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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from______________ to _______________

Commission File Number: 000-54533

CANWEALTH MINERALS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
27-2288541
(I.R.S. Employer Identification No.)
 
1376 Perrot Boulevard, Ile Perrot, Quebec, Canada J7V 7P2
 (Address of principal executive offices)
 
(514) 425-2020
(Issuer's telephone number)
 
USG1, Inc.
1126 Madison 9517, Fredericktown, Missouri 63645
(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) 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 x  No ¨

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.

Large accelerated filer
¨
 
Accelerated filer ¨
Non-accelerated filer
¨
 
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the Issuer's common stock as of November 14, 2013, was 50,769,231.



 
 

 
 
CANWEALTH MINERALS CORPORATION

TABLE OF CONTENTS
     
 
Page No.
PART I – FINANCIAL INFORMATION
     
Item 1.
Financial Statements.
 
     
 
Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited)
and December 31, 2012
1
     
 
Unaudited Condensed Consolidated Statements of Operations and Comprehensive
Loss for the Three and Nine Months Ended September 30, 2013 and 2012 and for
the period from February 1, 2006 (date of inception) through September 30, 2013
2
     
 
Unaudited Condensed Consolidated Statements of Changes in Stockholders’
Deficit for the period from February 1, 2006 (date of inception) through September 30, 2013
4
     
 
Unaudited Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2013 and 2012 and for the period from
February 1, 2006 (date of inception) through September 30, 2013
5
     
 
Notes to Unaudited Condensed Consolidated Financial Statements
7
     
Item 2.
Management's Discussion and Analysis of Financial Condition
 and Results of Operations
14
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
17
     
Item 4.
Controls and Procedures
17
     
PART II – OTHER INFORMATION
     
Item 1.
Legal Proceedings
18
     
Item 1A.
Risk Factors
18
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
18
     
Item 3.
Defaults Upon Senior Securities
18
     
Item 4.
Mine Safety Disclosures
18
     
Item 5.
Other Information
18
     
Item 6.
Exhibits
18
     
Signatures
   
 
 
 

 
 
Item 1.   Financial Statements
 
 CANWEALTH MINERALS CORPORATION
 (An Exploratory Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
September 30,
 2013
 
December 31,
2012
   
(unaudited)
     
ASSETS
         
Current assets:
         
Cash and cash equivalent
  $ 4,207     $ 424  
Other current assets
    -       3,601  
Total current assets
    4,207       4,025  
                 
Property and equipment
    46,644       51,960  
                 
Other assets:
               
Intangible assets
    23,688       13,138  
Total other assets
    23,688       13,138  
                 
Total assets
  $ 74,539     $ 69,123  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 201,985     $ 165,712  
Convertible note payable
    19,396       20,102  
Loans from non-related parties
    39,722       -  
Loans from related parties
    67,672       80,474  
Total current liabilities
    328,775       266,288  
                 
Commitments and contingencies
    -       -  
                 
Stockholders' deficit:
               
Preferred stock; $0.0001 par value, 20,000,000 shares authorized,
none issued and outstanding as of September 30, 2013 and
December 31, 2012
    -       -  
Common stock; $0.0001 par value, 100,000,000 shares authorized
               
50,769,231  and 44,169,231 shares issued and outstanding as of
September 30, 2013 and December 31, 2012, respectively
    5,077       4,417  
Additional paid in capital
    6,041       -  
Other comprehensive income (loss)
    5,788       (795 )
Deficit accumulated during the exploratory stage                 
    (271,142 )     (200,787 )
Total stockholders' deficit
    (254,236 )     (197,165 )
                 
Total liabilities and stockholders' deficit
  $ 74,539     $ 69,123  

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements
 
 
1

 
 
CANWEALTH MINERALS CORPORATION
 (An Exploratory Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

   
For the nine months
ended
September 30, 2013
   
For the nine months
ended
September 30, 2012
   
For the period
February 1, 2006
(date of inception)
through
September 30, 2013
 
Revenue
  $
-
    $
-
    $
-
 
                   
OPERATING EXPENSES:
                 
Selling, general and administrative
   
60,547
     
27,248
     
252,742
 
Total operating expenses
   
60,547
     
27,248
     
252,742
 
Loss from operations
   
(60,547)
     
(27,248)
     
(252,742)
 
OTHER INCOME (EXPENSE):
                       
Interest (expense) income
   
(628)
     
(57)
     
(4,904)
 
                         
Loss before provision for income taxes
   
(61,175)
     
(27,305)
     
(257,646)
 
Provision for income taxes :
                       
Current
   
-
     
-
     
-
 
Deferred
   
-
     
-
     
-
 
Total income taxes
   
-
     
-
     
-
 
                         
NET LOSS
 
$
(61,175)
   
$
(27,305)
   
$
(257,646)
 
Loss per common share, basic and
diluted
 
$
(0.00)
   
$
(0.00)
         
                         
Weighted average shares, basic and
diluted
   
50,769,231
     
44,169,231
         
                         
Comprehensive loss:
                       
Net loss
   
(61,175)
     
(27,305)
     
(257,646)
 
Cumulative translation gain (loss)
   
6,583
     
(2,216)
     
5,788
 
                         
Comprehensive loss
 
$
(54,592)
   
$
(29,521)
   
$
(251,858)
 
 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements

 
2

 

CANWEALTH MINERALS CORPORATION
 (An Exploratory Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
 
   
For the three months
ended
September 30, 2013
   
For the three months
ended
September 30, 2012
 
Revenue
  $ -     $ -  
                 
OPERATING EXPENSES:
               
Selling, general and administrative
    20,499       26,801  
Total operating expenses
    20,499       26,801  
Loss from operations
    (20,499 )     (26,801 )
OTHER INCOME (EXPENSE):
               
Interest (expense) income
    (30 )     (18 )
                 
Loss before provision for income taxes
    (20,529 )     (26,819 )
Provision for income taxes :
               
Current
    -       -  
Deferred
    -       -  
Total income taxes
    -       -  
                 
NET LOSS
  $ (20,529 )   $ (26,819 )
Loss per common share, basic and
diluted
  $ (0.00 )   $ (0.00 )
                 
Weighted average shares, basic and
diluted
    50,769,231       44,169,231  
                 
Comprehensive loss:
               
Net loss
    (20,529 )     (26,819 )
Cumulative translation gain (loss)
    (1,109 )     4  
                 
Comprehensive loss
  $ (21,638 )   $ (26,815 )
 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements

 
3

 

CANWEALTH MINERALS CORPORATION
(An Exploratory Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
DEFICIT
For the Period February 1, 2006 (date of inception) through September 30, 2013
 
   
 
Common Stock
               
(Deficit)
Accumulated
During
Exploratory Stage
       
   
 
Shares
   
Amount
   
Additional
paid in capital
   
Other
comprehensive
income
         
Total
 
Balance at date of inception,
February 1, 2006
    -     $ -     $ -     $ -     $ -     $ -  
Issuance of shares for seed
capital
    44,169,231       4,417       -       -       (4,317 )     100  
Cumulative translation gain
    -       -       -       25       -       25  
Net loss
    -       -       -       -       (262 )     (262 )
Balance, December 31, 2009
    44,169,231       4,417       -       25       (4,579 )     (137 )
Cumulative translation gain
    -       -       -       209       -       209  
Net loss for the year ended
December 31, 2010
    -       -       -       -       (8,527 )     (8,527 )
Balance, December 31, 2010
    44,169,231       4,417       -       234       (13,106 )     (8,455 )
Cumulative translation gain
    -       -       -       295       -       295  
Net loss for the year ended
December 31, 2011
    -       -       -       -       (18,620 )     (18,620 )
Balance, December 31, 2011
    44,169,231       4,417       -       529       (31,726 )     (26,780 )
Cumulative translation loss
    -       -       -       (1,324 )     -       (1,324 )
Net loss
    -       -               -       (169,061 )     (169,061 )
Balance, December 31, 2012
    44,169,231       4,417       -       (795 )     (200,787 )     (197,165 )
Effect of reverse acquisition,
February 11, 2013
    6,600,000       660       -       -       (9,180 )     (8,520 )
Capital contribution
    -       -       6,041       -       -       6,041  
Foreign currency translation
gain
    -       -       -       6,583       -       6,583  
Net loss for nine months ended
September 2013
    -       -       -       -       (61,175 )     (61,175 )
                                                 
Balance September 30, 2013
    50,769,231     $ 5,077     $ 6,041     $ 5,788     $ (271,142 )   $ (254,236 )
 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements
 
 
4

 

CANWEALTH MINERALS CORPORATION
(An Exploratory Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
For the nine months
ended
September 30, 2013
   
For the nine months
September 30, 2012
   
For the period
February 1, 2006
(date of inception)
through
September 30, 2013
 
CASH FLOWS FROM OPERATING ACTIVITIES :
                 
Net loss
  $ (61,175 )   $ (27,305 )   $ (257,646 )
Adjustments to reconcile net loss to net cash used in
operating activities:
                       
Operating expenses incurred by related parties on
behalf of the Company
    -       3,292       28,056  
Changes in operating assets and liabilities:
                       
Other current assets
    3,601       (224 )     -  
Accounts payable and accrued liabilities
    27,672       26,397       193,384  
                         
Net cash (used in) provided by operating activities
    (29,902 )     2,160       (36,206 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
    -       -       -  
CASH FLOWS FROM FINANCING ACTIVITES:
                       
Cash acquired on acquisition
 
    82       -       82  
Proceeds from issuance of convertible note payable
    -       -       20,102  
(Repayment of) proceeds from related party loans
    (18,018 )     -       (29,571 )
Proceeds from advances from others
    39,722       -       39,722  
Capital contribution
    6,041       -       6,142  
Net cash provided by financing activities
    27,827       -       36,477  
                         
Effect of foreign exchange gain (loss)
    5,858       (2,216 )     3,936  
                         
Net increase (decrease) in cash and cash equivalents
    3,783       (56 )     4,207  
                         
Cash and cash equivalents at beginning of period
    424       57       -  
                         
Cash and cash equivalents at end of period
  $ 4,207     $ 1     $ 4,207  
                         
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
                       
Cash paid during the period for interest
  $ -     $ -     $ -  
Cash paid during the period for income taxes
  $ -     $ -     $ -  
 
 
5

 
 
   
For the nine months
ended
September 30, 2013
   
For the nine months
September 30, 2012
   
For the period
February 1, 2006
(date of inception)
through
September 30, 2013
 
NON CASH INVESTING AND FINANCING
ACTIVITIES:
                 
Property and equipment purchased through loans from
related Parties
  $ -     $ 522     $ 50,833  
Intangible assets purchased through loans from related
parties and others
  $ 10,550     $ 770     $ 23,688  
Recapitalization effect on reverse acquisition
  $ 9,180     $ -     $ 13,497  
Sale of property and equipment to related party
  $ 5,334     $ -     $ 5,334  

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements .
 

 
 
 
 
 
6

 
 
CANWEALTH MINERALS CORPORATION
(An Exploratory Stage Company)
Notes to Interim Unaudited Condensed Consolidated Financial Statements
September 30, 2013
 
 
NOTE 1 - NATURE OF OPERATIONS
 
Canwealth Minerals Corporation (the “Company”) was organized on February 1, 2006 under the laws of the Canada Business Corporations Act.
 
Canwealth’s mission is to explore and develop the mining claims it has registered in various areas of Northern Quebec, which based on assay reports of preliminary surface samples taken from these sites, has shown to contain traces of various elements such as gold, silver, copper, rare earth elements and other such minerals.
 
The Company, when presented with the opportunity to do so, will seek to register additional land claims in other regions of Quebec, however it is not limited to only that region of North America, or any other area where opportunities may present themselves.  Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties.
  
The Company’s fiscal year end is December 31.
 
The Company is in the exploratory stage as defined by Accounting Standards Codification subtopic 915-10  Development Stage Entities  (“ASC 915-10”) with its efforts principally devoted to developing a platform of prime quality energy assets. To date, the Company has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception through September 30, 2013, the Company has accumulated deficit during exploratory stage of $254,236. The Company also owns, as of September 30, 2013, mining equipment with an associated cost of $46,644 and mining claims at a cost of $23,688.
 
NOTE 2 - MERGER AND RECAPITALIZATION
 
On August 10, 2012, USG1, Inc., a Delaware corporation (“USG1”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Canwealth Minerals Corporation, a Delaware corporation (“Canwealth Delaware”), and Kimi Royer as representative of the USG1 stockholders, pursuant to which Canwealth Delaware agreed to merge with and into USG1 at the closing.  The merger contemplated by the Merger Agreement was consummated on February 11, 2013. Upon the closing, the existing shares of Canwealth Delaware common stock were converted into 44,169,231 shares of USG1 common stock, representing 87% of the issued and outstanding shares of USG1 common stock immediately following the effective date. The existing USG1 stockholders continued to hold 6,600,000 shares of USG1 common stock, representing 13% of the issued and outstanding shares of USG1 common stock immediately following the effective date. As consideration for the merger, Canwealth Delaware shall pay the stockholder representative of USG1 an aggregate of Fifty Thousand Dollars ($50,000) (the "Merger Consideration"), who shall be solely responsible to distribute such Merger Consideration among the non-dissenting stockholders of USG1 on a pro rata basis relative to the number of shares of USGI Stock held by each such non-dissenting stockholder prior to the merger. The Merger Consideration shall be paid by Canwealth Delaware as follows:

(A)   Ten Thousand Dollars ($10,000) shall be payable upon a Registration Statement on Form S-1 filed by the surviving company of the merger being declared effective by the Securities and Exchange Commission; and

(B)   Forty Thousand Dollars ($40,000) shall be payable upon (i) the filing of a Form 15c2-11 by the surviving company of the merger and (ii) the shares of the surviving company stock being actively traded on a stock exchange or quotation service.

Prior to the merger, the stockholders of Canwealth Minerals Corporation, a company organized on February 1, 2006 under the laws of the Canada Business Corporations Act (“Canwealth Quebec”), contributed their shares of Canwealth Quebec to Canwealth Delaware in exchange for shares of Canwealth Delaware common stock. As a result of the foregoing, Canwealth Quebec is a wholly-owned subsidiary of Canwealth Delaware. Following the merger, USG1 succeeded to the mining business and operations of Canwealth Quebec.
 
 
7

 

Prior to the merger, there were no material relationships between USG1 and Canwealth Delaware or Canwealth Quebec or between Company’s respective affiliates, directors or officers. All USG1 pre-merger liabilities were settled prior to closing. Upon the effectiveness of the merger, the existing directors and officers of USG1 each resigned and Garth McIntosh was elected as the sole officer and director of USG1.

Contemporaneously with the merger, the corporate name “USG1, Inc.” was changed to “Canwealth Minerals Corporation”. As a result of the merger, Canwealth Quebec became a wholly-owned subsidiary of Canwealth Minerals Corporation (Delaware) and, accordingly, USG1 succeeded to the mining business and operations of the Canwealth entities.

Subsequent to the merger agreement, the members of Canwealth Delaware owned 50,769,231 (87%) of shares of USG1 common stock, effectively obtaining operational and management control of USG1. USG1 was a publicly registered corporation with no significant operations prior to the merger. For accounting purposes, Canwealth Delaware was the surviving entity of the merger. The merger was accounted for using the purchase method of accounting. As a result of the recapitalization and change in control, Canwealth Delaware was the acquiring entity in accordance with ASC 805, Business Combinations. The accumulated losses of Canwealth Delaware were carried forward after the completion of the Merger. Operations prior to the Merger were those of Canwealth Delaware.

Due to a conflict of interest, on November 24, 2012, one of the shareholders and directors of the Corporation sold his 20% interest back to the Corporation for $20 and he resigned from his position on the Board of Directors, all in accordance with agreements signed by all shareholders and directors of the Company. The remaining shareholders and directors approved the transaction on behalf of the Company. These 20 shares were re-issued to the remaining shareholders in accordance with their respective percentage interests in the Company.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies applied in the presentation of financial statements are as follows:
 
Revenue Recognition
 
The Company will recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. There was no effect of implementing 605-25 on the Company's financial position and results of operations.
 
Use of Estimates
 
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States 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 amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.

Cash and Cash Equivalent
 
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At September 30, 2013 cash consists of a checking account.
 
 
8

 
 
Mine Exploration and Development Costs
 
The Company accounts for mine exploration costs in accordance with Accounting Standards Codification 932,  Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. From February 1, 2006 (date of inception) through September 30, 2013, the Company had not incurred any mine development costs.
 
Mine Properties
 
The Company accounts for mine properties in accordance with Accounting Standard Codification 930, Extractive Activities-Mining . Costs of acquiring mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of value and any diminution in value. There were five mineral properties as of September 30, 2013 presented as intangible assets of $23,688. Many of the Company’s claims on mineral properties lapsed, resulting from the Company’s inability to perform the requisite exploration work within the initial two-year term due to a lack of sufficient funding. The Company elected not to re-acquire many of these mining claims because the land underlying certain claims on mineral properties was designated for other uses by the Quebec government which prohibited or significantly restricted mining activities, or because the Company otherwise believed that exploration of such property would not be desirable. Although the Company re-acquired many of the lapsed mining claims, the number of mineral properties was reduced from nine to five properties as of September 30, 2013.
 
 Income Taxes
 
The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as deferred officers’ compensation and stock compensation accounting versus tax differences.
 
Net Loss Per Share, basic and diluted
 
The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10) specifying the computation, presentation and disclosure requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. There were no diluted shares as of September 30, 2013 and 2012.
 
Derivative Instruments
 
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815,  Derivatives and Hedging (“ASC 815”),  which     establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
 
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
 
 
9

 
 
At September 30, 2013 and December 31, 2012, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.
 
Fair Value of Financial Instruments
 
The Company's financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2013.
 
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions
 
The Company does not have any assets or liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the year ended September 30, 2013 and December 31, 2012.
 
Foreign Currency Translation and Comprehensive Income (Loss)

The functional currency of Canwealth is the Canadian Dollar (“CAD”). For financial reporting purposes, CAD were translated into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.

Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in the results of operations. There has been no significant fluctuation in the exchange rate for the conversion of CAD to USD after the balance sheet date.
 
The Company uses Accounting Standard Codification 220 “Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the three and nine months ended September 30, 2013 and 2012 and for the period February 1, 2006 (date of inception) through September 30, 2013 consisted of net income and foreign currency translation adjustments.
 
The exchange rates used to translate amounts in CAD into USD for the purposes of preparing the financial statements were as follows:
 
 
 
Sept 30, 2013
 
December 31,
2012
   
Sept 30, 2012
 
Period-end CAD: USD exchange rate
  $ 0.9698     $ 1.0051     $ 0.9996  
Average Period CAD: USD exchange rate
  $ 0.9971     $ 1.0040     $ 0.9783  
 
 
10

 

Stock Based Compensation
 
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.
 
As of September 30, 2013 and December 31, 2012, the Company did not have any issued or outstanding stock options.
 
Concentration and Credit Risk
 
The Company’s principal operations are all carried out in Canada. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in Canada, and by the general state of Canadian economy.  The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
 
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
 
Research and Development
 
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company did not incur any research and development expenses from February 1, 2006 (date of inception) through September  30, 2013.
 
Reliance on Key Personnel and Consultants
 
The Company employs one executive officer, Garth McIntosh. The Company is heavily dependent on the continued active participation of Mr. McIntosh and key consultants. The loss of Mr. McIntosh or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.
 
Reclassification
 
Certain reclassifications have been made to prior periods’ data to conform to the current period’s presentation. These reclassifications had no impacts on the reported net loss.

Impact of New Accounting Standards
 
The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its unaudited condensed consolidated financial statements.
 
NOTE 4 - GOING CONCERN MATTERS

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of September 30, 2013, the Company has a deficit accumulated during exploration stage of $271,142 and has incurred significant operating losses and negative cash flows. For the nine months ended September 30, 2013, the Company sustained a net loss of $61,175 compared to a net loss of $27,305 for the nine months ended September 30, 2012. The Company will need additional financing which may take the form of equity or debt and the Company has converted certain liabilities into equity. In the event the Company are not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and its ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
 
11

 

The Company is seeking to raise capital through its initial public offering and through other potential financings and business opportunities. The Company’s goal is to raise the initial funding of approximately $15,000,000 to enable it to fund its operations for the next twelve months and beyond. These operations will be to engage a team of mining specialists and geologists, further develop the mining claims that the Company already owns, and to perform additional tests on existing claims to determine an overall strategy or mining plan. The amount of money raised will determine how long the Company will continue as a going concern.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2013 and December 31, 2012 are as follows:
 
             
   
September 30, 2013
   
December 31, 2012
 
Mining machinery and
equipment
  $ 46,644     $ 51,960  
Total
  $ 46,644     $ 51,960  

No depreciation has been charged for the nine months ended September 30, 2013 and 2012, since the Company is in assembly and testing mode, not in operations.

The above assets has been transferred from ICBS Ltd, a related party (refer note 7).

During the three and nine months ended September 30, 2013, the Company sold assets of $5,334 to ICBS Ltd (refer note 7).
   
NOTE 6 - CAPITAL STOCK

Preferred Stock

The Company is authorized to issue 20,000,000 shares of preferred stock, par value of $0.0001.

As of September 30, 2013 and December 31, 2012, no preferred stock was issued and outstanding.

Common Stock

The Company is authorized to issue 100,000,000 shares of common stock with par value of $0.0001 per share.
 
As noted earlier, on February 11, 2013, the Company consummated the transactions contemplated by the Merger Agreement that resulted in a reverse merger and a change in control of the Company. The shares of the Company outstanding prior to the closing of the merger are treated as having been issued as of that date, whereas the shares issued in connection with the merger are treated as having been issued since inception for all periods presented.

All reference to common stock shares and per share amounts have been retroactively restated to effect the reverse merger as if the transaction had taken place as of the beginning of the earliest period presented.

Prior to the merger, USG1 had 6,600,000 shares of common stock issued and outstanding.

During the nine months ended September 30, 2013, the Company received a capital contribution of $6,041.

In February 2013, in connection with the reverse merger transaction, the Company issued an aggregate of 44,169,231 shares of its common stock in exchange for existing shares of Canwealth Delaware.

As of September 30, 2013 and December 31, 2012, there were 50,769,231 and 44,169,231 shares of common stock issued and outstanding, respectively.
 
 
12

 
 
NOTE 7 - RELATED PARTY TRANSACTIONS
 
Mr. Garth McIntosh, the Company’s Chairman of the Board, Chief Executive Officer and President, is also a majority shareholder of ICBS Ltd. which is the largest shareholder of Canwealth Minerals Corporation. As of September 30, 2013 and December 31, 2012, the Company has taken loans from shareholders of $67,672 and $80,474, respectively. No formal repayment terms or arrangements existed. The above loans are non-interest bearing and payable on demand.
 
ICBS Ltd. gave a loan to the Company and also transferred assets worth $46,644 (net of sale to ICBS Ltd. of $5,334 during the nine months ended September 30, 2013) as of September 30, 2013. As of September 30, 2013, the Company acquired intangible assets of $23,688 through loans from related parties.
 
NOTE 8 – CONVERTIBLE NOTE PAYABLE

On October 20, 2012, the Company received a CAD20,000 (US$20,102) loan from a non-affiliate which was evidenced by a convertible promissory note due on January 20, 2013 (on May 11, 2013, the maturity date was extended to December 31, 2013).  This promissory note bears interest at a rate of 20% per annum and is immediately convertible into 100,000 shares of common stock of the Company.

As of September 30, 2013 and December 31, 2012, the principal balance of the convertible promissory note was $19,396 and $20,102, respectively, and accrued interest was $4,000 and $4,000, respectively.

NOTE 9- LOAN FROM NON-RELATED PARTIES

During the nine months ended September 30, 2013, the Company received advances from a non-affiliate of $42,127. As of September 30, 2013, the outstanding balance of such advances was $39,722. The above advances are non-interest bearing and payable on December 31, 2013.

NOTE 10 – NOTE FROM AGENT OF THE COMPANY

On August 26, 2013, the Company issued a promissory note in the principal amount of CAD14,000 to an agent of the Company as consideration for the re-acquisition by the Company of 140 mining claims which previously lapsed.  The promissory note is non-interest bearing and has a maturity date of August 26, 2014.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Operating lease
 
The Company does not currently lease facilities.
 
Litigation
 
The Company may be subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. The Company had no pending legal proceedings or claims other than described above as of September 30, 2013.

NOTE 12 – SUBSEQUENT EVENTS

On November 1, 2013, the Company issued a promissory note in the principal amount of CAD2,200 to an agent of the Company as consideration for the transfer of 22 mining claims to the Company.  The promissory note is non-interest bearing and has a maturity date of November 1, 2014.

 
13

 

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview and History

Canwealth Minerals Corporation (“Canwealth Quebec”) was organized on February 1, 2006 under the laws of the Canada Business Corporations Act.  Canwealth Quebec’s mission is to develop the mining concessions it has registered in various areas of Northern Quebec, which based on assay reports of preliminary samples taken from these sites, has shown to contain traces of various elements such as gold, silver, copper, rare earth and other such minerals.  

Prior to the consummation of the merger described in the following paragraph, the stockholders of Canwealth Quebec contributed their shares of Canwealth Quebec to Canwealth Minerals Corporation, a Delaware corporation (“Canwealth Delaware”), in exchange for shares of Canwealth Delaware common stock.

On August 10, 2012, USG1, Inc., the Company’s predecessor, entered into an Agreement and Plan of Merger with Canwealth Delaware and Kimi Royer as representative of the USG1 stockholders, pursuant to which Canwealth Delaware would merge with and into USG1.  The closing of the merger as contemplated by the Agreement and Plan of Merger occurred on February 11, 2013. At the closing, the existing shares of Canwealth Delaware common stock converted into 44,169,231 shares of USG1 common stock, representing 87% of the issued and outstanding shares of USG1 common stock immediately following the effective date and the existing USG1 stockholders continued to hold 6,600,000 shares of USG1 common stock, representing 13% of the issued and outstanding shares of USG1 common stock immediately following the effective date and effectively obtaining operational and management control of USG1.

Contemporaneously with the merger, the corporate name “USG1, Inc.” was changed to “Canwealth Minerals Corporation”.  As a result of the merger, Canwealth Quebec became a wholly-owned subsidiary of Canwealth Minerals Corporation (Delaware) and, accordingly, USG1 succeeded to the mining business and operations of the Canwealth entities.  
 
 
14

 

Results of Operations

Comparison of Results of Operations for the nine months ended September 30, 2013 and 2012

We reported a net loss of $61,175 during the nine months ended September 30, 2013 and a net loss of $27,305 during the nine months ended September 30, 2012.

General and administrative expenses were $60,547 for the nine months ended September 30, 2013. General and administrative expenses for the nine months ended September 30, 2012 were $27,248. During the nine month period ended September 30, 2013, Canwealth Minerals Corporation completed the merger with USG1, and as a result, incurred legal and professional fees. The $48,434 of operating expenses was primarily due to legal and accounting fees. In the prior year, there were very little transactions that occurred during the same nine month period ended September 30, 2012.

The following chart summarizes operating expenses and other income and expenses for the nine months ended September 30, 2013 and 2012:
 
   
For the nine
months
 ended
 September 30,
2013
   
For the nine
months
 ended
 September 30,
2012
 
Revenue
  $ -     $ -  
OPERATING EXPENSES:
               
Selling, general and administrative
    60,547       27,248  
Total operating expenses
    60,547       27,248  
                 
Loss from operations
    (60,547     (27,248
                 
OTHER INCOME (EXPENSE):
               
Interest (expense) income
    (628     (57
                 
Loss before provision for income taxes
    (61,175     (27,305
Provision for income taxes :
               
Current
    -       -  
Deferred
    -       -  
Total income taxes
    -       -  
                 
NET LOSS
  $ (61,175 )   $ (27,305 )
Cumulative translation gain (loss)
    6,583       (2,216
                 
Comprehensive loss
  $ (54,592 )   $ (29,521 )

 
15

 

Comparison of Results of Operations for the three months ended September 30, 2013 and 2012

We reported a net loss of $20,529 during the three months ended September 30, 2013 and a net loss of $26,819 during the three months ended September 30, 2012.

General and administrative expenses were $20,499 for the three months ended September 30, 2013. General and administrative expenses for the three months ended September 30, 2012 were $26,801.

The following chart summarizes operating expenses and other income and expenses for the three months ended September 30, 2013 and 2012:
 
   
For the three
months
 ended
 September 30,
2013
   
For the three
months
 ended
 September 30,
2012
 
Revenue
  $ -     $ -  
OPERATING EXPENSES:
               
Selling, general and administrative
    20,499       26,801  
Total operating expenses
    20,499       26,801  
                 
Loss from operations
    (20,499     (26,801
                 
OTHER INCOME (EXPENSE):
               
Interest (expense) income
    (30     (18
                 
Loss before provision for income taxes
    (20,529     (26,819
Provision for income taxes :
               
Current
    -       -  
Deferred
    -       -  
Total income taxes
    -       -  
                 
NET LOSS
  $ (20,529 )   $ (26,819 )
Cumulative translation gain (loss)
    (1,109     4  
                 
Comprehensive loss
  $ (21,638 )   $ (26,815 )


Liquidity and Capital Resources

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of September 30, 2013, the Company had a deficit accumulated during exploration stage of $254,236 and has incurred significant operating losses and negative cash flows. For the nine months ended September 30, 2013, the Company sustained a net loss of $61,175 compared to a net loss of $27,305 for the nine months ended September 30, 2012.

We have not yet recognized revenues from our operations. The Company will need additional financing which may take the form of equity or debt. In the event the Company is not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the company be unable to continue in existence.
 
 
16

 
 
Off-Balance Sheet Arrangements

There are no 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 is material to investors.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Current Report on Form 8-K filing with the Securities and Exchange Commission on February 15, 2013. In preparing our financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate these estimates and judgments. Our estimates are based on historical experience and on future expectations that we believe are reasonable. Actual results are likely to differ from our current estimates, and those differences may be material.


Item 3.   Quantitative and Qualitative Disclosures about Market Risk
 
We are a smaller reporting company and we are not required to provide the information under this item pursuant to Regulation S-K.
 
 
Item 4.   Controls and Procedures

Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules.  This evaluation was done as of the end of the fiscal year under the supervision and with the participation of the Company's principal executive officer (who is also the principal financial officer).  There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation.  Based upon that evaluation, the Management believes that the Company's disclosure controls and procedures are not effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized and processed timely.  The principal executive officer is directly involved in the day-to-day operations of the Company.

Management's Report of Internal Control over Financial Reporting

The Company is responsible for establishing and maintaining adequate internal control over financial reporting in accordance with the Rule 13a-15 of the Securities Exchange Act of 1934. The Company's sole officer, its president, conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of September 30, 2013, based on the criteria establish in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that the Company's internal control over financial reporting was not effective as of September 30, 2013, based on those criteria.  A control system can provide only reasonably, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal controls over financial reporting during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 
17

 

PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Item 1A.   Risk Factors

We are a smaller reporting company and we are not required to provide the information under this item pursuant to Regulation S-K.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.   Defaults Upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

Not applicable.

Item 5.   Other Information

None

Item 6.   Exhibits

The following exhibits are furnished with this report:

Exhibit No.
Description
   
*31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
*31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
*32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

 
18

 
Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
    Canwealth Minerals Corporation  
       
 
By:
/s/ Garth McIntosh  
      Garth McIntosh  
      Chief Executive Officer  
       
  Date:   November 19, 2013  
 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
 
 
By:
/s/ Garth McIntosh  
      Garth McIntosh  
      Chief Executive Officer  
 
 
By:
/s/ Garth McIntosh  
      Garth McIntosh  
   
  Chief Financial Officer
 
       
  Date:   November 19, 2013  
 
 
 
 
 
 19