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Shellron Capital Ltd Audit Report / Information 2022
48177_rns_2022-07-21_0f860e2e-50bb-40df-a291-2354e913674d.pdf
Audit Report / Information
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Financial Statements
For the Year Ended April 30, 2022 and Period from January 21, 2021 (date of incorporation) to April 30, 2021
(Expressed in Canadian Dollars)
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Shellron Capital Ltd.
Opinion
We have audited the financial statements of Shellron Capital Ltd. (the "Company"), which comprise the statements of financial position as at April 30, 2022 and 2021, and the statements of operations and comprehensive loss, changes in shareholders' equity, and cash flows for the year ended April 30, 2022 and period from January 21, 2021 (date of incorporation) to April 30, 2021, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2022 and 2021, and its financial performance and its cash flows for the year ended April 30, 2022 and period from January 21, 2021 (date of incorporation) to April 30, 2021 in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audits 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 in the financial statements, which indicates that the Company has no business operations and incurred negative cash flow from operations of \$75,885 during the year ended April 30,2022, and, as at that date, the Company had an accumulated deficit of \$136,619. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists 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.
Other Information
Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis, but does not include the financial statements and our auditor's report thereon.
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, 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. If, based on the work we have performed, conclude that there is a material misstatement of this other information, we are required to report that fact. 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 International Financial Reporting Standards, 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 $\bullet$ 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.
The engagement partner on the audit resulting in this independent auditor's report is Lonny Wong.
afunaGroup LIP
Saturna Group Chartered Professional Accountants LLP Vancouver, Canada July 20, 2022
| April 30, | April 30, | |
|---|---|---|
| 2022 | 2021 | |
| $($)$ | $($)$ | |
| Assets | ||
| Current assets | ||
| Cash | 486,849 | 205,324 |
| Receivables | 5,670 | 14 |
| Prepaid expenses | 2,800 | 5,000 |
| Total assets | 495,319 | 210,338 |
| Liabilities and Shareholders' Equity | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities | 498 | 4,000 |
| Total liabilities | 498 | 4,000 |
| Shareholders' equity | ||
| Share capital (Note 4a) | 569,910 | 212,500 |
| Reserves (Note 4b) | 61,530 | |
| Deficit | (136, 619) | (6,162) |
| Total shareholders' equity | 494,821 | 206,338 |
| Total liabilities and shareholders' equity | 495,319 | 210,338 |
Nature of operations and going concern (note 1)
Approved and authorized for issuance on behalf of the Board of Directors on July 20, 2022:
/s/ Andrew Yau Andrew Yau, Director /s/ Jorge Martinez
Jorge Martinez, Director
| Period from January 21, 2021 (date of |
||
|---|---|---|
| Year ended April 30, 2022 |
incorporation) to April 30, 2021 |
|
| (\$) | (\$) | |
| Expenses | ||
| General and administration (Note 5) | 6,737 | 1,857 |
| Professional fees | 28,765 | 4,305 |
| Share-based payments (Note 4b) | 61,530 | – |
| Transfer agent and filing fees | 33,425 | – |
| Total expenses | 130,457 | 6,162 |
| Net loss and comprehensive loss for the period | (130,457) | (6,162) |
| Loss per share, basic and diluted | (0.02) | – |
| Weighted average shares outstanding | 6,101,370 | 2,103,535 |
| Share Capital | |||||
|---|---|---|---|---|---|
| Number of Shares |
Amount $\left( \text{\$}\right)$ |
Reserves $($)$ |
Deficit $($)$ |
Total $(\$)$ |
|
| Balance, January 21, 2021 (date of incorporation) | |||||
| Shares issued for cash (Note 4) Net loss for the period |
4,250,000 | 212,500 | (6.162) | 212,500 (6,162) |
|
| Balance, April 30, 2021 | 4,250,000 | 212,500 | (6,162) | 206,338 | |
| Initial public offering (Note 4a) | 4,289,000 | 428,900 | 428,900 | ||
| Share issuance costs (Note 4a) | (71, 490) | $\qquad \qquad -$ | (71, 490) | ||
| Fair value of share options granted (Note 4b) | 61,530 | 61,530 | |||
| Net loss for the year | (130.457) | (130, 457) | |||
| Balance, April 30, 2022 | 8,539,000 | 569,910 | 61,530 | (136.619) | 494,821 |
| April 30, 2022 $($)$ |
Period from January 21, 2021 (date of Year ended incorporation) to April 30, 2021 $($ \$ $)$ |
|
|---|---|---|
| Operating Activities | ||
| Net loss for the period | (130, 457) | (6,162) |
| Items not involving cash: Share-based payments (Note 4b) |
61,530 | |
| Changes in non-cash working capital: Receivables Prepaid expenses Accounts payable and accrued liabilities |
(5,656) 2,200 (3,502) |
(14) (5,000) 4,000 |
| Net cash used in operating activities | (75, 885) | (7,176) |
| Financing Activities | ||
| Proceeds from shares issued (Note 4a) Share issuance costs (Note 4a) |
428,900 (71, 490) |
212,500 |
| Net cash from financing activities | 357,410 | 212,500 |
| Increase in cash | 281,525 | 205,324 |
| Cash, beginning of period | 205,324 | |
| Cash, end of period | 486,849 | 205,324 |
1. Nature of Operations and Going Concern
Shellron Capital Ltd. (the "Company" or "Shellron") was incorporated under the laws of the province of British Columbia, Canada on January 21, 2021. The Company's head office and principal address is located at 1090 Hamilton Street, Vancouver, British Columbia, Canada, V6B 2R9.
On November 22, 2021, the Company completed an initial public offering ("IPO") to be classified as a Capital Pool Company ("CPC") pursuant to the policies of the TSX Venture Exchange ("TSXV") Policy 2.4, and is listed on the TSXV under the trading symbol "SHLL". The Company is in the startup stage and its principal business will be the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction as defined by the rules of the TSXV. Such a transaction will be subject to shareholder and regulatory approval.
These financial statements have been prepared on a going concern basis which implies that the Company will continue realizing assets and discharging liabilities in the normal course of business for the foreseeable future. Should the going concern assumption not continue to be appropriate, further adjustments to carrying values of assets and liabilities may be required. During the year ended April 30, 2022, the Company has no business operations and incurred negative cash flow from operations of \$75,885. As at April 30, 2022, the Company had an accumulated deficit of \$136,619. The Company's continuing operations are dependent upon its ability to identify and evaluate assets or businesses with a view to potential acquisition or participation by completing a Qualifying Transaction, as defined in Exchange Policy 2.4, within 24 months of listing on the TSXV. The preceding indicates the existence of a material uncertainty that may cast substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recovery of assets and classification of assets and liabilities that may arise should the Company be unable to continue as a going concern.
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and has adversely affected global workforces, financial markets, and the general economy. Although, it is not possible for the Company to determine the duration or magnitude of the adverse results of COVID-19, the Company's ability to raise capital has not been impacted by COVID-19 and the Company does not expect such ability to raise capital to be impacted by COVID-19 in the future. The Company does not expect COVID-19 to significantly impact its ability to completing a Qualifying Transaction as it will leverage technological and local resources as required, and as a result, pandemic-related restrictions on trans-national travel are not expected to adversely impact the Company's ability to complete a Qualifying Transaction.
Basis of Presentation $2.$
(a) Statement of Compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), and Interpretations of the International Financial Reporting Interpretations Committee.
(b) Basis of Measurement
These financial statements have been prepared on the historical cost basis and are presented in Canadian dollars. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
(c) Use of Estimates and Judgments
Significant Estimates and Assumptions
The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities, the 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. The Company's management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
Basis of Presentation- continued $2.$
(c) Use of Estimates and Judgments - continued
Significant areas requiring the use of estimates include the fair value of share-based payments and unrecognized deferred income tax assets.
Significant Judgments
Going Concern
The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but is not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties related to events or conditions may cast significant doubt upon the Company's ability to continue as a going concern.
Share-based Payments
Fair values are determined using the Black-Scholes option pricing model. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide reliable measurement of the fair value of the Company's share options.
Significant Accounting Policies 3.
(a) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance, are readily convertible to known amounts of cash, and which are subject to insignificant risk of changes in value to be cash equivalents.
(b) Foreign Currency Translation
The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company is the Canadian dollar.
Transactions in currencies other than the Canadian dollar are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are reflected in the statement of operations for the year.
(c) Income Taxes
Income tax is recognized in the statement of operations except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.
Deferred income taxes are accounted for using the statement of financial position method of tax allocation. Under this method, deferred income tax assets and liabilities are recognized for the tax consequences of temporary differences by applying substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.
A deferred income tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred income tax asset will be recovered, the deferred income tax asset is reduced.
$3.$ Significant Accounting Policies - continued
(c) Income Taxes - continued
Deferred income tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current income tax assets and liabilities on a net basis. Current and deferred income taxes relating to items recognized directly in equity is recognized in equity and not in the statement of operations.
(d) Loss per Share
Basic loss per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted loss per share, whereby all "in the money" stock options and share purchase warrants are assumed to have been exercised at the beginning of the period and the proceeds from their exercise are assumed to have been used to purchase common shares at the average market price during the period. When a loss is incurred during the period, basic and diluted loss per share are the same as the exercise of stock options and share purchase warrants is considered to be anti-dilutive. As at April 30, 2022, the Company has $825,000$ (2021 – nil) potentially dilutive shares outstanding.
(e) Comprehensive Loss
Comprehensive income (loss) is the change in the Company's net assets that results from transactions, events and circumstances from sources other than the Company's shareholders and includes items that are not included in the statement of operations.
(f) Financial Instruments
The Company's financial instruments consist of cash and accounts payable and accrued liabilities.
The Company's classification of its financial instruments under IFRS 9 – Financial Instruments ("IFRS 9") is as follows:
| Asset or Liability | Classification |
|---|---|
| Cash | Amortized cost |
| Accounts payable and accrued liabilities | Amortized cost |
Classifications
On initial recognition, the Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:
- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- $\bullet$ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVTOCI if it meets both of the following conditions and is not designated as FVTPL:
- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the $\bullet$ principal amount outstanding.
An equity investment that is held for trading is measured at FVTPL. For other equity investments that are not held for trading, the Company may irrevocably elect to designate them as FVTOCI. This election is made on an investment-by-investment basis.
All financial assets not classified or measured at amortized cost or FVTOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Significant Accounting Policies – continued $3.$
(f) Financial Instruments - continued
Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has elected to measure them at FVTPL.
Measurement
Financial Assets at FVTOCI
Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss).
Financial Assets and Liabilities at Amortized Cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial Assets and Liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statement of operations. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are recognized in the statement of operations in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company's own credit risk will be recognized in other comprehensive income (loss).
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 if 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 the statement of comprehensive 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.
Derecognition
Financial Assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statement of operations. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).
Financial Liabilities
The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statement of operations.
$3.$ Significant Accounting Policies – continued
(g) Share-Based Payments
The Company grants share-based awards, including options, as an element of compensation to directors, officers, employees and service providers. Details of the Company's share option plan are disclosed in Note 4b.
The Company uses the Black-Scholes Option Pricing Model to measure the fair value for all share options granted, modified or settled during the period. Compensation expense is recorded based on the fair value of the award at the grant date, amortized over the vesting period. Each reporting date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is computed. The movement in cumulative expense is recognised in the statement of comprehensive income or as capitalized mineral resource property cost with a corresponding entry within equity, against share-based payments reserve. No expense is recognised for awards that do not ultimately vest. When options are exercised, the proceeds received, together with any related amount in share-based payments reserve, are credited to share capital.
(h) New Accounting Standards Not Yet Adopted
Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company's financial statements
4. Share Capital
(a) Common Shares
Authorized - unlimited common shares without par value
On November 22, 2021, the Company issued 4,289,000 common shares at \$0.10 per share for proceeds of \$428,900 pursuant to its IPO. In connection with the IPO, the Company incurred share issuance costs of \$71,490.
On March 12, 2021, the Company issued 4,250,000 common shares at \$0.05 per share for proceeds of \$212,500.
(b) Share Options
The Company has a share option plan to issue share options whereby the total share options outstanding may be up to 10% of its issued capital at the time of an applicable option grant. The Board of Directors may from time to time, grant options to directors, officers, employees or consultants. The exercise price of an option is not less than the closing price on the TSXV on the last trading day preceding the grant date.
The continuity of the Company's share options is as follows:
| Options | Weighted Average Number of Exercise Price $(\$)$ |
|
|---|---|---|
| Balance, January 21, 2021 (date of incorporation) and April 30, 2021 | ||
| Granted | 825,000 | 0.10 |
| Balance, April 30, 2022 | 825,000 | 0.10 |
Share Capital – continued 4.
(b) Share Options – continued
Additional information regarding the Company's share options as at April 30, 2022 is as follows:
| Outstanding and Exercisable | |||
|---|---|---|---|
| Weighted Average | Weighted | ||
| Range of | Remaining | Average Exercise | |
| Exercise Prices | Number of | Contractual Life | Price |
| (S | Options | (Years) | (\$) |
| 0.10 | 825,000 | 4.Ե |
The fair value of vested share options recognized as an expense during the year ended April 30, 2022 was \$61,530 (2021 -\$nil). The weighted average grant date fair value of share options granted during the year ended April 30, 2022 was \$0.07 $(2021 - $nil)$ per option.
The fair value for share options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:
| 2022 | 2021 | |
|---|---|---|
| Risk-free interest rate | $1.44\%$ | |
| Expected volatility | $100\%$ | |
| Expected option life (in years) | 5.0 |
5. Related Party Transactions
During the year ended April 30, 2022, the Company incurred general and administration overhead of \$8,000 (2021 - \$nil) to a company with common officers and directors.
Financial Instruments and Risk Management 6.
Financial Risks
The Company's financial instruments are exposed to certain financial risks. The risk exposures and the impact on the Company's financial instruments as at April 30, 2022 are summarized below.
(a) Credit Risk
The credit risk exposure on cash is limited to its carrying amount at the date of the statement of financial position. Cash is held as cash deposits with a creditworthy bank.
(b) Liquidity Risk
Liquidity risk arises from the Company's general and capital financing needs. The Company manages liquidity risk by attempting to maintain sufficient cash balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short term obligations. As at April 30, 2022, the Company has working capital of \$494,821.
Financial Instruments and Risk Management - continued 6.
- (c) Market Risks
- $(i)$ Foreign Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company's functional and reporting currency is the Canadian dollar. The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. As at April 30, 2022, the Company has a cash balance of US\$19,127. The Company has not hedged its exposure to currency fluctuations.
Sensitivity Analysis
The Company has a bank balance in US dollars. The Company estimates that $a +10\%$ change in the value of the Canadian dollar relative to the US dollar would have a corresponding effect of approximately \$2,500 on the statement of operations.
$(ii)$ Interest Rate Risk
The Company does not have any interest bearing debt and is therefore not exposed to interest rate risk.
Fair Values
Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:
- Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
- Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair values of the Company's financial instruments, which includes cash, accounts payable and accrued liabilities, approximate their carrying values due to the immediate or short-term maturity of these financial instruments.
Capital Management 7.
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to pursue a Qualifying Transaction and to maintain a flexible capital structure for its projects for the benefit of its stakeholders. As the Company is in the startup stage, its principal source of funds is from the issuance of common shares.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The proceeds raised from the issuance of common shares may only be used to identify and evaluate assets or businesses for future investment, with the exception that no more than the lesser of 30% of the gross proceeds from the issuance of common shares may be used to cover prescribed costs of issuing the common shares or administrative and general expenses of the Company. These restrictions apply until completion of a Qualifying Transaction by the Company as defined under the Exchange Policy 2.4. The Company currently is not subject to other externally imposed capital requirements.
Shel
Income Taxes 8.
The tax effect (computed by applying the Canadian federal and provincial statutory rate) of the significant temporary differences, which comprise deferred income tax assets and liabilities, are as follows:
| 2022 $\left( \text{\$}\right)$ |
2021 $\left( \text{\$}\right)$ |
|
|---|---|---|
| Canadian statutory income tax rate | 27% | 11% |
| Income tax recovery at statutory rate | (35,223) | (678) |
| Tax effect of: | ||
| Permanent differences and other | (2,689) | |
| Change in tax rate | (986) | |
| Change in unrecognized deferred income tax assets | 38,898 | 678 |
| Income tax provision |
The significant components of deferred income tax assets and liabilities are as follows:
| 2022 | 2021 | |
|---|---|---|
| $\left( \text{\$}\right)$ | $\left( \text{\$}\right)$ | |
| Deferred income tax assets | ||
| Non-capital losses carried forward | 24,134 | 678 |
| Share issuance costs | 15,442 | |
| Unrecognized deferred income tax assets | (39, 576) | (678) |
| Net deferred income tax asset |
As at April 30, 2022, the Company has non-capital losses carried forward of \$89,387, which is available to offset future years' taxable income. These losses expire as follows.
| Φ | |
|---|---|
| 2041 | 6,192 |
| 2042 | 83,225 |
| 89,387 |