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The Company is filing this Amendment No. 1 on Form 10-K (the “Amendment”) to our Annual Report on Form 10-K/A for the year ended July 31, 2014 (the “Form 10-K”), filed with the Securities and Exchange Commission on May 11, 2015 (the “Original Filing Date”) to restate the annual audited financial statements for the year ended July 31, 2014.

 

This amendment includes the audited financial statements for the year ended July 31, 2014. The original filing included unaudited management prepared financial statements.

 

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the certifications required pursuant to the rules promulgated under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which were included as exhibits to the Original Report, have been amended, restated and re-executed as of the date of this Amendment (No. 1 ) and are included as Exhibits 31.1 and 32.1 hereto

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COMPANY OVERVIEW

 

Green Hygienics Holdings Inc. (the Company) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources Inc. and issued 55,000 shares of common stock on June 12, 2008 (after accounting for the forward and reverse splits detailed below) for cash of $20,000.   On June 30, 2010 the Company changed its name to Takedown Entertainment Inc and forward split its issued shares on the basis of five new shares for one old share (5:1) on the same date. On July 24, 2012 the Company changed its name to Green Hygienics Holdings Inc. and, on the same date, reverse split both its issued and outstanding shares of common stock on a two thousand old for one new basis (1:2000).

 

During 2008 the Company staked one mineral claim located 100 km northwest of Vancouver, British Columbia and acquired a molybdenum property comprised of one mineral claim located approximately 35 kilometers north of Vancouver, British Columbia. We did not proceed with further exploration of the mineral claims due to a determination that the results of our initial geological program did not generate investor interest in the claims and we were unable to finance further exploration. Mineral property costs of $20,000 were expensed during 2009. Both properties have since been abandoned by the Company.

 

During the years 2009 to date the Company was involved in the acquisition, production, licensing, marketing and distribution of mixed martial arts (MMA) content, programming and merchandising for North American and International markets. The Company is currently negotiating to transfer to the former President of the Company all of its rights to and interests in its mixed martial arts program (Takedown), including any and all Takedown assets, in return for the forgiveness of a liability of $29,812 owing to the former President of the Company.

 

We had $3,361 in cash reserves as of the year ended July 31, 2014. We anticipate that we will incur $50,000 for administrative expenses, including professional legal and accounting expenses associated with compliance with our periodic reporting requirements over the next twelve months, and approximately $10,000 per month ($120,000) to continue with our business development.

 

We are contemplating raising additional capital to finance our business operations. No final decisions regarding financing have been made at this time. It is anticipated that funding for the Company will come from one or more of the following means: engaging in an offering of our stock; engaging in borrowing; locating a joint venture partner or partners.

 

BANKRUPTCY OR SIMILAR PROCEEDINGS

 

We have not been the subject of a bankruptcy, receivership or similar proceedings.

 

PRODUCTS AND SERVICES

 

During the years 2009 to date the Company was involved in the acquisition, production, licensing, marketing and distribution of mixed martial arts (MMA) content, programming and merchandising for North American and International markets. The Company was never able to close asset acquisition agreements due to a lack of funding. As a result, we have no customers or consumers of our products, we have no principal suppliers or sources for materials. There is no need for government approval of our products and services.

During the current year, we reviewed two business opportunities. On November 13, 2013, the Company entered into an option to purchase a 50% interest in BION for a total of $2,500,000, a company wholly owned by Aartha USA Inc. Aartha is an approved licensee of a patented hybrid iron/vanadium chemical solution technology developed and owned by PNNL Labs. PNNL has agreed to license Aartha its solution technology for a period of thirty years for the areas of North and South America and Aartha has agreed to supply BION with the solution technology for thirty years. The Company paid $98,800 for this option and has decided not to proceed with this business opportunity at this time.

On January 16, 2014 the Company entered an option agreement whereby the Company holds the option to acquire twelve 2 megawatt wind turbines for a total of $2,280,000 or $190,000 per each turbine.  An option fee of $150,000 was paid and has been expensed. The Company has decided not to proceed with this business opportunity at this time.

The Company is currently reviewing other business opportunities at this time.

 

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MARKETS AND CUSTOMERS

 

According to the directors of the Company: Mixed Martial Arts (MMA) is an international sport with mainstream acceptance: MMA events, featuring athletes using a variety of fighting styles including boxing, jiu jitsu and wrestling have seen growth over the last five years;  In 2009, total MMA pay-per-view revenues reached $450 million USD as compared to HBO Boxing at $175 million USD and WWE at $80 million USD; Add to that the revenue earned from live event ticket sales, television licensing, home video, merchandise and sponsorship, and the MMA industry is becoming the competition, with estimates of the global MMA market being a $1 billion USD industry. The Company continues to search for funding to continue its business.

 

COMPETITION

 

The entertainment industry is highly competitive. Competitors will include the Ultimate Fighting Championship (UFC), ProElite, and other independent media companies and individual producers and operators, most of which will have financial resources, personnel and facilities substantially greater than we have. We will face competition for the acquisition of broadcast rights and media network time.

 

REGULATIONS

 

We expect that our operations will comply in all respects with applicable laws and regulations. We believe that the existence and enforcement of such laws and regulations will have no more restrictive an effect on our operations than on other similar companies in the media and entertainment industry.

 

EMPLOYEES

 

The Company has no employees.

 

RESEARCH AND DEVELOPMENT EXPENDITURES

 

We have not incurred any research or development expenditures since our incorporation.

 

PATENTS AND TRADEMARKS

 

We do not own, either legally or beneficially, any patents or trademarks.

 

Reports to Securities Holders

We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation S-K for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing a Form 10K annually and Forms 10Q quarterly. In addition, we will file a Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, (“SEC”), at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 

Item 1A. Risk Factors

 

THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK. BEFORE MAKING A DECISION CONCERNING THE PURCHASE OF OUR SECURITIES, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN THIS ANNUAL REPORT WHEN YOU EVALUATE OUR BUSINESS.

 

Business Risks:

 

Risks Associated with Our Company. We have limited operating history which makes it difficult to evaluate the investment merits of our Company.

 

If we do not obtain additional financing, our business will fail because we will be unable to fund even the administration of our minimal operations. In order for the Company to continue we need to obtain additional financing. As of July 31, 2014 we had $3,361 cash on hand. We currently have limited operations.

 

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The future issuance of debt may contain contractual restrictions that may curtail implementation of our business plan. We do not have any contractual restrictions limiting our ability to incur debt. Any significant indebtedness, however, could restrict our ability to fully implement our business plan. If we are unable to repay the debt, we could be forced to cease operating.

 

The loss of any of our key personnel may affect our ability to implement our business plan and cause our stock to decline in value. We are dependent on David Ashby, President and Director of the Company, to implement our business plan. The loss of his services may have a negative effect on our ability to timely and successfully implement our business plan. We do not have an employment agreement with Mr. Ashby and we have not obtained key man insurance over him.

 

Investment Risks:

 

Our issuance of additional shares may have the effect of diluting the interest of shareholders; our common stock shareholders do not have preemptive rights. Any additional issuances of common stock by us from our authorized but unissued shares may have the effect of diluting the percentage interest of existing shareholders. The securities issued to raise funds may have rights, preferences or privileges that are senior to those of the holders of our other securities, including our common stock. The board of directors has the power to issue such shares without shareholder approval. We fully intend to issue additional common shares in order to raise capital to fund our business operations and growth objectives.

 

We do not anticipate paying dividends to our common stockholders in the foreseeable future, which makes investment in our stock speculative and risky. We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not paid and do not plan to pay dividends indicates that we must use all of our funds we generate for reinvestment in our business activities. Investors also must evaluate an investment in the Company solely on the basis of anticipated capital gains.

 

Limited liability of our executive officers and directors may discourage shareholders from bringing a lawsuit against them. Our Memorandum and Articles of Incorporation contain provisions that limit the liability of our directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage shareholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the shareholders. In addition, a shareholder's investment in the Company may be adversely affected to the extent that we pay costs of settlement and damage awards against officers or directors pursuant to the indemnification provisions of the bylaw. The impact on a shareholder's investment in terms of the cost of defending a lawsuit may deter the shareholder from bringing suit against any of our officers or directors. We have been advised that the SEC takes the position that these article and bylaw provisions do not affect the liability of any director under applicable federal and state securities laws.

 

We are a development stage company and we expect to incur operating losses for the foreseeable future. We were incorporated on June 12, 2008 and our business to date has been principally organizational activities. We have no way to evaluate the likelihood that our business will be successful. Potential investors should be aware of the difficulties normally encountered by startup companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the business that we plan to undertake. These potential problems include, but are not limited to, additional costs and expenses that may exceed current estimates. We anticipate that we will incur increased operating expenses without realizing any revenues. We recognize that if business revenues are not forthcoming, we will not be able to continue business operations.  There is no history upon which to base any assumption as to the likelihood that we will prove successful, and if we are unsuccessful in addressing these risks, our business will most likely fail.

 

We have yet to earn continuous or sufficient revenue and our ability to sustain our operations is dependent on our ability to raise additional financing. As a result there is substantial doubt about our ability to continue as a going concern. We have accumulated net losses of $12,447,398 for the period from inception June 12, 2008 to July 31, 2014 and have insufficient revenues to date. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditor has expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. As a result we may have to liquidate our business and you may lose your investment. You should consider our auditor's comments when determining if an investment in our company is suitable.

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Because our current officers and directors have other business interests, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail. Mr. David Ashby, our President and director, currently devotes his full attention providing services to the Company. While he presently possesses adequate time to attend to our interest, it is possible that the demands on him from other obligations could increase, with the result that he would no longer be able to devote sufficient time to the management of our business. This could negatively impact our business development.

 

We may be unable to obtain additional capital that we may require to implement our business plan. This would restrict our ability to grow. The proceeds from our financing efforts to date have provided us with a limited amount of working capital not sufficient to fund our proposed operations.  We will require additional capital to continue to operate our business and our proposed operations.  We may be unable to obtain additional capital as and when required.

 

Future acquisitions and future development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

 

We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, the capital we have received to date is not sufficient to fund our operations going forward without obtaining additional capital financing.

 

Any additional capital raised through the sale of equity may dilute your ownership percentage.  This could result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity.  The terms of securities we issue in future may be more favorable to our new investors, and may  include preferences,  superior  voting  rights and the  issuance  of  warrants  or other derivative  securities,  and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

 

Our ability to obtain  needed  financing  may be impaired by such factors as the capital markets generally, our status  as a new  enterprise  without  a  demonstrated  operating  history or the retention or loss of key  management.  If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may be required to cease our operations.

 

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs.  We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.

 

The limited trading of our common stock may impair your ability to sell your shares. There has been no trading market for our common stock since our inception. The lack of trading of our common stock and the low volume of any future trading may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Such factors may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.

 

The market price of our common stock is likely to be highly volatile and subject to wide fluctuations. Assuming we are able to establish an active trading market for our common stock, the market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:   

 

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and our results of operations and financial condition.

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Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline. Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, costs that we incur, and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.

 

Applicable SEC rules governing the trading of "penny stocks" will limit the trading and liquidity of our common stock, which may affect the trading price of our common stock. Our common stock is presently considered to be a "penny stock" and is subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and which regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the FINRA system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.

 

Forward-looking statements

 

This Form 10-K contains forward-looking statements that involve risk and uncertainties.  We use words such as anticipate, believe, will, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements.  Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.

 

 

Item 2. Properties

 

We currently do not own any physical property or own any real property.  

 

Item 3. Legal Proceedings

We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.

 

Item 4. Mine Safety Procedures

Not applicable

 

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As of April 30, 2015 there were 48 shareholders of record of our common stock.

Since inception we have not paid any dividends on our common stock.  We currently do not anticipate paying any cash dividends in the foreseeable future.  Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.  Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, that our Board of Directors may deem relevant.

NONE

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, if our common stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities.

 

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This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of our report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We are a development stage company and have not yet generated or realized any revenues.

We are still in the development stage and have not generated any revenues to date.

We incurred operating losses of $12,447,398 from date of incorporation June 12, 2008 to the year ended July 31, 2014. These losses consisted of general operating expenses and professional fees incurred in connection with the day to day operation of our business, the preparation and filing of our periodic reports and the development of our media content, systems and business. An analysis of the loss is as follows:

		Year ended				Year ended
Expense		7/31/2014				7/31/2013				Change
General/Administration fees		$	208,578			$	208,533			$	45
Management fees			1,083,000				73,762				1,009,238
Consulting fees			125,341				71,428				53,913
Interest			11,595				9,266				2,329
Loss on extinguishment of debt			228,058				7,939,914				(7,711,856	)
Loss on advances			248,800				-				248,800
Net loss for year		$	1,905,372			$	8,302,903			$	(6,397,531	)

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Our cash balance at July 31, 2014 was $3,361 (2013- $4,324) with outstanding liabilities of $434,679 (2013 - $236,882).

Our current cash balance will be unable to sustain operations for the next twelve months. We will be forced to raise additional funds by issuing new debt or equity securities or otherwise. During the year ended July 31, 2014 we raised $217,500 in equity and increased our debt to a related party by $70,774. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We are a development stage company and have generated no revenue to date.

We are not currently able to fund our levels of operations for the next twelve months. As a result we will be forced to raise additional funds by issuing new debt or equity securities or otherwise.  If we fail to raise sufficient capital when needed, we will not be able to complete our business plan.  We are a development stage company and have generated no revenue to date.

Our auditor has issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills.

The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions. Management has plans to seek additional capital through a private placement and public offering of its common stock.

We do not have any 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.

 

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1. Nature of Operations and Continuance of Business

Green Hygienics Holdings Inc.(the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc. to pursue alternative energy and other environmentally friendly ventures.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at July 31, 2014, the Company has not generated any revenues, has a working capital deficit of $431,318, and an accumulated deficit of $12,447,398 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Significant Accounting Policies

(a) Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.

(b) Use of Estimates

The preparation of financial statements in accordance 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 at the date of the consolidated financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to the fair value of stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

(c) Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

(d) Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

(e) Foreign Currency Translation

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

2. Significant Accounting Policies (continued)

(f) Financial Instruments and Fair Value Measures

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loan payable, convertible debt, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(g) Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

(h) Loss Per Share

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

(i) Comprehensive Loss

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements.

(j) Reclassifications

Certain of the prior period amounts have been reclassified to conform to the current period’s presentation.

 

The Company has limited operations and is considered to be in the development stage. During the year ended July 31, 2014, the Company elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to exploration stage.

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3. Loans Payable

(a) As at July 31, 2014, the Company owed$105,250 (2013 - $18,750) to a non-related party, which is non-interest bearing, unsecured, and due on demand.

(b) As at July 31, 2014, the Company owed $25,000 (2013 - $nil) to a non-related party, which is non-interest bearing, unsecured, and due on demand.

(c) As at July 31, 2014, the Company owed $nil (2013 - $95,500) to a non-related party, which is non-interest bearing, unsecured, and due on demand. Refer to Note 6(e).

4. Convertible Debt

(a) On December 17, 2013, the Company issued a convertible note for $24,853 to a non-related party. The note bears interest at 10% per annum, is unsecured, and is due on December 17, 2014. The unpaid amount of principal and accrued interest can be converted into common stock of the Company at any time at the holder’s option at a price of $0.00125 per share.

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $24,583 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. During the year ended July 31, 2014, the Company accreted $5,343 of the debt discount which was recorded as interest expense. As at July 31, 2014, the carrying value of the convertible note was $5,343. Refer to Note 8.

(b) On December 31, 2013, the Company issued a convertible note for $19,500 to a non-related party. The note bears interest at 10% per annum, is unsecured, and is due on December 31, 2014. The unpaid amount of principal and accrued interest can be converted into common stock of the Company at any time at the holder’s option at a price of $0.00125 per share.

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $19,500 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. During the year ended July 31, 2014, the Company accreted $3,581 of the debt discount which was recorded as interest expense. As at July 31, 2014, the carrying value of the convertible note was $3,581. Refer to Note 8.

5. Related Party Transactions

(a) During the year ended July 31, 2014, the Company incurred $83,000 (2013 - $14,000) in management fees and $15,889 (2013 - $nil) in consulting fees to the President and Chief Executive Officer (“CEO”) of the Company.

(b) On July 31, 2014, the Company issued a promissory note for $70,774 to the CEO of the Company. The note bears interest at 5% per annum, is unsecured, and is due on January31, 2015. Refer to Note 8.

(c) As at July 31, 2014, the Company owed $nil (2013 - $29,812) to a former director of the Company, which is included in accounts payable and accrued liabilities.

 

6. Common Stock

Share transactions for the year ended July 31, 2014:

(a) On November 6, 2013, the Company issued 650 shares of common stock at $100 per share for proceeds of $65,000. In connection with this share issuance, the Company issued 20 shares of common stock with a fair value of $2,000 as a finder’s fee.

(c) On November 7, 2013, the Company issued 5,000 shares of common stock with a fair value of $1,000,000 to the President and CEO of the Company for management fees.

(d) On November 17, 2013, the Company issued 454 shares of common stock with a fair value of $69,889 for consulting fees.

(e) On November 17, 2013, the Company issued 1,905 shares of common stock with a fair value of $293,370 to settle a loan payable of $95,500. The Company recorded a loss on settlement of $197,870.

(f) On February 28, 2014, the Company issued 1,525 shares of common stock at $100 per share for proceeds of $152,500. In connection with this share issuance, the Company incurred a finder’s fee of $28,500.

(g) On May 27, 2014, the Company issued 500 shares of common stock with a fair value of $50,000 for general and administrative fees.

Share transactions for the year ended July 31, 2013:

(a) On August 31, 2012, the Company issued 70 shares of common stock with a fair value of $16,800 to the directors of the Company for management fees.

(b) The Company issued 4,375 shares of common stock with a fair value of $892,500 to settle loans payable of $98,750. This resulted in a loss on settlement of $793,750.

(c) The Company 36,836 shares of common stock with a fair value of $7,514,523 to settle accounts payable of $123,192 and debt of $245,167. This resulted in a loss on settlement of $7,146,164.

(d) The Company issued 5,000 shares of common stock at $0.25 per share for proceeds of $250,000.

7. Income Taxes

The Company has net operating losses carried forward of $3,134,360 available to offset taxable income in future years which commence expiring in fiscal 2028.

The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

 

 

7. Income Taxes (continued)

 

The significant components of deferred income tax assets and liabilities as at July 31, 2014 and 2013 are as follows:

 

8. Subsequent Events

(a) On August 11, 2014, the Company issued a convertible note for $86,500 to a non-related party. The note bears interest at 10% per annum, is unsecured, and is due on August 11, 2015. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option at a price of $0.25 per share of the Company’s common stock.

(b) On August 11, 2014, the Company issued a convertible note for $25,000 to a non-related party. The note bears interest at 10% per annum, is unsecured, and is due on August 11, 2015. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option at a price of $0.25 per share of the Company’s common stock.

(c) On April 15, 2015, the Company issued a promissory note for $145,000 to a non-related party. The note bears interest at 5% per annum, is unsecured, and is due on October 15, 2015. In the event of default, the holder may convert the unpaid amount of principal and accrued interest at a price of $0.01 per share of the Company’s common stock.

(d) On April 15, 2015, the Company issued a promissory note to a non-related party for $189,150 to settle convertible debtof $155,853 plus accrued interest of $33,297. Refer to Notes 4, 8(a) and 8(b). The promissory note bears interest at 5% per annum, is unsecured, and is due on October 15, 2015. In the event of default, the holder may convert the unpaid amount of principal and accrued interest into shares of common stock of the Company at a price of $0.01 per share.

(e) On June 1, 2015, the Company completed a 200-for-1 reverse split of its common stock. All share amounts have been retroactively restated for all periods presented.

(f) On June 3, 2015, the Company issued 30,000,000 shares of common stock to settle outstanding promissory notes and accrued interest totalling $334,150. Refer to Notes 8(c) and (d).

(g) On June 22, 2015, the Company issued 1,500,000 shares of common stock to settle $4,500 owing to the former President and CEO of the Company. Refer to Note 5(b).

(h) On July 7, 2015, the Company issued 50,000 shares of common stock to settle $150owing to the former President and CEO of the Company. Refer to Note 5(b).

(i) On July 20, 2015, the Company issued 1,500,000 shares of common stock to settle $4,500 owing to the former President and CEO of the Company. Refer to Note 5(b).

(j) On August 24, 2015, the Company issued 1,600,000 shares of common stock settle $4,800 owing to the former President and CEO of the Company. Refer to Note 5(b)

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