ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes for the years ended December 31, 2012 and December 31, 2011 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors" beginning on page 8 of this annual report.
Our audited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Consolidated Operations
The following discussion and analysis provides information that our company believes is relevant to an assessment and understanding of our company’s results of consolidated operation and financial condition for the fiscal year ended December 31, 2012.
16
Comparison of the fiscal years ended December 31, 2012 and 2011
Revenue
During the fiscal year ended December 31, 2012 and December 31, 2011 our company generated no revenue.
|
|
For Year Ended December 31,
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
$
|
|
-
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
Consulting
|
|
-
|
|
|
300
|
|
Exploration
|
|
500
|
|
|
2,040
|
|
Impairment of mineral interest
|
|
10,000
|
|
|
-
|
|
Legal and accounting
|
|
29,159
|
|
|
5,694
|
|
Re-staking claim
|
|
-
|
|
|
-
|
|
Operation and administration
|
|
20,665
|
|
|
5,233
|
|
Total operating expense
|
|
60,324
|
|
|
13,267
|
|
|
|
|
|
|
|
Net loss from operations
|
|
(60,324)
|
|
|
(13,267)
|
Expenses
During the fiscal year ended December 31, 2012, our company reported total operating expenses of $60,324 as compared to $13,267 during the year period ended December 31, 2011, an increase of $47,057. The increase in operating expenses is primarily due to increases in legal and accounting, impairment of mining interest and operation and administration expense. The increases in these expenses are primarily attributable to the purchase of assets in a new venture, as well as, the preparation and filing of our quarterly report with the Securities and Exchange Commission.
17
Net Loss
Our company had a net loss of $61,456 for the fiscal year ended December 31, 2012, as compared to a net loss of $13,267 for the fiscal year ended December 31, 2011, a change of $48,189. The change in net loss was primarily due to an increase in operating expenses, and interest expense during the fiscal year ended December 31, 2012.
ANALYSIS OF FINANCIAL CONDITION
Liquidity and Capital Resources
As at the date of this annual report we have suspended our plan of operation as it relates to the exploration of our Portage Bay property. We are presently engaged in negotiations regarding a potential asset acquisition or business combination with GEN BioPharma Inc., a private pharmaceutical company specializing in oncology products. However, as of the date of this annual report we have not entered into any provisional or definitive agreement with GEN BioPharma Inc. Accordingly, our present plan of operation for the twelve month period beginning January 1, 2013 is limited to administrative activities required to pursue our ongoing negotiations and pursuit of new business opportunities, and to maintain our public reporting requirements.
We estimate our operating expenses and working capital requirements for the next twelve months to be as follows:
Expense
|
|
Cost
|
General and administrative expenses
|
$
|
30,000
|
Management and administrative costs
|
$
|
60,000
|
Legal Fees
|
$
|
50,000
|
Auditor Fees
|
$
|
10,000
|
|
$
|
150,000
|
As at December 31, 2012 we had current assets of $1,716,629 including cash on hand of $1,079,044. Our current liabilities as at December 31, 2012 were $1,789,157, resulting in a working capital deficit of $72,528.
In order to improve our liquidity, we plan pursue additional equity financing from private investors or possibly a registered public offering. We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.
Current Assets and Total Assets
As of December 31, 2012, the consolidated balance sheet reflects that our company had: i) total current assets of $1,716,629, as compared to total current assets of $2,457 at December 31, 2011, a increase of $1,714,172; and ii) total assets of $1,717,240, as compared to total assets of $13,631 at December 31, 2011, an increase of $1,703,609. The increase in total current assets and total assets was primarily attributable to stock offering which began in December of 2012 and closed on March 13, 2013.
Total Current Liabilities and Total Liabilities
As of December 31, 2012, the consolidated balance sheet reflects that our company had total current liabilities and total liabilities of $1,789,157, as compared to total current liabilities and total liabilities of $24,092 at December 31, 2011, an increase of $1,765,065. This increase was due to increases in accounts payable, a note payable, accrued interest on the note payable, increases in related party payable and stock subscription payable from the stock offering that began in December 2012 and closed in March 2013.
18
C
ash Flow
During the fiscal year ended December 31, 2012, cash was primarily used to fund operations. Our company reported a net increase in cash during fiscal year ended December 31, 2012 as compared to December 31, 2011 from financing activities. See below for additional discussion and analysis of cash flow.
|
|
Fiscal year ended December 31,
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
(21,568)
|
|
$
|
(14,498)
|
Net cash used in investing activities
|
|
(637,585)
|
|
|
(1,690)
|
Net cash provided by financing activities
|
|
1,735,740
|
|
|
15,219
|
|
|
|
|
|
|
Net Change in Cash
|
$
|
1,076,587
|
|
$
|
(969)
|
During the fiscal year ended December 31, 2012, net cash provided by operating activities was $21,568, compared to net cash used in operating activities of $14,498 during the fiscal year ended December 31, 2011. The increase in net cash used in operating activities of $7,070 is primarily due to a private placement offering that began in December 2012 and closed on March 13, 2013.
During the fiscal year ended December 31, 2012, net cash used in investing activities was $637,585, compared to net cash used in investing activities of $1,690 during the fiscal year ended December 31, 2011. The increase in net cash used in investing activities was due to the purchase of assets in a new business venture.
During the fiscal year ended December 31, 2012, net cash provided by financing activities was $1,735,740, compared to net cash provided by financing activities of $15,219 during the fiscal year ended December 31, 2011. The increase in net cash provided by financing activities was due to the purchase of assets in a new business venture.
During the fiscal year ended December 31, 2012, an officer and director advanced $27,740 to our company.
As discussed herein, our company reported a net loss of $61,456 during the fiscal year ended December 31, 2012, compared to $13,267 during the fiscal year ended December 31, 2011. The increase was primarily due to increases in: legal and accounting, impairment of mineral interest, and operation and administration expense.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of our company required by Article 8 of Regulation S-X are attached to this report.
20
RESOLUTE ONCOLOGY INC.
(FORMERLY PEQUOT RESOURCES, INC.)
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012 and 2011
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Consolidated Balance Sheets
|
F-2
|
|
|
Consolidated Statements of Operations And Comprehensive Income
|
F-3
|
|
|
Consolidated Statements of Stockholders Deficit
|
F-4
|
|
|
Consolidated Statements of Cash Flows
|
F-5
|
|
|
Notes to Consolidated Financial Statements
|
F-6 – F-13
|
21
Morrill & Associates, LLC
Certified Public Accountants
1448 North 2000 West, Suite 3
Clinton, Utah 84015
801-820-6233 Phone; 801-820-6628 Fax
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Resolute Oncology, Inc. (formerly Pequot Resources, Inc.)
(A Development Stage Company)
Sherman Oaks, California
We have audited the accompanying balance sheets of Resolute Oncology, Inc. (a development stage company) as of December 31, 2012 and 2011 and the related statements of operations, stockholders’ deficit and cash flows for the years then ended and for the period from inception on June 23, 2009 through December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Resolute Oncology, Inc. (a development stage company) as of December 31, 2012 and 2011 and the results of its operations and cash flows for the years ended December 31, 2012 and 2011 and for the period from inception on June 23, 2009 through December 31, 2012 in conformity with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has no significant operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Morrill & Associates
Morrill & Associates
Clinton, Utah 84015
March 19, 2013
|
(Formerly Pequot Resources, Inc.)
|
(A Development Stage Company)
|
Consolidated
Balance Sheets
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,079,044
|
$
|
|
2,457
|
|
Advance on asset transfer
|
|
637,585
|
|
|
-
|
|
Total current assets
|
|
1,716,629
|
|
|
2,457
|
|
|
|
|
|
|
|
Property and Equipment
|
|
|
|
|
|
|
Accumulated depreciation
|
|
(1,079)
|
|
|
(516)
|
|
Computer equipment
|
|
1,690
|
|
|
1,690
|
|
Mining interests
|
|
-
|
|
|
10,000
|
|
Total property and equipment
|
|
611
|
|
|
11,174
|
|
|
|
|
|
|
|
Total assets
|
$
|
1,717,240
|
$
|
|
13,631
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
30,858
|
$
|
|
2,665
|
|
Accrued interest
|
|
1,132
|
|
|
-
|
|
Related party payable
|
|
49,167
|
|
|
21,427
|
|
Note payable
|
|
500,000
|
|
|
-
|
|
Stock subscription payable
|
|
1,208,000
|
|
|
-
|
|
Total current liabilities
|
|
1,789,157
|
|
|
24,092
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,789,157
|
|
|
24,092
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
Common stock, $.001 par value,
|
|
|
|
|
|
|
412,000,000 shares authorized;
|
|
|
|
|
|
|
37,400,000 shares issued and outstanding
|
|
37,400
|
|
|
37,400
|
|
Additional paid-in capital
|
|
(2,400)
|
|
|
(2,400)
|
|
Deficit, accumulated during the development stage
|
|
(106,917)
|
|
|
(45,461)
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
(71,917)
|
|
|
(10,461)
|
|
Total liabilities and stockholders’ deficit
|
$
|
1,717,240
|
$
|
|
13,631
|
The accompany notes are an integral part of these financial statements.
F-2
Resolute Oncology Inc.
|
(Formerly Pequot Resources, Inc.)
|
(A Development Stage Company)
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
For Year Ended December 31,
|
|
|
Accumulated from June 23, 2009 (inception) through
December 31,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
$
|
|
-
|
$
|
|
-
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
-
|
|
|
300
|
|
|
2,000
|
|
Exploration
|
|
500
|
|
|
2,040
|
|
|
5,590
|
|
Impairment of mineral interest
|
|
10,000
|
|
|
-
|
|
|
10,000
|
|
Legal and accounting
|
|
29,159
|
|
|
5,694
|
|
|
54,584
|
|
Re-staking claim
|
|
-
|
|
|
-
|
|
|
800
|
|
Operation and administration
|
|
20,665
|
|
|
5,233
|
|
|
32,811
|
|
Total operating expense
|
|
60,324
|
|
|
13,267
|
|
|
105,785
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
(60,324)
|
|
|
(13,267)
|
|
|
(105,785)
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(1,132)
|
|
|
-
|
|
|
(1,132)
|
Total other income (expense)
|
|
(1,132)
|
|
|
-
|
|
|
(1,132)
|
|
|
|
|
|
|
|
|
|
|
Net loss prior to income tax
|
|
(61,456)
|
|
|
(13,267)
|
|
|
(106,917)
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(61,456)
|
$
|
|
(13,267)
|
$
|
|
(106,917)
|
|
|
|
|
|
|
|
|
|
Loss per common share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.00)
|
$
|
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
37,400,000
|
|
|
37,400,000
|
|
|
|
The accompany notes are an integral part of these financial statements.
F-3
Resolute Oncology Inc.
|
(Formerly Pequot Resources, Inc.)
|
(A Development Stage Company)
|
Consolidated
Statements of Stockholders' Deficit
|
From June 23, 2009 (inception) through December 31, 2012
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional Paid-in Capital
|
|
|
Accumulated Deficit During Development Stage
|
|
|
Total Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 23, 2009 (inception)
|
|
-
|
$
|
|
-
|
$
|
|
-
|
$
|
|
-
|
$
|
|
-
|
|
Shares issued for cash at $0.001 per share
|
|
27,500,000
|
|
|
27,500
|
|
|
(22,500)
|
|
|
-
|
|
|
5,000
|
|
Shares issued for cash at $0.01 per share
|
|
8,250,000
|
|
|
8,250
|
|
|
6,750
|
|
|
-
|
|
|
15,000
|
|
Shares issued for cash at $0.05 per share
|
|
1,650,000
|
|
|
1,650
|
|
|
13,350
|
|
|
-
|
|
|
15,000
|
|
Net loss for the year ending December 31, 2009
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,408)
|
|
|
(2,408)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
37,400,000
|
|
|
37,400
|
|
|
(2,400)
|
|
|
(2,408)
|
|
|
27,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for year ending December 31, 2010
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(29,786)
|
|
|
(29,786)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
37,400,000
|
|
|
37,400
|
|
|
(2,400)
|
|
|
(32,194)
|
|
|
2,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for year ending December 31, 2011
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(13,267)
|
|
|
(13,267)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
37,400,000
|
|
|
37,400
|
|
|
(2,400)
|
|
|
(45,461)
|
|
|
(10,461)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for year ending December 31, 2012
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(61,456)
|
|
|
(61,456)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
37,400,000
|
$
|
|
37,400
|
$
|
|
(2,400)
|
$
|
|
(106,917)
|
$
|
|
(71,917)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompany notes are an integral part of these financial statements.
F-4
Resolute Oncology Inc.
|
(Formerly Pequot Resources, Inc.)
|
(A Development Stage Company)
|
Consolidated
Statements of Cash Flow
|
|
|
|
|
|
|
|
|
|
For Year Ended December 31,
|
|
|
Accumulated from June 23, 2009 (inception) through December 31,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(61,456)
|
|
$
|
(13,267)
|
|
$
|
(106,917)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net
|
|
|
|
|
|
|
|
|
|
cash used in operating activities
|
|
|
|
|
|
|
|
|
|
Impairment of mineral interest
|
|
10,000
|
|
|
-
|
|
|
-
|
|
Depreciation
|
|
563
|
|
|
516
|
|
|
1,079
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable
|
|
28,193
|
|
|
(1,747)
|
|
|
30,858
|
|
Increase (decrease) in accrued interest
|
|
1,132
|
|
|
-
|
|
|
1,132
|
|
Net cash provided by (used in) operating activities
|
|
(21,568)
|
|
|
(14,498)
|
|
|
(73,848)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
Advance on asset transfer
|
|
(637,585)
|
|
|
-
|
|
|
(637,585)
|
|
Cash paid for equipment
|
|
-
|
|
|
(1,690)
|
|
|
(1,690)
|
|
Net cash used in investing activities
|
|
(637,585)
|
|
|
(1,690)
|
|
|
(639,275)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from related party payable
|
|
27,740
|
|
|
15,219
|
|
|
49,167
|
|
Proceeds from notes payable
|
|
500,000
|
|
|
-
|
|
|
500,000
|
|
Proceeds from issuance of common stock
|
|
-
|
|
|
-
|
|
|
35,000
|
|
Increase in subscription payable
|
|
1,208,000
|
|
|
-
|
|
|
1,208,000
|
|
Net cash provided by financing activities
|
|
1,735,740
|
|
|
15,219
|
|
|
1,792,167
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
1,076,587
|
|
|
(969)
|
|
|
1,079,044
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
2,457
|
|
|
3,426
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
$
|
1,079,044
|
|
$
|
2,457
|
|
$
|
1,079,044
|
|
|
|
|
|
|
|
|
|
|
Supplement Disclosures:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
Cash paid for income tax
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The accompany notes are an integral part of these financial statements.
F-5
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
Note 1 – Nature of Operations
The Company was incorporated in the State of Nevada on June 23, 2009. On June 22, 2011, the Company changed the name to Pequot Resources, Inc. Effective January 9, 2013, the Company changed its name to “Resolute Oncology Inc.”, by way of a merger with its wholly-owned subsidiary Resolute Oncology Inc., which was formed solely for the change of name. The name change became effective with the Over-the-Counter Bulletin Board at the opening of trading on January 9, 2013. The Company acquired a mineral property located in the Sudbury Mining District, within the province of Ontario, Canada and has not determined whether this property contains reserves that are economically recoverable. The recoverability of property expenditures will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying property, and the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreement and upon future profitable production of proceeds for sale thereof.
The Company has evaluated the above mining interest and has decided not to further develop the mining property.
On December 17, 2012, the Company incorporated a wholly owned subsidiary, Resolute Oncology Limited, an Ireland corporation, for the purpose of managing the potential operations in Europe. As of the inception, December 17, 2012 to December 31, 2012 there have been no activities in the subsidiary.
Note 2 - Recent Accounting Pronouncements
The Company has reviewed accounting pronouncements issued during the past two years and have adopted any that are applicable to our company. The Company has determined that none had a material impact on the Company’s financial position, results of operations, or cash flows for the years ended December 31, 2012 and 2011.
Note 3 - Significant Accounting Policies
The following is a summary of significant account policies used in the preparation of these financial statements.
a.
Basis of presentation
The financial statements of the Company have been prepared on the accrual basis in accordance with General Accepted Accounting Principles (GAAP) accepted in the United States of America applicable to exploration stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is December 31.
b.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
c.
Mineral rights, property and acquisition costs
The Company has been in the development stage since its formation on June 23, 2009 and has not yet realized any revenues from its planned operations.
Mineral exploration costs are expensed as incurred. The costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred to develop and expand the capacity of mines, or to develop mine areas in advance of production are also capitalized. Costs incurred, once proven and probable reserves have been established, are capitalized and will be amortized using the unit-of-production method over the life of the mineral rights. Costs incurred to maintain current exploration or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment.
The Company has abandoned its mining project and charged the mining property cost to impairment of mineral interest.
d. Impairment of long-lived assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 930-360-35,
Asset Impairment
, as of December 31, 2012, exploration progress has stopped and the mining interest has been impaired.
e.
Fair Value of Financial instruments
The Company adopted FASB ASC 820-10-50, “
Fair Value Measurements.
This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
|
·
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
·
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
|
·
|
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
|
The carrying amounts reported in the balance sheet for the cash and cash equivalents, and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
f. Income taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred income tax assets and liabilities are provided based on the difference between the financial statement and tax bases of assets and liabilities measured by the currently enacted tax rates in effect for the years in which these differences are expected to reverse. Deferred tax expense or benefit is the result of changes in deferred tax assets and liabilities.
g.
Basic and diluted net loss per share
The Company computes net loss per share in accordance with GAAP. The Company presents both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerators) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive. The Company had no common stock equivalents outstanding for the year ended December 31, 2012 and 2011.
|
|
|
|
For the Year Ended
December 31,
2012
|
|
|
For the Year Ended
December 31,
2011
|
|
|
|
|
|
|
|
|
Basic Earnings per share:
|
|
|
|
|
|
|
Income(loss)(numerator)
|
$
|
(61,456)
|
|
$
|
(13,267)
|
|
Shares(denominator)
|
|
37,400,000
|
|
|
37,400,000
|
|
|
Per share amount
|
$
|
(0.00)
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31,
2012
|
|
|
For the Year Ended
December 31,
2011
|
|
|
|
|
|
|
|
|
Fully Diluted Earnings per share:
|
|
|
|
|
|
Income(loss)(numerator)
|
$
|
(61,456)
|
|
$
|
(13,267)
|
|
Shares(denominator)
|
|
37,400,000
|
|
|
37,400,000
|
|
|
Per share amount
|
$
|
(0.00)
|
|
$
|
(0.00)
|
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
h.
Use of estimates and assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. In these financial statements, assets, liabilities and earnings involve extensive reliance on management’s estimates. Actual results could differ from those estimates.
i. Concentrations of credit risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and related party payables. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management also routinely assesses the financial strength and credit worthiness of any parties to which it extends funds and as such, it believes that any associated credit risk exposures are limited.
j. Risks and uncertainties
The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, and other risks associated with operating a resource exploration business, including the potential risk of business failure.
Note 4 – Advance on Asset Transfer
The Company has advanced $637,585 during the year ended December 31, 2012 to pay for consulting services, legal fees, license and permits, and rights in connection with its ongoing negotiations regarding a potential asset acquisition or business combination for GEN BioPharma Inc. dba Resolute Oncology. The advance will be due and payable on the earlier of December 31, 2013. The advance shall bear no interest until the Maturity Date. If not repaid or otherwise extinguished at the Maturity Date, the loan shall bear interest at the rate of 10% per annum thereafter.
Note 5 – Mineral Property
Pursuant to a mineral property purchase agreement dated December 10, 2009, the Company acquired a 100% undivided right, title and interest in a mineral claim, located in all parts of North East Quarter of the South Half Lot 8, Concession 4, claim # 4253705 Rathbun Township in the Sudbury Mining District within the province of Ontario for a cash payment of $10,000 US Dollars. Since the Company has not established the commercial feasibility of the mineral claim, the acquisition costs have been capitalized. The Company has decided not to pursue the development of the mineral property. The mining interest has been impaired for $10,000.
Note 6 – Related Party Payable
The president, Blair Sorby, advanced the Company an additional $27,740 for operating costs during the yearend December 31, 2012. The total advance as of December 31, 2012 is $49,167.
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
The accrued interest rate is 3.5% per annum. The total accrued interest is $1,132 at December 31, 2012.
Note 7 – Note Payable
The Company has taken a bridge loan of $500,000 dollars due on December 31, 2013. The loan shall bear no interest until maturity date. If not repaid by maturity date, the loan shall bear interest at 10% per annum thereafter.
Note 8 – Stock Subscription Payable
The Company entered into a private placement offering in December 2012. The Company collected the proceeds of $1,208,000 as of December 31, 2012. The private placement offering closed on March 13, 2013 where upon stock subscription agreements went into effect.
Note 9 - Capital Stock
Authorized
The total authorized capital is 412,000,000 common shares with a par value of $0.001 per common share.
Issued and outstanding
In July 2009 the Company issued 22,000,000 shares of our common stock for cash at $0.0002 per share
In August 2009 the Company issued 5,500,000 and 5,500,000 shares of our common stock for cash at $0.0002 and $0.002 per share, respectively.
In September 2009 the Company issued 2,750,000 and 1,155,000 shares of our common stock for cash at $0.002 and $0.01 per share, respectively.
In October 2009 the Company issued 495,000 shares of our common stock for cash at $0.01 per share.
In December 2012, the Company entered into a private placement offering of our common stock at $0.50 per share. The Company has collected the proceeds of $1,208,000 as of December 31, 2012 and has recorded the proceeds as a stock subscription payable under current liabilities until the offering closed on March 14, 2013.
Note 10 - Income Taxes
The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48)). FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained will be sustained upon examination based upon the technical merits of the position. If the more-likely-than- not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income from continuing operations for the year ended December 31, 2012 and the December 31, 2011 due to the following:
Deferred tax assets and the valuation account are as follows:
|
|
|
For Year Ended
|
|
|
For Year Ended
|
|
|
|
2012
|
|
|
2011
|
Deferred tax asset:
|
|
|
|
|
|
|
Net operating loss carryforward
|
$
|
36,352
|
|
$
|
15,457
|
|
Valuation allowance
|
|
(36,352)
|
|
|
(15,457)
|
|
|
|
|
|
|
|
|
Total
|
$
|
-
|
|
$
|
-
|
The components of income tax expense are as follows:
|
|
|
For Year Ended
December 31,
|
|
|
For Year Ended
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Current Federal tax
|
$
|
-
|
|
$
|
-
|
|
Current State tax
|
|
-
|
|
|
-
|
|
Change in NOL benefit
|
|
20,895
|
|
|
4,511
|
|
Change in valuation allowance
|
|
(20,895)
|
|
|
(4,511)
|
|
|
|
|
|
|
|
|
Total
|
$
|
-
|
|
$
|
-
|
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
The potential income tax benefit of these losses has been offset by a full valuation allowance.
As of December 31, 2012, the Company has an unused net operating loss carry-forward balance of $106,917 that is available to offset future taxable income. This unused net operating loss carry-forward balance begins to expire in 2027.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
For Year Ended
December 31,
2012
|
|
|
|
Beginning balance
|
$
|
-
|
|
$
|
-
|
Additions based on tax positions related to current year
|
|
-
|
|
|
-
|
Additions for tax positions of prior years
|
|
-
|
|
|
-
|
Reductions for tax positions of prior years
|
|
-
|
|
|
-
|
Reductions in benefit due to income tax expense
|
|
-
|
|
|
-
|
Ending balance
|
$
|
-
|
|
$
|
-
|
At December 31, 2012, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
As of December 31, 2012 and 2011, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are those since inception June 23, 2009 through the year ended December 31, 2012.
Note 11 – Going Concern
These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $106,917 and further losses are anticipated in the development of its business. This raises substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement and public offering of its common stock. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Resolute Oncology Inc.
(Formerly Pequot Resources, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statement
December 31, 2012 and 2011
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and develop other business ventures.
These factors, among others raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 12 – Subsequent Events
Effective January 9, 2013, our company changed its name from “Pequot Resources, Inc.” to “Resolute Oncology Inc.”, by way of a merger with our company’s wholly-owned subsidiary Resolute Oncology Inc., which was formed solely for the change of name. The name change became effective with the Over-the-Counter Bulletin Board at the opening of trading on January 9, 2013 under our company’s new symbol “
REON
”. Our new CUSIP number is 76118C102.
On January 18, 2013, in accordance with board approval, our company filed a Certificate of Change with the Nevada Secretary of State to give effect to a forward split of our authorized, issued and outstanding shares of common stock on a 5.5 new for one (1) old basis, such that our authorized capital will be increased from 75,000,000 to 412,500,000 shares of common stock and correspondingly, our issued and outstanding shares of common stock will be increased from 6,800,000 to 37,400,000 common shares, all with a par value of $0.001.
The forward stock split became effective with the Over-the-Counter Bulletin Board at the opening of trading on February 1, 2013 under the symbol "
REOND"
. The "D" was placed on our company’s ticker symbol for 20 business days. After 20 business days, our symbol reverted back to its original symbol "
REON
". This change in capital structure has been retroactively applied throughout these financial statements.
On February 4, 2013, we closed a private placement by issuing an aggregate of 2,870,000 shares of our common stock at a price of $0.50 per share, for gross proceeds of $1,435,000. We issued the securities to six (6) non U.S. persons (at that term as defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 and to five (5) U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) relying upon Rule 506 of Regulation D of the Securities Act of 1933.
On March 13, 2013, we closed a private placement by issuing 116,000 shares of our common stock at a price of $0.50 per share, for gross proceeds of $58,000. We issued the securities to one (1) non U.S. person (at that term as defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933
.
Resolute Oncology Inc. has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions occurring during this period that required recognition or disclosure in its financial statements.