NOTES TO THE FINANCIAL STATEMENTS
March 31, 2016
NOTE 1 - NATURE OF BUSINESS
Nature of Business
Altus Explorations, Inc. (the "Company") was incorporated in the state of Nevada on November 2, 2001.
On October 1, 2010, Altus entered into a Share Exchange Agreement (the "Agreement") with UWD Unitas World Development Inc. ("UWD"), a privately held Canadian incorporated company. Pursuant to the Agreement, Altus issued 80,000,000 shares of common stock for the acquisition of 450 shares of common stock of The Canadian Tactical Training Academy Inc., representing 100% of the issued and outstanding shares of common stock, which were held by UWD. Further, Altus changed its name to Canadian Tactical Training Academy Inc. and increased the authorized share capital from 40,000,000 to 250,000,000 shares of common stock and then further from 250,000,000 to 450,000,000. The Company assumed the business Canadian Tactical Training Academy Inc., which is the training of law enforcement, security, investigation and protection for officers and individuals.
On June 2, 2014 the Company changed its name to Earth Life Sciences Inc. On June 12, 2015, the Company, through an option agreement, issued 225,000,000 shares to Mr. Song Bo, to earn the mineral rights for the White Channel mineral claims located in British Columbia.
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 is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern and the ability of the Company to emerge from the Development stage are dependent upon management's successful efforts to raise additional equity financing to continue operations and generate sustainable significant revenues.
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. The Company will require significant additional financial resources and will be dependent on future financings to fund its ongoing operations as well as other working capital requirements. There is no guarantee that management will be able to raise adequate equity financings or generate profits from operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.
Management of the Company has undertaken steps as part of a plan with the goal of sustaining Company operations for the next twelve months and beyond. These steps include: (a) continuing efforts to raise additional capital and/or other forms of financing; and (b) controlling overhead and expenses. Management is aware that material uncertainties exist, related to current economic conditions, which could cast a doubt about the Company's ability to continue to finance its activities. It is to be expected that the Company may incur further losses in the Development of its business and there can be no assurance that any of these efforts will be successful.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and are expressed in U.S. dollars. The Company's fiscal year-end is December 31. The functional currency of the Company is Canadian Dollars
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 periods. Actual results could materially differ from those estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination of impairment of long lived assets, expected tax rates for future income tax recoveries and determining the fair values of financial instruments.
Equipment
Equipment is recorded at cost. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets which is three years for computers.
Impairment of Assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value cost of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.
Other Comprehensive Income
The Company reports and displays comprehensive income and its components in the financial statements. During the years ended December 31, 2015 and 2014, the Company had no components that would cause comprehensive income to be different than net loss.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting this standard, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
Basic and Diluted Loss per Share
Basic loss per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. For the years presented, diluted loss per share is equal to basic loss per share as the effect of the computations are anti-dilutive.
Financial Instruments
The carrying value of the Company's financial instruments, consisting of cash, accounts payable, convertible loans and subscriptions received in advance approximates their fair value. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Stock-based Compensation
Compensation cost related to share-based payments, such as stock options and employee stock purchase plans, are recognized in the financial statements based on the grant-date fair value of the award. The compensation cost associated with the issuance of stock options will be recognized over its vesting period based on the estimated grant-date fair value.
Stock awards outstanding under the Company's current plans are fully vested, therefore there is no unrecognized compensation cost related to non vested options. No options were granted or exercised during the years ended December 31, 2015 and 2014.
Recent Accounting Pronouncements
In May 2009, the Financial Accounting Standards Board ("FASB") issued guidance that establishes general standards of accounting for and disclosure of events that occur subsequent to the balance sheet date but before financial statements are issued. The statements defines two types of subsequent events: 1) recognized subsequent events, which provide additional evidence about conditions that existed at the balance sheet date, and (2) non-recognized subsequent events, which provide evidence about conditions that did not exist at the balance sheet date, but arose before the financial statements were issued. Recognized subsequent events are required to be recognized in the financial statements, and non-recognized subsequent events are required to be disclosed. The adoption had no material impact on the Company's financial position, results of operations or cash flows.
In June 2009, the FASB issued the Accounting Standards Codification, which establishes a sole source of US authoritative GAAP. The Codification is meant to simplify user access to all authoritative accounting guidance by reorganizing US GAAP pronouncements into approximately ninety accounting topics within a consistent structure; its purpose is not to create new accounting and reporting guidance. The adoption of this guidance did not have an effect on the Company's results of operations, financial position or cash flows.
In June 2014, FASB issued Accounting Standards Update (ASU) No. 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.
A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718,
Compensation Stock Compensation
. As a result, the target is not reflected in the estimation of the awards grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the consolidated financial statements.
In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15
Preparation of Financial Statements Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern.
Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entitys liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entitys liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30,
Presentation of Financial StatementsLiquidation Basis of Accounting
. Even when an entitys liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entitys ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.
We have reviewed the FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.
NOTE 3 - ACCOUNTS AND CONVERTIBLE LOANS PAYABLE
As at December 31, 2015, the Company had accounts payable of $317,941 and convertible loans payable of $422,534.
The Company has outstanding various convertible loans at the following terms:
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Party
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Original Amount
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Balance
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Interest Rate
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|
Conversion Rate
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LagunaFinance - 2011
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$
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77,464
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|
|
Demand
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|
0
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%
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|
$
|
0.001
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|
Unitas 2011
|
|
|
107,588
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|
|
Demand
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|
|
0
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%
|
|
$
|
0.001
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|
M. Landaverde - 2011
|
|
|
145,312
|
|
|
Demand
|
|
|
0
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%
|
|
$
|
0.001
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|
SSIS 2011
|
|
|
32,170
|
|
|
Demand
|
|
|
0
|
%
|
|
$
|
0.001
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|
SG - 2011
|
|
|
15,000
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|
|
Demand
|
|
|
0
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%
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|
$
|
0.001
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TOTAL
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$
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422,534
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The Loans are convertible at the shareholders' option into common stock at a conversion rate of $0.001 per common share. The Company may prepay the Loans at anytime without penalty or bonus.
As at December 31, 2015, the Company has not repaid all of the Loans, nor have the shareholders' provided a Notice of Conversion to the Company.
On July 15, 2015, the Company converted $45,000 of Loans into 45,000,000 shares of the Company..
NOTE 4 - COMMON STOCK
On April 25, 2014, the Company converted $55,000 of its convertible debt into 184,371 shares of common stock of the Company. Pre-split, this equated to 55,000,000 shares.
On June 2, 2015, the Company completed a reverse stock split of 40:1.
On June 10, 2015, the Company completed a reverse stock split of 8:1.
On June 19, 2015, the Company entered into an option agreement (Agreement) with Song Bo, a private mineral holder, to earn a 100% beneficial interest in certain mineral concessions known as the White Channel mineral claims (the Property). Under the terms of the Agreement the Company will have the right to purchase the right, title, and interest in the Property as well as enter onto the Property to conduct reconnaissance, exploration, and development work on the Property. In exchange, the Company issued 225,000,000 restricted shares and pay the sum of $180,000 payable in instalments of $30,000 on the 15
th
of every month commencing July 15, 2015 through December 15, 2015. In addition, the Company shall pay a further $50,000 on each anniversary of the Agreement for a period of four years commencing June 19, 2016 through June 19, 2019.
The Property is subject to a 4% NSR on precious metals, and also subject to royalty payments of $0.25 per tonne on the sale of pit run products or processed products; or $0.35 per tonne on the sale of processed mineral products where the selling price of the processed minerals products sell for a price in excess of $35 per tonne; or an amount of $1.00 per tonne on the same of processed mineral products where the selling price of the processed mineral products sell for a price in excess of $100 per tonne. 50% of the NSR can purchased by the Company for $1,000,000 at any time before the fifth year anniversary of the Agreement.
On July 2, 2015, the Company issued a total of 45,000,000 shares to satisfy certain outstanding convertible debt in the amount of $45,000.
The Company will maintain its security business as well as develop its mining interests.
NOTE 5 - INCOME TAXES
The Company is subject to United States federal and state income taxes at an approximate rate of 35%.
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards, regardless of their time of expiry.
No provision for income taxes has been provided in these financial statements due to the net loss for the years ended December 31, 2015 and 2013. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code and similar state provisions.