Annual Financial Report
Fortune Graphite Inc. - Fortune Graphite Inc. Audited Financial Results 2014.
PR Newswire
London, February 6, 2015
Fortune Graphite Inc. (FORT) released audited financial results for financial
year 2014.
Fortune Graphite Inc. (FORT) released today its audited financial report for
the 2014 financial year ending January 31, 2015.
The report includes financial statements of Fortune Graphite Inc., which are
comprised of the statement of financial position as at January 31, 2015 and
the related statements of profit or loss and other comprehensive income,
changes in shareholders' equity, and cash flows statement.
The complete audited financial report was posted on the GXG site for further
review.
The audited financial report presents the following results
Fortune Graphite Inc.
(An Exploration Stage Enterprise)
Financial Statements
As of and for the Years Ended
January 31, 2015 and
2014
And
Report of Independent Public Accounting Firm
Fortune Graphite Inc.
(An Exploration Stage Enterprise) Index to Financial Statements
January 31, 2015 and 2014
Financial Statements:
Statement of Financial Position ............................ 2
Statement of Profit or Loss and
Other Comprehensive Income ................................. 3
Statement of Changes in Shareholders' Equity ............... 4
Statement of Cash Flows .................................... 5
Notes to Financial Statements............................. 6 -10
GREGORYSCOTT
875 N Michigan Ave Suite 3100
Chicago, IL 6061 1 USA (312) 752-5426
www.gregoryscottinternational.com
REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Fortune Graphite Inc.:
Report on the Financial Statements
We have audited the financial statements of Fortune Graphite Inc.,
(an exploration stage enterprise) which are comprised of the statemen t of fin
an cial position as at January 31, 2015 and 2014, and the related statements
of pr ofit of loss an d oth er comprehensive income, changes in shareholders'
equity, and cash flows for each of the years then ended, and a summar y of
significant accounting policies and other explanator y notes.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation of financial
statements that give a true and fair view in accordance with International
Financial Reporting Standards ("IFRS") and for such internal control as
management deter mines is necessar y to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
An audit involves per for ming procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation of financial statements
that give a true and fair view 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 entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying financial statements give a true
and fair view of the financial position of Fortune Graphite Inc. as at January
31, 2015 and 2014, and of their financial performance and cash flows for each
of the years then ended in accordance with IFRS.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 of
the accompanying financial statements, the Company is dependent on generating
revenue and obtaining outside sources of financing for the continuation of its
operations. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Chicago, Illinois USA
February 1, 2015
Statement of Financial Position
As of January 31, 2015 and 2014
Assets January 31, January 31,
Note 2015 2014
Noncurrent assets
Intangible assets - mineral rights 6 3,900,000 3,900,000
Furniture and fixtures 3 8,287 2,390
Total noncurrent assets $ 3,908,287 $ 3,902,390
Current assets
Cash 3 8,431 11,015
Receivables 3 24,477 23,502
Total current assets $ 32,908 $ 34,517
Total assets $ 3,941,195 $ 3,936,907
Shareholders' Equity & Liabilities
Shareholders' equity
Share capital 7 $ 3,939,800 $ 3,939,800
Accumulated deficit 7 (345,392) (280,275)
Total shareholders' equity $ 3,594,408 $ 3,659,525
Current liabilities
Due to related parties 8 346,787 277,382
Total current liabilities $ 346,787 $ 277,382
Total liabilities $ 346,787 $ 277,38
Total shareholders' equity and liabilities $ 3,941,195 $ 3,936,907
The accompanying notes are in integral part of the financial statements.
Statement of Profit of Loss and Other Comprehensive Income
As of January 31, 2015 and 2014
Year Ended Year Ended
January 31, January 31,
2015 2014
Note
Revenue 3 $ - $ -
Operating Expenses
Filing and transfer agent fees $ (14,505) $ (24,510)
General and administrative (12,933) (11,831)
Management fees (9,382) (4,311)
Professional fees (14,466) (3,210)
Rent (6,597) (7,992)
Telecommunications (2,246) (1,787)
Transportation (4,988) (2,912)
Total expenses 3 $ (65,117) $ (56,553)
Income taxes 3 $ - $ -
Net loss $ (65,117) $ (56,553)
Other comprehensive income 3 $ - $ -
Total comprehensive loss $ (65,117) $ (56,553)
Loss per share
Loss per common share - basic and diluted 3 $ (0.003) $ (0.002)
Weighted average common shares
outstanding - basic and diluted 3 25,749,118 25,749,118
The accompanying notes are in integral part of the financial statements
Statement of Changes in Shareholders' Equity
As of January 31, 2015 and 2014
Share Capital Accumulated
Note Shares Amount Deficit Total
Balance at February 1, 2013 10,203,636 $ 1,039,800 $ (223,722) $ 816,078
Common stock issued for mineral rights 7 18,000,000 1,800,000 - 1,800,000
Common stock issued for notes payable 7 11,000,000 1,100,000 - 1,100,000
Net loss for the year ended
January 31, 2014 7 - - (56,553) (56,553)
Balance at January 31, 2014 39,203,636 $ 3,939,800 $ (280,275) $ 3,659,525
Net loss for the year ended
January 31, 2015 7 - - (65,117) (65,117)
1:1.54 reverse stock split 7 (13,454,518) - - -
Balance at January 31, 2015 25,749,118 $ 3,939,800 $ (345,392) $ 3,594,408
Statement of Cash Flow
As of January 31, 2015 and 2014
January 31, January 31,
2015 2014
Cash flow from operating activities:
Net loss $ (65,117) $ (56,553)
Adjustments to reconcile net loss
to cash flow used in operating activities: - -
Depreciation 478 598
Increase in due to related parties 69,405 19,107
Increase in receivables (975) (23,502)
Net used in operating activities $ 3,791 $ (60,350)
Cash flow from investing activities: $ (6,375) $ -
Cash flow from financing activities: $ - $ -
Net change in cash and cash equivalents $ (2,584) $ (60,350)
Cash and cash equivalents at beginning of the period 11,015 71,365
Cash and cash equivalents at end of the period $ 8,431 $ 11,015
Interest paid $ - $ -
Taxes paid $ - $ -
Non cash investing and financing activities - debit (credit)
Acquisition of mineral rights for common stock payable
Common stock payable $ - $1,800,000
Common stock $ - $(1,800,000)
Common stock issued for notes payable - related party
Notes payable - related party $ - $1,100,000
Common stock $ - $1,100,000
1. Nature of Operations
Fortune Graphite Inc. ("Fortune Graphite" or "the Company") was
incorporated on March 10, 2010, in British Columbia, Canada. The Company
identifies and brings to market valuable mining properties bearing graphite
carbon, gold, silver and other precious metals.
Based on the Company's business plan, it is an exploration stage
enterprise since planned principle mining operations have not yet commenced.
Accordingly, the Company has prepared its financial statements i n accordance
with International Financial Reporting Standards ("IFRS") that apply to
developing enterprises.
2. Going Concern
The preparation of financial statements in accordance with IFRS
contemplates that operations will be sustained for a reasonable period. The
Company is in the exploration stage and is dependent on generating revenue and
outside sources of financing for continuation of its operations. These
conditions raise substantial doubt about the ability of the Company to
continue as a going concern for a reasonable period.
The company plans to improve its financial condition through
raising capital and ultimately generating revenue. However, there is no
assurance that the company will be successful in accomplishing this objective.
Management believes that this plan provides an opportunity for the Company to
continue as a going concern. We cannot give any assurances regarding the
success of management's plans. Our financial statements do not include
adjustments relating to the recoverability of recorded assets or liabilities
that might be necessary should we be unable to continue as a going concern.
3. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of
these financial statements are set out below.
Basis of Preparation - The financial statements are presented in
Canadian dollars in accordance with IFRS, using the historical cost
convention.
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Management believes that the
estimates are reasonable.
Intangible Assets: Mineral Rights - Purchased intangible assets are
recorded at cost, where cost is the amount of cash or cash equivalents paid or
the fair value of other consideration given to acquire an asset at the time of
its acquisition. The cost of such an intangible asset is measured at fair
value unless the exchange transaction lacks commercial substance or the fair
value of neither the asset received nor the asset given up is reliably
measurable. If the fair value of either the asset received or the asset given
up can be measured reliably, then the fair value of the asset given up is used
to measure cost unless the fair value of the asset received is more clearly
evident. The Company capitalizes acquisition and annual renewal costs
associated with mineral rights as intangible assets. The amount capitalized
represents fair value at the time the mineral rights are acquired. Upon
commencement of commercial production, the mineral rights will be amortized
using the unit-of-production method over their expected useful life.
Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highl y liquid investments with original
maturities of three months of less to be cash equivalents. Cash and cash
equivalents are stated at cost which approximates fair value.
Receivables - Receivables are recorded at cost, less any necessary
allowance for impairment in value.
Due to Related Parties - Due to related parties represent related
obligations allocated from affiliated entities t o pay for goods or services
that have been acquired in the ordinary course of business from suppliers.
Revenue and Associated Costs - The Company recognizes revenue when
persuasive evidence of an arrangement exists, services are rendered, the sales
price or fee is fixed or determinable, and collectability is reasonably
assured. Costs associated with the production of revenues are expensed as
incurred.
Impairment of Non-Financial Assets - Assets that are subject to
amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset's carrying
amount exceeds its recoverable amount. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows, such as the mining property level.
Income Taxes - The Company follows the asset and liability method
of accounting for future income taxes. Under this method, future income tax
assets and liabilities are recorded based on temporary differences between the
carrying amount of assets and liabilities and their corresponding tax basis.
In addition, the future benefits of income tax assets including unused tax
losses, are recognized, subject to a valuation allowance to the extent that it
is more likely than not that such future benefits will ultimately be realized.
The Company has provided a 100% valuation allowance to its deferred tax assets
associated with net operating losses, resulting in no net tax impact for any
of the years presented.
Future income tax assets and liabilities are measured using enacted
tax rates and laws expected to apply when they are to be either settled or
realized. The Company does not have any significant deferred tax asset or
liabilities at January 31, 2015. The Company's effective tax rate approximates
the Federal statutory rates.
Other Comprehensive Income - Other comprehensive income represents
the change in equity of an enterprise during a period from transactions from
non-owner sources. The Company has no accounts or transactions that give rise
to other comprehensive income.
Loss Per Common Share - Basic loss per common share is calculated
by dividing the net loss by the weighted average number of common shares
outstanding during that period. Diluted loss per share is calculated by based
on the treasury stock method, by dividing loss available to common
shareholders, adjusted for the effects of dilutive convertible securities, by
the weighted average number of common shares outstanding during the per iod
and all additional common shares that would have been outstanding had all
potential dilutive common share been issued. This method computes the number
of additional shares by assuming all dilutive options are exercised. That the
total number of shares is then reduced by the number of common shares assumed
to be repurchased from the total of issuance proceeds, using the average
market price of the Company's common shares for the period. There were no
dilutive securities during the period presented in the accompa nyin g
financial statements.
Segment Reporting - Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has
been identified as the steering committee that makes strategic decisions. The
Company operates in one segment described in Note 1, consisting of its mining
operations.
Accounting Policy Changes
In November 2009, the IASB issued IFRS 9 Financial Instruments as
the first step in its project to replace IAS
39 Financial Instruments: Recognition and Measurement. IFRS 9
retains but simplifies the mixed measurement
model and establishes two primary measurement categories for financial assets:
amortized cost and fair value. The basis of classification depends on an
entity's business model and the contractual cash flow of the financial Asset.
Classification is made at the time the financial asset is initially
recognized, namely when the entity becomes a party to the contractual
provisions of the instrument. IFRS 9 amends some of the requirements of IFRS 7
Financial Instruments: Disclosures including added disclosures about
investments in equity instruments measured at fair value in OCI, and guidance
on financial liabilities and de-recognition of financial instruments. In
December 2011, the IASB issued an amendment that adjusted the mandatory
effective date of IFRS 9 from January 1, 2013 to January 1, 2015. The adoption
of this standard had no material impact on our financial
statements.
In May 2011, the IASB issued IFRS 10 Consolidated Financial
Statements to replace IAS 27 Consolidated and Separate Financial Statements
and SIC 12 Consolidation - Special Purpose Entities. The new consolidation
standard changes the definition of control so that the same criteria apply to
all entities, both operating and special purpose entities, to determine
control. The revised definition focuses on the need to have both power and
variable returns before control is present. IFRS 10 must be applied starting
January 1, 2013 with early adoption permitted. The adoption of this standard
had no material impact on our financial statements.
In May 2011, the IASB issued IFRS 11 Joint Arrangements to replace
IAS 31, Interests in Joint Ventures. The new standard defines two types of
arrangements: Joint Operations and Joint Ventures. Focus is on the rights and
obligations of the parties involved to reflect the joint arrangement, thereby
requiring parties to recognize the individual assets and liabilities to which
they have rights or for which they are responsible, even if the joint
arrangement operates in a separate legal entity. IFRS 11 must be applied
starting January 1, 2013 with early adoption permitted. The adoption of this
standard had no material impact on our financial statements.
In May 2011, the IASB issued IFRS 12 Disclosure of Interests in
Other Entities to create a comprehensive disclosure standard to address the
requirements for subsidiaries, joint arrangements and associates including the
reporting entity's involvement with other entities. It also includes the
requirements for unconsolidated structured entities (i.e. special purpose
entities). IFRS 12 must be applied starting January 1, 2013 with early
adoption permitted. The adoption of this standard had no material impact on
our financial statements.
In May 2011, the IASB issued IFRS 13 Fair Value Measurement as a
single source of guidance for all fair value measurements required by IFRS to
reduce the complexity and improve consistency across its application. The
standard provides a definition of fair value and guidance on how to measure
fair value as well as a requirement for enhanced disclosures. Enhanced
disclosures about fair value are required to enable financial statement users
to understand how the fair values were derived. IFRS 13 must be applied
starting January 1, 2015 with early adoption permitted. The adoption of this
standard had no material impact on our financial statements.
In October 2011, the IASB issued IFRIC 20 Stripping Costs in the
Production Phase of a Surface Mine. IFRIC
20 provides guidance on the accounting for the costs of stripping
activity in the production phase of surface
mining when two benefits accrue to the entity from the stripping
activity: useable ore that can be used to produce inventory and improved
access to further quantities of material that will be mined in future periods.
IFRIC 20
Must be applied starting January 1, 2013 with early adoption
permitted. The adoption of this standard had no
Material impact on our financial statements.
4. Critical Accounting Estimates and Judgments
Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. The Company
makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year include:
Mineral Rights - Significant estimates and assumptions are required
to determine the expected useful lives for amortizing the Company's intangible
assets with finite useful lives. Estimates are also necessary in assessing
whether there is an impairment of their value requiring a write-down of their
carrying amount. In order to ensure that its assets are carried at no more
than their recoverable amount, the Company evaluates at each reporting date
certain indicators that would result, if applicable, in the calculation of an
impairment test. The recovera ble amount of an asset or group of assets may
require the Company to use estimates and mainly to assess the future cash
flows expected to arise from the asset or group of assets and a suitable
discount rate in order to calculate present value. Any negative change in
relation to the operating performance or the expected future cash flows of
individual assets or group of assets will change the expected recoverable
amount of these assets or group of assets, and therefore may require a
write-down of their carrying amount.
Contingent Liabilities - The Company is required to make judgments
about contingent liabilities including the probability of pending and
potential future litigation outcomes that, by their nature, are dependent on
future events that are inherently uncertain. In making its determination of
possible scenarios, management considers the evaluation of outside counsel
knowledgeable about each matter, as well as known outcomes in case law.
5. Financial Risk Management Objectives and Policies
The Company has a system of controls in place to create an
acceptable balance between the cost of risks occurring and the cost of
managing the risk . Management continually monitors the Company's
risk management process to ensure that an appropriate balance between risk and
control is achieved. Ris k management policies and systems are reviewed
regularly to reflect changes in market conditions and the Company's
activities. The Company reviews and agrees policies and procedures for the
management of these risks.
The Company is exposed to financial risks arising from its
operations and the use of financial instruments. The key financial risks
include market risk, credit risk, and liquidity risk. The following section
provides details regarding the Company's exposure to these risks and the
objectives, policies and processes for the management of these risks.
Market Risk - Market risk is the risk that changes in market
prices, such as foreign exchange rates, interest rates and equity prices, will
affect the Company's income or the value of its holdings of financial
instruments. Management believes the Company is not exposed to significant
market risk.
Credit Risk - Credit risk is the risk of loss that may arise on
outstanding financial instruments should a counterparty default on its
obligations. Credit risk arising from the inability of a customer to meet the
terms of the Company's financial instrument contracts is generally limited to
the amounts, if any, by which the customer's obligations exceed the
obligations of the Company. The Company's exposure to credit risk arises
primarily from its cash & cash equivalents and amounts due from affiliates for
which the Company minimizes credit risk by dealing with reputable
counterparties with high credit ratings and no history of default
Liquidity Risk - Liquidity risk is the risk that the Company will
encounter difficulty in meeting financial obligations due to shortage of
funds. The Company's exposure to liquidity risk arises primarily from
mismatches of the maturities of financial assets and liabilities. The
Company's liquidity risk management policy is to monitor its net operating
cash flows and maintain an adequate level of cash and cash equivalents through
regular review of its working capital requirements. The Company monitors and
maintains a level of cash considered adequate by management to finance the
Company's operations and mitigate the effects of the fluctuations in cash
flows.
Capital Management - The primary objective of the Company's capital
management is to ensure that it maintains a strong credit rating and healthy
capital ratios in order to support its business and maximize shareholder
value. The Company manages its capital structure and makes adjustments to it,
in light of changes i n economic conditions. To maintain or adjust the capital
structure, the Company may adjust the dividend payment to shareholders, return
capital to shareholders, or issue new shares. The Company has complied with
all externally imposed capital requirements as at January 31, 2015, and no
changes were made to the Company's capital management objectives, policies or
processes during the year then ended.
6. Intangible Assets - Mineral Rights
The Company acquired mineral rights associated with the following
properties from related parties in exchange for shares of its common stock,
cash, and notes payable due to the related parties. These mineral rights are
located in the Slocan Mining Division, a reported graphite mineral bearing
region I n British Columbia, Canada, and in the reported gold and silver
bearing placer properties in British Columbia, Canada. The mineral rights are
recorded in the accompanying statement of financial position at their
carryover basis, representing the original cost paid by these related parties
to acquire the mineral rights.
Year Mineral
Acquired Rights
Description
AA Bentinck 2010 $500,000
Harris Gold 2010 600,000
Creek
King David 2010 750,000
Castle
McVicar 2010 550,000
Superior 2011 1,500,000
$3,900,000
During the year ended January 31, 2014, the Company paid the final
contractual amounts due for the mineral rights by issuing 18,000,000 shares of
common stock to settle the remaining $1,800,000 "common stock payable"
obligation due on various properties, and by issuing 11,000,000 shares of
common stock to settle the remaining $1,100,000 due on various notes payable
due to these related parties in connection with the mineral rights purchase
agreements. As a result, the Company has fully paid for its mineral rights as
of January 31, 2015 and 2014.
Pursuant to these acquisitions, the Company is the legal and
registered owner of 2,924 hectares containing graphite carbon, 60 hectares
containing gold, and 21 hectares containing silver at January 31, 2015.
7. Shareholders' Equity
The Company is authorized to issue an unlimited number of no-par
value shares of common stock.
On April 12, 2013, the Company's common stock was admitted to
trading on the GXG Markets ("Market") First Quote segment under the symbol
"FORT". On January 1, 2015 the Company's Board of Directors amended its bylaws
to implement a reverse split of its common stock with a ratio of 1 post-split
share for every 1.54 share issued and outstanding on that date, resulting in a
reduction of the Company's issued and outstanding common shares from
39,203,636 to 25,749,118. This was executed to meet the €0.10
per-share equivalent value required by new Market rules. All share and related
information presented in these financial statements and accompanying footnotes
has been adjusted retroactively to reflect the decreased number of shares
resulting from the split. At January 31, 2015, the Company has 25,749,118
shares of common stock issued and outstanding.
All shares of the Company's common stock have equal rights and
privileges with respect to voting, liquidation and dividend rights. Each share
of common stock entitles the holder thereof to: one non-cumulative vote for
each share held of record on all matters submitted to a vote of the
stockholders; to participate equally and to receive any and all such dividends
as may be declared by the Board of Directors out of funds legally available
therefore; and to participate pro rata in any distribution of assets available
for distribution upon liquidation. Stockholders have no pre-emptive rights to
acquire additional shares of common stock or any other securities. Common
shares are not subject to redemption and carry no subscription or conversion
rights. All outstanding shares of common stock are fully paid and
non-assessable.
8. Due to Related Parties
Due to related parties represents obligations allocated from
affiliated entities to pay for goods or services that have been acquired in
the ordinary course of business from suppliers by the affiliates on the
Company's behalf. This obligation is non-interest bearing, and has no stated
maturity date.
9 . Subsequent Events
No events occurred subsequent to January 31, 2015 that would
require adjustment to the accompanying financial statements.
10. Approval of Financial Statements
The accompanying financial statements were approved by the board of
directors and authorized for issue on
February 1, 2015.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the
normal course of business. The Company had a deficit accumulated during the
development stage of approximately $345,000 at January 31, 2015, had a net
loss of approximately $345,000 for the period from Inception through January
31, 2015, and net cash used in operating activities of approximately $345,000
for the period from Inception through January 31, 2015.
The Directors take responsibility for this announcement.
For further information:
Fortune Graphite Inc.
Dr. Klaus Wagner-Bartak
President and CEO
Chairman of the Board of Directors
260 Queen's Quay West #3104
Toronto, Ontario M5J 2N3 Canada
Toll Free: (+1) 866 209-0451
Tel: (+1) 416 367-8240
Fax: (+1) 416 367-8334
email: info@fortunegraphite.com
web: www.fortunegraphite.com