UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: January 31, 2016

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-55398

 

AUREUS INCORPORATED

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

3555 ½ TizerLand, Helena, MT 59602

(Address of principal executive offices, including zip code)

 

(775) 398-3173

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days.

Yes [  ] No [X]

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-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]

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 126,450,000 shares of common stock as of July 15, 2016.

 

 

  

Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Forward Looking Statements	11
Plan of Operations	11
Phases I-IV Exploration Program	14
Results of Operations	16
Recent Accounting Pronouncements	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	18
Item 4. Controls and Procedures.	18
Evaluation of Disclosure Controls and Procedures	18
Changes in Internal Control over Financial Reporting	18
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	19
Item 3. Defaults Upon Senior Securities.	19
Item 4. Mine Safety Disclosures.	19
Item 5. Other Information.	19
Item 6. Exhibits.	19
SIGNATURES	20

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

AUREUS INCORPORATED

CONDENSED BALANCE SHEETS

 

		January 31, 2016				October 31, 2015
		(Unaudited)				(Audited)
ASSETS
Current assets:
Cash		$	518			$	924
Prepaid Professional Fees			999				1,248
Total assets		$	1,517			$	2,172
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable		$	19,115			$	8,115
Accrued Expenses			962				175
Note payable			40,000				20,000
Loan from Related Party			24,656				24,656
		$	84,733			$	52,946
Stockholders’ deficit :
Common stock; authorized 150,000,000; 126,450,000 shares at $0.001 par issued and outstanding at January 31, 2016 and October 31, 2015		$	126,450			$	126,450
Additional Paid in Capital			(95,700	)			(95,700	)
Accumulated deficit		$	(113,966	)		$	(81,524	)
Total stockholders’ deficit		$	(83,216	)		$	(50,774	)
Total liabilities and stockholders’ deficit		$	1,517			$	2,172

 

The accompanying notes are an integral part of these financial statements

 

 

AUREUS INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		For the Three Month Period Ended January 31, 2016				For the Three Month Period Ended January 31, 2015
REVENUES		$	-			$	-
OPERATING EXPENSES
General and administrative		$	31,706			$	10,931
Total Operating Expenses		$	31,706			$	10,931
Interest Expense			736				-
Net loss for the period		$	(32,442	)		$	(10,931	)
Net loss per share:
Basic and diluted		$	(0.00	)		$	(0.00	)
Weighted average number of shares outstanding:
Basic and diluted			126,450,000				126,450,000

 

The accompanying notes are an integral part of these financial statements

 

 

AUREUS INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Three Month Period Ended January 31, 2016				For the Three Month Period Ended January 31, 2015
Cash flow from operating activities:
Net loss		$	(32,442	)		$	(10,931	)
Decrease / (Increase) in prepaid expenses			250				(4,000	)
Increase in accounts payable			11,000				-
Increase in accrued expenses			786				-
Net cash used in operating activities			(20,406	)			(14,931	)
Cash flows from financing activities:
Proceeds from notes payable			20,000				-
Loan from related party			-				597
Net cash provided by financing activities			20,000				597
Decrease in cash during the period			(406	)			(14,334	)
Cash, beginning of period			924				32,725
Cash, end of period		$	518			$	18,391
Supplemental disclosure of cash flow information:
Cash paid during the period
Taxes		$	-			$	-
Interest		$	-			$	-

 

The accompanying notes are an integral part of these financial statements

 

 

AUREUS INCORPORATED

NOTES TO CONDESNED UNAUDITED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Aureus Incorporated (the “Company”) was incorporated in the State of Nevada on April 19, 2013. The Company was organized to develop and explore mineral properties in the State of Nevada. On October 1, 2014, the Company entered into a Purchase Agreement with Gold Exploration Management Services, Inc. (“Gold Exploration”) pursuant to which the Company purchased 100% of Gold’s Exploration’s interest in one claim block of 11 claims or 220 acres, in Elko County, Nevada (the “Gold Creek Property”) for $15,000. The claims were registered in the name of Gold Exploration. On August 31, 2015, Gold Exploration’s title to the mining claims on the Gold Creek Property expired but has been re-staked by the Company. In September 2015, the Interior for Land and Minerals Management (“ILLM”) imposed a prohibition on mining activities on 10 million acres of public and National Forest System Lands, including the Gold Creek Property, in order to protect the greater sage-grouse and its habitat from adverse effects of locatable mineral exploration and mining activities, subject to valid existing rights (the “Land Freeze”). Due to the Land Freeze, the Company has not been able to have the title to the Gold Creek Property transferred into the Company’s name or to conduct any activities on the Gold Creek Property.

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in United States (US) dollars and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015. The accompanying unaudited financial statements of the Company should be read in conjunction with the audited financial statements and accompanying notes filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Cash and Cash Equivalents

 

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. As of January 31, 2016 and October 31, 2015, there were no cash equivalents.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Impairment of Long Lived Assets

 

The Company tests its assets for recoverability whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable, which includes comparing the carrying amount of a long-lived asset to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss would be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. For the Company’s mining claims, this test includes examining the discounted and undiscounted cash flows associated with value beyond proven and probable reserves, in determining whether the mining claim is impaired.

 

 

Start-up Expenses

 

The Company expenses costs associated with start-up activities as incurred. Accordingly, start-up costs associated with the Company’s formation have been included in the Company’s general and administrative expenses.

 

Mining Interests and Exploration Expenditures

 

Exploration costs are expensed in the period in which they occur. The Company capitalizes costs for acquiring and leasing mineral properties and expenses costs to maintain mineral rights as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mineral interests are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.

 

Income Taxes

 

The Company utilizes FASB ACS 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

The accounting guidance for uncertainties in income tax prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company recognizes a tax benefit from an uncertain tax position in the financial statements only when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s widely understood administrative practices and precedents.

 

Interest and penalties on tax deficiencies recognized in accordance with ACS accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

 

We have implemented certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertain tax positions, as defined. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 and have analyzed filing positions in United States jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We have identified the United States as our “major” tax jurisdiction. Generally, we remain subject to United States examination of our income tax returns.

 

Fair Value of Financial Instruments

 

The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.

 

FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

 

	●	Level 1: Quoted prices in active markets for identical assets or liabilities
	●	Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
	●	Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

 

Basic and Diluted Loss Per Share

 

Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the period presented. ASC 260 requires presentation of basic earnings per share and diluted earnings per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) is similarly calculated. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the three months ended January 31, 2016 and 2015, there were no potentially dilutive securities.

 

Recent Accounting Pronouncements

 

The Company has reviewed all 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 condensed consolidated financial statements.

 

In June 2014, the FASB issued ASU 2014-12, “Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period.” This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements.

 

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40),” which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company adopted this new standard for the fiscal year ending December 31, 2014.

 

In April 2015, the FASB issued ASU 2015-3, “Interest - Imputation of Interest (Subtopic 835-30),” related to the presentation of debt issuance costs. This standard will require debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. These costs will continue to be amortized to interest expense using the effective interest method. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, and retrospective adoption is required. We will adopt this pronouncement for our year beginning January 1, 2016. We do not expect this pronouncement to have a material effect on our consolidated financial statements.

 

 

NOTE 3 – GOING CONCERN

 

The Company has sustained operating losses since inception. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its shareholders or other sources, as may be required.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Management is endeavoring to begin exploration activities however, may not be able to do so within the next fiscal year. Management is also seeking to raise additional working capital through various financing sources, including the sale of the Company’s equity securities, which may not be available on commercially reasonable terms, if at all.

 

If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced and the new equity securities may have rights, preferences or privileges senior to those of the holders of our common stock.

 

NOTE 4 – LOAN FROM RELATED PARTY

 

During the period from April 19, 2013 to October 31, 2015, the Company received advances totaling $24,656 from Dong Gu Kang and Min Jung Kang, the Company’s former executive officers and directors (the “Selling Stockholders”). The advance was unsecured, non-interest bearing and due upon demand giving 30 days written notice to the borrower. In connection with the Stock Purchase Agreement, dated September 30, 2015, among the Company, the Selling Stockholders and Maverick, LLC, a Nevis limited liability company (“Maverick”), pursuant to which Maverick purchased 90,000,000 shares of common stock of the Company from the Selling Stockholders, Maverick assumed $24,656 in outstanding debt owed the Selling Stockholders by the Company; constituting 100% of the debt owed the Selling Stockholders of the Company, pursuant to a Debt Assumption Agreement, dated September 30, 2015, between the Company, the Selling Stockholders and Maverick. Maverick beneficially owns 71.7% of the common stock of the Company.

 

The balance of loan from related party as of January 31, 2016 and October 31, 2015 are $24,656 and $24,656, respectively.

  

NOTE 5 – NOTES PAYABLE

 

On September 9, 2015, we sold Backenald Corp. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale. As of January 31, 2016 and October 31, 2015, accrued interest amounted to $579 and $175, respectively.

 

On November 16, 2015, we sold Craigstone a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale. As of January 31, 2016 accrued interest amounted to $333.

 

 

NOTE 6 – DEPOSIT ON MINERAL PROPERTY ACQUISITION

 

On October 1, 2014, the Company entered into a Purchase Agreement with Gold Exploration Management Services, Inc. to purchase 11 claims in Mineral County Nevada known as the Gold Creek Property (the “Gold Creek Property”). The Company paid a total of $15,000 for the purchase of the Gold Creek Property, and was reflected in the financial statements as a deposit, until such time as the ownership transferred to the Company. In September 2015, the Interior for Land and Minerals Management (“ILLM”) imposed a prohibition on mining activities on 10 million acres of public and National Forest System Lands, including the Gold Creek Property, in order to protect the greater sage-grouse and its habitat from adverse effects of locatable mineral exploration and mining activities, subject to valid existing rights (the “Land Freeze”). Due to the Land Freeze, the Company has not been able to have the title to the Gold Creek Property transferred into the Company’s name or to conduct any activities on the Gold Creek Property. On October 31, 2015 the Company recorded an impairment of $15,000 due the Land Freeze.

 

NOTE 7 – COMMON STOCK

 

On November 17, 2015, the Company, authorized a fifteen-for-one (15:1) forward stock split of the Company’s common stock, par value $0.001 per share without changing the authorized number or par value of the Common Stock and with fractional shares resulting from the Forward Split being rounded up to the nearest whole number. The Forward Split became effective on November 25, 2015. As a result of the Forward Split, the number of the Company’s issued and outstanding shares of Common Stock were increased from 8,430,000 to 126,450,000. The amounts are being presented retroactive in the financial statements at January 31, 2016.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On March 22, 2016, we sold Craigstone Ltd. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale.

 

 

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

 

Forward Looking Statements

 

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. You should read statements that contain these words carefully because they:

 

●		discuss our future expectations;
●		contain projections of our future results of operations or of our financial condition; and
●		state other “forward-looking” information.

 

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in this report.

 

Unless stated otherwise, the words “we,” “us,” “our,” the “Company” or “Aureus,” “ARSN” in this section collectively refer to Aureus Incorporated, a Nevada corporation.

 

Plan of Operations

 

We are a startup mining exploration company without mining operations. Since our inception, we have not generated any revenues and our net losses were $(32,442) for the three months ended January 31, 2016 and our accumulated stockholders deficit was $(83,216) at January 31, 2016. In their audit report included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, our auditors have expressed their doubt as to our ability to continue as a going concern. To date, we have funded our operations by issuing equity and debt and our lack of capital has delayed the implementation of our business plan. There can be no assurances that we will be able to obtain such capital on sufficient terms, if at all.

 

Corporate History; Overview

 

The Company was incorporated in the Nevada on April 19, 2013.

 

On September 30, 2015, the Company, Dong Gu Kang and Min Jung Kang, the principal stockholders of the Company (the “Selling Stockholders”), and Maverick, LLC, a Nevis limited liability company (“Maverick”), entered into a stock purchase agreement (the “Stock Purchase Agreement”), pursuant to which Maverick purchased an aggregate of 90,000,000 shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), of the Company from the Selling Stockholders in consideration for $0.001 per share, for a total purchase price of $6,000. The Shares represent approximately 71.17% of the 126,450,000 outstanding shares of Common Stock of the Company, and the transaction constituted a change in control of the Company. Maverick purchased the Shares by issuing each Selling Stockholder a non-interest bearing promissory note for his pro rata portion of the Shares. Both promissory notes are unsecured, mature December 30, 2016 and may be prepaid without penalty. Ester Barrios is the Managing Member of Maverick has voting and dispositive control over these securities.

 

 

In connection with the Stock Purchase Agreement, the Company, Selling Stockholders and Maverick entered into a debt assumption agreement (the “Debt Assumption Agreement”) pursuant to which Maverick assumed an aggregate of $24,656 in outstanding debt owed the Selling Stockholders by the Company; constituting 100% of the debt owed the Selling Stockholders of the Company.

 

The Stock Purchase Agreement and Debt Assumption Agreement contained customary representations, warranties and covenants made by the Selling Stockholders, Maverick and the Company.

 

On September 17, 2015, the board of directors (the “Board”) of the Company increased the size of the Board to three persons and appointed Mr. Tracy Fortner to fill the created vacancy. Directors serve for a period of one year until the next stockholders’ meeting and until their respective successor is elected and qualifies.

 

On September 17, 2015, Dong Gu Kang and Min Jung Kang resigned from the Board and as executive officers of the Company, effective immediately. Dong Gu Kang had been serving as the President, Chief Executive Officer, Secretary of the Company. Min Jung Kang had been serving as the Treasurer of the Company. Their respective departures were not related to any issues regarding financial disclosures or accounting or legal matters.

 

On September 17, 2015, the Board appointed Tracy Fortner as the President, Chief Executive Officer, Secretary and Treasurer of the Company.

 

On November 25, 2015, we effected a fifteen-for-one (15:1) forward stock split (the “Forward Split”) of the Company’s common stock, without changing the authorized number or par value of the Common Stock and with fractional shares resulting from the Forward Split being rounded up to the nearest whole number. As a result of the Forward Split, the number of the Company’s issued and outstanding shares of Common Stock was increased from 8,430,000 to 126,450,000. Unless noted otherwise, all share amounts in this Report reflect the Forward Split.

 

Overview

 

On October 1, 2014, we entered into a Purchase Agreement with Gold Exploration Management Services, Inc. (“Gold Exploration”) pursuant to which we purchased 100% of Gold’s Exploration’s interest in one claim block of 11 claims or 220 acres, in Elko County, Nevada (the “Gold Creek Property”) for $15,000. The Gold Creek Property is accessible via Nevada State Route #225 connecting to county road USFS Road #745) which provide access to the immediately adjacent Gold Creek Ranger Station. The nearest commercial airport is in Reno, approximately 260 road miles from the Gold Creek Property. The claims were registered in the name of Gold Exploration. On August 31, 2015, Gold Exploration’s title to the mining claims on the Gold Creek Property expired but has been re-staked by the Company. Due to the Land Freeze (as defined below) by the ILLM in 2015 of 10 million acres of public and National Forest System lands identified as Sagebrush Focal Areas in Idaho, Montana, Oregon, Utah, Wyoming and Nevada, including the Gold Creek Property, to protect the greater sage-grouse, Gold Creek’s title to the mining claims on the Gold Creek Property has not been transferred into the Company’s name. The Company anticipates once the Land Freeze is lifted, of which there can be no assurances, Gold Exploration will apply to renew the claims and at that point the claims are expected to be transferred to the Company. There can be no assurances that the Land Freeze will be lifted or that if lifted, we will have sufficient funds to have the mining claims transferred into the Company’s name. The $15,000 paid by the Company for the purchase of the Gold Creek Property is reflected in the financial statements as a deposit, until such time as the ownership transferred to the Company.

 

Land Freeze – Force Majeure

 

Commencing in 2010, there has been heightened awareness of the conservation of the greater sage-grouse, the largest grouse found in North America currently inhabiting the sage-steppe ecosystems in Montana, southern Idaho, northeastern California, eastern Oregon, northwestern Colorado, and broader sections of Wyoming, Utah and Nevada.

 

 

In 2014, Nevada adopted the Nevada Greater Sage-grouse Conservation Plan of 2014 (“2014 State Plan”), a sage-grouse conservation plan which provides broad goals, objectives, and management actions to ameliorate the primary threats to sage-grouse in Nevada. Nevada is also in the process of developing a Nevada Sage-Grouse Strategic Action Plan (“SAP”) which is expected to into greater detail and identify areas to focus conservation efforts in order to achieve the broad goals and objectives outlined in the 2014 State Plan.

 

Also, on September 23, 2015, the Assistant Secretary of the Interior for Land and Minerals Management (“ILLM”) approved an application to withdraw (i.e., prohibiting mining) approximately 10 million acres of public and National Forest System lands identified as Sagebrush Focal Areas in Idaho, Montana, Nevada, Oregon, Utah, and Wyoming from location and entry under the United States mining laws to protect the greater sage-grouse and its habitat from adverse effects of locatable mineral exploration and mining, subject to valid existing rights (the “Land Freeze”). Comments on the proposed withdrawal application or scoping comments on issues to be analyzed in the Environmental Impact Statement must have been received by December 23, 2015.

 

The Company’s Property is included in the approximately 10 million acres of land currently closed for mining exploration under the Land Freeze by the ILLM and being studied by Nevada in connection with SAP. Therefore, under this force majeure event, the Company is currently prohibited from conducting any mining activities on the Gold Creek Property and, depending on the outcomes of the ILLM’s Environmental Impact Statement and Nevada’s SAP, the Company may be permanently prohibited or restricted from conducting any activities on the Gold Creek Property. The Company intends, however, to pursue potential acquisitions of other land on which it may conduct mining activities. The Company is not currently a party to any oral or written agreement to purchase any land at this point in time.

 

If and when we are permitted to conduct exploration activities on the Gold Creek Property or any additional land we acquire, our goal is to assess whether our claim or claims possess any commercially viable mineral deposits by a four phase program.

 

During the next 12 months, we do not anticipate generating any revenue. If additional funds become required, the additional funding will come from equity financing from the sale of our equity of debt securities or sale of part of our interest in our mining claims. If we are successful in completing an equity or convertible debt financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our securities to fund our operations or programs. In the absence of such financing, our business will fail.

 

We may consider entering into a joint venture partnership by linking with another resource company to provide the required funding to complete our four phase exploration program. We have not undertaken any efforts to locate a joint venture partner for the program. If we enter into a joint venture arrangement, we will assign a percentage of our interest in our mining claims to the joint venture partner.

 

Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mining claims in the exploration stage ultimately develop into producing, profitable mines. Our future financial results are also uncertain due to a number of factors, some of which are outside of our control. These factors include, but are not limited to:

 

●

Our ability to raise additional funding;

 

●

The market price for, gold and silver;

 

●

The results of our proposed exploration programs on the mineral property; and

 

●

Our ability to find joint venture partners for the development of our property interests

 

 

Due to our lack of operating history and present inability to generate revenues, our auditors have stated their opinion that there currently exists substantial doubt about our ability to continue as a going concern. Even if we complete our current exploration program and it is successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral reserve.

 

Below is our budget for our proposed four phase exploration program.

 

Phases I-IV Exploration Program

 

BUDGET Phase I		Unit Cost Incl Tax				Units				Total Cost
Budget–Initial Engineering Report
Cost Element
Geologist Professional Fees			800				6				4,800
Rock, Soil and Stream Sediment Samples 40 Samples			30				40				1,200
Field Vehicles: Transportation Inclusive			100				5				500
Compilation and Data Input			700				3				2,100
Report Preparation ,Drafting and Copying, Communications			900				1				900
Total Including Contingencies											9,500

 

BUDGET PHASE II		Unit Cost Incl Tax				Units				Total Cost
Geochemical Sampling: Soil, rock and Talus Fines:			300				10				3,000
Geological Mapping and Supervision			800				10				8,000
Environmental Permitting and Bonding			8,000				1				8,000
Assays and Analyses			28				50				1,400
Sample and Materials Transportations			1,000				1				1,000
Field Vehicles			120				10				1,200
Compilation and Data Input			700				2				1,400
Report Preparation ,Drafting and Copying, Communications			1,000				1				1,000
Subtotal											25,000
Contingency 10%											2,500
BUDGET PHASE II											27,500

 

BUDGET PHASE III		Unit Cost Incl Tax				Units				Total Cost
Geochemical Sampling: Rock ,Detailed Target Definition			20				300				6,000
Geological Mapping and Supervision			800				16				12,800
Environmental Permitting and Bonding			11,000				1				11,000
Road and Trail preparation			6,000				1				6,000
Trenching and detailed sampling			10,000				1				10,000
Assays and Analyses			28				150				4,200
Sample and Materials Transportations			50				40				2,000
Field Vehicles			120				12				1,440
Compilation and Data Input			700				8				5,600
Report Preparation, Drafting and Copying, Communications			2,000				1				2,000
Subtotal											61,040
Contingency10%											6,104
BUDGET PHASE III											67,144

 

BUDGET- PHASE IV		Unit Cost Incl Tax				Units				Total Cost
Diamond Drilling 3000Feet			40				3,000				120,000
Mob/Demob			10,000				1				10,000
Geological Mapping and Supervision			800				30				24,000
Environmental Permitting and Bonding			15,000				1				15,000
Road and Trail preparation			6,000				1				6,000
Assays and Analyses			25				1,000				25,000
Sample and Materials Transportations			50				50				2,500
Field Vehicles			120				40				4,800
Compilation and Data Input			700				20				14,000
Report Preparation ,Drafting and Copying, Communications			5,000				1				5,000
Subtotal											226,300
Contingency10%											22,630
BUDGET PHASE IV											248,930

 

 

Risks and Uncertainties

 

There are a number of known material risks and uncertainties that are reasonably likely to have a material impact on our revenues, operations, liquidity and income over the short and long term. The primary risk that we face over the long term is that our mining claims may not contain a commercially viable mineral deposit. If our mining claims do not contain a commercially viable deposit, this will have a material effect on our ability to earn revenue and income as we will not be able to sell any minerals.

 

There are a number of industry-wide risk factors that may affect our business. The most significant industry-wide risk factor is that mineral exploration is an inherently risky business. Very few exploration companies go on to discover economically viable mineral deposits or reserves that ultimately result in an operating mine.

 

In order for us to commence mining operations we face a number of challenges which include finding qualified professionals to conduct our exploration program, obtaining adequate financing to continue our exploration program, locating a viable ore body, partnering with a senior mining company, obtaining mining permits, and ultimately selling minerals in order to generate revenue. Another important industry-wide risk factor is that the price of commodities can fluctuate based on world demand and other factors. For example, if the price of a mineral were to dramatically decline this could make any ore we have on our mining claims uneconomical to mine. We and other companies in our business are relying on a price of ore that will allow us to develop a mine and ultimately generate revenue by selling minerals.

 

Finally, we face a risk of not being able to finance our exploration plans. With each unsuccessful attempt at locating a commercially viable mineral deposit we become more and more unattractive in the eyes of investors. For the short term this is less of an issue because we have enough funds to complete the first phase of our exploration program. However, over the long term this can become a serious issue that can be difficult to overcome. Without adequate financing we cannot operate and complete our exploration on the Gold Creek Property. However, this risk is faced by all exploration companies and it is not unique to us.

 

 

Results of Operations

 

Three Months Ended January 31, 2016 compared to January 31, 2015

 

Revenues

 

We did not have any revenues for the three months ended January 31, 2016 and 2015, respectively.

 

General and Administrative Expenses

 

We recognized general and administrative expenses in the amount of $31,706 and $10,931 for the three months ended January 31, 2016 and 2015, respectively. The increase is a result of increased professional fees.

 

Net Loss

 

We incurred a net loss of $32,442 for the three months ended January 31, 2016, as compared to $10,931 for the comparable period of 2015. The increase in the net loss was primarily the result of professional fees.

 

Liquidity and Capital Resources

 

As of January 31, 2016, the Company had a cash balance of $518 and an accumulated deficit of $(113,966). We do not have sufficient funds to operate for the next twelve months. There can be no assurance that additional capital will be available to the Company.

 

Since inception, the Company has funded its operations through the sale of equity securities and loans from our executive officers.

 

To date, we have raised $53,155 via two private offerings, of 6,0000,000 (90,000,000 post-Forward Split) shares of common stock subscribed for at $0.001 to our former officers and directors, for a total cash proceeds of $6,000; 2,430,000 (36,450,000 post-Forward Split) shares of common stock were subscribed for by 34 non-affiliate shareholders at a price of $0.01 for a total cash proceeds of $24,300. The Company registered the 2,430,000 (36,450,000 post-Forward Split) shares of common stock on a Form S-1 declared effective by the SEC on March 10, 2015.

 

The Company also received loans from our former executive officers and directors in the amount of $24,656. The loans were unsecured, non-interest bearing and are due upon demand giving 30 days’ written notice to the borrower. On September 30, 2015, Maverick assumed this debt pursuant to a Debt Assumption Agreement, dated September 30, 2015.

 

On September 9, 2015, we sold Backenald Corp. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale. As of January 31, 2016 and October 31, 2015, accrued interest amounted to $579 and $175, respectively.

 

On November 16, 2015, we sold Craigstone a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale. As of January 31, 2016 accrued interest amounted to $333.

 

As of January 31, 2016, we had no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.

 

 

Subsequent Event:

 

On March 22, 2016, we sold Craigstone Ltd. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale.

 

Going Concern Consideration

 

The Company incurred a net loss of $(32,442) for the three months ended January 31, 2016. In addition, the Company had a stockholders’ deficiency of $(83,216) at January 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

The Company believes that it will need approximately $250,000 to fund its expenses and execute its business plan over the next twelve months. There can be no assurance that additional capital will be available to us or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing holders of common stock. If adequate funds are not available or not available on acceptable terms, we may be unable to fund and develop our business.

 

Cash and Cash Equivalents

 

The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.

 

		For the Three Months Ended January 31,
		2016				2015
Net cash used in operating activities		$	(20,406	)		$	(14,931	)
Net cash provided by financing activities		$	20,000			$	597

 

Net cash used in operations was $20,406 for the three months ended January 31, 2016 compared to $14,931 for the three months ended January 31, 2015. This increase was primarily attributable to increased losses which were partially offset by an increase in accounts payable.

 

New cash flows provided by financing activities for the three months ended January 31, 2016 were $20,000 compared to $597 for the three months ended January 31, 2015. This increase was attributable to proceeds from the issuances of promissory notes.

 

 

Off-Balance Sheet Arrangements

 

Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of January 31, 2016, we had no such arrangements.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or are not believed by the Company management, to have a material impact on the Company’s present or future financial statements.

 

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities”. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The Company elected early adoption of ASU 2014-10. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company. The company elected early adoption of ASU 2014-10.

 

No other accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or are not believed by the Company management, to have a material impact on the Company’s present or future financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We are a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of January 31, 2016.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three-month period ended January 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

 

There are no pending legal proceedings to which we are a party or of which any of our properties is the subject. Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.

 

Item 1A. Risk Factors.

 

We are a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

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.

 

Subsequent Event:

 

On March 22, 2016, we sold Craigstone Ltd. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary of the date of issuance. The Company may prepay any or all of the outstanding principal of the promissory note at any time without penalty and shall be accompanied by payment of the accrued interest on the amount prepaid. The promissory note automatically becomes due upon an event of default, including breach, default, bankruptcy and sale.

 

Item 6. Exhibits.

 

The following documents are included herein:

 

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

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized

 

	AUREUS INCORPORATED
Date: July 18, 2016	By:	/s/ Tracy Fortner
	Name:	Tracy Fortner
	Title:	President, Chief Executive Officer, Secretary and Treasurer (Principal Executive Officer) (Principal Financial and Accounting Officer)