Item 1.              Financial Statements

Our consolidated unaudited interim financial statements for the three and nine month periods ended March 31, 2014 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

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LITHIUM EXPLORATION GROUP, INC.
(An Exploration Stage Company)

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

4

The accompanying notes are an integral part of these consolidated financial statements.

5

The accompanying notes are an integral part of these consolidated financial statements.

6

The accompanying notes are an integral part of these consolidated financial statements.

7

The accompanying notes are an integral part of these consolidated financial statements.

8

The accompanying notes are an integral part of these consolidated financial statements.

9

The accompanying notes are an integral part of these consolidated financial statements.

10

The accompanying notes are an integral part of these consolidated financial statements.

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1.      Organization

Lithium Exploration Group, Inc. (formerly Mariposa Resources, Ltd.) (the “Company”) was incorporated on May 31, 2006 in the State of Nevada, U.S.A. It is based in Scottsdale, Arizona, USA. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.

Effective November 30, 2010, the Company changed its name to “Lithium Exploration Group, Inc.,” by way of a merger with its wholly-owned subsidiary Lithium Exploration Group, Inc., which was formed solely for the change of name.

A wholly owned subsidiary, 1617437 Alberta Ltd. was incorporated in the province of Alberta, Canada on July 8, 2011. Effective October 2, 2013, the subsidiary changed its name to Alta Disposal Ltd.

On October 18, 2013, the Company acquired 51% interest in Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.).

On March 1, 2014, the Company acquired 50% interest in Tero Oilfield Services Ltd.

The Company is an exploration stage company that engages principally in the acquisition, exploration, and development of resource properties. Prior to June 25, 2009, the Company had the right to conduct exploration work on 20 mineral mining claims in Esmeralda County, Nevada, U.S.A. On July 31, 2009, the Company acquired an option to enter into a joint venture for the management and ownership of the Jack Creek Project, a mining project located in Elko County, Nevada. On September 25, 2009, the joint venture was terminated and the Company entered into an agreement with Beeston Enterprises Ltd., under which the Company was granted an option to acquire an undivided 50% interest in eight mineral claims located in the Clinton Mining District of British Columbia, Canada. On December 16, 2010, the Company entered into an Assignment Agreement to acquire an undivided 100% right, title and interest in and to certain mineral permits located in the Province of Alberta, Canada (see Note 5). On November 8, 2011, the Company entered into a letter agreement with Glottech-USA. Pursuant to the terms of the agreement, the Company was granted an exclusive license to use and distribute the technology within the Swan Hills region of Alberta as well as a non-exclusive right to distribute the technology within Canada.

Exploration Stage Company

The Company is considered to be in the exploration stage as defined in FASC 915-10-05 “ Development Stage Entities, ” and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7. The Company is devoting substantially all of its efforts to development of business plans and the acquisition of mineral properties.

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2.      Significant Accounting Policies

Basis of presentation and consolidation

The accompanying consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The consolidated interim financial statements include the accounts of the Company, its wholly-owned subsidiary Alta Disposal Ltd. and its 51% owned subsidiary Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.). Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company. Significant estimates that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $731,531and $248,624 in cash and cash equivalents at March 31, 2014 and June 30, 2013, respectively.

Concentration of Risk

The Company maintains cash balances at a financial institution which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for banks located in the US. As of March 31, 2014 and June 30, 2013, the Company had $422,033 and $25,935, respectively, in deposits in excess of federally insured limits in its US bank. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash in bank accounts.

Prepaid expenses

Prepaid expenses mainly consist of legal retainers, deposit for mineral property exploration, and shares issued for investor relations. Legal retainers and deposit for mineral property exploration will be expensed in the period when services are completed. Shares issued for investor relations are amortized as investor relation expenses over the service term.

Start-Up Costs

In accordance with FASC 720-15-20 “ Start-Up Costs,” the Company expenses all costs incurred in connection with the start-up and organization of the Company.

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2.      Significant Accounting Policies - Continued

Mineral Acquisition and Exploration Costs

The Company has been in the exploration stage since its formation on May 31, 2006 and has not yet realized any revenue from its planned operations. It is primarily engaged in the acquisition, exploration, and development of mining properties. Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess 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.

Net Income or (Loss) per Share of Common Stock

The Company has adopted FASC Topic No. 260, “ Earnings Per Share ,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

Potentially dilutive securities are not presented in the computation of EPS since their effects are anti-dilutive.

Foreign Currency Translations

The Company’s functional and reporting currency is the US dollar. All transactions initiated in other currencies are translated into US dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the US dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.

No significant realized exchange gain or losses were recorded from inception (May 31, 2006) to March 31, 2014.

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2.      Significant Accounting Policies - Continued

Comprehensive Income (Loss)

FASC Topic No. 220, “ Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. From inception (May 31, 2006) to March 31 2014, the Company had no material items of other comprehensive income.

Risks and Uncertainties

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

Environmental Expenditures

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

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

Warrants

We value our warrants with provisions resulting in derivative liabilities at fair value using the lattice model according to ASC-815-10-55. We revalue our warrants at the end of every period at fair value and record the difference in other income (expense) in the consolidated statements of operations.

Convertible Debentures and Convertible Promissory Notes

We value our convertible debentures and convertible promissory notes with provisions resulting in beneficial conversion features from the embedded derivative at fair value according to ASC-840-10-25-14, rather than have its conversion feature bifurcated and reported separately due to ASC-815-15-25-1b. Because the value of the derivative related to the warrant exceeds the proceeds of the loan, the Company allocated 100% of the proceeds to the warrant derivative and took a day one loss for the difference between the proceeds and the fair value of the warrants, resulting in a debt discount on the full fair value of the debenture because no proceeds were available to be allocated to the debt or its beneficial conversion feature. That debt discount is accreted to interest expense over the stated life of the note using the interest method in accordance with ASC 470-20-35-7a and 835-30-35-2. Unaccreted debt discount on the date of conversion is accreted to interest expense on that date.

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2.      Significant Accounting Policies - Continued

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of the short maturity of these instruments.

The Company’s Level 3 financial liabilities consist of the derivative liability of the Company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company used a lattice model which incorporates transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Recent Accounting Pronouncements

Recent accounting pronouncements that are listed below did not, and are not currently expected to, have a material effect on the Company’s financial statements, but will be implemented in the Company’s future financial reporting when applicable.

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2.      Significant Accounting Policies - Continued

FASB Statements:

In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.

Accounting Standards Updates ("ASUs") through ASU No. 2014-08 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

3.      Capital Stock

Authorized Stock

At inception, the Company authorized 100,000,000 common shares and 100,000,000 preferred shares, both with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

Effective April 8, 2009, the Company increased the number of authorized shares to 600,000,000 shares, of which 500,000,000 shares are designated as common stock par value $0.001 per share, and 100,000,000 shares are designated as preferred stock, par value $0.001 per share.

Share Issuances

For the period ended March 31, 2014:

On July 1, 2013, the Company issued 80,000 common shares at a market price of $0.10 per share for consulting fees.

On July 1, 2013, the Company issued 37,594 common shares at the weighted average price of $0.1330 per share for consulting fees.

On July 3, 2013, the Company issued 954,461 common shares at a deemed price of $0.0825 per share for note payable conversion of $105,410 (Note 5).

On July 9, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.045 per share for debenture conversion of $138,462 (Note 6).

On July 15, 2013, the Company issued 181,818 common shares at a market price of $0.11 per share for consulting fees.

On July 15, 2013, the Company issued 54,545 common shares at a market price of $0.11 per share for consulting fees.

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3.      Capital Stock - Continued

Share Issuances - Continued

On August 1, 2013, the Company issued 48,485 common shares at a market price of $0.1650 per share for consulting fees.

On August 1, 2013, the Company issued 46,997 common shares at a market price of $0.1454 per share for consulting fees.

On August 13, 2013, the Company issued 1,585,714 common shares at a deemed price of $0.0735 per share for promissory note and interest conversion of $163,693 (Note 7).

On August 14, 2013, the Company issued 844,300 common shares at a deemed price of $0.0525 per share for debenture conversion of $68,194 (Note 6).

On August 15, 2013, the Company issued 28,736 common shares at a market price of $0.2088 per share for consulting fees.

On September 1, 2013, the Company issued 57,469 common shares at a market price of $0.1450 per share for consulting fees.

On September 1, 2013, the Company issued 61,069 common shares at a market price of $0.1310 per share for consulting fees.

On September 6, 2013, the Company issued 2,375,052 common shares at a deemed price of $0.19 per share for warrants exercise of $446,789 (Note 7).

On September 15, 2013, the Company issued 48,702 common shares at a market price of $0.1232 per share for consulting fees.

On September 19, 2013, the Company issued 1,400,000 common shares at a deemed price of $0.045 per share for debenture conversion of $96,923 (Note 6).

On September 23, 2013, the Company issued 1,293,717 common shares at a deemed price of $0.04 per share for warrants exercise of $56,486 (Note 7).

On October 1, 2013, the Company issued 71,716 common shares at a market price of $0.1162 per share for consulting fees.

On October 9, 2013, the Company issued 1,300,000 common shares at a deemed price of $0.045 per share for debenture conversion of $58,500.

On October 10, 2013, the Company issued 66,667 common shares at a market price of $0.12 per share for consulting fees.

On October 15, 2013, the Company issued 95,643 common shares at a market price of $0.0941 per share for consulting fees.

On October 18, 2013, the Company issued 20,000,000 common shares at a deemed price of $0.001 per share for the conversion of 20,000,000 Series A Convertible Preferred shares.

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3.      Capital Stock - Continued

Share Issuances - Continued

On October 24, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.03825 per share for debenture conversion of $117,692.

On October 24, 2013, the Company issued 501,355 common shares at a deemed price of $0.05 per share for warrants exercise of $23,864 (Note 7).

On November 1, 2013, the Company issued 90,679 common shares at a market price of $0.0919 per share for consulting fees.

On November 1, 2013, the Company issued 87,052 common shares at a market price of $0.0919 per share for consulting fees.

On November 11, 2013, the Company issued 1,387,500 common shares at a deemed price of $0.042 per share for promissory note and interest conversion of $81,846 (Note 7).

On November 15, 2013, the Company issued 109,756 common shares at a market price of $0.082 per share for consulting fees.

On November 18, 2013, the Company issued 2,500,000 common shares at a deemed price of $0.03 per share for promissory note and interest conversion of $150,000 (Note 7).

On November 18, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.03 per share for debenture conversion of $92,308.

On December 1, 2013, the Company issued 105,888 common shares at a market price of $0.0787 per share for consulting fees.

On December 4, 2013, the Company issued 1,435,345 common shares at a deemed price of $0.0406 per share for promissory note and interest conversion of $81,846 (Note 7).

On December 15, 2013, the Company issued 155,980 common shares at a market price of $0.0577 per share for consulting fees.

On December 20, 2013, the Company issued 3,000,000 common shares at a deemed price of $0.0163 per share for promissory note and interest conversion of $97,800 (Note 7).

On January 1, 2014, the Company issued 134,329 common shares at a market price of $0.067 per share for consulting fees.

On January 6, 2014, the Company issued 2,553,681 common shares at a deemed price of $0.02282 per share for promissory note conversion.

On January 6, 2014, the Company issued 3,000,000 common shares at a deemed price of $0.02261 per share for Convertible debenture conversion.

On January 15, 2014, the Company issued 1,601,227 common shares at a deemed price of $0.0163 per share for promissory note conversion of $26,100.

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3.      Capital Stock - Continued

Share Issuances - Continued

On January 16, 2014, the Company issued 3,500,000 common shares at a deemed price of $0.02261 per share for Convertible debenture conversion.

On February 1, 2014, the Company issued 211,268 common shares at a market price of $0.0426 per share for consulting fees.

On February 4, 2014, the Company issued 899,071 common shares at a deemed price of $0.01228 per share for warrants exercise of $11,042 (Note 7).

On February 11, 2014, the Company issued 3,000,000 common shares at a deemed price of $0.0320 per share for preferred stock conversion.

On February 14, 2014, the Company issued 2,000,000 common shares at a deemed price of $0.0224 per share for promissory note conversion.

On February 14, 2014, the Company issued 3,300,000 common shares at a deemed price of $0.0224 per share for Convertible debenture conversion.

On February 24, 2014, the Company issued 2,000,000 common shares at a deemed price of $0.040 per share for preferred stock conversion.

On March 1, 2014, the Company issued 160,715 common shares at a market price of $0.0560 per share for consulting fees.

On March 3, 2014, the Company issued 1,902,344 common shares at a deemed price of $0.0224 per share for promissory note conversion.

On March 3, 2014, the Company issued 3,472,734 common shares at a deemed price of $0.0224 per share for Convertible debenture conversion.

On March 5, 2014, the Company issued 2,500,000 common shares at a deemed price of $0.0960 per share for preferred stock conversion.

On March 6, 2014, the Company issued 6,250,000 common shares at a deemed price of $0.0800 per share for preferred stock conversion.

On March 6, 2014, the Company issued 5,999,000 common shares at a deemed price of $0.0800 per share for preferred stock conversion.

On March 6, 2014, the Company issued 1,804,063 common shares at a deemed price of $0.0261 per share for warrants exercise of $47,200 (Note 7).

On March 7, 2014, the Company issued 6,000,000 common shares at a deemed price of $0.0780 per share for preferred stock conversion.

On March 12, 2014, the Company issued 745,856 common shares at a deemed price of $0.0579 per share for preferred stock conversion.

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3.      Capital Stock - Continued

Share Issuances - Continued

On March 13, 2014, the Company issued 2,326,283 common shares at a deemed price of $0.0100 per share for warrants exercise of $23,270 (Note 7).

On March 17, 2014, the Company issued 6,750,000 common shares at a deemed price of $0.0506 per share for preferred stock conversion.

On March 21, 2014, the Company issued 1,736,372 common shares at a deemed price of $0.0629 per share for preferred stock conversion.

For the year ended June 30, 2013:

On July 10, 2012, the Company issued 1,504,415 common shares at a deemed price of $0.1925 per share for debenture conversion and accrued interest of $289,600 (Note 6).

On August 21, 2012, the Company issued 815,047 common shares at a deemed price of $0.1595 per share for debenture conversion of $130,000 (Note 6).

On September 17, 2012, the Company issued 1,581,028 common shares at a deemed price of $0.1265 per share for debenture conversion of $200,000 (Note 6).

On October 25, 2012, the Company cancelled 20,000,000 common shares and in exchange, 20,000,000 preferred shares were issued.

On November 1, 2012, the Company issued 62,500 common shares at a market price of $0.24 per share for mining expenses.

On November 13, 2012, the Company issued 41,667 common shares at a market price of $0.24 per share for investor relation expenses.

On November 22, 2012, the Company issued 949,171 common shares at a deemed price of $0.1170 per share for debenture conversion and accrued interest of $111,053 (Note 6).

On December 1, 2012, the Company issued 55,556 common shares at a market price of $0.27 per share for mining expenses.

On December 13, 2012, the Company issued 38,462 common shares at a market price of $0.26 per share for investor relation expenses.

On January 2, 2013, the Company issued 55,556 common shares at a market price of $0.27 per share for mining expenses.

On January 14, 2013, the Company issued 40,000 common shares at a market price of $0.25 per share for investor relation expenses.

On January 25, 2013, the Company issued 1,028,113 common shares at a deemed price of $0.25 per share for warrants exercise of $257,028 (Note 6).

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3.      Capital Stock - Continued

Share Issuances - Continued

On February 1, 2013, the Company issued 78,947 common shares at a market price of $0.19 per share for mining expenses.

On February 14, 2013, the Company issued 41,667 common shares at a market price of $0.24 per share for investor relation expenses.

On February 19, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.077 per share for debenture conversion of $154,000 (Note 6).

On March 1, 2013, the Company issued 48,387 common shares at a market price of $0.31 per share for mining expenses.

On March 1, 2013, the Company issued 25,806 common shares at a market price of $0.31 per share for consulting fees.

On March 8, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.077 per share for debenture conversion of $154,000 (Note 6).

On March 14, 2013, the Company issued 47,619 common shares at a market price of $0.21 per share for investor relation expenses.

On March 15, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.095 per share for debenture conversion of $190,000 (Note 6).

On March 15, 2013, the Company issued 38,876 common shares at a market price of $0.2315 per share for consulting fees.

On March 15, 2013, the Company issued 95,238 common shares at a market price of $0.21 per share for consulting fees.

On March 27, 2013, the Company issued 389,189 common shares at a market price of $0.185 per share for investor relation expenses.

On April 1, 2013, the Company issued 71,429 common shares at a market price of $0.21 per share for mining expenses.

On April 1, 2013, the Company issued 38,095 common shares at a market price of $0.21 per share for consulting fees.

On April 15, 2013, the Company issued 100,000 common shares at a market price of $0.20 per share for consulting fees.

On April 15, 2013, the Company issued 57,007 common shares at a market price of $0.2105 per share for consulting fees.

On April 15, 2013, the Company issued 50,000 common shares at a market price of $0.20 per share for investor relation expenses.

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3.      Capital Stock - Continued

Share Issuances - Continued

On April 23, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.0805 per share for debenture conversion of $161,000 (Note 6).

On April 29, 2013, the Company issued 300,000 common shares at a market price of $0.18 per share for director fees.

On May 1, 2013, the Company issued 47,059 common shares at a market price of $0.17 per share for consulting fees.

On May 13, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.075 per share for debenture conversion of $150,000 (Note 6).

On May 15, 2013, the Company issued 113,636 common shares at a market price of $0.1760 per share for consulting fees.

On May 15, 2013, the Company issued 70,588 common shares at a market price of $0.17 per share for consulting fees.

On May 30, 2013, the Company issued 2,400,000 common shares at a deemed price of $0.075 per share for debenture conversion of $180,000 (Note 6).

On June 1, 2013, the Company issued 50,000 common shares at a market price of $0.16 per share for consulting fees.

On June 14, 2013, the Company issued 142,857 common shares at a market price of $0.14 per share for consulting fees.

On June 15, 2013, the Company issued 88,235 common shares at a market price of $0.136 per share for consulting fees.

Since its inception (May 31, 2006), the Company has issued shares of its common stock as follows, retroactively adjusted to give effect to the 10 for 1 forward split:

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24

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3.      Capital Stock - Continued

Of these shares, 13,068,308 were issued to directors and officers of the Company. 18,516,037 were issued to independent investors. 872,375 were issued for mining expenses. 948,604 were issued for investor relation expenses. 200,000 were issued for debt settlement. 43,001,127 were issued for debenture and interest conversion. 1,028,113 were issued for exercise of warrants attached to convertible debentures. 17,965,811 were issued for promissory note and interest conversions. 9,199,541 were issued for exercise of warrants attached to convertible promissory notes. 954,461 were issued for note payable conversion. 2,000,000 were issued for a mining option settlement. 20,000,000 were issued for the conversion of Series A Convertible Preferred shares. 34,981,228 were issued for the conversion of Series B Convertible Preferred shares. The Company has no stock option plan, warrants or other dilutive securities, other than warrants issued to acquire 37,959,395 shares of the Company regarding convertible promissory notes (Note 7).

As per management agreements, the Company is obligated to issue 300,000 common shares to two directors by April 27, 2014 provided that they continue to serve as members to the Company’s board of directors. 300,000 common shares were issued to the two directors on April 27, 2011, April 27, 2012 and April 29, 2013 respectively.

On January 3, 2014, the Company designated 2,000,000 preferred stock with a par value $0.001 per share, issuable only in consideration of the extinguishment of existing debt convertible in to the Company’s common stock with a par value of $0.001. The designated preferred stock shall be issued on the basis of 1 preferred stock for each $1 of convertible debt.

4.      Provision for Income Taxes

The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under FASC 740-20-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.

Exploration stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated during the period from May 31, 2006 (date of inception) through March 31, 2014 of $11,311,568 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately $640,186 and $1,367,596 during the periods ended March 31, 2014 and 2012, respectively.

The Company follows the provisions of uncertain tax positions as addressed in FASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.

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4.      Provision for Income Taxes - Continued

The Company has no tax position at March 31, 2014 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at March 31, 2014. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended exploration stage activities. The tax years for June 30, 2013, June 30, 2012 and June 30, 2011 are still open for examination by the Internal Revenue Service (IRS).

5.      Mineral Property Costs

Mineral Claims, Clinton Mining District

On September 25, 2009, and amended June 24, 2010, the Company entered into an Option Agreement under which the Company was granted an option to acquire an undivided 50% interest in eight mineral claims located in the Clinton Mining District, Province of British Columbia, Canada (the “Claims”), which Claims total in excess of 3,900 hectares, in consideration of the issuance of 1,500,000 common shares of the Company on or before December 31, 2010. The Claims were subject to a two percent net smelter royalty which can be paid out for the sum of $1,000,000 (CAD). The Company can earn an undivided 50% interest in the Claims by carrying out a $100,000 (CAD) exploration and development program on the Claims on or before December 31, 2010, plus an additional $200,000 (CAD) exploration and development program on the Claims on or before September 25, 2011.

In the event that the Company acquires an interest in the Claims, the Company and the Optionor have further agreed, at the request of either party, to negotiate a joint venture agreement for further exploration and development of the Claims.

On April 29, 2011, the Company entered into a mutual release agreement. The Company is released from any obligations related to the Claims for considerations of a cash payment of CDN $ 54,624 (US$57,901) and the issuance of 200,000 common shares of the Company. The shares have been valued at a market price of $3.70 for a total of $740,000. The total amount of $797,901 has been recorded as mining expenses.

Mineral Permit

On December 16, 2010, the Company entered into an Assignment Agreement to acquire the following:

27

5.      Mineral Property Costs - Continued

In consideration for the Assignment, the Company agreed to pay US$90,000 by way of cash or stock of equal value (consisting of amounts previously paid by the Assignor pursuant to the Option Agreement). The full $90,000 (consisting of option payments ‘i’ and ‘vi’ below) was expensed and included in the December 31, 2011 accounts payable balance. The Option shall be in good standing and exercisable by the Company by paying the following amounts on or before the dates specified in the following schedule:

The Optionee shall provide a refundable amount of CDN$50,000 (paid) to the Optionor by November 2, 2010, which shall be applied by the Optionor towards work assessment expenses acceptable to the Government of Alberta, with any unused portion to be applied against payments required to maintain the permits underlying the property in good standing.

On December 31, 2012, the Company entered into an agreement to amend the original payment requirement of CDN$100,000 due on January 1, 2013 to the following payments: CDN $20,000 (paid) cash payment due on January 1, 2013 and CDN $80,000 by a 15% one year promissory note starting January 1, 2013. The promissory note is interest free until March 31, 2013. After then, interest will accrue on the principal balance then in arrears at the rate of 15% per annum. No payments shall be payable until December 31, 2013. At any time, the Optionor may elect to convert the remaining balance of CDN $80,000 plus accrued interest into common shares of the Company at 75% of the closing market price of the Company’s common shares on the election day. The full $100,000 (consisting of cash payment of $20,000 and note payable of $80,000) was expensed. The note is subject to be measured at its fair value in accordance with ASC 480-10-25-14. The fair value at issuance was $106,667. An additional $26,667 was charged to mining expense. An interest expense of CDN$3,058 (US$2,899) was accrued as at June 30, 2013. On July 3, 2013, the Optionor elected to convert the promissory note of CDN $80,000 (US $75,844) plus accrued interest of CDN $3,058 (US $2,899) for the total amount of CDN $83,058 (US $78,743) into 954,461 common shares of the Company at a price of US $0.0825 per share.

Glottech Technology

On March 17, 2011 and subsequently amended on November 18, 2011, the Company entered into a letter agreement to acquire one initial unit of proprietary and patented mechanical ultrasound technology for use in water purification, inclusive of its process of separating from water, as the primary fluid stock, the salt and other minerals and by –products contained therein, with Glottech – USA.

28

5.      Mineral Property Costs - Continued

To acquire the unit, the Company must make the following payments:

Commencing as of the end of an initial sixty day testing and training period following satisfactory delivery and physical setup of the technology, and continuing thereafter for as long as the technology remains in the possession of the Company, the Company shall pay continuing monthly royalties in an amount equal to $2.00 per physical ton of water processed pursuant to the usage of the technology.

On June 12, 2012, the Company filed a complaint with the court of common pleas of Chester County, Pennsylvania against Glottech – USA, LLC, Eldredge, Inc., and the Eldredge Companies, Inc. The complaint seeks an order of the court granting possession of the unit, in its current state, to the Company.

Effective August 14, 2012, the Company entered into an option agreement with GD Glottech-International, Limited (“GD International”) to protect our license and distribution rights in the event that GD-Glottech-USA, LLC (“GD USA”) is unable to perform and honor the obligations contingent to a letter agreement dated November 8, 2011.

Pursuant to the terms of the option agreement, we are required to provide an initial deposit of $150,000 to be held in escrow for the option to obtain a license on the patent rights, as set forth in the option agreement. A further $15,000 was required for exercising the option agreement and it will be credited to future fees when patents rights are exercised. We exerised this option agreement on September 1, 2012 and released the funds to GD International.

On October 1, 2012, the Company entered into a sales agency agreement with GD International. The agreement shall replace all agreements entered previously. Pursuant to the agreement, the Company is appointed as GD International’s sales agent for the technology within the territory. As a consideration, 2,000,000 common shares of the Company shall be issued to GD International (issued: see d) above). GD International retains all right, title and interest in the technology. The term of this agreement will be an initial period of five years. The term shall be automatically renewable thereafter for successive five year periods provided that the Company has sold not less than 25 or more technology units during each applicable five year period.

On May 2, 2013, the Company entered into an agreement to retain the future use of the unit. Pursuant to the agreement, the Company must make the following payments:

29

6.      Convertible Debenture

On May 15, 2012, the Company entered into a securities purchase agreement with an investor. Pursuant to the terms of the agreement, the investor acquired convertible debentures with an aggregate face value of $1,680,000, at an original issuance discount of $180,000; resulting in $1,500,000 net proceeds to the Company. The debenture is due on May 15, 2013 and carries no interest, with an effective interest rate of 561.35% . The debenture is convertible at the lower of $0.45 and 65% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions. The debenture is also subject to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $2,584,615. On February 19, 2013, $154,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.077 per share in accordance with the terms of the agreement. On March 8, 2013, $154,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.077 per share in accordance with the terms of the agreement. On March 15, 2013, $190,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.095 per share in accordance with the terms of the agreement. On April 23, 2013, $161,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.0805 per share in accordance with the terms of the agreement. On May 13, 2013, $150,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.075 per share in accordance with the terms of the agreement. On May 30, 2013, $180,000 in face value of the debenture was converted to 2,400,000 common shares at a price of $0.075 per share in accordance with the terms of the agreement. On July 9, 2013, $90,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.045 per share in accordance with the terms of the agreement. On August 14, 2013, $44,326 in face value of the debenture was converted to 844,300 common shares at a price of $0.0525 per share in accordance with the terms of the agreement. On September 19, 2013, $63,000 in face value of the debenture was converted to 1,400,000 common shares at a price of $0.045 per share in accordance with the terms of the agreement. The debenture was extended on July 23, 2013 for 12 months and will expire on May 15, 2014. On October 9, 2013, $58,500 in face value of the debenture was converted to 1,300,000 common shares at a price of $0.045 per share in accordance with the terms of the agreement. On October 24, 2013, $76,500 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.03825 per share in accordance with the terms of the agreement. On November 18, 2013, $60,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.03000 per share in accordance with the terms of the agreement. On January 6, 2014, $67,830 in face value of the debenture was converted to 3,000,000 common shares at a price of $0.02261 per share in accordance with the terms of the agreement. On January 16, 2014, $79,135 in face value of the debenture was converted to 3,500,000 common shares at a price of $0.02261 per share in accordance with the terms of the agreement. On February 14, 2014, $73,920 in face value of the debenture was converted to 3,300,000 common shares at a price of $0.0224 per share in accordance with the terms of the agreement. On February 28, 2014, $77,789 in face value of the debenture was converted to 3,472,734 common shares at a price of $0.0224 per share in accordance with the terms of the agreement.

As of March 31, 2014, the debenture has been fully converted to common shares.

On September 17, 2012, the Company entered into an amended agreement to revise the conversion price of the debenture entered into on May 15, 2012. The debenture is now convertible at the lower of $0.20 and 65% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions.

30

7.      Convertible Promissory Notes

On February 13, 2013, the Company entered into a securities purchase agreement with one investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with an aggregate face value of $1,100,000, at an issuance discount of $100,000; resulting in $1,000,000 net proceeds to the Company. On February 13, 2013, $100,000 net proceeds were received with an issuance discount of $10,000 for an aggregate face value of $110,000. On April 24, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On June 4, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On June 27, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On August 14, 2013, $75,000 net proceeds were received with an issuance discount of $7,500 for an aggregate face value of $82,500. On August 13, 2013, $110,000 in face value of the note was converted to 1,585,714 common shares at a price of $0.0735 per share in accordance with the terms of the agreement. On November 11, 2013, $55,000 in face value of the note was converted to 1,387,500 common shares at a price of $0.042 per share in accordance with the terms of the agreement. On December 4, 2013, $55,000 in face value of the note was converted to 1,435,345 common shares at a price of $0.04060 per share in accordance with the terms of the agreement. On December 9, 2013, $100,000 net proceeds were received with an issuance discount of $10,000 for an aggregate face value of $110,000. There is no guarantee the investor will make additional payments. The note of $247,500 is due on February 13, 2016 and carries a one-time interest rate of 5% over the term of note, with an effective interest rate of 171.61% . The note is convertible at the lower of $0.25 and 70% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $353,571. During the period ended December 31, 2013, an interest expense of $22,289 was accrued.

Effective March 1, 2013, the Company entered into another securities purchase agreement with another investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with an aggregate face value of $672,000, at an issuance discount of $72,000; resulting in $600,000 net proceeds to the Company.

On March 1, 2013, $150,000 net proceeds were received with an issuance discount of $18,000 for an aggregate face value of $168,000. The note of $168,000 is due on March 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $336,000. On November 18, 2013, $75,000 in face value of the note was converted to 2,500,000 common shares at a price of $0.03 per share in accordance with the term of the agreement. On December 20, 2013, $48,900 in face value of the note was converted to 3,000,000 common shares at a price of $0.0163 per share in accordance with the terms of the agreement.

31

7.      Convertible Promissory Notes - Continued

On April 1, 2013, an additional $150,000 of net proceeds was received with an issuance discount of $18,000 for an aggregate face value of $168,000. The note of $168,000 is due on April 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $336,000.

On May 1, 2013, an additional $100,000 of net proceeds was received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on May 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

On June 1, 2013, an additional $100,000 of net proceeds was received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on June 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

On July 1, 2013, the final tranche of $100,000 of net proceeds were received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on July 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior to the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

32

7.      Convertible Promissory Notes - Continued

Effective September 13, 2013, the Company entered into another securities purchase agreement with an investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with aggregate net proceeds of $500,000,

On September 16, 2013, $250,000 net proceeds were received. The note of $250,000 is due on March 16, 2015 and carries an annual interest rate of 15%, with an effective interest rate of 227.33% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on September 16, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $500,000. During the period ended December 31, 2013, an interest expense of $10.993 was accrued.

On October 1, 2013, $250,000 net proceeds were received. The note of $250,000 is due on March 16, 2015 and carries an annual interest rate of 15%, with an effective interest rate of 227.33% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on October 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-1, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $500,000. During the period ended December 31, 2013, an interest expense of $9,452 was accrued.

The investor has the option during the 18 month period following September 13, 2013 to purchase additional convertible notes upon the same terms and conditions for up to $1,500,000.

Along with the promissory note issued on February 13, 2013, the Company issued warrants for 540,540 shares of the Company at an exercise price of $0.185 expiring February 13, 2018, 263,158 shares of the Company at an exercise price of $0.190 expiring April 24, 2018, 297,619 shares of the Company at an exercise price of $0.168 expiring June 4, 2018, 400,000 shares of the Company at an exercise price of $0.125 expiring June 27, 2018 and 334,821 shares of the Company at an exercise price of $0.224 expiring August 14, 2018 respectively. Along with the promissory note issued on March 1, 2013, the Company issued warrants to acquire a total of 3,632,433 shares of the Company for a period of five years at an exercise price of $0.185. Along with the promissory note entered on September 16, 2013, the Company issued warrants to acquire a total of 2,777,778 shares of the Company for a period of five years at an exercise price of $0.09.

The warrants bear a cashless exercise provision. The warrants also include anti-dilution protection with respect to lower priced issuances of common stock or securities convertible or exchangeable into common stock, which provision resulted in derivative liability treatment under ASC topic 815-10-55. Fair values at issuance totaled $94,594, $1,126,054, $50,000, $50,595, $48,000, $75,000 and $368,333 for warrants issued on February 13, 2013, March 1, 2013, April 24, 2013, June 4, 2013, June 27, 2013, August 14, 2013 and September 16, 2013 respectively.

33

7.      Convertible Promissory Notes - Continued

On September 6, 2013, 3,632,433 warrants were exercised for 2,375,052 common shares of the Company at a deemed price of $0.19 in accordance with the terms of the agreement. A loss of $83,546 was recorded when the warrants were valued prior to the warrants exercise. On September 23, 2013, 540,540 warrants were exercised for 1,293,717 common shares of the Company at a deemed price of $0.04 in accordance with the term of the agreement. A loss of $2,432 was recorded when the warrants were valued prior to the warrants exercise. On October 24, 2013, 263,158 warrants were exercised for 501,355 common shares of the Company at a deemed price of $0.05 in accordance with the term of the agreement. A gain of $2,632 was recorded when the warrants were valued prior to the warrants exercise. On February 4, 2014, 297,619 warrants were exercised for 899,071 common shares of the Company at a deemed price of $0.01 in accordance with the term of the agreement. A gain of $18,720 was recorded when the warrants were valued prior to the warrants exercise. On March 6, 2014, 400,000 warrants were exercised for 1,804,063 common shares of the Company at a deemed price of $0.03 in accordance with the terms of the agreement. A loss of $7,200 was recorded when the warrants were valued prior to the warrants exercise. On March 13, 2014, 334,821 warrants were exercised for 2,326,283 common shares of the Company at a deemed price of $0.01 in accordance with the terms of the agreement. A gain of $51,730 was recorded when the warrants were valued prior to the warrants exercise.

The Company used the Lattice Model for valuing warrants using the following assumptions:

At March 31, 2014, the warrants were valued at $2,532,340 resulting in a gain of $1,404,045 in the period ended March 31, 2014. The corresponding debt discount of the promissory notes was accreted to interest expense over the terms of notes of 3 years, 1 year and 18 months respectively. During the period ended March 31, 2014, an accretion of $191,143 was recognized as interest expense.

34

7.      Convertible Promissory Notes - Continued

$220,000 Loan

On March 3, 2014, we entered into a securities purchase agreement with JDF, pursuant to which JDF provided us with an aggregate investment of $220,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued JDF an original issue discount 10% convertible promissory note of $220,000 due September 3, 2014 and convertible into common shares on a cashless basis at a price per share of 50% of the lower of lowest closing bid price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion.

In addition on March 3, 2014, we issued an aggregate of 4,000,000 warrants to JDF in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.05 and expire after a term of three years. In the case that after six months there is no registration statement available for the resale of our common shares from exercising of these warrants, the warrants may be exercised on a cashless basis at a price as set out in the warrant.

Loan Agreement with JSJ Investments Inc.

On February 23, 2014, we entered into a securities purchase agreement with JSJ Investments Inc., pursuant to which JSJ Investments provided our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued JSJ Investments a convertible promissory note with 12% interest due August 27, 2014 and convertible into common shares on a cashless basis at a price of the lower of 50% of the average of the three lowest bids on the 20 trading days before February 27, 2014 or of a notice to convert during the twenty trading days preceding the delivery of any related conversion notice.

In addition, we issued warrants to purchase an aggregate of 1,111,111 common shares of our company to JSJ in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of approximately $0.09 and expire after a term of five years. In the case that after six months there is no registration statement available for the resale of our common shares from exercising of these warrants, the warrants may be exercised on a cashless basis at a price as set out in the warrant.

Loan Agreement with Centaurian Fund

On February 27, 2014, we entered into a securities purchase agreement with Centaurian Fund, pursuant to which Centaurian provided our company with an aggregate investment of $50,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued Centaurian a convertible promissory note with 15% interest due August 27, 2014 and convertible into common shares on a cashless basis at a price of the lower of 50% of the average of the three lowest bids on the 20 trading days before February 27, 2014 or of a notice to convert during the 20 trading days preceding the delivery of any related conversion notice.

In addition, we issued warrants to purchase an aggregate of 5,156,250 common shares of our company to Centaurian in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.06 and expire after a term of six months. In the case that our common share closing price is greater than $0.06 per share for two days, the warrants may be exercised on a cashless basis at a price pursuant to the warrant.

Loan Agreement with LG Capital Funding, LLC

On February 27, 2014, we entered into a securities purchase agreement with LG Capital Funding, LLC, pursuant to which LG Capital provided our company with an aggregate investment of $75,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued LG Capital a convertible promissory note with 10% interest due February 27, 2015 and convertible into common shares on a cashless basis at a price of 50% of the lowest closing bid price of our common shares during the prior 20 trading days including the delivery of any related conversion notice.

During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal amount of this Note along with any interest that has accrued during that period, (ii) if the redemption is after the 91st day this Note is in effect, but less than the 150th day this Note is in effect, then for an amount equal to 140% of the unpaid principal amount of this Note along with any accrued interest and (ii) if the redemption is after the 150th day this Note is in effect, but less than the 180th day this Note is in effect, then for an amount equal to 150% of the unpaid principal amount of this Note along with any accrued interest. This Note may not be redeemed after 180 days. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

Loan Agreement with St. George Investments LLC

On February 28, 2014, we entered into a securities purchase agreement with St. George Investments LLC, pursuant to which St. George Investments provided our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued St. George Investments a convertible promissory note of $125,500 including 15% prepaid interest due August 28, 2015 and convertible into common shares on a cashless basis at a price of 50% of the lower of lowest closing bid price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion.

In addition, we issued an aggregate of $1,481,481 warrants to St. George Investments in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.0675 and expire after a term of five years.

35

7.      Convertible Promissory Notes - Continued

Loan Agreement with Vista Capital Investments, LLC

On February 28, 2014, we entered into a securities purchase agreement with Vista Capital Investments, LLC, pursuant to which Vista Capital provides our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued Vista Capital a convertible promissory note of $110,000 with 12% interest due September 1, 2014 and convertible into common shares on a cashless basis at a price of the lesser of $0.075 or 50% of the lowest bid price of our common shares during the prior 25 consecutive trading days prior the delivery of any related conversion notice.

In addition, we issued warrants to purchase an aggregate of 10,312,500 common shares of our company to Vista Capital in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.06 and expire after a term of six months. In the case that our common share closing price is greater than $0.06 per share for two days, the warrants may be exercised on a cashless basis at a price pursuant to the warrant.

Loan Agreement with Union Capital, LLC

On March 3, 2014, we entered into a securities purchase agreement with Union Capital, LLC, pursuant to which Union provided our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued Union a convertible promissory note of $50,000 with 10% interest due March 5, 2015 and convertible into common shares on a cashless basis at a price per share of 50% of the lowest closing bid price of our common shares during the prior 20 trading days including the delivery of any related conversion notice.

In addition, we issued warrants to purchase an aggregate of 941,619 common shares of our company to Union in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.0531 and expire after a term of five years. In the case that after six months there is no registration statement available for the resale of our common shares from exercising of these warrants, the warrants may be exercised on a cashless basis at a price as set out in the warrant.

During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal amount of this Note along with any interest that has accrued during that period, (ii) if the redemption is after the 91st day this Note is in effect, but less than the 150th day this Note is in effect, then for an amount equal to 140% of the unpaid principal amount of this Note along with any accrued interest and (ii) if the redemption is after the 150th day this Note is in effect, but less than the 180th day this Note is in effect, then for an amount equal to 150% of the unpaid principal amount of this Note along with any accrued interest. This Note may not be redeemed after 180 days. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

Loan Agreement with Iconic Holdings, LLC

On March 3, 2014, we entered into a securities purchase agreement with Iconic Holdings, LLC, pursuant to which Iconic provides our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued Iconic a convertible promissory note of $100,000 with 12% interest due September 3, 2014 and convertible into common shares on a cashless basis at a price of 50% of the lower of lowest closing bid price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion.

In addition, we issued an aggregate of 2,000,000 warrants to Iconic in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.05 and expire after a term of three years.

Loan Agreement with Adar Bays, LLC

On March 3, 2014, we entered into a securities purchase agreement with Adar Bays, LLC, pursuant to which Adar provided our company with an aggregate investment of $50,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants. We issued Adar a convertible promissory note of $50,000 with 10% interest due March 4, 2015 and convertible into common shares on a cashless basis at a price per share of 50% of the lowest closing bid price of our common shares during the prior 20 trading days including the delivery of any related conversion notice.

In addition on March 4, 2014, we issued an aggregate of 941,619 warrants to Adar in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.0531 and expire after a term of five years.

During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal amount of this Note along with any interest that has accrued during that period, (ii) if the redemption is after the 91st day this Note is in effect, but less than the 150th day this Note is in effect, then for an amount equal to 140% of the unpaid principal amount of this Note along with any accrued interest and (ii) if the redemption is after the 150th day this Note is in effect, but less than the 180th day this Note is in effect, then for an amount equal to 150% of the unpaid principal amount of this Note along with any accrued interest. This Note may not be redeemed after 180 days. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

Loan Agreement with Black Mountain Equities, Inc.

On March 3, 2014, we entered into a securities purchase agreement with Black Mountain Equities, Inc., pursuant to which Black Mountain provided our company with an aggregate investment of $100,000 in consideration of our issuance of original issue discount convertible promissory notes and common share purchase warrants. We issued Black Mountain a convertible promissory note of $115,000 with 15% prepaid interest due April 1, 2015 and convertible into common shares on a cashless basis at the lesser price per share of $0.06 or 50% of the lowest trade price of our common shares during the prior 20 trading days immediately preceding the delivery of any related conversion notice.

In addition on March 3, 2014, we issued an aggregate of 1,666,666 warrants to Black Mountain in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.06 and expire after a term of five years. In the case that our common share closing price is greater than $0.06 per share for two days, the warrants may be exercised on a cashless basis at a price pursuant to the warrant.

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8.      Convertible Preferred Shares

On January 3, 2014 the Company entered into a convertible debt settlement agreement with one investor. Pursuant to the terms of the agreement, the investor acquired 1,134,500 convertible Series B Preferred Shares to extinguish the balance of convertible debts with an aggregate principal amount of $1,134,500. The conversion price of the Series B Preferred Shares shall be the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date of the applicable convertible debt instrument of the Corporation from which the applicable Series B Preferred Shares were converted, or (ii) 50 % of the lowest reported sale price for the 20 days prior to the conversion date of the Series B Preferred Shares.

During the period ended March 31, 2014, 597,175 Series B Preferred Shares were converted into 34,981,228 common shares of the Company for a total fair value of $2,359,055 of which a gain of $626,879 was recorded. As at March 31, 2014, the balance of the Series B Preferred Shares is 537,325 with a fair value of $1,253,758.

9.      Note Payable

On March 3, 2014, the Company entered into a Secured Note for a principal amount of $330,000 (US$298,518). The note bears interest at 20% per annum and is due on June 1, 2014. As security for the Principal and Interest payable under this Note, the Company provided the Lender contemporaneously with the advance of the Principal, the general security agreement granting the Lender a security interest in all of the Company’s subsidiary Alta Disposal Ltd’s present and after acquired personal property. The Company further agrees that it will not transfer, assign, pledge or provide a negative pledge to any third party with respect to the Security while the Note is outstanding.

10.    Related Party Transactions

During the period ended March 31, 2014, the Company incurred consulting fees of $167,800 (2012 - $36,000) with directors and officers.

As of March 31, 2014, the Company was obligated to a director for a non-interest bearing demand loan with a balance of $45,332 (June 30, 2013 - $45,332). The Company plans to pay the loan back as cash flows become available.

These transactions are in the normal course of operations and are measured at the exchange amount of consideration established and agreed to by the related parties.

11.   Going Concern and Liquidity Considerations

The accompanying financial statements have been prepared assuming that 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. As at March 31, 2014, the Company had a working capital deficiency of $3,568,752 and an accumulated deficit of $39,723,131. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.

The ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtaining additional financing to continue operations, explore and develop the mineral properties and the discovery, development and sale of ore reserves.

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11.    Going Concern and Liquidity Considerations - Continued

In response to these problems, management intends to raise additional funds through public or private placement offerings.

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.

12.    Commitments

Employment Agreements

On January 12, 2014, the Company entered into an employment agreement with a director and officer. Commencing on January 12, 2014, the director and officer will be employed for 24 months ending on January 12, 2016. Pursuant to the agreement, annual salary of US$120,000 is payable monthly in cash or if the Company does not have available cash, in shares of the Company’s common stock.

Consulting Agreements

On January 12, 2012, the Company entered into two consulting agreements with consultants to provide services as members of the Board of Directors in regards to the Company’s management and operations. The compensation for the services to be provided by each consultant will be 150,000 shares of the Company’s common stock issuable at the beginning of each year from an effective date of April 27, 2011 to April 27, 2014, of which 150,000 shares have already been issued to each consultant in each of their first, second and third years of service (Note 3).

On November 1, 2013, the Company entered into an agreement with a consultant to provide consulting services to Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.). Pursuant to the agreement, the consultant will receive CDN$7,600 per month from November 1, 2013 to April 30, 2014.

On November 1, 2013, the Company entered into a second agreement with a consultant to provide consulting services to Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.). Pursuant to the agreement, the consultant will receive CDN$7,600 per month from November 1, 2013 to April 30, 2014.

On October 1, 2013, the Company entered into an agreement with an Agent to act as its non-exclusive intermediary to locate qualified prospects (each, a “Prospect”) that may desire to provide financing (debt or equity).

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12.    Commitments - Continued

The Company agreed to pay the following:

This agreement shall become effective October 1, 2013. Termination of this agreement shall be the date of the closing transaction(s) or three (3) months from the date above, whichever is earlier. However, the Company agrees to extend the terms of the Agreement twenty four (24) months following the date of termination, to any transaction(s) with any Prospect previously introduced in writing to The Company that are a result of Agent’s documented efforts prior to the date of termination.

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13.    Loan Receivable

Secured Bridge Loan Agreement