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Power One Resources Corp. — Audit Report / Information 2024
Dec 28, 2024
48124_rns_2024-12-27_91d9fba8-a6c0-432d-a9a1-95cee11255ba.pdf
Audit Report / Information
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POWER ONE RESOURCES CORP.
Financial Statements
For the year ended August 31, 2024
Expressed in Canadian Dollars
Crowe
Crowe MacKay LLP
1100 - 1177 West Hastings Street
Vancouver, BC V6E 4T5
Main +1 (604) 687-4511
Fax +1 (604) 687-5805
www.crowemackay.ca
Independent Auditor's Report
To the Shareholders of Power One Resources Corp.
Opinion
We have audited the financial statements of Power One Resources Corp. (the "Company"), which comprise the statements of financial position as at August 31, 2024 and August 31, 2023 and the statements of operations and comprehensive loss, shareholders' equity and cash flows for the years then ended, and notes to the financial statements, including a summary of material accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2024 and August 31, 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 to the financial statements which describes the material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Other than the matter described in the Material Uncertainty Related to Going Concern section, we have determined there are no key audit matters to be communicated in our report.
Other Information
Management is responsible for the other information. The other information comprises:
- Management's Discussion and Analysis
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained the other information prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Hilda Leung.
Crowe Mackay, LLP
Chartered Professional Accountants
Vancouver, Canada
December 27, 2024
POWER ONE RESOURCES CORP.
Statements of Financial Position
As at August 31, 2024 and 2023
(Expressed in Canadian dollars)
| 2024 | 2023 | |
|---|---|---|
| ASSETS | ||
| Current | ||
| Cash | $ 159,544 | $ 1,000,215 |
| Amount receivable | 18,175 | 329 |
| Due from related party (Note 8) | 7,645 | - |
| Prepaid expenses | 53,254 | - |
| Marketable securities (Note 8) | 2,850 | 4,275 |
| Loan receivable (Note 5) | 393 | 50,393 |
| 241,861 | 1,055,212 | |
| Deferred listing costs | - | 7,865 |
| Exploration and evaluation assets (Note 6) | 2,479,322 | 2,421,286 |
| $ 2,721,183 | $ 3,484,363 | |
| LIABILITIES | ||
| Current | ||
| Accounts payable and accrued liabilities (Notes 8 and 10) | $ 253,093 | $ 107,727 |
| Flow-through premium (Note 10) | - | 78,283 |
| 253,093 | 186,010 | |
| Non-current | ||
| Accounts payable and accrued liabilities (Note 8) | - | 153,000 |
| 253,093 | 339,010 | |
| SHAREHOLDERS' EQUITY | ||
| Share capital (Note 7) | 3,561,799 | 3,561,799 |
| Contributed surplus | 157,500 | 157,500 |
| Deficit | (1,251,209) | (573,946) |
| 2,468,090 | 3,145,353 | |
| $ 2,721,183 | $ 3,484,363 |
Going concern (Note 1)
Approved and authorized for issuance on behalf of the Board of Directors on December 27, 2024:
/s/ Wazir Khan
/s/ Fraser Rieche
Wazir Khan
Fraser Rieche
The accompanying notes are an integral part of these financial statements
POWER ONE RESOURCES CORP.
Statements of Operations and Comprehensive Loss
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
| 2024 | 2023 | |
|---|---|---|
| Operating expenses | ||
| Consulting and management fees (Note 8) | $ 186,842 | $ 60,425 |
| Office and miscellaneous (Note 8) | 38,308 | 365 |
| Filing fees | 37,945 | 2,867 |
| Professional fees (Note 8) | 98,795 | 63,748 |
| Shareholder communication | 27,760 | - |
| Transfer agent | 6,283 | 10,508 |
| Total operating expenses | 395,933 | 137,913 |
| Loss before other items | (395,933) | (137,913) |
| Other items: | ||
| Interest income (expense) (Note 8) | 224 | (3,645) |
| Other income (Note 10) | 48,316 | 1,782 |
| Unrealized loss on fair value of marketable securities | (1,425) | (6,175) |
| Write-off of interest payable (Note 8) | - | 4,891 |
| Flow-through penalties and indemnification costs (Note 10) | (39,894) | (8,696) |
| Impairment of mineral property (Note 6) | (288,551) | - |
| Total other items | (281,330) | (11,843) |
| Net loss and comprehensive loss for the year | $ (677,263) | $ (149,756) |
| Basic and diluted loss per share | $ (0.02) | $ (0.00) |
| Weighted average number of common shares outstanding | 33,218,597 | 32,959,405 |
The accompanying notes are an integral part of these financial statements
POWER ONE RESOURCES CORP.
Statements of Changes in Shareholders' Equity
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
| Number of shares | Share Capital | Contributed Surplus | Deficit | Total Shareholders' Equity | |
|---|---|---|---|---|---|
| Balance, August 31, 2022 | 32,423,597 | $ 3,482,299 | $ 157,500 | $(424,190) | $ 3,215,609 |
| Private placement | 795,000 | 111,300 | - | - | 111,300 |
| Premium on flow-through shares | - | (31,800) | - | - | (31,800) |
| Net loss and comprehensive loss for the year | - | - | - | (149,756) | (149,756) |
| Balance, August 31, 2023 | 33,218,597 | 3,561,799 | 157,500 | (573,946) | 3,145,353 |
| Net loss and comprehensive loss for the year | - | - | - | (677,263) | (677,263) |
| Balance, August 31, 2024 | 33,218,597 | $ 3,561,799 | $ 157,500 | $(1,251,209) | $ 2,468,090 |
The accompanying notes are an integral part of these financial statements
POWER ONE RESOURCES CORP.
Statements of Cash Flows
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
| 2024 | 2023 | |
|---|---|---|
| Operating Activities | ||
| Net loss for the year | $ (677,263) | $ (149,756) |
| Items not affecting cash | ||
| Accrued interest expense | - | 3,288 |
| Derecognition of flow-through premium | (78,283) | (1,782) |
| Unrealized loss on fair value of marketable securities | 1,425 | 6,175 |
| Write-off of interest payable | - | (4,891) |
| Impairment of mineral property | 288,551 | - |
| Changes in non-cash working capital items related to operations: | ||
| Amount receivable | (17,846) | 2,201 |
| Prepaid expenses and deferred listing costs | (45,389) | (7,865) |
| Accounts payable and accrued liabilities | 75,376 | 69,517 |
| Cash used in operating activities | (453,429) | (83,113) |
| Investing Activities | ||
| Exploration and evaluation assets | (340,397) | - |
| Advance for exploration and evaluation assets | - | (7,722) |
| Loan repayment (advanced) | 50,000 | (50,393) |
| Cash used in investing activities | (290,397) | (58,115) |
| Financing Activities | ||
| Issuance of common shares, net | - | 111,300 |
| Loan received (repayment) | - | (100,000) |
| Related party loan advanced or repaid | (96,845) | - |
| Cash provided by (used in) financing activities | (96,845) | 11,300 |
| Change in cash during the year | (840,671) | (129,928) |
| Cash, beginning of year | 1,000,215 | 1,130,143 |
| Cash, end of the year | $ 159,544 | $ 1,000,215 |
| Non-cash investing and financing activities | ||
| Settlement of due from related parties by receipt of marketable securities | $ - | $ 10,450 |
| Exploration and evaluation assets in accounts payable and accrued liabilities | $ 6,190 | $ - |
The accompanying notes are an integral part of these financial statements
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
1. Nature and continuance of operations
Power One Resources Corp. (the "Company") was incorporated on March 23, 2021, under the laws of the Province of British Columbia, Canada, as a wholly-owned subsidiary of Marvel Discovery Corp. ("Marvel"). On May 13, 2021, a Plan of Arrangement (the "Plan of Arrangement") was approved by the shareholders of Marvel whereby Marvel distributed 100% of its interest in certain properties (the "Spin-out Properties") to the Company. The Company's common shares commenced trading on the TSX Venture Exchange on January 18, 2024, under the symbol PWRO.
The Company principal activity is the acquisition and exploration of mineral properties in Canada.
The corporate office and principal place of business of the Company is Suite 1100 – 1111 Melville Street, Vancouver, B.C., V6E 3V6.
The Company is in the business of exploring its mineral exploration assets and has not yet determined whether these properties contain ore reserves that are economically recoverable. At August 31, 2024, the Company was in the exploration stage and had interests in properties in Canada.
These financial statements have been prepared on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The ability of the Company to continue as a going concern and the recoverability of the amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development, and upon future profitable production or proceeds from the disposition thereof. There is significant uncertainty regarding the outcome of these matters. The Company has sustained losses from operations and has an ongoing requirement for capital investment to explore its exploration and evaluation assets. As at August 31, 2024, the Company had working capital deficiency of $11,232 (2023 - working capital of $869,202) and accumulated deficit of $1,251,209 (2023 - $573,946). Based on its current plans, budgeted expenditures, and cash requirements, the Company does not have sufficient cash to finance its current plans. The Company expects that it will need to raise substantial additional capital to accomplish its business plan over the next several years. The Company expects to seek additional financing through equity financing. There can be no assurance as to the availability or terms upon which such financing might be available.
These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.
The Company's business may be affected by changes in political and market conditions, such as interest rates, availability of credit, inflation rates, changes in laws, and national and international circumstances. Recent geopolitical events and potential economic global challenges such as the risk of higher inflation and energy crises, may create further uncertainty and risk with respect to the prospects of the Company's business.
These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
2. Basis of preparation
Statement of compliance
The financial statements of the Company have been prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The financial statements of the Company have been prepared on an accrual basis and are based on historical costs, except for financial instruments classified as fair value through profit and loss, which are stated at their fair value. The financial statements are presented in Canadian dollars, which is the Company's functional currency, unless otherwise noted.
The financial statements were reviewed by the Board of Directors and approved on December 27, 2024.
3. Material accounting policies
The accounting policies set out below have been applied consistently in the financial statements, unless otherwise indicated.
Exploration and evaluation assets
The Company is in the exploration stage in respect to its exploration and evaluation assets.
Pre-exploration costs are expensed in the year in which they are incurred.
Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation expenditures are recognized and capitalized, in addition to the acquisition costs. These direct expenditures include such costs as materials used, geological and geophysical evaluation, surveying costs, drilling costs, payments made to contractors and depreciation on property and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.
Where the Company has entered into option agreements for the acquisition of an interest in exploration and evaluation assets which provided for periodic payments, such amounts unpaid are not recorded as a liability when they are payable entirely at the Company's discretion. Although the Company has taken steps to verify title to the exploration and evaluation assets in which it has an interest, these procedures do not guarantee the Company's title. The exploration and evaluation assets may be subject to prior undetected agreements or transfers and title may be affected by such defects.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written-off to profit or loss.
The Company assesses exploration and evaluation assets for indications of impairment at each reporting date.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development and is classified as "mine development cost". Exploration and evaluation assets are tested for impairment before the assets are transferred to development properties.
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POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
3. Material accounting policies – (cont’d)
Impairment of assets
The carrying amount of the Company's assets (which include exploration and evaluation assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in profit or loss.
The recoverable amount of assets is the greater of an asset's fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.
Financial instruments
Financial Assets
All financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss ("FVTPL"), transaction costs.
The Company's cash and marketable securities have been designated as FVTPL and due from related parties and loan receivable at amortized cost.
The Company classifies its accounts payable and accrued liabilities as financial liabilities held at amortized cost.
Impairment of Financial Assets at Amortized Cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses of the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
3. Material accounting policies – (cont’d)
Provisions
Rehabilitation Provision
The Company is subject to various government laws and regulations relating to environmental disturbances caused by exploration and evaluation activities. The Company records the present value of the estimated costs of legal and constructive obligations required to restore the exploration sites in the year in which the obligation is incurred. The nature of the rehabilitation activities includes restoration, reclamation and re-vegetation of the affected exploration sites.
The rehabilitation provision generally arises when the environmental disturbance is subject to government laws and regulations. When the liability is recognized, the present value of the estimated costs is capitalized by increasing the carrying amount of the related exploration and evaluation assets. Over time, the discounted liability is increased for the changes in present value based on current market discount rates and liability specific risks.
Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to the corresponding assets and rehabilitation liability in the year in which they occur.
Other Provisions
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
Flow-through shares
The Company will, from time to time, issue flow-through shares to finance a significant portion of its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On the issuance of a flow-through share, it is bifurcated into equity (share) and liability (flow-through) components on the issue date. The equity portion is measured at the market value and the residual is allocated as a liability. This is effectively the "premium" the investor attributes to a flow-through share versus an ordinary share. Upon qualifying expenditures being incurred, the Company derecognizes the liability and recognizes the premium as other income. The flow-through share program requires the Company to spend an amount equivalent to the proceeds of the issued flow-through common shares on Canadian qualifying exploration expenditures within the timeline specified by the Government of Canada flow-through regulations. The Company may be required to indemnify the flow-through shareholders for any tax and other costs payable by them if the required exploration expenditures are not incurred before the deadline. The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the Government of Canada flow-through regulations. The related interest and penalties for the Part XII.6 tax and any potential costs to indemnify the shareholders is recorded into flow-through penalties and indemnification costs on the statements of operations.
Share capital
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The fair value of the common shares issued in the private placements is determined to be the more easily measurable component and is valued at their fair value, as determined
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POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
3. Material accounting policies – (cont’d)
Share capital – (cont’d)
by the closing quoted price on the date of the announcement of the private placement. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded to contributed surplus. The value of warrants that expire or are forfeited stays in contributed surplus. If and when the expiration date of such warrants is extended or the exercise price decreases, the Company does not record a charge for the incremental increase in fair value.
Share-based payment
The Company operates a stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payment to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured. The corresponding amount is recorded to the contributed surplus. If the fair value of the goods or services received cannot be reliable measured, the fair value of options is determined using the Black-Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. All equity-settled share-based payment is reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid. The value of options that expire or are forfeited stays in contributed surplus.
Recent accounting pronouncements and changes in accounting policies
The Company adopted the following accounting standards during the year ended August 31, 2024:
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
These amendments continue the IASB's clarifications on applying the concept of materiality. These amendments help companies provide useful accounting policy disclosures, and they include: requiring companies to disclose their material accounting policies instead of their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and do not need to be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material. The IASB also amended IFRS Practice Statement 2 to include guidance and examples on applying materiality to accounting policy disclosures. The implementation of these amendments reduced disclosures in the notes to the financial statements.
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for future accounting periods are as follows:
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
The amendments to IAS1 provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. These amendments are effective for reporting periods beginning on or after January 1, 2024 and are not expected to have a material impact on the Company.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
3. Material accounting policies – (cont’d)
Recent accounting pronouncements and changes in accounting policies - (cont’d)
IFRS 18 Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued this new standard which will replace IAS 1. This standard aims to improve the consistency and clarity of financial statement presentation and disclosures by providing updated guidance on the structure and content of financial statements. IFRS 18 is effective January 1, 2027, with early adoption permitted. The Company is in the process of assessing the impact of the adoption of these standards and amendments in the Company’s financial statements.
4. Critical accounting estimates and judgments
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
The effect of a change in an accounting estimate is recognized prospectively by including it in net loss in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both.
Critical judgments in applying accounting policies
Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are discussed below:
Going Concern
The assessment of the Company’s ability to continue as a going concern require significant judgement. See Note 1.
Title to mineral property interests
Although the Company has taken steps to verify title to mineral properties in which it has an interest, 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.
Impairment of mineral properties
In accordance with the Company’s accounting policy for its mineral properties, exploration and evaluation expenditures on mineral properties are capitalized. There is no certainty that the expenditures made by the Company in the exploration of its property interests will result in discoveries of commercial quantities of minerals. The Company applies judgment to determine whether indicators of impairment exist for these capitalized costs.
Management uses several criteria in making this assessment, including the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of mineral properties are budgeted, and evaluation of the results of exploration and evaluation activities up to the reporting date.
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POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
5. Loan receivable
On October 11, 2022, the Company entered into an agreement with 1254883 B.C. Ltd. ("1254883") whereby the Company advanced $100,000 to 1254883 to purchase 1,000,000 common shares in the capital of the Company held by Zimtu Capital Corp. The loan is unsecured, non-interest bearing and due nine months from the date of the agreement.
During the year ended August 31, 2023, the parties entered into a loan extension agreement whereby the repayment date was extended to October 11, 2023. The Company received partial payment of the loan during the year ended August 31, 2023, and the balance of the loan was repaid in full October 25, 2023.
6. Exploration and evaluation assets
| Serpent River | Wicheeda North | Total | |
|---|---|---|---|
| August 31, 2022 | $ 2,158,914 | $ 254,650 | $ 2,413,564 |
| Exploration and evaluation | 5,408 | 2,314 | 7,722 |
| August 31, 2023 | 2,164,322 | 256,964 | 2,421,286 |
| Drilling | 315,000 | - | 315,000 |
| Field expenses | - | 31,110 | 31,110 |
| Geophysical | - | 2,400 | 2,400 |
| Technical report | - | 8,130 | 8,130 |
| Mining tax credits | - | (10,053) | (10,053) |
| Impairment | - | (288,551) | (288,551) |
| August 31, 2024 | $ 2,479,322 | $ - | $ 2,479,322 |
The following is a description of the Company's exploration and evaluation assets:
Serpent River Project (Ontario)
On May 13, 2021, the Company completed a plan of arrangement with Marvel and acquired 100% interest in ten mining claims in the Sault Ste. Marie Mining Division, Elliot Lake area, in Northern Ontario. The original agreement included a 2.0% Net Smelter Return Royalty ("NSR") relating to the original acquisition by Marvel. The Company may at any time purchase 1.0% of the NSR for $1.5 million.
Wicheeda North Property (British Columbia)
On May 13, 2021, the Company completed a plan of arrangement with Marvel and acquired 100% interest in four mineral claims located in the Cariboo Mining Division northeast of Prince George, British Columbia. The original agreement requires a payment of 2% NSR. The Company may acquire one-half of the NSR for $1 million within five years of the agreement date.
During the fiscal year ended August 31, 2024, the Company determined that due to current market conditions, that it would maintain the Wicheeda property but not carry out exploration and evaluation activities for the foreseeable future. As a result, impairment in the amount of $288,551 was recorded in connection with the Wicheeda property.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
7. Share capital
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
On August 31, 2024, there were 33,218,597 (2023 – 33,218,597) issued and fully paid common shares.
Issuances
During the year ended August 31, 2024:
There were no share issuances during the year ended August 31, 2024.
During the year ended August 31, 2023:
On December 28, 2022, the Company issued 795,000 units at a price of $0.14 per unit for total proceeds of $111,300. Each unit consisted of one flow-through common share and a non-flow-through share purchase warrant exercisable into a common share for a period of three years from the date of issuance. Each share purchase warrant is exercisable at a price of $0.40. The Company recognized a flow-through premium of $31,800 on the private placement.
Share purchase warrants
The changes in warrants during the years ended August 31, 2024 and 2023 are as follows:
| August 31, 2024 | August 31, 2023 | |||
|---|---|---|---|---|
| Number of warrants | Weighted average exercise price | Number of warrants | Weighted average exercise price | |
| Balance, beginning of year | 13,983,846 | $ 0.28 | 13,188,846 | $ 0.35 |
| Issued | - | - | 795,000 | 0.40 |
| Balance, end of year | 13,983,846 | $ 0.28 | 13,983,846 | $ 0.28 |
Details of warrants outstanding as at August 31, 2024 are as follows:
| Number of warrants | Exercise price $ | Date of expiry |
|---|---|---|
| **1,800,000 | 0.10 | July 26, 2026 |
| **200,000 | 0.055 | July 26, 2026 |
| *1,030,000 | 0.30/0.50 | January 18, 2025/January 18, 2026 |
| *1,000,000 | 0.30/0.50 | January 18, 2025/January 18, 2026 |
| *9,158,846 | 0.30/0.50 | January 18, 2025/January 18, 2026 |
| 795,000 | 0.40 | December 28, 2025 |
| 13,983,846 |
*During the year ended August 31, 2023, the Company extended the terms of an aggregate of 11,188,846 warrants to be exercisable at $0.30 per warrant until 12 months following the Listing Date and at $0.50 per warrant thereafter until 24 months following the Listing Date defined as the date on which the Company's shares begin trading on the TSX Venture Exchange. The Company's shares listed on the TSXV Venture Exchange on January 18, 2024.
16
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
7. Share capital – (cont'd)
Share purchase warrants – (cont'd)
During the year ended August 31, 2024, the Company extended the expiry date of an aggregate of 2,000,000 warrants. These warrants, originally set to expire on July 26, 2024, are now exercisable at $0.10 per warrant until the new expiry date of July 26, 2026. Additionally, the Company repriced 200,000 of those warrants to an exercise price of $0.055 per share, subject to an accelerated expiry such that if the closing price of the Shares on the TSXV exceeds $0.069 per Share for 10 consecutive trading days (the "Premium Trading Days"), the exercise period of the repriced warrants will be reduced to 30 days. For more certainty, the reduced exercise period of 30 days will begin no more than 7 calendar days after the tenth Premium Trading Day.
As at August 31, 2024, the weighted average remaining life of the share purchase warrants is 1.45 years.
Stock options
On April 19, 2022, the Company adopted a stock option plan under which it is authorized to grant options to officers, directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. The options can be granted for a maximum of ten years and vest as determined by the Board of Directors. The exercise price of each option granted may not be less than the fair market value of the common shares.
On May 8, 2023, 100,000 options were cancelled.
The changes in stock options during the years ended August 31, 2024, and 2023 are as follows:
| August 31, 2024 | August 31, 2023 | |||
|---|---|---|---|---|
| Number of stock options | Weighted average exercise price | Number of stock options | Weighted average exercise price | |
| Balance, beginning of year | 1,900,000 | $ 0.14 | 2,000,000 | $ 0.14 |
| Cancelled | - | - | (100,000) | 0.14 |
| Balance, end of year | 1,900,000 | $ 0.14 | 1,900,000 | $ 0.14 |
Details of options outstanding and exercisable as at August 31, 2024 are as follows:
| Number of stock options | Exercise price $ | Date of expiry |
|---|---|---|
| 1,400,000 | 0.14 | April 19, 2027 |
| 250,000 | 0.14 | June 8, 2027 |
| 250,000 | 0.14 | June 13, 2027 |
| 1,900,000 |
As at August 31, 2024, the weighted average remaining life of the stock options is 2.67 years.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
8. Related party transactions
Related party balances
The following amount is included in due from related parties and accounts payable and accrued liabilities:
| August 31, 2024 | August 31, 2023 | |
|---|---|---|
| Due from related parties | ||
| Marvel Discovery Corp. controlled by common directors and officers^{(2)} | $ 7,645 | $ - |
| $ 7,645 | $ - | |
| Current accounts payable and accrued liabilities | ||
| R7 Capital Ventures Ltd. controlled by the former CEO^{(1)} | $ 63,800 | $ - |
| Marvel Discovery Corp. controlled by common directors and officers^{(2)} | - | 6,801 |
| Non-current accounts payable and accrued liabilities | ||
| R7 Capital Ventures Ltd. controlled by the former CEO^{(1)} | - | 153,000 |
| $ 63,800 | $ 159,801 |
(1) Accounts payable and accrued liabilities include $63,800 (2023 - $153,000) due to R7 Capital Ventures Ltd (the "Lender"), a company controlled by the former CEO.
On April 1, 2023, the Company entered into a debt amendment agreement with the lender, modified by a second debt amendment agreement on October 1, 2023. The Lender has agreed to not seek repayment of the debt of $153,000 repayable 15-months following the date the Company's common shares begin trading on the TSXV. The Company was listed on the TSXV on January 18, 2024. Accordingly, the amount has been reclassified from non-current to current. No interest will be accrued on the debt unless it is not repaid by the payment date, in which case retroactive interest at a rate of 7.5% per annum will apply from the date of the agreement. During the year ended August 31, 2024, the Company settled $89,200 of the debt.
(2) On June 15, 2022, the Company entered into a loan agreement with Marvel to borrow $100,000 which is unsecured, bears interest at 7.5% per annum and will be repaid the earlier of five business days following the Company's first equity financing of at least $1,000,000 or thirteen months following the date of this agreement. On February 7, 2023, the Company repaid the $100,000 to Marvel and Marvel agreed to waive the interest. Accordingly, the Company recorded a write-off of interest payable of $4,891 to the statements of operations as at August 31, 2023.
On December 12, 2022, the Company was issued 95,000 Marvel shares valued at $0.11 per share for an aggregate value of $10,450 to settle the balance due from Marvel at August 31, 2022.
The amounts due from/to Marvel Discovery Corp. as at August 31, 2024 and 2023 are unsecured, non-interest bearing and have no fixed terms of repayment.
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POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
8. Related party transactions – (cont'd)
Key management personnel compensation
The Company's related parties include key management personnel, which includes Officers and Directors of the Company, and companies related by way of directors or shareholders in common. During the years ended August 31, 2024 and 2023, management compensation is as follows:
| For the year ended August 31, 2024 | For the year ended August 31, 2023 | |
|---|---|---|
| Consulting and management fees to R7 Capital Ventures Ltd. controlled by the former CEO | $ 120,000 | $ 60,000 |
| Rent expenses recorded in office and miscellaneous to R7 Capital Ventures Ltd. controlled by the former CEO | 12,000 | - |
| Professional fees to Brant Capital Partners Inc. controlled by the CFO | 21,000 | - |
| $ 153,000 | $ 60,000 |
9. Financial risk management
The Company is exposed in varying degrees to a variety of financial instrument related risks.
Credit Risk
The Company is exposed to credit risk by holding cash. Holding the cash in large Canadian financial institutions minimizes this risk. The Company has minimal accounts receivable exposure, and its various refundable credits are due from the Canadian government.
Interest Rate Risk
The Company's exposure to interest rate risk relates to its ability to earn interest income on cash balances at variable rates. Currently, this risk will have an immaterial effect on operations.
Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from currency risk or interest rate risk). The Company is at risk to changes in commodity prices which may affect financing options available to the Company and the fair value of its marketable securities.
Liquidity Risk
Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Cash on hand at August 31, 2024 and expected cash flows for the next 12 months are not sufficient to fund the Company's ongoing operational needs. The Company intends to continue relying on the issuance of securities to finance its future activities; however, there can be no assurance that such financing will be available on a timely basis under terms acceptable to the Company.
POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
9. Financial risk management – (cont’d)
Capital Management
The Company is engaged in the mineral exploration field and manages related industry risk issues directly. The Company is potentially at risk for environmental issues and fluctuations in commodity based market prices associated with resource property interests. Management is of the opinion that the Company addresses environmental risk and compliance in accordance with industry standards and specific project environmental requirements. The Company includes cash and equity in the definition of capital. Equity is comprised of issued common shares, contributed surplus, and deficit.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares, purchase shares for cancellation pursuant to normal course issuer bids or make special distributions to shareholders. The Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital. There were no changes in the Company's approach to capital management during the year ended August 31, 2024.
Fair Value
The fair value of the Company's financial assets and liabilities approximates the carrying amount. Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
- Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
- Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
- Level 3 – Inputs that are not based on observable market data.
Cash and marketable securities are measured using level 1 fair value hierarchy.
Management believes that the recorded values of all accounts payable and accrued liabilities, loan receivable, and due from related parties approximate their current fair values because of their nature and anticipated settlement dates.
10. Flow-through commitments and contingencies
Flow-through common shares require the Company to spend an amount equivalent to the proceeds of the issued flow-through common shares on Canadian qualifying exploration expenditures within a 24-month period. The Company may be required to indemnify the holders of such shares for any tax and other costs payable by them in the event the Company has not made the required exploration expenditures.
During the year ended August 31, 2022, the Company received $209,150 from the issuance of flow-through shares. The Company renounced $209,150 to the subscribers and has until December 31, 2023 to incur the qualifying expenditures. A flow-through premium of $48,265 was recognized initially during the year ended August 31, 2022. During the year ended August 31, 2024, the Company recognized $46,483 (2023 - $1,782) as other income as the flow-through commitment has been fully satisfied as at August 31, 2024.
During the year ended August 31, 2023, the Company received $111,300 from the issuance of flow-through shares. The Company renounced $111,300 to the subscribers and has until December 31, 2023, to incur the qualifying expenditures. A flow-through premium of $31,800 was recognized initially during the year ended August 31, 2023. During the year ended August 31, 2024, the Company recognized $1,833 (2023 - $Nil) as other income for the portion of the flow-through commitment fulfilled as at
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POWER ONE RESOURCES CORP.
Notes to the Financial Statements
For the years ended August 31, 2024 and 2023
(Expressed in Canadian dollars)
10. Flow-through Commitments and Contingencies – (cont'd)
December 31, 2023. As at December 31, 2023, the deadline to incur the qualifying expenditures has passed and the Company did not fulfill its obligations of approximately $105,000. An amount totaling $69,861 has been accrued in accounts payable and accrued liabilities as at August 31, 2024 for the indemnification of the shareholders for taxes and penalties related to the unspent portion of the commitment and for Part XII.6 taxes and related interest and penalties owed to the Canada Revenue Agency. $29,967 flow-through premium has been derecognized and netted against flow-through penalties and indemnification costs.
11. Income taxes
Income tax expense varies from the amount that would be computed from applying the combined federal and provincial income tax rate to loss before taxes as follows:
| 2024 | 2023 | |
|---|---|---|
| Net loss before income taxes for the year | $ (677,263) | $ (149,756) |
| Statutory Canadian corporate tax rate | 27.00% | 27.00% |
| Expected (recovery) at statutory rate | (182,900) | (40,400) |
| Permanent difference | (5,900) | 400 |
| Change in unrecognized deferred tax assets | 188,800 | 40,000 |
| Income tax recovery | $ - | $ - |
The following is the analysis of recognized deferred tax assets and liabilities:
| 2024 | 2023 | |
|---|---|---|
| Deferred tax liabilities | ||
| Resource properties | $ - | $ (87,000) |
| Deferred tax liabilities | - | (87,000) |
| Deferred tax assets | ||
| Non-capital losses | - | 87,000 |
| Deferred tax assets | - | 87,000 |
| Net deferred tax assets (liabilities) | $ - | $ - |
The significant components of the Company's temporary differences, unused tax credits and unused tax losses that have not been included on the statements of financial position are as follows:
| Expiry | 2024 | 2023 | |
|---|---|---|---|
| $ | $ | ||
| Exploration and evaluation assets | None | 71,000 | - |
| Share issuance costs | 2025 - 2026 | 4,000 | 6,000 |
| Non-capital losses | 2040 - 2044 | 827,000 | 95,000 |
| Marketable securities | None | 8,000 | 6,000 |