunder Bay Mining Division of Ontario. The option agreement is denominated in Canadian dollars.
Consideration for the option was the issuance of 2,000,000 common shares of the Company, cash payments totaling $103,718 (CDN$110,000), and aggregate exploration expenditures of $969,268 (CDN$1,000,000) as follows:
i) Cash payments:
* $46,640 (CDN$50,000) upon execution of the Option agreement (paid);
* $57,078(CDN$60,000) on or before December 1, 2009 (paid)
ii) Exploration expenditures of $484,768 (CDN$500,000) on or before December 31, 2010, and $969,268 (CDN$1,000,000) in aggregate on or before December 31, 2011.
In aggregate to July 31, 2011, the Company incurred exploration expenditures aggregating $32,080 (CDN$32,836) (See below regarding status of the agreement)
iii) The issuance of 2,000,000 common shares (none issued) to the shareholders of the optionor, as directed by the optionor.
Upon earning its 50% interest in the option, the Company was to enter into a joint venture agreement to develop and operate the property.
Pursuant to the agreement, if commercial production had been achieved and the Company sold or otherwise disposed of metals and minerals that had been produced and removed from the KRK West properties, the Company would pay Thunder Bay a 3% Net Smelter Return royalty.
In the event the Company sold or caused the sale of products other than to a smelter or refinery or otherwise caused the removal of products from the Property, the Company would pay a 2% Net Smelter Return Royalty. Alternatively, the Company could buy back the royalty right for $1,000,000 for each breccia pipe that reached commercial production.
The property option agreement was stated in Canadian dollars. The US dollar equivalent was converted using the foreign exchange rate at July 31, 2010 for all future commitments.
During the year ended July 31, 2010, the Company learned that the optionor had allowed the underlying claims to lapse, and therefore the option agreement was null and void.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
The Company, and a director of the Company (The Company subsequently purchased these claims from the director), purchased the claims from persons who re-staked the claims for an aggregate amount of $27,577. Subsequent to acquisition, the claims were transferred to the Company’s wholly owned subsidiary, Northern Bonanza Inc. Due to the lapse of the underlying claims the Company impaired a total of $131,295 of acquisition costs incurred as of July 31, 2010 made up of the initial $103,718 payment and the additional payment of $27,577.
The original optionor represents that control of the claims remains with the optionor and that the Company has no right to further explore the property. The Company disagrees with this assertion and accordingly, ownership to the claims is in dispute. On January 6, 2011 the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims. The hearing did not occur as the other party filed for a change of venue. A determination regarding the change of venue has not yet been made and a date for rendering the decision has not yet been established. Mediation regarding the matter was deferred until late 2011 and prior to the hearing the optionor cancelled the mediation.
In October 2011, the Company, as a result of the cancellation of the mediation hearing with William J. Wheeler regarding the Thunder Bay claims, decided the best course of action was to file suit. Accordingly, a suit was filed against Thunder Bay and Wheeler in Ontario Superior Court of Justice. In the suit we detail the breach of the Agreement by Thunder Bay and Wheeler and request:
|
|
*
|
An order transferring an application regarding mining claims pending before the Office of the Mining and Lands Commissioner to the Ontario Superior Court of Justice to be consolidated with this action;
|
|
|
*
|
A declaration regarding our ownership and Thunder Bay and Wheeler’s ownership with respect to certain mining claims; and
|
|
|
*
|
$1,200,000 in damages from Thunder Bay and Wheeler.
|
b) During the year ended July 31, 2010, the Company entered into a property purchase agreement, which was formalized on May 4, 2010, to acquire a 100% interest in 21 mining claims located in the Northern Ontario for $50,767 (Cdn$51,800). During the year ended July 31, 2010, the Company incurred an additional $17,741 in staking costs in relation to these claims. Subsequent to acquisition the claims and exploration costs were transferred to NBI at cost.
During the year ended July 31, 2010, the Company made exploration advances to the operator amounting to $47,806. As of July 31, 2010 the operator had incurred exploration expenses aggregating $20,118 resulting in net advances held being $26,968. During the year ended July 31, 2011, the Company made further advances to the operator of $7,040.
During the year ended July 31, 2011 the operator incurred exploration expenditures of $34,008 and the Company also incurred direct exploration expenditures of $47,335.
As of October 31, 2015, the operator held exploration advances amounting to $0 (2014 - $0). Due to lack of funding, the Company has no immediate plans to explore these mines to determine resources available and consequently the costs incurred of $68,599 for these mineral properties was deemed to be fully impaired as of July 31, 2011.
c) On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, (“Vulture”) a Nevada limited Liability Company. Vulture holds 27 mineral claims in Maricopa County, Arizona, known as the Vulture Mine. As consideration for the acquisition the Company issued 4,000,000 common shares with a fair value of $2,000,000.
This transaction has been recorded as an asset acquisition and the fair value paid has been allocated to the cost of acquisition of the mineral property.
Due to lack of funding, the Company has no immediate plans to explore these mines to determine resources available and consequently the costs of $2,000,000 incurred for these mineral properties is deemed to be fully impaired.
During the three months October 31, 2015, the Company incurred exploration expenditures of $0 (October 31, 2014 - $0) on the property.
d) On March 28, 2012, the Company entered into a property option agreement whereby the Company was granted an option to earn a 100% interest in 3 mineral tenures located in Northern British Columbia. The option agreement is denominated in US dollars.
Consideration for the option was the issuance of 1,000,000 common shares of the Company on March 28, 2012 valued at $80,000, (issued) and cash payment of $5,000 by April 2, 2012 (paid) and aggregate exploration expenditures of $25,000 by September 15, 2013.
As of October 31, 2015, no exploration expenditures have been incurred on the property.
Source Gold Corp.
(An Exploration Stage Company)
Notes to the Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)
The Company had no income tax expense during the reported period due to net operating losses.
A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:
|
|
||||||||
|
2015
|
2014
|
|||||||
|
Operating loss for the three months ended October 31
|
$ | (1,631,882 | ) | $ | (15,156 | ) | ||
|
Average statutory tax rate
|
34 | % | 34 | % | ||||
|
Expected income tax provisions
|
$ | (554,840 | ) | $ | (5,153 | ) | ||
|
Unrecognized tax loses
|
(554,840 | ) | (5,153 | ) | ||||
|
Income tax expense
|
$ | - | $ | - | ||||
The Company has net operating losses carried forward of approximately $20,315,987 for tax purposes which
may be recognized in future periods, not to exceed 20 years.
|
|
None.
|
|
On November 6, 2015, the Company purchased all data and rights to the “we buy gold” website from Santa Rosa Resources. The Company issued 50,000,000 shares of common stock with a value equal to par $0.00001.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
|
October 31, 2015
$
|
July 31, 2015
$
|
|||||||
|
Current Assets
|
56,034 | 63,115 | ||||||
|
Current Liabilities
|
4,356,183 | 2,971,382 | ||||||
|
Working Capital (Deficit)
|
(4,300,149 | ) | (2,908,267 | ) | ||||
Cash Flows
| Three Months Ended | ||||||||
|
October 31, 2015
$
|
October 31, 2014
$
|
|||||||
|
Cash Flows from (used in) Operating Activities
|
(246,000 | ) | (48,581 | ) | ||||
|
Cash Flows from (used in) Investing Activities
|
- | - | ||||||
|
Cash Flows from (provided by) Financing Activities
|
246,000 | 48,000 | ||||||
|
Net Increase (decrease) in Cash During Period
|
- | (581 | ) | |||||
Results for the Three Months Ended October 31, 2015 Compared to the Three Months Ended October 31, 2014
Operating Revenues
The Company’s revenues for the three months ended October 31, 2015 and October 31, 2014 were $0 and $0, respectively. We do not anticipate earning additional revenues until such time that we enter into commercial production of our claims. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources, or if such resources are discovered, that we will enter into commercial production.
Cost of Revenues
The Company’s cost of revenues for the three months ended October 31, 2015 and October 31, 2014 were $0 and $0, respectively.
Operating Expenses
Operating expenses for the three months ended October 31, 2015 and October 31, 2014 were $251,237 and $63,376, respectively. Operating expenses consisted primarily of consulting fees, management fees, legal fees and accounting and audit fees. The increase was primarily attributable to an increase in general and administrative fees for normal operations.
Other Income (Expense)
:
Other income (expense) consisted of gain on derivative valuation and interest expense. The loss or gain on derivative valuation is directly attributable to the change in fair value of the derivative liability from date of issuance during 2014 through October 31, 2015. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. Interest associated with the derivative instruments amounted to $(1,575,567) for the three months ended October 31, 2015 and $(138,680) for the three months ended October 31, 2014. There was a gain of $194,922 on derivative valuation for the three months ended October 31, 2015 and $186,900 for the three months ended October 31, 2014.
Net Loss
Net loss for the three months ended October 31, 2015 was $(1,631,882) compared with a net loss of $(15,156) for the three months ended October 31, 2014. The increased net loss is due to an increase in operating expenses and interest expenses.
Liquidity and Capital Resources
As at October 31, 2015, the Company had a cash balance and total assets of $0 and $141,034, respectively, compared with $0 and $148,115 of cash and total assets, respectively, as of July 31, 2015. The decrease in cash was due to normal operating activities and the decrease in total assets was due to the use of cash for operations.
As at October 31, 2015, the Company had total liabilities of $4,356,183 compared with $2,971,382 as of July 31, 2015. The increase in total liabilities was attributed to an increase in related party loans and new promissory notes issued.
The overall working capital deficit increased from $2,908,267 at July 31, 2015 to $4,300,149 at October 31, 2015.
Cash flows from Operating Activities
During the three months ended October 31, 2015, cash used in operating activities was $(246,000) compared to $(48,581) for the three months ended October 31, 2014. The increase in the amounts of cash used for operating activities was primarily due to the noncash expenses relating to the increase in interest on convertible notes.
Cash flows from Investing Activities
During the three months ended October 31, 2015 cash used in investing activities was $0 compared to $0 for the three months ended October 31, 2014.
Cash flows from Financing Activities
During the three months ended October 31, 2015, cash provided by financing activities was $246,000 compared to $48,000 for the three months ended October 31, 2014.
Quarterly Developments
None.
Subsequent Developments
None.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited 2015 financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company 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.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is 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 by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of April 30, 2015, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on November 12, 2014 for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
On October 26, 2009, we entered into an agreement with Thunder Bay Minerals, Inc. (the “Agreement” and “Thunder Bay”, respectively) under which we were granted an option to acquire an undivided 50% interest in 19 mineral claims known as the KRK West Claim, located north of Thunder Bay, Ontario, Canada. During the year ended July 31, 2010, we learned that Thunder Bay had allowed the KRK West Claims to lapse, and therefore the option agreement was null and void. As discussed above, we were able to re-purchase 13 of the 19 KRK West Claims from persons who re-staked the claims for an aggregate amount of $27,578. We also incurred exploration expenditures of $555 in relation to these claims. Subsequent to acquisition of the claims they were transferred to our wholly owned subsidiary, Northern Bonanza, Inc.
Thunder Bay currently maintains that control of the KRK West Claims remains with it and that we have no right to further explore the property. We disagree with this assertion and accordingly ownership to the claims is in dispute.
On January 6, 2011, the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims. The hearing did not occur as the other party filed for a change of venue and mediation regarding the matter was scheduled. Two days prior to the scheduled mediation, William J. Wheeler (“Wheeler”), the principal of Thunder Bay, cancelled the mediation.
As a result of the cancellation, we decided the best course of action was to file suit. Accordingly, we filed an action against Thunder Bay and Wheeler in Ontario Superior Court of Justice. In the suit we detail the breach of the Agreement by Thunder Bay and Wheeler and request:
|
·
|
An order transferring an application regarding mining claims to Ontario Superior Court to be consolidated with this action;
|
|
·
|
A declaration regarding our ownership and Thunder Bay and Wheeler’s ownership with respect to certain mining claims; and
|
|
·
|
$1,200,000 in damages from Thunder Bay and Wheeler.
|
The Company entered into a formal settlement agreement with a vendor to settle an amount due of Cdn$34,000 by monthly installments of Cdn$5,000 commencing May 15, 2011. As of October 31, 2015, Cdn$30,000 of the total amount due has been paid.
Other than the foregoing we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
1. Quarterly Issuances:
None.
2. Subsequent Issuances:
On November 6, 2015, pursuant to an agreement, the Company issued 50,000,000 shares of common stock to Santa Rosa Resources.
On November 10, 2015, the holder of a convertible note converted $2,500 of principal into 5,000,000 shares of common stock.
On November 16, 2015, the holder of a convertible note converted $2,000 of principal and $217 of interest into 443,310 shares of common stock.
None.
None.
On August 10, 2015, the Company reassigned the principal amount of a note with Dhugald Pinchin to Santa Rosa Resources. The note amount is in the sum of $57,500 and matured on November 30, 2013.
On October 31, 2015, the Company executed a Convertible Promissory Note with Direct Capital Group, Inc. Under the terms of the note, the Company pays the holder a total of $240,000, which accrues interest at an annual rate of 8% and has a maturity date of May 1, 2015. This note also contains customary events of default.
|
Exhibit Number
|
Description of Exhibit
|
Filing
|
|
|
3.1
|
Articles of Incorporation
|
Filed with the SEC on October 7, 2008 as part of our Registration of Securities on Form S-1.
|
|
|
3.2
|
Bylaws
|
Filed with the SEC on October 7, 2008 as part of our Registration of Securities on Form S-1.
|
|
|
3.3
|
Extension of Option Agreement.
|
Filed with the SEC on November 15, 2011, as part of our Annual Report on Form 10-K.
|
|
|
3.4
|
Resolution Increasing Management Compensation Agreement.
|
Filed with the SEC on November 15, 2011, as part of our Annual Report on Form 10-K.
|
|
|
10.1
|
Mineral Property Option Agreement, by and between the Company and Thunder Bay Minerals, Inc., dated October 26, 2009.
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Filed with the SEC on October 28, 2009, as part of our Current Report on Form 8-K.
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10.2
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Purchase Agreement between the Company and John Sadowski, President of North Star Prospecting, Inc., dated May 4, 2010.
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Filed with the SEC on May 10, 2010, as part of our Current Report on Form 8-K.
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10.3
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Purchase Agreement between the Company and Lauren Notar, dated July 30, 2010.
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Filed with the SEC on August 4, 2010, as part of our Current Report on Form 8-K.
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10.4
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Purchase Agreement between the Company and Vulture Gold, LLC, dated August 7, 2010.
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Filed with the SEC on August 12, 2010, as part of our Current Report on Form 8-K.
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10.5
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Promissory Note by and between the Company and Asher Enterprises, Inc., dated January 23, 2012.
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Filed with the SEC on March 15, 2012 as part of our Quarterly Report on Form 10-Q.
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10.6
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Promissory Note by and between the Company and Greenshoe Investments, dated March 19, 2012.
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Filed with the SEC on June 14, 2012 as part of our Quarterly Report on Form 10-Q.
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10.7
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Property Option Agreement, dated March 28, 2012.
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Filed with the SEC on June 14, 2012 as part of our Quarterly Report on Form 10-Q.
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10.8
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Promissory Note by and between the Company and Asher Enterprises, Inc., dated May 14, 2012.
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Filed with the SEC on June 14, 2012 as part of our Quarterly Report on Form 10-Q.
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10.9
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Promissory Note by and between the Company and Asher Enterprises, Inc., dated October 5, 2012
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Filed with the SEC on November 7, 2012 as part of our Annual Report on Form 10-K.
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10.10
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Promissory Note by and between the Company and Syndication Capital, LLC., dated May 1, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.11
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Employment Agreement by and between the Company and Dhugald Pinchin, dated May 15, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.12
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Promissory Note by and between the Company and Dhugald Pinchin, dated May 31, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.13
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Promissory Note by and between the Company and Syndication Capital, LLC, dated June 1, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.14
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Promissory Note by and between the Company and Dhugald Pinchin, dated June 30, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.15
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Promissory Note by and between the Company and Syndication Capital, LLC., dated July 1, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.16
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Promissory Note by and between the Company and Dhugald Pinchin, dated July 31, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.17
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Promissory Note by and between the Company and Syndication Capital, LLC., dated August 1, 2013
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.18
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Promissory Note by and between the Company and Dhugald Pinchin, dated August 31, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.19
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Promissory Note by and between the Company and Syndication Capital, LLC., dated September 1, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.20
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Promissory Note by and between the Company and Dhugald Pinchin, dated September 30, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.21
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Promissory Note by and between the Company and Syndication Capital, LLC., dated October 1, 2013.
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Filed with the SEC on December 4, 2013, as part of our Annual Report on Form 10-K.
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10.22
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Promissory Note by and between the Company and Dhugald Pinchin, dated October 31, 2013.
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Filed with the SEC on December 18, 2013 as part of our Quarterly Report on Form 10-Q.
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10.23
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Promissory Note by and between the Company and Syndication Capital, LLC, dated November 1, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.24
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Promissory Note by and between the Company and Syndication Capital, LLC, dated November 1, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.25
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Promissory Note by and between the Company and Dhugald Pinchin, dated November 30, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.26
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Promissory Note by and between the Company and Syndication Capital, LLC, dated December 1, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.27
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Promissory Note by and between the Company and Asher Enterprises Inc, dated December 13, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.28
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Promissory Note by and between the Company and Dhugald Pinchin, dated December 31, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.29
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Promissory Note by and between the Company and Syndication Capital, LLC, dated January 1, 2014
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.30
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Promissory Note by and between the Company and Dhugald Pinchin, dated January 31, 2013.
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Filed with the SEC on March 24, 2014 as part of our Quarterly Report on Form 10-Q.
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10.31
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Promissory Note by and between the Company and Syndication Capital, LLC, dated February 1, 2014
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.32
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Promissory Note by and between the Company and Dhugald Pinchin, dated February, 28, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.33
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Promissory Note, by and between the Company and Syndication Capital, LLC, date March 1, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.34
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Promissory Note, by and between the Company and LG Capital Funding, LLC, dated March 17, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.35
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Promissory Note, by and between the Company and LG Capital Funding, LLC, dated March 17, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.36
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Promissory Note, by and between the Company and Gel Properties, LLC, dated March 26, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.37
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Promissory Note by and between the Company and Dhugald Pinchin, dated March 31, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.38
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Promissory Note by and between the Company and Syndication Capital, LLC, dated April 1, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.39
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Promissory Note by and between the Company and Dhugald Pinchin, dated April 30, 2014.
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Filed with the SEC on June 16, 2014, as part of our Quarterly Report on Form 10Q.
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10.40
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Promissory Note by and between the Company and Syndication Capital, LLC, dated May 1, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.41
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Promissory Note, by and between the Company and Gel Properties, LLC, dated May 19, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.42
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Promissory Note by and between the Company and Adar Bays, LLC, dated May 19, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.43
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Promissory Note by and between the Company and Syndication Capital, LLC, dated June 1, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.44
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Promissory Note, by and between the Company and Union Capital, LLC, dated June 6, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.45
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Promissory Note by and between the Company and Union Capital, LLC, dated June 6, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.46
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Promissory Note by and between the Company and Union Capital, LLC, dated July 2, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.47
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Promissory Note by and between the Company and Union Capital, LLC, dated July 2, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.48
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Promissory Note, by and between the Company and LG Capital Funding, LLC, dated July 9, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.49
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Promissory Note by and between the Company and LG Capital Funding, LLC, dated July 9, 2014.
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Filed with the SEC on November 12, 2014, as part of our Annual Report on Form 10-K.
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10.50
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Promissory Note by and between the Company and Syndication Capital, LLC, dated September 1, 2014.
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Filed with the SEC on December 15, 2014, as part of our Quarterly Report on Form 10Q.
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10.51
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Promissory Note by and between the Company and Syndication Capital, LLC, dated December 1, 2014.
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Filed with the SEC on March 16, 2015, as part of our Quarterly Report on Form 10Q.
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10.52
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated December 31, 2014.
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Filed with the SEC on March 16, 2015, as part of our Quarterly Report on Form 10Q.
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10.53
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated December 31, 2014.
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Filed with the SEC on March 16, 2015, as part of our Quarterly Report on Form 10Q.
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10.54
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated March 24, 2015.
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Filed with the SEC on June 15, 2015, as part of our Quarterly Report on Form 10Q.
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10.55
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated April 30, 2015.
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Filed with the SEC on June 15, 2015, as part of our Quarterly Report on Form 10Q.
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10.56
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Promissory Note by and between the Company and Rider Capital Corp. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.57
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Promissory Note by and between the Company and Rider Capital Corp. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.58
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Promissory Note by and between the Company and Rider Capital Corp. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.59
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Promissory Note by and between the Company and Rider Capital Corp. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.60
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Promissory Note by and between the Company and Rider Capital Corp. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.61
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Promissory Note by and between the Company and Xploration, Inc. dated May 1, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.62
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated July 31, 2015.
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Filed with the SEC on November 13, 2015, as part of our Annual Report on Form 10-K.
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10.63
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Promissory Note by and between the Company and Direct Capital Group, Inc. dated October 31, 2015.
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Filed herewith.
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31.1
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Certification of Principal Executive Officer Pursuant to Rule 13a-14
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Filed herewith.
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31.2
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Certification of Principal Financial Officer Pursuant to Rule 13a-14
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Filed herewith.
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32
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Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act
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Filed herewith
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101.INS*
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XBRL Instance Document
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Filed herewith
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101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
Filed herewith
|
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101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith
|
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101.LAB*
|
XBRL Taxonomy Extension Labels Linkbase Document
|
Filed herewith
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101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith
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101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
SOURCE GOLD CORP.
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||
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Dated: December 9, 2015
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/s/ Edward Aruda
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Edward Aruda
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||
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Its: President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
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TABLE OF CONTENTS
Part I - FinancialItem 1. Financial StatementsNote 1 Basis Of PresentationNote 2 Nature Of Operations and Going ConcernNote 3 Summary Of Significant Accounting PoliciesNote 4 Computer EquipmentNote 5 Financial InstrumentsNote 6 Related Party TransactionsNote 7 Convertible Notes PayableNote 8 Derivative LiabilitiesNote 9 Preferred StockNote 10 Common StockNote 11 Mineral PropertiesNote 12 Income TaxesNote 13 CommitmentsNote 14 Subsequent EventsItem 2. Management's Discussion and Analysis Of Financial Condition Or Plan Of OperationItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits