REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Golden Star Resource Corp.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Golden Star Resource Corp. (the “Company”) as of June 30, 2019 and
2018, and the related statements of operations and comprehensive loss, stockholders’ (deficiency) equity, and cash flows
for years then ended, and the related note (collectively referred to as the “financial statements”). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2019 and
2018, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Material
Uncertainty Related to Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has incurred losses from inception and has not generated revenue to date. These
factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 2 The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
MNP
We
have served as the Company’s auditor since 2011.
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Vancouver,
British Columbia
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September
27, 2019
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Chartered
Professional Accountants
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NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
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1.
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NATURE
OF OPERATIONS AND GOING CONCERN
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Organization
The
Company was incorporated in the State of Nevada, U.S.A. on April 21, 2006.
Exploration
Stage Activities
The
Company has been in the exploration stage since its formation and is primarily engaged in the acquisition and exploration of mining
claims. Upon location of a commercial minable reserve, the Company expects to actively prepare the site for its extraction and
enter a development stage. Currently, the Company is actively looking for other mineral properties for its
planned business operation.
GOING
CONCERN
The
general business strategy of the Company is to acquire and explore mineral properties. The continued operations of the Company
and the recoverability of mineral property costs is dependent upon the existence of economically recoverable mineral reserves,
the ability of the Company to obtain necessary financing to complete the development of its properties, and upon future profitable
production. The Company has not generated any revenues or completed development of any properties to date. Further, the Company
has a working capital deficit of $593,352 (June 30, 2018 - $560,460), has incurred losses of $700,412 since inception, and further
significant losses are expected to be incurred in the exploration and development of its mineral properties. The Company will
require additional funds to meet its obligations and maintain its operations. There can be no guarantee that the Company will
be successful in raising the necessary financing. Management’s plans in this regard are to raise equity financing as required.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments that might result from this uncertainty.
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2.
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BASIS
OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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BASIS
OF PRESENTATION
The
accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”)
in the United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S Securities and Exchange Commission
(“SEC”) for interim financial information. The financial statements reflect all normal recurring adjustments, which,
in the portion of management, are considered necessary for a fair presentation of the results for the periods shown. The results
of operations for the periods presented are not necessarily indicative of the results expected for any future period. The information
included in these financial statements should be read in conjunction with Management’s Discussion and Analysis and the audited
financial statements and accompanying notes filed in Form 10-K for the year ended June 30, 2019 filed on September
27, 2019 with the U.S. Securities and Exchange Commission.
GOLDEN
STAR RESOURCE CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
SIGNIFICANT
ACCOUNTING POLICIES
Cash
and Cash Equivalents
Cash
and cash equivalents consist entirely of readily available cash balances. There were no cash equivalents as of June 30, 2019
and 2018.
Income
Taxes
Income
taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, deferred tax liabilities
and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted income tax rates expected to apply when the asset is realized or the liability is settled.
The effect of a change in income tax rates on deferred tax liabilities and assets is recognized in income in the period in which
the change occurs. Deferred tax assets are recognized to the extent that they are considered more likely than not to be realized.
Per
FASB ASC 740 “Income taxes” under the liability method, it is the Company’s policy to provide for uncertain
tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more
likely than not to be sustained upon examination by tax authorities. At June 30, 2019, the Company believes it has appropriately
accounted for any unrecognized tax benefits. To the extent the Company prevails in matters for which a liability for an unrecognized
benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given
financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded
as Interest Expense.
Comprehensive
Income (Loss)
The
Company accounts for comprehensive income under the provisions of ASC Topic 220-10, Comprehensive Income – Overall, which
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company
is disclosing this information on its Statements of Operations and Comprehensive Loss.
Earnings
(Loss) Per Share
Basic
loss per share is computed on the basis of the weighted average number of common shares outstanding during each period. Diluted
loss per share is computed on the basis of the weighted average number of common shares and dilutive securities outstanding.
Stock options are considered to be common stock equivalents and were not included in the net loss per share calculation for the
year ended June 30, 2019 and 2018 because the inclusion of such underlying shares would have had an anti-dilutive effect.
Financial
Instruments and Fair Value of Financial Instruments
Fair
Value of Financial Instruments – the Company adopted SFAS ASC 820-10-50, “Fair Value Measurements”. This guidance
defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure
requirements for fair value measures. The three levels are defined as follows:
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●
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Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
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●
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Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
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●
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Level
3 inputs to valuation methodology are unobservable and significant to the fair measurement.
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GOLDEN
STAR RESOURCE CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
As
at June 30, 2019, the fair value of cash and cash equivalents
was measured using Level 1 inputs.
The
Company’s financial instruments are cash, accounts payable and accrued liabilities, loan payable and due to related party.
The recorded values of cash and cash equivalents, accounts payable and accrued liabilities and loan payable approximate their
fair values based on their short-term nature.
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3.
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RECENT ADOPTED AND FUTURE ACCOUNTING STANDARD
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RECENT
ADOPTED ACCOUNTING STANDARD
The
following accounting standards were adopted by the Company effective July 1, 2018:
In
May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.
This update provided clarity and reduced both diversity in practice and cost and complexity when applying the guidance in Topic
718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments. The new guidance reduced diversity in practice in how certain transactions are classified in the statement of cash flows.
In
January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities. The amendments to the guidance enhance the reporting model for financial instruments, which
includes amendments to address aspects of recognition, measurement, presentation, and disclosure.
In
January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments
clarified the definition of a business. The amendments affect all companies that must determine whether they have acquired or
sold a business.
The
adoption of the standards above has no impact on the Company’s financial statements.
RECENT
ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In
July 2017, the FASB issued ASU 2017-11”Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480);
Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II)
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 allows
companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is
considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with
down round features may no longer be required to be accounted for as derivative liabilities.
A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward.
For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a
dividend and a reduction of income available to Common Stockholders in computing basic earnings per share. For convertible instruments
with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial
conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018,
and interim periods within those fiscal years. Early adoption is permitted.
GOLDEN
STAR RESOURCE CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
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3.
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RECENT ADOPTED AND FUTURE ACCOUNTING STANDARD (Continued)
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In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure
Requirements for Fair Value Measurement. For all entities, amendments are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and
weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description
of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the
initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective
date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of
ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date.
In
June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting. These amendments expand the scope of Topic 718, Compensation—Stock Compensation (which currently only includes
share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently,
the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic
505-50, Equity—Equity-Based Payments to Non-Employees. This standard is effective for fiscal years beginning after December
15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s
adoption date of Topic 606, Revenue from Contracts with Customers.
In
February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (Topic 842) “Leases.”
Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, “Leases.” Under
Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced
disclosures. Leases will continue to be classified as either finance or operating.
In
July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. For entities that early adopted Topic
842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic
842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective
for use for fiscal years beginning after December 15, 2018.
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash flow statements.
GOLDEN
STAR RESOURCE CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
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4.
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MINERAL CLAIM INTEREST
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On
August 15, 2013, the Company entered into a Quitclaim Deed (the “Deed”) with Kee Nez Resources, LLC (“Grantor”),
a Utah limited liability company. Pursuant to the Deed, the Grantor, in consideration of $10 and other valuable consideration,
remise, release, and forever quitclaim unto the Company all of Grantor’s right, title, and interest in and to the GSR group
of unpatented lode mining claims situated in Churchill Country, Nevada. As a result, the Company has obtained title to the GSR
claims in August 2013.
The
Company did not incur further expenditures on the property during the period ending June 30, 2019 (June 30, 2018: $nil) due to
lack of cash.
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a)
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On
April 24, 2006, the Company issued 6,000,000 common shares at $0.00001 per share to two founding shareholders.
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b)
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On
March 28, 2007, the Company closed its public offering and issued additional 1,070,000 common shares at $0.10.
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c)
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The
Company has not issued any shares during the year ended June 30, 2019 and 2018 and it has no stock option plan, warrants or
other dilutive securities.
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6.
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DUE TO RELATED PARTIES
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As
of June 30, 2019 due to related parties balance of $211,541 (June 30, 2018: $182,628) represents the combination of the following:
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a)
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$54,959
(June 30, 2018: $54,959) owed to a company controlled by a former director and principal shareholder of the Company, for the
amount of office, transfer agent and travel expenses paid by the related party on behalf of the Company. The amount is unsecured,
non-interest bearing and due on demand;
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b)
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$28,000
(June 30, 2018: $28,000) owed to a director of the Company, for the amount of office, travel and telephone expenses paid by
the related party on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.
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c)
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$128,582
(June 30, 2018: $99,669) was payable to a principal shareholder’s company, for the operating expenses paid by the related
party on behalf of the Company. The loan amount is unsecured, non-interest bearing and due on demand.
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Loan
payable consists of the following:
$201,558
(June 30, 2018: $201,558) was payable to non-related parties. The loan amount is unsecured, non-interest bearing and due on demand.
GOLDEN
STAR RESOURCE CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
(Stated
in U.S. Dollars)
A
reconciliation of income tax expense to the amount computed at the statutory rate is as follows:
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2019
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2018
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Net loss for the year
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$
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(32,892
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)
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$
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(36,342
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Statutory tax rate
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21.00
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%
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27.50
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%
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Computed expected (benefit) income taxes
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(6,907
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)
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(9,994
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)
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Income tax benefit not recognized
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6,907
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9,994
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$
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-
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$
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-
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Significant
components of deferred income tax assets are as follows:
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2019
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2018
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Operating losses carried forward
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$
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140,000
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$
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140,000
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Valuation allowance
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(140,000
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)
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(140,000
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)
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$
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-
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$
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-
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The
Company has incurred operating losses of approximately $689,000 which, if unutilized, will expire through to 2039. Future tax
benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset
by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of
the operating loss carry forwards:
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Amount
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Expiration Date
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37,000
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2027
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68,000
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2028
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22,000
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2029
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13,000
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2030
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88,000
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2031
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107,000
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2032
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125,000
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2033
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54,000
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2034
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57,000
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2035
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30,000
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2036
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19,000
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2037
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36,000
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2038
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33,000
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2039
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Total income tax operating loss carry forward
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689,000
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