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 June 30, 2014

 

[ ]

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. EmployerIdentification 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 August 14, 2014, was 50,769,231. 

 

CANWEALTH MINERALS CORPORATION

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	1
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended June 30, 2014 and 2013and for the period from February 1, 2006 (date of inception) through June 30, 2014	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the period from February 1, 2006 (date of inception) through June 30, 2014	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2014 and 2013and for the period from February 1, 2006 (date of inception) through June  30, 2014	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	12
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosures	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
Signatures

 

Item 1. Financial Statements

 

 CANWEALTH MINERALS CORPORATION

(An Exploratory Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) 

		June 30,				December 31,
		2014				2013
ASSETS
Current assets:
Cash and cash equivalent		$	4,956			$	466
Other current assets			—				—
Total current assets			4,956				466
Property and equipment			42,321				43,063
Other assets:
Intangible assets			23,815				24,233
Total other assets			23,815				24,233
Total assets		$	71,092			$	67,762
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	293,974			$	217,296
Convertible note payable			22,558				22,558
Loans from non-related parties			96,176				54,775
Loans from related parties			64,130				63,451
Total current liabilities			476,838				358,080
Commitments and contingencies			—				—
Stockholders' deficit:
Preferred stock; $0.0001 par value, 20,000,000 shares authorized, none issued and outstanding as of June 30, 2014 and December 31, 2013			—				—
Common stock; $0.0001 par value, 100,000,000 shares authorized
50,769,231  shares issued and outstanding as of June 30, 2014 and December 31, 2013			5,077				5,077
Additional paid in capital			6,041				6,041
Other comprehensive income (loss)			16,309				11,543
Deficit accumulated during the exploratory stage			(433,173	)			(312,979	)
Total stockholders' deficit			(405,746	)			(290,318	)
Total liabilities and stockholders' deficit		$	71,092			$	67,762

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

CANWEALTH MINERALS CORPORATION

(An Exploratory Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited) 

 

																			For the
																			period
																			February 1,
																			2006
			For the six				For the six				For the three				For the three				(date of
			months				months				months				months				inception)
			ended				ended				ended				ended				through
			June 30,				June 30,				June 30,				June 30,				June 30,
			2014				2013				2014				2013				2014
Revenue		$	—			$	—			$	—			$	—			$	—
OPERATING EXPENSES:
Selling, general and administrative			119,864.00				40,048				76,310.00				5,230				414,307
Total operating expenses			119,864.00				40,048				76,310.00				5,230				414,307
Loss from operations			(119,864.00	)			(40,048	)			(76,310.00	)			(5,230	)			(414,307.00	)
OTHER INCOME (EXPENSE):
Interest (expense)			(330.00	)			(598	)			(287.00	)			(66	)			(5,370	)
(Loss) income before provision for income taxes			(120,194.00	)			(40,646	)			(76,597.00	)			(5,296	)			(419,677.00	)
Provision for income taxes :
NET (LOSS) INCOME		$	(120,194.00	)		$	(40,646	)		$	(76,597	)		$	(5,296	)		($	419,677.00	)
(Loss) Earnings per common share, basic and diluted		$	0.00			$	0.00			$	0.00			$	0.00
Weighted average shares, basic and diluted			50,769,231.00				50,769,231.00				50,769,231.00				50,769,231.00
Comprehensive loss:
Net (loss) income			(120,194.00	)			(40,646	)			(76,597.00	)			(5,296.00	)			(419,677.00	)
Foreign currency translation adjustment			(2,051.00	)			7,692				(10,648.00	)			3,217				7,652
Comprehensive loss		($	122,245.00	)		$	(32,954	)		($	87,245.00	)		($	2,079.00	)		($	412,025.00	)

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

CANWEALTH MINERALS CORPORATION

(An Exploratory Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Period February 1, 2006 (date of inception) through June 30, 2014

(Unaudited) 

 

																		(Deficit)
																		Accumulated
										Additional				Other				During
		Common Stock								paid in				comprehensive				Exploratory
		Shares				Amount				capital				income				Stage				Total
Balance at date of inception, February 1, 2006			—				—				—				—				$				$
Issuance of shares for seed capital			44,169,231				4,417				—				—				(4,317	)			100
Foreign currency translation gain			—				—				—				25				—				25
Net loss			—				—				—				—				(262	)			(262	)
Balance, December 31, 2009			44,169,231				4,417				—				25				(4,579	)			(137	)
Foreign currency 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	)
Foreign currency translation gain			—				—				—				295				—				295
Net loss for the year ended December 31, 2011			—				—				—				—				(18620	)			(18,620	)
Balance, December 31, 2011			44,169,231				4,417				—				529				(31,726	)			(26,780	)
Foreign currency translation gain			—				—				—				(1324	)			—				(1,324	)
Net loss			—				—								—				(169061	)			(169061	)
Balance, December 31, 2012			44,169,231				4417				—				(795	)			(200787	)			(197165	)
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			—				—				—				12,338				—				12,338
Net loss for year ended
December 31, 2013			—				—				—				—				(103,012	)			(103,012	)
Balance, December 31, 2013			50,769,231				5077				6041				11,543				(312,979	)			(290,318	)
Foreign currency translation gain			—				—				—				4,766				—				4,766
Net loss for the period ended June 30, 2014			—				—				—				—				(120,194	)			(120,194	)
Balance June 30, 2014			50,769,231				5,077				6,041				16,309				(433,173	)			(405,746	)

 

 

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

 

 

CANWEALTH MINERALS CORPORATION

(An Exploratory Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		(Unaudited) For the six months ended June 30, 2014				For the six months ended June 30, 2013				For the period February 1, 2006 (date of inception) through June 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES :
Net (loss) income		$	(120,194	)		$	(40,646	)		$	(419,677	)
Adjustments to reconcile net loss to net cash used in operating activities:
Operating expenses incurred by related parties on behalf of the Company			—				—				28,056
Changes in operating assets and liabilities:
Other current assets			—				3,601				—
Accounts payable and accrued liabilities			76,678				14,751				294,735
Net cash  used in operating activities			(43,516	)			(22,294	)			(96,886	)
CASH FLOWS FROM INVESTING ACTIVITIES:			—				—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible note payable			—				—				18,798
Cash acquired on acquisition			—				82				82
Intangible assets purchased through from related parties							—				84,079
Advances (repayment) of non-related parties			41,401				12,180
Advances (repayment) of related party loans			67				(3,689	)			(34,724	)
Recapitalization effect on reverse acquisition							—				(9,189	)
Proceeds from issuance of shares							—
Capital contribution			—				6,041				6,141
Net cash provided by financing activities			42,080				14,614				60,085
Effect of foreign exchange gain			7,977				7,692				15,043
Net increase in cash and cash equivalents			4,490				12				14,411
Cash and cash equivalents at beginning of period			466				424				—
Cash and cash equivalents at end of period		$	4,956			$	436			$	14,411
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest		$	—			$	—			$	—
Cash paid during the period for income taxes		$	—			$	—			$	—
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchased through loans from related parties		$	—			$	—			$	50,833
Intangible assets purchased through loans from related parties		$	—			$	453			$	23,688
Recapitalization effect on reverse acquisition		$	—			$	9,180			$	9,180
Sale of property and equipment to a related party		$	—			$	5,334			$	10,024

  

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

CANWEALTH MINERALS CORPORATION

(An Exploratory Stage Company)

Notes to Interim Unaudited Condensed Consolidated Financial Statements

June 30, 2014

(Unaudited)

 

NOTE 1 - NATURE OF OPERATIONS

 

Canwealth Minerals Corporation was organized on February 1, 2006 under the laws of the Canada Business Corporations Act.

 

Canwealth’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.

 

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 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 June 30, 2014, the Company has accumulated deficit during exploratory stage of $435,224.

 

NOTE 2 - BASIS OF PRESENTATION

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X relating to smaller reporting companies. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three months June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014 or any other period.

 

The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

 

The accounting policies followed by the Company are set forth in Note 3 to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2013.

 

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”). 

 

 

 

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A summary of significant accounting policies applied in the presentation of financial statements are as follows:

  

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 June 30, 2014 cash consists of a checking account.

 

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 June 30, 2014, 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 nine mineral properties as of June 30, 2014 presented as intangible assets of $23,815.

 

 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 June 30, 2014 and 2013.

 

 

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.

 

At June 30, 2014 and December 31, 2013, 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 June 30, 2014.

 

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 March 31, 2014 and December 31, 2013. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the period ended June 30, 2014 and December 31, 2013.

 

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 six months ended June 30, 2014 and 2013 and for the period February 1, 2006 (date of inception) through June 30, 2014 consisted of net loss 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:

		June 30, 2014				December 31, 2013				June 30, 2013
Period-end CAD: USD exchange rate		$	0.9237			$	0.9399			$	0.9694
Average Period CAD: USD exchange rate		$	0.9372			$	0.9710			$	1.0064

 

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 June 30, 2014, the Company did not have any issued or outstanding stock options.

 

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 June 30, 2014.

 

Reliance on Key Personnel and Consultants

 

The Company employs three executive officers. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management 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

 

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 June 30, 2014, the Company has a deficit accumulated during exploration stage of $435,224 and has incurred significant operating losses and negative operating cash flows since inception. 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 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 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.

 

 

NOTE 5 - CAPITAL STOCK

 

Preferred Stock

 

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

As of June 30, 2014 and December 31, 2013, 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 of June 30, 2014 and December 31, 2013 there were 50,769,231 shares of common stock issued and outstanding.

 

NOTE 6 - 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 June 30, 2014 and December 31, 2013, the Company has taken loans from shareholders of $64,130 and $63,451, respectively. No formal repayment terms or arrangements existed. The entire above loan is non-interest bearing and payable on demand.

 

ICBS Ltd. has given a loan to the Company and also transferred the assets worth $42,321 as of June 30, 2014. As of June 30, 2014, the intangible asset acquired through loans from related parties had a net balance of $23,815.

 

 

NOTE 7 – CONVERTIBLE NOTE PAYABLE

 

On October 20, 2012, the Company entered into an agreement with a third party non-affiliate to a 20% interest bearing convertible note for $22,558 (CAD $20,000) due on December31, 2014, with the conversion features commencing immediately. The note is convertible into 100,000 shares of common stock of the Company.

 

As of June 30, 2014 and December 31, 2013, the balance in the note and accrued interest was $22,558. The lender has agreed to freeze interest at $4,000 provided the loan is repaid on or prior to the due date.

 

 

NOTE 9- 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 as of June 30, 2014.

 

 

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 CanwealthDelawarecommon stock converted into 44,169,231 shares of USG1 common stock, and the existing USG1 stockholders continued to hold 6,600,000 shares of USG1 common stock.

 

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.

 

Results of Operations

 

During the six month period ended June 30, 2014, Canwealth Minerals Corporation incurred legal and professional fees. The $119,864 of operating expenses consisted mostly of management, legal and accounting fees. In the prior year, there was $40,048 of operating expenses during the same six month period ended June 30, 2013.

 

We reported a net loss of $120,194 during the six months ended June 30, 2014 as compared to a net loss of $40,646 during the three months ended June 30, 2013.

 

General and administrative expenses were $76,310 for the three months ended June 30, 2014. General and administrative expenses for the three months ended June 30, 2013 were $5,230. The general and administrative expenses increased primarily due to the accrual of management compensation for the six month period ended June 30, 2014.

 

The following chart summarizes operating expenses and other income and expenses for the six months ended June 30, 2014 and the six months ended June 30, 2013:

						For the six months ended June 30, 2014				For the six months ended June 30, 2013
Revenue			$				—			$	—
OPERATING EXPENSES:
Selling, general and administrative							119,864				40,048
Total operating expenses							119,864				40,048
Loss from operations							119,864				40,048
OTHER INCOME (EXPENSE):
Interest (expense)							(330	)			(598	)
(Loss) income before provision for income taxes							(120,194	)			(40,646	)
Provision for income taxes :
Current							—				—
Deferred							—				—
Total income taxes							—				—
NET (LOSS)			$				(120,194	)		$	(40,646	)

 

 

The following chart summarizes operating expenses and other income and expenses for the three months ended June 30, 2014 and the three months ended June 30, 2013:

						For the three months ended June 30, 2014				For the three months ended June 30, 2013
Revenue			$				—			$	—
OPERATING EXPENSES:
Selling, general and administrative							76,310				5,230
Total operating expenses							76,310				5,230
Loss from operations							76,310				5,230
OTHER INCOME (EXPENSE):
Interest (expense)							(287	)			(66	)
(Loss) income before provision for income taxes							(76,597	)			(5,296	)
Provision for income taxes :
Current							—				—
Deferred							—				—
Total income taxes							—				—
NET (LOSS)			$				(76,597	)		$	(5,296	)

 

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 June 30, 2014, the Company had a deficit accumulated during exploration stage of $435,224 and has incurred significant operating losses and negative cash flows. For the six months ended June 30, 2014, the Company sustained a net loss of $120,194 compared to a net loss of $40,646 for the six months ended June 30, 2013.

 

We have not yet recognized revenues from our operations. The Company will need additional financing which may take the form of equity or debt. The Company intends to seek investors in the short term to borrow money in the form of convertible debentures in order to raise working capital to continue its operations. 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.

 

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.

 

 

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

 

Management’s Report on Internal Control over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.  We have assessed the effectiveness of those internal controls as of last day of the period covered by this Report, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework as a basis for our assessment.

 

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected.  In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting.  This material weakness consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our Company.  The relatively small number of individuals who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system.  The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

 

 

As we are not aware of any instance in which the Company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, we determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our very limited resources at this time and not in the interest of our shareholders.

 

This Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Report.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company's internal controls over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 

 

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

 

 

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: August 19, 2014

 

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.

 

	Canwealth Minerals Corporation
	By: /s/ Garth McIntosh
	Garth McIntosh
	Chief Executive Officer

 

	By: /s/ Garth McIntosh
	Garth McIntosh
	Chief Financial Officer
	Date: August 19, 2014