AZIL Aziel Corporation (CE)

On July 19, 2012, the directors and majority shareholder approved a resolution to forward split the shares on a 1:30 basis, to be effective August 9, 2012.  The number of shares has been retroactively restated to reflect the forward split.

The accompanying notes are an integral part of the financial statements.

6

US Tungsten Corp.

(An Exploration Stage Company)

Statement of Cash Flows

7

(Expressed in U.S. Dollars) (Unaudited)

                            The accompanying notes are an integral part of the financial statements.

8

US Tungsten Corp.

(An Exploration Stage Company)

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 2:

Significant Accounting Policies – ( continued )

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 applicable to exploration stage enterprises, and are expressed in U.S. dollars.  The Company’s fiscal year end is May 31.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Mineral property costs

The Company has been in the exploration stage since its formation on January 10, 2007 and has not yet realized any revenues from its planned operations.  It is primarily engaged in the acquisition and exploration of mining properties.  In accordance with FASB ASC 932 “Extractive Activities–Oil and Gas”, costs incurred to purchase or acquire a property (whether proved or unproved reserves) shall be capitalized when incurred. This includes acquisition costs associated with mineral claims. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves, currently no property has reached the production stage. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title.  Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Environmental expenditures

The operations of the Company have been, and may in the future, be affected from time to time, in varying degrees, by changes in environmental regulations, including those for future reclamation and site restoration costs.  Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable.  The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

10

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 2:

Significant Accounting Policies – ( continued )

Impairment of Long-Lived Assets

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17, if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-10 through 15-5, Impairment or Disposal of Long-Lived Assets.

Income taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with FASB ASC 740 “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes.  Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carry-forwards.  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 provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards.  This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

11

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 2:

Significant Accounting Policies – ( continued )

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of August 31, 2013 and May 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market.  Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

Basic and diluted net loss per share

The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

12

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 2:

Significant Accounting Policies – ( continued )

Use of estimates

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

Concentrations of credit risk

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and accounts payable.  The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits.

Risks and uncertainties

The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.

Website Development Costs

Costs incurred in developing and maintaining a website are charged to expense when incurred for the planning, content population, and administration or maintenance of the website. All development costs for the application, infrastructure, and graphics development are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized using the straight-line basis over a three year estimated economic life of the product.

Asset Retirement Obligation

The Company follows ASC 410, Asset Retirement and Environmental Obligations, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability and is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate.

13

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 3:

Recent accounting pronouncements

The Company has evaluated the recent accounting pronouncements and believes that none of them will have a material effect on the company’s financial statements.

Amortization of $334 and $nil is included in general and administrative expenses in the statement of operations for the periods ended August 31, 2013 and August 31, 2012, respectively.  

Note 5:

Mineral Claim

Pursuant to a mineral property purchase agreement dated February 26, 2007, the Company acquired a 100% undivided right, title and interest in a mineral claim, located in the Alberni Mining Division of British Columbia, Canada for a cash payment of $5,129 and delivery of a geological report.  The Company has paid an additional $6,098 for a geological report and $2,285 in Mineral right renewal fees.  Mineral property acquisition costs are capitalized when incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves, currently no property has reached the production stage. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.  During the year ended May 31, 2011, the Company evaluated the mineral claim and determined that the asset has been impaired because the Company could not project any future cash flows or salvage value and the asset was not recoverable.  Consequently, the Company has recorded an impairment loss for the full amount of $13,512 for the year ended May 31, 2011.

Pursuant to a mineral property assignment agreement dated August 21, 2012, the Company acquired an option to acquire a 100% interest in 3 mineral claims in Calvert, Montana, subject to a 2% Net Value Royalty.  Consideration for the property was as follows:

14

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 5:

Mineral Claim – ( continued )

Cash payments totalling $1,000,000 payable as follows:

-

$5,000 upon the execution of an assignment agreement, (paid);

-

$5,000 on or before October 1, 2012, (paid);

-

$15,000 on or before June 18, 2013, (paid);

-

$20,000 on or before June 18, 2014;

-

$25,000 on or before June 18, 2015;

-

$30,000 on or before June 18, 2016;

-

$35,000 on or before June 18, 2017;

-

$40,000 on or before June 18, 2018;

-

$45,000 on or before June 18, 2019;

-

$50,000 on or before June 18, 2020;

-

$50,000 every year until $1,000,000 is paid.

The Company has the right to purchase up to 1.8% of the Net Value Royalty for $1,500,000.

On October 9, 2012 the Company completed the registration and acquisition of 195 newly staked mineral claims located in Calvert, Montana.  The claims were registered on behalf of the Company with the U.S. Department of the Interior, Bureau of Land Management, at a cost of $12,285.  The claims span approximately 3,900 acres and are contiguous with the three claims that constitute the Company’s recently optioned Calvert Property.  The newly acquired claims will form part of the Calvert Property for the purposes of that Option Agreement and will be subject to a 2% net smelter royalty.

On January 31, 2013 the Company entered into an agreement to stake additional claims in Montana.  The Company has advanced $25,000 to stake additional mineral claims located in Calvert, Montana.  Once completed, and should our company wish to proceed with the staking of the Greenstone area we will be required to pay to Dykes Geologic $15,000. The Company also has an obligation to issue 100,000 shares as part of the acquisition which has been valued at $42,000 and accrued as stock payable.

On June 6, 2013, the Company filed its geological report on the Property in an 8K.

Note 6:

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.

15

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 7:

Common Stock

On July 19, 2012, the directors and majority shareholder passed a resolution to forward split the Company’s shares on a 1:30 basis, to be effective August 9, 2012.  The number of shares has been retroactively restated to reflect the forward split.

a.

Authorized - The total authorized capital is 2,250,000,000 common shares with a par value of $0.001.

b.

Issued and outstanding - The total issued and outstanding capital stock is 75,750,000.  

On February 8, 2007, 135,000,000 common shares of the Company were subscribed for cash proceeds of $4,500. Out of these 123,000,000 shares were subsequently cancelled during the year ended May 31, 2013. (Note 8)

On February 21, 2007, 37,500,000 common shares of the Company were subscribed for cash proceeds of $5,000.

On March 19, 2007, 26,250,000 common shares of the Company were subscribed for cash proceeds of $17,500.

As of March 19, 2007, the Company received a total of $27,000 for 75,750,000 shares of common stock.

On February 19, 2013, the Company entered into a share cancellation/return to treasury agreement with Matthew Markin, President, wherein Matthew Markin has agreed to the cancellation and return to treasury of 123,000,000 shares of common stock of Company held by Matthew Markin.

On April 4, 2013, the Board of Directors of the Company ratified, approved and adopted a Stock Option Plan for the Company in the amount of 8,000,000 shares with an exercisable period up to 5 years.  In the event an optionee ceases to be employed by or to provide services to the Company for reasons other than cause, any Stock Option that is vested and held by such optionee may be exercisable within up to three months after the effective date that his position ceases. No Stock Option granted under the Stock Option Plan is transferable. Any Stock Option held by an optionee at the time of his death may be exercised by his estate within one year of his death or such longer period as the Board of Directors may determine.

On March 1, 2013, the Company granted 240,000 fully vested stock options to directors of the Company at $0.30 per share expiring March 1, 2018.

16

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 7:

Common Stock – ( continued )

On May 10, 2013, the Company granted 200,000 fully vested stock options to a director of the Company at $0.30 per share expiring May 10, 2018.

On May 14, 2013, the Company granted 150,000 fully vested stock options to directors of the Company at $0.30 per share expiring May 14, 2018.

On May 23, 2013, the Company granted 1,000,000 fully vested stock options to a director of the Company at $0.30 per share expiring May 23, 2018.

On May 24, 2013, the Company granted 50,000 fully vested stock options to a director of the Company at $0.30 per share expiring May 24, 2018.

On May 31, 2013, the Company granted 118,022 fully vested stock options to directors of the Company at $0.31 per share expiring May 31, 2018.

On June 1, 2013, the Company granted 500,000 fully vested stock options to a director of the Company at $0.30 per share expiring August 31, 2018.

On August 31, 2013, the Company granted 355,000 fully vested stock options to directors and senior officers of the Company at $0.24 per share expiring August 31, 2018.

During the period ended August 31, 2013, a total of 855,000 options were granted.  The Company recognized stock based consulting expenses totalling $204,666 which was charged to operations.  The fair value of each option granted is estimated at the respective grant date using the Black-Scholes Option Model.  The following assumptions were made in estimating the fair value:

At August 31, 2013, the following stock options were outstanding:

17

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

At August 31, 2013, no warrants were outstanding.

c.

Stock payable – The Company has accrued for various obligations to issue shares.

On January 31, 2013, the Company has an obligation to issue 100,000 shares in accordance with an agreement to stake additional claims in Montana.  This obligation to issue shares has been accrued at $42,000 and has been recorded as an exploration advance.

On February 11, 2013, the Company entered into an agreement for consulting services with an unrelated party in an arm’s length transaction.  The terms of the agreement is 12 months and requires the issuance of 150,000 restricted common shares after the first three months.  The Company has recognized the shares payable under the contract to August 31, 2013 and has accrued $46,500 as stock payable.

On February 8, 2013, the Company recorded the fair value of the beneficial conversion feature of funds received from the line of credit (see note 10), total beneficial conversion feature was recorded to additional paid - in capital in the amount of $160,000.

On February 19, 2013, the Company recorded the fair value of the beneficial conversion feature of funds received from the line of credit (see note 10), total beneficial conversion feature was recorded to additional paid - in capital in the amount of $100,000.

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US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 8:

Reclassification: Stock Split Adjustment

Effective February 19, 2013, the President voluntarily cancelled 123,000,000 shares of his      outstanding common stock of the Company which were cancelled and returned to the pool of the Company’s authorized and unissued shares of common stock.  These cancelled shares were previously recorded in the financials at a total of pre-split 135,000,000.  Since the shares under this agreement have been cancelled without the exchange of consideration to reduce number of shares outstanding, the Company considered the change in capital structure from the cancellation agreement in substance a reverse stock split.  In accordance with SAB Topic 4-C, the Company recorded the cancellation retroactively as a reduction to the par value of common stock with a corresponding increase to accumulated deficit.

Note 9:

Related Party Transactions

As of August 31, 2013 and May 31, 2013, total advances from a director of the Company were $109,178 and $109,178, respectively and of these advances, $86,515 and $86,515 were from a former director of the Company.  The amounts are unsecured, non interest bearing and are due on demand.  

On January 15, 2013 and subsequently amended on May 23, 2013, the Company entered into an employment agreement with a director and senior officer.  Terms of employment include monthly payments of $2,500, payment of a signing bonus in the amount of $5,000 cash (paid) and the issuance of 1,000,000 stock options at a price of $0.30 exercisable for a period of five years.  In addition, the Company will grant 50,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $290,000 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $1,143 at May 31, 2013.

On February 21, 2013 and subsequently amended on May 10, 2013, the Company entered into a director’s association agreement with a new director.  Terms of the agreement include the issuance of 200,000 options at a price of $0.30 exercisable for a period of five years and payment of $500 per directors’ meeting attended.  In addition, the Company will grant 20,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $62,000 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $1,200 at May 31, 2013.

19

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 9:

Related Party Transactions – ( continued )

On March 1, 2013 and subsequently amended on May 14, 2013 the Company entered into a director’s advisory agreement with a new director.  Terms of the agreement include the issuance of 50,000 stock options at a price of $0.30 exercisable for a period of five years and payment of $500 per directors’ meeting attended.  In addition, the Company will grant 50,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.   The Company has recognized a value of $15,500 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $971 at May 31, 2013.

On May 14, 2013 the Company entered into a director’s advisory agreement with a new director.  Terms of the agreement include the issuance of 100,000 stock options at a price of $0.30 exercisable for a period of five years and payment of $500 per directors’ meeting attended.   In addition, the Company will grant 20,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $31,000 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $971 at May 31, 2013.

On May 24, 2013 the Company entered into a director’s advisory agreement with a new director.  Terms of the agreement include the issuance of 50,000 stock options at a price of $0.30 exercisable for a period of five years and payment of $500 per directors’ meeting attended.   In addition, the Company will grant 20,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $14,500 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $400 at May 31, 2013.

On March 1, 2013, the Company entered into an employment agreement with a senior officer.  Terms of the agreement include the issuance of 200,000 stock options at a price of $0.30 exercisable for a period of five years and payment of $500 per directors’ meeting attended.   In addition, the Company will grant 100,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $80,000 for the options granted upon agreement date and has accrued a proportionate amount of quarterly options to be valued at $26,000 at May 31, 2013.

20

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 9:

Related Party Transactions – ( continued )

On June 1, 2013, the Company entered into an employment agreement with a director and senior officer.  Terms of the agreement include monthly payments of $15,000, payment of a signing bonus of $100,000, and the issuance of 500,000 stock options at a price of $0.30 exercisable for a period of five years.   In addition, the Company will grant 125,000 options at the end of each fiscal quarter at an exercise price fixed at the previous 10 day trading average plus 10%.  The Company has recognized a value of $129,997 for the options granted upon agreement date.

On August 31, 2013, the Company granted a total of 355,000 options exercisable at a price of $0.224 for a period of five years to directors and senior officers pursuant to the terms of their respective employment and association agreements.  The Company has recognized a value of $74,670 for the options granted upon agreement date.

Note 10:

Line of Credit

On February 2, 2013, the Company entered into an agreement for a $1,000,000 line of credit which is convertible into shares of the Company with an unrelated third party in an arm’s length transaction.  The loan is convertible into shares at a price of $0.30 until February 2, 2014 and bears interest of 5% per year.  As at August 31, 2013 a total of $9,117 was charged to interest. Upon conversion the Company will issue up to 2,000,000 share purchase warrants to purchase 2,000,000 restricted common shares at $0.80 per shares for a period of three years.  The Company and lender have agreed to convert the outstanding balance and interest into shares at the end of the calendar year.   

As at August 31, 2013, the Company has received $451,000.  The Company has determined the value associated with the conversion feature in connection with the convertible note payable.  The Company has determined the note, with a face value of $451,000, to have a beneficial conversion feature of $98,607.  The beneficial conversion feature has been accreted and is being amortized over the life of the note (which is calendar year end December 31 for each year when the advance is received; being the proposed date of conversion).  As at August 31, 2013, $161,397 had been amortized and expensed as interest.  The beneficial conversion feature is valued under the intrinsic value method.

21

US Tungsten Corp.

(An Exploration Stage Company)

Notes to Unaudited Financial Statements

(Expressed in U.S. Dollars)

August 31, 2013

Note 11:

Other

On February 21, 2013, Company entered into insurance agreement with a third party. As per agreement the Company needs to pay an annual premium of $17,500.

As a parallel arrangement, Company entered in to a financing arrangement with IPFS Corporation. As per terms of financing agreement the Company paid a cash down payment of $1,493 on signing of the agreement and the balance amount in 11 monthly installments. As on August 31, 2013, $ 7,266 is payable to IPFS Corporation, which is reflected in other loans.

As of August 31, 2013 and May 31, 2013, the Company had prepaid insurance totaling $9,702 and $12,753, respectively.  The prepaid insurance will be expensed on a straight line basis over the remaining life of the insurance policy.  During the periods ended August 31, 2013 and 2012, the Company recorded $4,251 and $NIL of insurance expenses.

Note 12:

Subsequent Event

On October 2, 2013, Matthew Markin resigned as President and Director of the Company

22

ITEM 2.

23

work on the Calvert Property, consisting of verifying the historical insitu reserves and a regional exploration program to evaluate the potential for discovering additional reserves along strike.   We estimate that the cost of this program will be approximately $100,000.

In addition, we anticipate spending approximately $150,000 on administrative expenses, including fees payable in connection with the filing of our annual and quarterly reports and complying with reporting obligations.

Utilizing the letter of credit, we believe that we have sufficient funds to cover the anticipated administrative expenses and work program over the next 12 months.  

However, we anticipate that we will require additional funding to continue to develop and explore the Calvert Property and to cover our administrative expenses.  We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or from director loans. We do not have any arrangements in place for any future equity financing or loans.

Our current cash on hand will not be sufficient to acquire any new assets, should we desire to do so, and additional funds will be required to close any possible acquisition.  As a reporting company we will need to maintain our periodic filings with the appropriate regulatory authorities and will incur legal and accounting costs.  If no other such opportunities are available and we cannot raise additional capital to sustain minimum operations, we may be forced to discontinue business.  We do not have any specific alternative business opportunities in mind and have not planned for any such contingency.

Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines.  Our future financial results are also uncertain due to a number of factors, some of which are outside our control.  These factors include the following:

·

our ability to raise additional funding;

·

the market price for minerals that may be found on the Calvert Property;

·

the results of our proposed exploration programs on the Calvert property; and

·

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

We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities.  For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

Results of Operations

Three Months Ended August 31, 2013 Compared to the Three Months Ended August 31, 2012

We have had no operating revenues since our inception on January 10, 2007 through August 31, 2013, and incurred operating expenses in the amount of $405,424 for the three months ended August 31, 2013, compared to operating expenses in the amount of $18,549 for the three months ended August 31, 2012.  Our activities have been financed from the proceeds of share subscriptions and director loans.

24

During the three months ended August 31, 2012, we incurred a net loss of $(484,166), which resulted in an accumulated deficit of $(1,501,640).

Revenues

We did not generate any revenues during the three months ended August 31, 2013 or the three months ended August 31, 2012.

Expenses

During the three months ended August 31, 2013 and August 31, 2012, legal and accounting fees were $6,900 and $11,537 respectively and general and administrative expenses were $19,369 and $7,012, respectively.  During the three months ended August 31, 2013 we also incurred expenses for management fees of $161,500 (August 31, 2012 - $Nil), stock based compensation of $204,666 (August 31, 2012 - $Nil) and exploration costs of $12,655 (August 31, 2012 - $Nil).

Net Loss

We incurred net losses from operations of $484,166 and $18,549 for the three months ended August 31, 2013 and August 31, 2012, respectively.

Liquidity and Capital Resources

We had cash and cash equivalent of $89,403 as of August 31, 2013, compared to a cash and cash equivalent position of $121,849 at May 31, 2013.  Since inception through to and including August 31, 2013, we have raised $27,000 through private placements of our common shares and we have received contributed capital by related parties of $1,000 and advances from a related party of $231,178.

Effective February 2, 2013, we entered into a letter of credit with a non-US person wherein they will loan our company up to $1,000,000 by way of periodic advances at our request for a period of one year.  The loan amounts will be convertible into shares of common stock of our company at a rate of $0.30 per common share and shall bear annual interest of 5% per annum.  As at May 31, 2013 a total of $4,735 was charged to interest. As of the three months ended August 31, 2013, we had received $421,000 and no stock has been issued.

We expect to run at a loss for at least the next twelve months. We have no agreements for additional financing and cannot provide any assurance that additional funding will be available to finance our operations on acceptable terms in order to enable us to complete our plan of operations.  There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing.  If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of our mineral claims and our venture will fail.

Material Events and Uncertainties

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable exploration stage companies.

There can be no assurance that we will successfully address such risks, expenses and difficulties.

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ITEM 3.

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ITEM 1A.

RISK FACTORS

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

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not make any sales of equity securities during the quarter.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

We have no senior securities outstanding.

ITEM 4.

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ITEM 6.

EXHIBITS  

(1)

Filed as an exhibit to our registration statement on Form S-1 filed June 17, 2008 and incorporated herein by this reference

(2)

Filed as an exhibit to our annual report on Form 10-K filed August 25, 2011 and incorporated herein by this reference.

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