Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean First American Silver Corp., unless otherwise indicated.
General Overview
We were incorporated in the State of Nevada on April 29, 2008, under the name "Mayetok, Inc.". As Mayetok, Inc. we were engaged in the development of a website to market vacation properties in the Ukraine.
On June 8, 2010, we initiated a one (1) old for 35 new forward stock split of our issued and outstanding common stock. As a result, our authorized capital increased from 100,000,000 to 3,500,000,000 shares of common stock and the issued and outstanding increased from 2,200,000 shares of common stock to 77,000,000 shares of common stock, all with a par value of $0.001.
Also on June 8, 2010, we changed our name from "Mayetok, Inc." to "First American Silver Corp.", by way of a merger with our wholly owned subsidiary First American Silver Corp., which was formed solely for the change of name. We changed the name of our company to reflect the new direction of our company in the business of acquiring, exploring and developing mineral properties. As of June 2010, we had abandoned our former business plan of seeking to market vacation properties.
Our name change and forward stock split became effective with the Over-the-Counter Bulletin Board at the opening of trading on June 16, 2010, on which date we adopted the new stock symbol "FASV".
On June 18, 2018, we changed our name from "First American Silver Corp." to “Century Cobalt Corp”, by way of a merger with our wholly owned subsidiary Century Cobalt Corp., which was formed solely for the change of name. We changed the name of our company to reflect the new direction of our company in the business of acquiring, exploring and developing mineral properties. Our name change became effective with the Over-the-Counter Bulletin Board at the opening of trading on June 18, 2018, on which date we adopted the new stock symbol "CCOB”
Our Current Business
On August 7, 2018, we entered into an assignment agreement with Oriental Rainbow Group Ltd., in regards to the acquisition of certain mineral claims in Lemhi County, Idaho known as the “Idaho Cobalt Belt”.
Oriental Rainbow and Plateau Ventures LLC had entered into a purchase agreement dated September 4, 2017, wherein Oriental Rainbow had acquired from Plateau a 100% interest in the property, subject to certain subsequent payments and conditions.
The claims comprising the property (649 claims) initially totaled approximately 12,980 acres, subject to an option under the purchase agreement for the acquisition of additional claims. Such option had been exercised with additional claims acquired, resulting in a total of 695 claims comprising approximately 13,900 acres.
Oriental Rainbow has assigned its interest in the property to us in consideration for 2,500,000 restricted shares of common stock (the “Consideration Shares”). We have assumed all of Oriental Rainbow’s obligations under the purchase agreement, which material obligations include: the issuance of up to 500,000 restricted shares of common stock to Plateau upon listing on a recognized stock exchange; and paying Plateau $1,000,000 in four equal staged payments upon completion of a positive feasiblity study on the property.
On September 14, 2018, we entered into a consulting agreement with Alexander Stanbury, whereby Mr. Stanbury agreed to provide consulting services to us regards to his position is our President and Chief Executive Officer. The agreement has a three year term, commencing August 1, 2018. As compensation for entering into the agreement and providing such consulting services, we have agreed to compensate Mr. Stanbury by issuing 5,000,000 restricted common shares of our capital stock. In addition, Mr. Stanbury will be receiving a salary of $102,000 per annum and shall be entitled to receive an additional 1,000,000 common shares on each anniversary of the effective date of the agreement.
Prior to August 1, 2018, the Company had a verbal agreement with Mr. Stanbury whereby he would bill the Company $8,500 per month which included June 2018 and July 2018.
Prior thereto on September 11, 2018 we entered into a consulting agreement with Lester Kemp, whereby Mr. Kemp agreed to provide services as our Chief Technical Officer.
The agreement has term expiring December 31, 2020, with the term having commenced on August 1, 2018. As compensation for entering into the agreement and providing such consulting services, we have agreed to compensate Mr. Kemp by issuing 250,000 restricted common shares of our capital stock. In addition, Mr. Kemp shall be entitled to receive an additional 250,000 common shares after six months from the effective date of the agreement.
Results of Operations
Three Months Ended August 31, 2018 Compared to the Three Months Ended August 31, 2017
We had a net loss of $127,994 for the three month period ended August 31, 2018 which was $115,964 more than the net loss of $12,030 for the three month period ended August 31, 2017. The change in our results over the two periods is a result of increases in exploration, consulting, professional and general and administrative expenses.
The following table summarizes key items of comparison and their related increase (decrease) for the three month periods ended August 31, 2018 and August 31, 2017:
|
|
Three Months
Ended
August 31, 2018
|
|
|
Three Months
Ended
August 31, 2017
|
|
|
Change Between
Three Month
Periods Ended
August 31, 2018 and
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
$
|
21,222
|
|
|
$
|
3,707
|
|
|
$
|
17,515
|
|
Consulting fees
|
|
|
48,063
|
|
|
|
-
|
|
|
|
48,063
|
|
Transfer agent and filing fees
|
|
|
5,196
|
|
|
|
1,410
|
|
|
|
3,786
|
|
Exploration
|
|
|
9,842
|
|
|
|
-
|
|
|
|
9,842
|
|
General and administrative
|
|
|
35,886
|
|
|
|
413
|
|
|
|
35,473
|
|
Interest/Other (income) expense
|
|
|
7,785
|
|
|
|
6,500
|
|
|
|
1,285
|
|
Net loss
|
|
$
|
127,994
|
|
|
$
|
12,030
|
|
|
$
|
115,964
|
|
Nine months Ended August 31, 2018 Compared to the Nine months Ended August 31, 2017
We had a net loss of $113,010 for the nine month period ended August 31, 2018, which was $71,835 more than the net loss of $41,175 for the nine month period ended August 31, 2017. The change in our results over the two periods is a result of increases in exploration, consulting, professional and general and administrative expenses.
The following table summarizes key items of comparison and their related increase (decrease) for the nine month periods ended August 31, 2018 and August 31, 2017:
|
|
Nine months
Ended
August 31, 2018
|
|
|
Nine months
Ended
August 31, 2017
|
|
|
Change Between
Nine month
Periods Ended
August 31, 2018 and
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
$
|
40,133
|
|
|
$
|
14,056
|
|
|
$
|
26,077
|
|
Consulting fees
|
|
|
79,743
|
|
|
|
-
|
|
|
|
79,743
|
|
Transfer agent and filing fees
|
|
|
10,730
|
|
|
|
7,871
|
|
|
|
2,859
|
|
Exploration
|
|
|
9,843
|
|
|
|
-
|
|
|
|
9,843
|
|
General and administrative
|
|
|
51,297
|
|
|
|
505
|
|
|
|
50,792
|
|
Interest/Other (income) expense
|
|
|
(78,735
|
)
|
|
|
18,743
|
|
|
|
(94,478
|
)
|
Net loss
|
|
$
|
113,010
|
|
|
$
|
41,175
|
|
|
$
|
71,835
|
|
Revenue
We have not earned any revenues since our inception and we do not anticipate earning revenues in the upcoming quarter.
Liquidity and Capital Resources
Our balance sheet as of August 31, 2018 reflects current assets of $236,693. We had cash in the amount of $165 and a working capital deficit in the amount of $486,991 as of August 31, 2018 We have insufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
Working Capital
|
|
At
August 31, 2018
|
|
|
At
November 30 2017
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
236,693
|
|
|
$
|
541
|
|
Current liabilities
|
|
|
723,684
|
|
|
|
517,113
|
|
Working capital
|
|
$
|
(486,991
|
)
|
|
$
|
(516,572
|
)
|
We anticipate generating losses and, therefore, may be unable to continue operations further in the future.
Cash Flows
|
|
Nine months Ended
|
|
|
|
August 31, 2018
|
|
|
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) operating activities
|
|
$
|
(42,076
|
)
|
|
$
|
(25,708
|
)
|
Net cash (used in) investing activities
|
|
|
(108,000
|
)
|
|
Nil
|
|
Net cash provided by (used in) financing activities
|
|
|
149,700
|
|
|
|
26,000
|
|
Net (decrease) in cash during period
|
|
$
|
(376
|
)
|
|
$
|
292
|
|
Operating Activities
Net cash used in operating activities during the nine months ended August 31, 2018 was $42,076, an increase of $16,368 from the $25,708 net cash outflow during the nine months ended August 31, 2017.
Investing Activities
Cash used in investing activities during the nine months ended August 31, 2018 was $108,000, which was a $108,000 increase from the $Nil cash used in investing activities during the nine months ended August 31, 2017. The increase was a result of expenditures related to the acquisition of a resource property.
Financing Activities
Cash used in financing activities during the nine months ended August 31, 2018 was $149,700 as compared to $26,000 in cash provided by financing activities during the nine months ended August 31, 2017.
We estimate that our operating expenses and working capital requirements for the next 12 months to be as follows:
Estimated Net Expenditures During The Next Twelve Months
Payments due under property purchase agreement
|
|
$
|
108,000
|
|
General and administrative expenses
|
|
|
180,000
|
|
Professional fees
|
|
|
60,000
|
|
Total
|
|
$
|
348,000
|
|
To date we have relied on proceeds from the sale of our shares in order to sustain our basic, minimum operating expenses; however, we cannot guarantee that we will secure any further sales of our shares. We estimate that the cost of maintaining basic corporate operations (which includes the cost of satisfying our public reporting obligations) will be approximately $2,000 per month. Due to our current cash position of approximately $165 as of August 31, 2018, we estimate that we have insufficient cash to sustain our basic operations for the next twelve months.
We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.
Future Financings
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Accounting Basis
Our company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America ("GAAP" accounting). Our company has adopted a December 31 fiscal year end.
Cash and Cash Equivalents
Our company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At August 31, 2018 and November 30, 2017, respectively, we had $165 and $541 of unrestricted cash to be used for future business operations.
Our company's bank accounts are deposited in insured institutions. The funds are insured up to $250,000. At times, our company's bank deposits may exceed the insured amount. Management believes that it has little risk related to the excess deposits.
Concentrations of Credit Risk
Our company maintains our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. Our company continually monitors our banking relationships and consequently has not experienced any losses in such accounts. Our company believes we are not exposed to any significant credit risk on cash and cash equivalents.
Stock-based Compensation
Our company accounts for employee stock-based compensation in accordance with the guidance of ASC Topic 718, COMPENSATION - STOCK COMPENSATION which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. There has been no stock-based compensation issued to employees.
Our company follows ASC Topic 505-50, formerly EITF 96-18, "ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING GOODS AND SERVICES," for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to our company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is our company's policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of August 31, 2018, there have been no interest or penalties incurred on income taxes.
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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Our company is in the exploration stage and has yet to realize revenues from operations. Once our company has commenced operations, we will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by our customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing our company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.