UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2014
[ ] TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
[ ] to [ ]
Commission file number 000-54881
LITHIUM EXPLORATION GROUP, INC.
(Exact name of registrant as specified in its charter)
| Nevada |
06-1781911 |
| (State or other jurisdiction of incorporation or |
(I.R.S. Employer Identification No.) |
| organization) |
|
| |
|
| |
|
| 3800 N Central Avenue, Suite 820, Phoenix, AZ 85012 |
85012 |
| (Address of principal executive offices) |
(Zip Code) |
| |
|
| Registrant's telephone number, including area code: |
480.641.4790 |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class |
Name of Each Exchange On Which Registered |
| N/A |
N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
(Title of
class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 the Securities Act.
Yes
[ ] No [X]
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act
Yes
[ ] No [X]
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the last 90 days.
Yes
[X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-K (§229.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.[ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] |
Accelerated
filer [
] |
| Non-accelerated filer [
] |
Smaller reporting
company [X] |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No
[X]
The aggregate market value of Common Stock held by
non-affiliates of the Registrant on December 31, 2013 was $1,306,362 based on a
$0.06735 average bid and asked price of such common equity, as of the last
business day of the registrant’s most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the
registrant’s classes of common stock as of the latest practicable date.
398,972,192 common shares as of October 8,
2014.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
3
PART I
Item
1. Business
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as “may”,
“should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue” or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors”, that may cause our or our industry’s actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States Dollars and all references to “common
shares” refer to the common shares in our capital stock.
As used in this annual report, the terms “we”, “us”, “our
company”, mean Lithium Exploration Group, Inc. a Nevada corporation, and our
wholly owned subsidiary, Alta Disposal Ltd., an Alberta, Canada corporation, our
partially owned subsidiary, Alta Disposal Morinville Ltd., an Alberta, Canada
corporation, and our partially owned investment, Tero Oilfield Services Ltd., an
Alberta, Canada corporation, unless otherwise indicated.
Corporate History
We were incorporated on May 31, 2006 in the State of Nevada
under the name “Mariposa Resources, Ltd.” Effective November 30, 2010, we
changed our name to “Lithium Exploration Group, Inc.,” by way of a merger with
our wholly-owned subsidiary Lithium Exploration Group, Inc., which was formed
solely for the change of name.
Our executive offices are located at 3800 N Central Avenue, Suite 820, Phoenix, AZ 85012, and our telephone number is (480) 641-4790. We also have an office at 840 6th Ave SW Suite 300, Calgary, Alberta T2P 3E5. The phone number for our Calgary office is 403-930-1925.
On October 18, 2013, our company, through our wholly owned
subsidiary, Alta Disposal Ltd. (formerly 1617437 Alberta Ltd.), an Alberta,
Canada corporation, completed the acquisition of 51% of shares of Blue Tap
Resources Inc. for total payment of CAD$466,547. As of September 30, 2013, CDN
$300,000 (US$294,908) was paid regarding the acquisition. As a result of the
share acquisition, Blue Tap Resources Inc. is now a partially owned subsidiary
of our company through our wholly owned subsidiary, Alta Disposal Ltd. On
January 22, 2014, Blue Tap Resources Inc. changed its name to Alta Disposal
Morinville Ltd.
Other than as set out herein, we have not been involved in any
bankruptcy, receivership or similar proceedings, nor have we been a party to any
material reclassification, merger, consolidation or purchase or sale of a
significant amount of assets not in the ordinary course of our business.
Our Current Business
We are corporation engaged principally in the acquisition,
exploration, and development of resource properties. Through our subsidiary Alta
Disposal Morinville Ltd., we also operate in the waste water disposal industry.
4
Assignment Agreement with Lithium Exploration VIII
Ltd.
On December 16, 2010, we entered into an assignment agreement
with Lithium Exploration VIII Ltd. (not related to our company) to acquire an
undivided 100% right, title and interest in and to certain mineral permits
located in the Province of Alberta, Canada. Lithium Exploration VIII and Golden
Virtue Resources Inc. (formerly First Lithium Resources Inc.) (not related to
our company) had entered into an underlying option agreement dated October 6,
2010, which option agreement and interest were assigned to our company.
On December 31, 2012, our company entered into an amending
agreement to amend an original payment requirement of the assignment agreement
of CAD$100,000 due on January 1, 2013 to the following payments:
- CAD$20,000 (USD$20,000) cash payment due on January 1, 2013; and
- CAD$80,000 (USD$80,000) by a 15% one year promissory note starting January
1, 2013.
The note was interest free until March 31, 2013. After March
31, 2013, interest accrued on the principal balance then in arrears at the rate
of 15% per annum. Payments were due and payable by December 31, 2013. Further,
at any time, Lithium Exploration VIII and Golden Virtue could elect to convert
the remaining balance of the note and accrued interest into common shares of our
company at 75% of the closing market price of our company’s common shares on the
election day.
On July 3, 2013, Lithium Exploration VIII and Golden Virtue
elected to convert the note and accrued interest in the combined aggregate
amount of CAD$83,057.53 (USD$78,743) into common shares of our company. Pursuant
to this election, we issued an aggregate of 954,461 shares of our common stock
at the price of USD$0.0825 per share.
Glottech
On November 8, 2011, we entered into a letter agreement with
Glottech-USA. Pursuant to the terms of the agreement, we were 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.
We previously made the following payments in association with
the production of a working unit of Glottech-USA’s technology:
- $25,000 on March 21, 2011 in consideration for entering into the letter
agreement dated March 17, 2011;
- $75,000 on May 27, 2011 in consideration for continuance of the March 17,
2011 agreement; and
- $700,000 on May 27, 2011 in consideration for a licensing and technology
payment.
As part of the November 8, 2011 agreement, our officer and
director, Alexander Walsh, agreed to provide Glottech-USA with the option, for a
period of 12 months from delivery of the first unit, to acquire 2,000,000 shares
of our common stock currently held by him, for a total price of $1.00.
Additionally, if, for any reason, Mr. Walsh failed to deliver the 2,000,000
shares of our common stock to Glottech-USA, we agreed to issue the shares from
treasury.
On June 12, 2012, we filed a complaint against Glottech-USA in
the Court of Common Pleas of Chester County, Pennsylvania, alleging that
Glottech-USA misused our funds and was in breach of our agreements that called
for Glottech-USA to deliver one initial unit of the mechanical ultrasound
technology. We further alleged that Glottech-USA was financially insolvent and
unable to fulfill its promises to us.
On June 12, 2012, we filed a complaint with the Court of Common
Pleas of Chester County, Pennsylvania against Glottech-USA, LLC, Eldredge, Inc.,
and the Eldredge Companies, Inc. Pursuant to an unopposed motion, the Eldredge
parties were dismissed in October of 2012. The complaint initially sought an
order of the Court granting possession of the initial unit.
5
Effective August 14, 2012, we entered into an option agreement
with GD Glottech International to protect our license and distribution rights in
the event that Glottech-USA became unable to perform and honor its obligations
to us.
Pursuant to the terms of the option agreement, we were required
to provide an initial amount 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. On
September 1, 2012, Glottech-USA’s license to the technology expired and also on
September 1, 2012, we exercised this option agreement and released the funds to
GD Glottech International.
On October 1, 2012, we entered into a license agreement and a
sales agency agreement with GD Glottech, regarding GD Glottech International’s
proprietary and patented mechanical ultrasound technology for use in water
purification in the process of separation of salt and other minerals from
lithium bearing brine produced from oil and gas operations. The license
agreement and sales agency agreement expands and replaces all prior agreements
among our company, GD Glottech International and Glottech-USA, LLC regarding our
rights to use and sell the mechanical ultrasound technology, included in our
letter of intent dated November 18, 2011, and our option agreement dated August
14, 2012.
Pursuant to the sales agency agreement we were appointed as
sales agent for the patented mechanical ultrasound technology within Canada. Our
appointment is exclusive within the field of non petro-chemical mining and
non-exclusive in all other fields of use. In consideration of the sales agency
rights, we agreed to issue to GD Glottech International 2,000,000 common shares
of our capital stock, which obligation has been satisfied through the transfer
to GD Glottech International of 2,000,000 shares held by our officer and
director, Alexander Walsh. It was the explicit intention of the parties that
this share transfer fulfills the prior obligations of Alexander Walsh and our
company with respect to the option contemplated in the March and November 2011
agreements with Glottech-USA. We will receive a royalty in respect of sales of
the technology secured by us. The term of the initial agreement will be for 5
years with the possibility of extension if sales targets are achieved.
Pursuant to the license agreement, we obtained the exclusive
right to use the mechanical ultrasound technology within the field of
non-petro-chemical mining within the territory of Canada. We may also sublicense
our rights under the license in respect of one or more units of the technology
to any entity operating within the field of use in which we own or beneficially
own at least a 20% equity interest. GD Glottech International agreed to supply
us with up to 5 technology units per 12-month period from the effective date of
the license term, which will start from the month of delivery of the unit of the
technology. The first unit of the technology provided under the license to be
provided at no additional cost to us and subsequent units shall be subject to a
fee based on the then current retail price of the units. If we sublicense any of
our rights, the term of the applicable license will be for 5 years from the date
the applicable unit is delivered. Pursuant to the license agreement, GD Glottech
International shall provide ongoing technical assistance and training in respect
of our use of the technology at our cost.
In consideration of the license, we will pay to GD Glottech
International a royalty based on the tonnage of water produced by our use of the
technology in accordance with the agreement. A minimum annual royalty will be
applicable. The term of the license agreement shall be for an initial period of
5 years and shall be renewable for additional terms of 5 years provided that we
satisfy the minimum royalty requirements during each period.
GD Glottech International’s technology is designed to separate
suspended solids from water (brine), which is one step in the process that we
are taking to produce commercially viable minerals. The technology produces
extremely high temperatures, which destroy organic substances such as bacteria
and other toxic agents. We believe that GD Glottech International's technology
can provide lower costs of operation as well as reduced time for site clean-up
than traditional methods of water treatment. We anticipate using this
application to extract dissolved solids like lithium, potassium, and magnesium
from oil field brine. The disposal of produced water (brine) from oil and gas
production in Alberta is a significant environmental issue for the province and
presents a considerable economic issue for producers. We intend to use the
technology on our Valleyview Property in Alberta, in cooperation with oil and
gas producers, to treat and dispose of their produced water while monetizing the
minerals that are contained within that produced water stream that is being
brought to the surface during the oil and gas production process. As we own the
MAIM (Metals and Industrial Minerals) claims to the minerals on the Valleyview
Property, the minerals contained in their produced water stream fall under our
rights. While we have had discussions with oil and gas consultants and oil
operators regarding their difficulties in treating the brine at some of their
fields, we have no formal agreements in place.
6
The technical process is based on the use of mechanical
ultrasound generated through the production of a series of cavitations.
Mechanical ultrasound is a machine-produced sound of a frequency above the upper
limit of the normal range of human hearing. Cavitations are the rapid formation
and collapse of bubbles in liquids, caused by the movement of something such as
a propeller or by waves of high-frequency sound. The production of mechanical
ultrasound allows GD Glottech International’s technology to distill the fluid
stock. Using mechanical ultrasound for distillation has been attempted before,
but the external energy requirement needed to produce the mechanical ultrasound
was far too expensive to make it commercially viable. GD Glottech
International’s technology uses the energy released during the cavitations in
order to make it commercially viable from an economic perspective. During these
cavitations, a millisecond of energy is released. During this release,
temperatures can reach 5,000 degrees centigrade.
On August 27, 2012, we filed a motion to amend our complaint to
include claims of breach of trust and fiduciary duty, breach of good faith and
fair dealing, breach of contract, conversion of funds, fraud, and the imposition
of a constructive trust. We believe that this action was necessary to protect
our interests against possible misuse of funds by Glottech-USA, LLC and its
principals. We will also seek damages as appropriate.
On October 19, 2012, GD Glottech International moved to
intervene as an interested party in the litigation pending against Glottech-USA.
GD Glottech International cited its role as owner of the patents as a basis for
intervening in the litigation against Glottech-USA. We believe GD Glottech
International’s entry into the litigation against Glottech-USA is favorable to
our cause in the litigation.
On October 22, 2012, the Court of Common Pleas in Chester
County, Pennsylvania, granted our motion to amend our complaint against
Glottech-USA to add claims for fraud and damages reflective of the malfeasance
which we allege against Glottech-USA and its officers.
On December 12, 2012, GD Glottech International removed the
management of Glottech-USA and appointed itself as the manager of Glottech-USA.
On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to
dissolve Glottech-USA in Mississippi on the basis that Glottech-USA was unable
to meet its financial obligations and could not finish or deliver the unit to
us.
On December 19, 2012, an attorney purportedly acting on behalf
of Glottech-USA filed a motion in the lawsuit pending in Chester County,
Pennsylvania, seeking possession of the unit. In addition, Glottech-USA filed a
counterclaim seeking possession of the unit.
GD Glottech International immediately filed a motion to quash
Glottech-USA’s motion and for sanctions against the law firm that filed the
motion. We also filed a motion, seeking disqualification of the law firm that
purported to represent Glottech-USA on the basis that the new management for
Glottech-USA had fired the law firm and, as such, the law firm no longer had
authority to represent Glottech-USA.
On April 25, 2013, we attended a hearing on the motions pending
in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on
any of the motions and, instead, stayed the case as to Glottech-USA until
December of 2013 pending the outcome of the lawsuit seeking dissolution of
Glottech-USA. The matter in Pennsylvania is no longer stayed. An attorney
purporting to represent Glottech-USA and the receiver appointed in Mississippi
has filed motions and other documents that may move the matter forward. We have
pending preliminary objections to the counterclaim, including a request for a
determination of which group is in control of Glottech-USA.
Certain members of Glottech-USA continue to pursue dissolution
of the company in Mississippi. The members of Glottech-USA who seek dissolution
have stated in court filings that it is not practicable for Glottech-USA to
continue as an ongoing business. In addition, Sulzer filed suit against
Glottech-USA Texas for unfulfilled obligations.
We do not believe that Glottech-USA has sufficient capital to
continue as an ongoing business. We have provided full consideration to
Glottech-USA and complied with all other agreed upon terms. We believe any
assertions against us to lack merit.
7
Given pending litigation against Glottech-USA, and the
uncertainties naturally inherent of any litigation (particularly as to outcome
and timing thereof), we have moved to assure continuity of our licensing rights
through entering into, and exercising, the option to contract directly with the
technology inventor and patents owner, GD Glottech International. Thus,
regardless of the outcome of the litigation, or indeed any action or inaction of
Glottech-USA, our interest in the technology is assured.
Alta Disposal Morinville Ltd. Acquisition
On June 11, 2013, we entered into a letter of intent with Alta
Disposal Morinville Ltd. (formerly Blue Tap Resources Inc.) pursuant to which we
agreed to acquire not less than 51% of the outstanding securities of Alta
Disposal Morinville in consideration of an aggregate investment of $450,000 in
Alta Disposal Morinville’s waste water disposal facility located in Morinville,
Alberta. The closing of the transaction was subject to a number of conditions
precedent, including but not limited to completion of due diligence and the
negotiation of a definitive long form agreement.
On July 29, 2013, in anticipation of the completion of a formal
agreement with Alta Disposal Morinville embodying the terms of the letter of
intent, we entered into a convertible debenture agreement with Alta Disposal
Morinville pursuant to which we agreed to deliver to Alta Disposal Morinville up
to CAD$300,000 (approximately USD$291,000) payable in two installments of
CAD$150,000 deliverable respectively upon execution of the convertible
debenture, and within 5 business days following receipt of regulatory approval
for the re-activation of Alta Disposal Morinville’s waste water disposal
facility. Delivery of the first and second installments totaling CAD$300,000
have been satisfied and the acquisition was finalized as of October 18, 2013.
The funds advanced are secured against all present and future assets and
undertakings of Alta Disposal Morinville and are convertible at our option into
a number of common shares of Alta Disposal Morinville equal to 51% of its issued
and outstanding voting stock.
Effective August 1, 2013, we entered into a joint venture
agreement with Alta Disposal Morinville pursuant to which our company and Alta
Disposal Morinville will operate certain lands and facilities including a
disposal well in the Morinville area of Alberta.
On October 18, 2013, we completed the acquisition of 51% of the
outstanding securities of Alta Disposal Morinville, pursuant to a letter of
intent with Alta Disposal Morinville dated June 11, 2013. As a result of the
share acquisition, Alta Disposal Morinville is now a partially owned subsidiary
of our company through our wholly owned subsidiary, Alta Disposal Ltd.
In accordance with the letter of intent, we acquired, through
our wholly owned subsidiary, Alta Disposal Ltd., 51% of the outstanding
securities of Alta Disposal Morinville (being 510,000 common shares) in
consideration of an aggregate investment of CDN$466,547 (approximately
USD$453,204) in Alta Disposal Morinville’s waste water disposal facility located
in Morinville, Alberta, where Alta Disposal Morinville holds a 100% working
interest in 17 freehold mineral leases. There are currently two standing natural
gas wells and one disposal well located on the leases, including water disposal
facilities, tanks and equipment. Payment of an initial CDN$300,000 (USD$291,000)
of the CDN$466,547 aggregate investment was made pursuant to a secured
convertible debenture which has been fully converted into common shares of Alta
Disposal Morinville. The Alta Disposal Morinville leases are subject to a 3%
gross overriding royalty held by Mr. Vincent Murphy pursuant to a gross
overriding royalty agreement dated June 30, 2013. The royalty is payable on all
fluids separated, treated, or otherwise enhanced for sale on the lease property.
The acquisition of Alta Disposal Morinville was completed
through our wholly owned subsidiary, Alta Disposal Ltd., which was formed in the
Province of Alberta for the primary purpose of the transaction with Alta
Disposal Morinville. Concurrent with the closing of the acquisition, Alta
Disposal entered into a unanimous shareholders and management agreement (the
“Shareholders Agreement”) dated October 18, 2013 with Excel Petroleum Ltd.
(which holds 49% of Alta Disposal Morinville) and Alta Disposal Morinville
itself.
8
Pursuant to the Shareholders Agreement, Alta Disposal may
continue to fund the current capital requirements of Alta Disposal Morinville up
to an aggregate of $420,000 in consideration of additional shares of Alta
Disposal Morinville at the rate of 163,250 shares (equivalent to approximately
5% of Alta Disposal Morinville’s common shares on a diluted basis) for each
$105,000 funded until Alta Disposal holds an aggregate of 70% of Alta Disposal
Morinville’s outstanding common shares. If Alta Disposal elects to fund the
on-going capital requirements of Alta Disposal Morinville beyond the aggregate
of $870,000, any such funds advanced by Alta Disposal will be deemed to be funds
loaned by Alta Disposal to Alta Disposal Morinville on a non-interest bearing,
unsecured bridge loan basis. Any such funds provided to Alta Disposal Morinville
will be repayable from cash flow generated by Alta Disposal Morinville. Funds
loaned prior to June 30, 2014 will not be due and payable until June 30, 2014
and thereafter will not be due and payable until at least 6 months following the
date of any such loan.
Other terms of the Shareholders Agreement include:
- the board of directors of Alta Disposal Morinville will consist of 3
directors including 2 nominees of Alta Disposal and 1 nominee of Excel.
- Alexander Walsh will serve as chairman of the board of directors,
president and chief executive officer of Alta Disposal Morinville.
- Approval of the shareholders holding not less than 60% of Alta Disposal
Morinville shares will be required to remove or appoint officers of Alta
Disposal Morinville.
- Unanimous approval of the shareholders will be required in order to (i)
effect capital alterations; (ii) declare dividends except following the
completion of a fiscal year end and on a pro-rata basis to all shareholders;
or (iii) wind-up; dissolve; or reorganize the corporation or sell or lease
substantially all of its assets.
- Alta Disposal will otherwise have sole discretion and authority in respect
of any and all management and operational decisions relating to the
corporation.
- Each shareholder of Alta Disposal Morinville will have a right of first
refusal to purchase all shares sought to be sold by the other shareholder.
- Customary restrictions on the encumbrance and disposition of shares.
The Shareholders Agreement additionally provides for the
engagement of Valeura Energy Inc. as the operator of Alta Disposal Morinville’s
lands, wells, the facilities, pipelines and disposal wells pursuant to an
operating agreement between Alta Disposal Morinville and Valeura dated July 9,
2013. Valeura was to retain a 10% working interest in Alta Disposal Morinville’s
lands until completion of the initial work on the disposal well project and will
re-convey that interest to Alta Disposal Morinville provided that Alta Disposal
Morinville has paid Valeura a cash payment of $2,500 per month for acting as
operator of the disposal well and the lands and upon payment of an amount of
$10,000 to Valeura upon completion of the project. The disposal well work
program must be mutually approved by Alta Disposal Morinville and Valeura. Alta
Disposal Morinville will be responsible for all costs and expenses relating to
the work program.
Tero Oilfield Services Ltd. Acquisition
On August 20, 2013, we entered into a letter of intent with
Tero Oilfield Services Ltd., a private company, pursuant to which Tero agreed to
sell up to 75% of the issued and outstanding common shares of Tero to our
company in exchange for payment in the amount of $1,500,000.
On March 1, 2014, Alta Disposal Ltd., our wholly-owned
subsidiary, entered into a share purchase agreement with Tero and Garry Hofmann,
the sole shareholder of Tero. Pursuant to the agreement, Mr. Hofmann agreed to
sell and we agreed to purchase 50% of the issued and outstanding common shares
of Tero in exchange for an aggregate of CAD$1,000,000. As part of the share
purchase by Alta Disposal, on February 22, 2014, Tero declared a dividend in the
amount of $307,104, payable to Mr. Hofmann by way of a promissory note.
Additionally, Alta Disposal, Tero and Mr. Hofmann entered into
an option agreement entitling Alta Disposal to purchase up to an additional 25%
of the issued and outstanding common shares of Tero from Mr. Hofmann exercisable
at a price of $500,000 for a period of one year.
9
Lastly, Alta Disposal, Tero and Mr. Hofmann entered into a
shareholders’ agreement concerning any potential financing by the shareholders
of Tero for the benefit of Tero’s operations. This agreement provides that the
shareholders of Tero, Alta Disposal and Mr. Hofmann, may by unanimous resolution
advance to Tero, upon demand by Tero, such funds as may be determined specified
by unanimous resolution, subject to the agreement.
Tero was a family owned waste disposal company. The waste
disposal facility had been under the same ownership since it began operations in
1997. In 2002, Tero successfully reclassified the original Class II well to a
Class IB disposal well and expanded the capabilities of the facility to handle
solid waste disposal. The facility is located near Wardlow, Alberta and is right
in the heart of the area's oil and gas producers. The nearest competing
commercial disposal companies are 75 kilometers away which presents Tero’s
facility with a large geographical advantage.
On September 15, 2014, Northern Hunter Energy Inc. entered into
a conveyance agreement with Tero dated June 1, 2014. Pursuant to this agreement,
Northern Hunter Energy will transfer a 10% working interest in certain assets of
the Morinville, Alberta property, which was previously acquired from Valeura, to
Tero effective June 1, 2014 for the sum of $10,000. As of the date of this
annual report, the transfer has not been completed and the sum of $10,000 has
not been paid.
Loan Agreements with Hagen Investments Ltd.
On March 28, 2012, we entered into a securities purchase
agreement with Hagen Investments Ltd., as modified on May 15, 2012 and September
17, 2012. Pursuant to the terms of the agreement, within 45 days Hagen would
acquire convertible debentures with an aggregate total of $1,680,000, at an
original issuance discount of $180,000, resulting in $1,500,000 net proceeds to
us.
On May 15, 2012, we received $1,500,000 from Hagen and closed
the securities purchase agreement. In conjunction with this closing we issued
the convertible debenture in the amount of $1,680,000. The debenture was due on
May 15, 2013, carried no interest, and is convertible at the lower of $0.45 per
share or 65% of the lowest reported price of our common stock over the 20
trading days immediately prior to the date of conversion. Additionally, we
issued Hagen a warrant to acquire 3,333,333 shares of our common stock for a
period of five years. On September 17, 2012, we entered into an agreement to
modify pricing mechanisms of the warrant and the convertible debenture in the
original securities purchase agreement such that the exercise price per share of
the common stock under the warrant shall be $0.20, subject to adjustment, and
the conversion price of the debenture shall be the lesser of (i) 65% of the
lowest reported sale price of the common stock for the 20 trading days
immediately prior to the conversion date, or (ii) $0.20. Excluding the
modifications to the exercise price of the warrant and to reduce the conversion
price of the debenture, the original securities purchase agreement dated March
28, 2012, will remain un-amended and in full force and effect. The debenture was
extended and will expire on May 15, 2014.
On January 6, 2014, we entered into an amendment and settlement
agreement dated January 3, 2014 with JDF Capital. The settlement agreement
amends the terms of the senior convertible debenture dated May 15, 2012 which
was issued pursuant to the securities purchase agreement dated March 28, 2012
(as amended on May 15, 2012 and September 17, 2012) between our company and
Hagen Investments Ltd. JDF Capital Inc. is the assignee of the $1,680,000 May
15, 2012 debenture, which was due on December 28, 2012. As of March 3, 2014, we
no longer owed any amount on the May 15, 2012 debenture due to conversions of
the debt into equity of our company.
In addition, the settlement agreement retires secured
convertible promissory notes held by JDF Capital dated September 16, 2013 and
October 15, 2013 in the aggregate amount of $1,134,500. In consideration of the
retirement of the convertible notes, we have designated and issued to JDF
Capital 1,134,500 shares of Series B Preferred Stock (issued on January 6, 2014)
which are convertible into common shares upon the same terms and preferences as
the retired debentures. Each Series B Preferred Share is valued at $1 per share
and is convertible into common shares at the conversion price equal to a 50%
discount to the lowest reported sale price of our common stock during the 20 day
period preceding the conversion date. The Series B Preferred Shares are
non-voting with the common shares prior to conversion and have a liquidation
preference to the common shares of $1 per share upon any liquidation,
dissolution or winding-up of our company. We have authorized 2,000,000 shares of
Series B Preferred Stock in the aggregate which are issuable only in
consideration of the extinguishment of existing convertible debt of our
company.
10
Loan Agreements with JDF Capital Inc.
$672,000 Loan
On February 19, 2013, we entered into a securities purchase
agreement, with an effective date of March 1, 2013, with JDF Capital Inc.
Pursuant to the terms of the agreement, our company issued a secured convertible
promissory note in an aggregate principal amount of $672,000 and a warrant to
purchase 3,632,433 shares of our company’s common stock with an exercise price
of $0.185 per share for an aggregate exercise price of $672,000 for a period of
five years, for consideration of $600,000 (original issue discount of $72,000 in
lieu of interest), of which $150,000 was paid to our company upon closing on
March 1, 2013. The note shall have a maturity date of 12 months from each
tranche of consideration, as set out in the note. Additional payments of
$150,000 were funded to our company on April 1, 2013, $100,000 on May 1, 2013,
$100,000 on June 1, 2013, and $100,000 on July 1, 2013 to satisfy the aggregate
amount of $600,000 as part of the February 19, 2013 agreement. Accordingly, our
company was indebted to JDF for funds provided to us in the amount of
USD$672,000 pursuant to the conditions of the securities purchase agreement
dated February 19, 2013.
On September 6, 2013 the 3,632,433 warrants issued in
connection with the $672,000 loan was converted into 2,375,052 shares of our
common stock. On October 31, 2013, we entered into a securities assignment
agreement with JDF and Blue Citi LLC, where the parties agreed to assign an
aggregate of $150,000 of the securities purchase agreement to Blue Citi.
On January 6, 2014, JDF entered into a securities amendment and
settlement agreement with us, where we agreed to convert the remaining portions
of the securities purchase agreement of $522,000 into Series B Convertible
Preferred Stock of our company (the “Preferred Shares”), being 1 Preferred Share
per $1 remaining payable pursuant to the securities purchase agreement. Each
Preferred Share is convertible into common shares of our company by cashless
conversion at a price of 50% of the lowest traded price of the previous 20
trading days of a notice to convert.
As at June 30, 2013 we had issued 35,045,996 common shares in
full conversion and settlement of the convertible note and all Series B
Preferred Shares issued in relation to the $672,000 loan. The issuances included
the following:
- On November 18, 2013 we issued 2,500,000 common shares for an aggregate
conversion price of $75,000.
- On December 20, 2013 we issued 3,000,000 common shares for an aggregate
conversion price of $48,900.
- On January 15, 2014 we issued 1,601,227 common shares for an aggregate
conversion price of $26,100.
- On February 11, 2014 we issued 3,000,000 common shares for an aggregate
conversion price of 48,000 Series B Preferred Shares ($48,000).
- On Feb 24, 2014 we issued 2,000,000 common shares for an aggregate
conversion price of 32,000 Series B Preferred Shares ($32,000).
- On March 5, 2014 we issued 2,500,000 common shares for an aggregate
conversion price of 40,000 Series B Preferred Shares ($40,000).
- On March 7, 2014 we issued 6,750,000 common shares for an aggregate
conversion price of 122,175 Series B Preferred Shares ($122,175).
- On March 12, 2014 we issued 745,856 common shares for an aggregate
conversion price of 13,500 Series B Preferred Shares ($13,500)
- On March 17, 2014 we issued 6,000,000 common shares for an aggregate
conversion price of 106,500 Series B Preferred Shares ($106,500).
- On April 7, 2014 we issued 6,948,913 common shares for an aggregate
conversion price of 159,825 Series B Preferred Shares ($159,825).
$500,000 Loan
On September 13, 2013, we entered into a securities purchase
agreement with JDF, pursuant to which JDF agreed to provide our company with an
aggregate investment of $500,000 in consideration of our issuance of convertible
promissory notes and common share purchase warrants.
11
On September 16, 2013, JDF funded a first installment of
$250,000 in consideration of a secured convertible promissory note in the amount
of $306,250, being $250,000 and 18 months prepaid interest at 15%. The note has
a maturity date of 18 months from September 16, 2013. As additional
consideration, we also issued to JDF an aggregate of 2,777,778 warrants
exercisable for the purchase of one common share for a period of five years. The
warrants are exercisable for the purchase of our common shares at a price of the
lowest closing price of our common shares in the 20 trading days preceding the
date that the warrants are exercised, multiplied by 150%. JDF may, in the
alternative, exercise the warrants on a cashless basis in the event the shares
underlying the warrants are not registered in a registration statement within 6
months of the securities purchase agreement. The cashless exercise price will be
the quotient obtained by dividing [(A-B) (X)] by (A), where:
| |
(A) = |
the volume weighted average price on the trading day
immediately preceding the date on which JDF elects to exercise the warrant
by means of a cashless exercise; |
| |
(B) = |
the cash exercise price of $ 0.09, as adjusted for
anti-dilution; and |
| |
(X) = |
the number of warrant shares that would be issuable upon
exercise of the warrant if such exercise were by means of a cash exercise
rather than a cashless exercise. |
The second $250,000 installment of the financing was paid to us
on October 1, 2013, pursuant to which we issued a second convertible promissory
note upon the same terms. We also issued 3,703,704 additional warrants with to
JDF with each warrant exercisable into one common share for a period of five
years. The warrants are exercisable into our common shares at a price of the
lowest closing price of our common shares in the 20 trading days preceding the
date that the warrants are exercised, multiplied by 150%. JDF may, in the
alternative, exercise the warrants on a cashless basis in the event the shares
underlying the warrants are not registered in a registration statement within 6
months of the securities purchase agreement.
Each convertible promissory note is convertible in whole or in
part at JDF’s option before or after maturity into shares of our common stock at
a conversion price equal to a 50% discount to the lowest closing price of our
common shares in the 20 trading days preceding (i) the date of the purchase
agreement; or (ii) the conversion date. Notwithstanding the conversion right,
JDF is not entitled to hold in excess of 9.99 percent of our issued and
outstanding common shares at any time. JDF 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 in additional financing.
On January 6, 2014, JDF entered into a securities amendment and
settlement agreement with us, where we agreed to convert the entire $612,500
portion of the convertible notes into 612,500 Series B Preferred Shares, being
one Preferred Share per $1 remaining payable pursuant to the securities purchase
agreement. Each Preferred Share is convertible into common shares of our company
by cashless conversion at a price equal to 50% of the lowest traded price during
the 20 trading days prior to a notice of conversion.
Between March 21, 2014 and June 2, 2014 we converted and
settled all 612,500 Series B Preferred Shares as follows:
- On March 6, 2014, we issued 5,999,000 common shares for an aggregate
conversion price of 95,984 Series B Preferred Shares ($95,984).
- On March 17, 2014, we issued 6,250,000 common shares of 100,000 Series B
Preferred Shares ($100,000).
- On March 21, 2014, we issued 1,736,372 for an aggregate conversion price
of 39,016 Series B Preferred Shares ($39,016).
- On May 14 we issued 7,000,000 common shares for an aggregate conversion
price of 149,800 Series B Preferred Shares ($149,800).
- On June 2, 2014 we issued 3,352,941 common shares for an aggregate
conversion price of 71,250 Series B Preferred Shares ($72,000).
- On June 2, 2014 we issued 7,363,352 common shares for an aggregate
conversion price of 156,450 Series B Preferred Shares ($156,450).
On July 16, 2014, we issued 9,713,996 common shares in full
conversion of the 2,777,778 share purchase warrants (adjusted for dilution)
issued in connection with the September 16, 2013 convertible note.
12
On August 8, 2014, we issued 8,905,569 common shares in full
conversion of the 3,703,704 warrants (adjusted for dilution) issued in
connection with the October 1, 2013 convertible note.
$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. The fair value of the note at issuance was
$440,000. During the year ended June 30, 2014, an interest expense of $8,800 was
accrued in respect of the note.
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.
- On September 3, 2014 we issued 500,000 common shares in conversion of
$5,000 payable pursuant to the note.
- On September 4, 2014 we issued 583,333 common shares in full cashless
exercise of the 4,000,000 warrants issued in connection with the note.
- On September 15, 2014 we issued 5,584,185 common shares in conversion of
$28,200 payable pursuant to the note.
- On September 24, 2014 we issued 9,090,909 common shares in conversion of
$25,000 payable pursuant to the note.
As at the date of this report $175,000 remains payable pursuant
to the note.
$500,000 Loan
On March 15, 2014, we entered into a securities purchase
agreement with JDF, pursuant to which JDF provided us with an aggregate
investment of $500,000 in consideration of our issuance of convertible
promissory notes and common share purchase warrants. We issued JDF a 10%
original issue discount convertible promissory note of $550,000 due September
15, 2015 and convertible into common shares on a cashless basis at a price per
share of 35% 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. The note bears interest, in arrears,
at a rate per annum equal to fifteen percent (15%) accruing on a semi-annual
basis commencing March 15, 2014 in cash or restricted shares of the Company’s
common stock, par value $0.001 per share at the option of the holder. The fair
value of the note at issuance was $846,154. During the year ended June 30, 2014,
an interest expense of $24,063 was accrued in respect of the note.
In addition on March 15, 2014, we issued an aggregate of
18,333,333 warrants to JDF 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 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.
As at the date of this report the full amount of the note and
warrants remain unconverted and outstanding.
13
$600,000 Loan
On August 6, 2014, we entered into a securities purchase
agreement with JDF dated July 22, 2014 pursuant to which we issued to JDF a
convertible promissory note in the aggregate principal amount of $708,000, which
amount includes the purchase price of $600,000 plus 18 months prepaid interest
at the rate of 12% per annum. The convertible note has a maturity date of
January 22, 2016 and is convertible in whole or in part into shares of our
common stock at price per share equal to 65% of the lowest reported sale price
of our common shares during the 20 trading days prior to July 22, 2014 ($0.04)
or prior to the applicable conversion date. Our company will have the option to
prepay the note within 60 days subject to a 10% penalty, within the subsequent
60 days subject to a 20% penalty, or anytime thereafter prior to maturity
subject to a 30% penalty. The purchase price of the promissory note is payable
in six installments beginning upon the effective date of the agreement (which
amount has been paid) and monthly thereafter beginning on August 22, 2014. The
promissory note is secured in first position against all assets of our
subsidiary, Alta Disposal Ltd., pursuant to a general security agreement between
Alta Disposal and JDF.
As additional consideration for the proceeds of the convertible
note, we issued to JDF Capital warrants exercisable for 5 years to purchase up
to 17,700,000 shares of our common stock at an exercise price of $0.04 per
share, subject to cashless exercise provisions.
As at the date of this report $200,000 has been funded pursuant
to the note which amount remains unconverted and outstanding.
Loan Agreement with JMJ Financial
On February 13, 2013, we entered into a securities purchase
agreement with JMJ Financial. Pursuant to the terms of the agreement, our
company will also enter into a convertible promissory note in the principal
amount of $1,100,000 (for consideration of up to $1,000,000), of which $100,000
shall be paid to our company upon closing of the convertible promissory note and
a common stock purchase warrant for the purchase of up to 540,540 shares of our
common stock at an exercise price of $0.185 for a period of five years. The
convertible promissory note shall have a maturity date of February 13, 2016. The
remainder of the convertible debenture can be drawn down on by mutual agreement
from JMJ Financial and our company. As at the date of this report we have made
the following issuances of common stock in conversion of the February 13, 2013
note:
- On August 13, 2013 we issued 1,585,714 common shares in conversion of
$163,693 payable pursuant to the note.
- On November 11, 2013, we issued 1,387,500 common shares in conversion of
$81,846 payable pursuant to the note.
- On December 4, 2013, we issued 1,435,345 common shares in conversion of
$81,846 payable pursuant to the note.
- On January 6, 2014 we issued 2,553,681 common shares in conversion of
$81,846 payable pursuant to the note.
- On February 14, 2014 we issued 2,000,000 common shares in conversion of
$62,921 payable pursuant to the note.
- On March 3, 2014 we issued 1,902,344 common shares in conversion of
$62,921 payable pursuant to the note.
- On June 10, 2014 we issued 1,600,000 common shares in conversion of
$47,752 payable pursuant to the note.
- On June 27, 2014 we issued 1,700,000 common shares in conversion of
$44,171 payable pursuant to the note.
- On July 16, 2014 we issued 1,800,000 common shares in conversion of
$70,200 payable pursuant to the note.
- On August 1, 2014 we issued 1,062,687 common shares in conversion of
$39,000 payable pursuant to the note.
As at June 30, 2014, there remains a balance of $343,475
unconverted and payable pursuant to the note.
On September 23, 2013 we issued 1,293,717 common shares at a
deemed of $0.04 per share in full cashless exercise of the 540,540 warrants
issued in connection with the note.
14
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. The
fair value of the note at issuance was $200,000. During the year ended June 30,
2014, an interest expense of $4,000 was accrued in respect of the note, which
remains unconverted and outstanding as at the date of this report.
In addition, we issued warrants to purchase an aggregate of
1,111,111 common shares of our company to JSJ Investments 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 28, 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 28, 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 28, 2014 or of a notice to convert during the 20 trading days preceding
the delivery of any related conversion notice. The fair value of the note at
issuance was $100,000. During the year ended June 30, 2014, an interest expense
of $1,667 was accrued in respect of the note, which remains unconverted and
outstanding as at the date of this report. 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. The fair
value of the note at issuance was $150,000. During the year ended June 30, 2014,
an interest expense of $2,500 was accrued in respect of the note, which remains
unconverted and outstanding as at the date of this report.
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. The fair value of the note at issuance was $200,000.
During the year ended June 30, 2014, an interest expense of $5,000 was accrued
in respect of the note, which remains unconverted and outstanding as at the date
of this report.
15
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.
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
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 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. The fair value of the note at
issuance was $220,000. During the year ended June 30, 2014, an interest expense
of $7,543 was accrued in respect of the note, which remains unconverted and
outstanding as at the date of this report.
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 during the period beginning August 28, 2014
and ending August 28, 2019. 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. The fair value of
the note at issuance was $200,000. During the year ended June 30, 2014, an
interest expense of $4,000 was accrued in respect of the note, which remains
unconverted and outstanding as at the date of this report.
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.
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. The fair value of the note at
issuance was $100,000. During the year ended June 30, 2014, an interest expense
of $1,667 was accrued in respect of the note, which remains unconverted and
outstanding as at the date of this report.
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.
16
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. The fair value of
the note at issuance was $100,000. During the year ended June 30, 2014, an
interest expense of $1,667 was accrued in respect of the note, which remains
unconverted and outstanding as at the date of this report.
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.
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. The fair value of the note at issuance was $230,000. During the year
ended June 30, 2014, an interest expense of $5,750 was accrued in respect of the
note, which remains unconverted and outstanding as at the date of this report.
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.
Loan Agreement with 514742 B.C. Ltd.
On March 3, 2014, we entered into a securities purchase
agreement with Alta Disposal Ltd., our wholly-owned subsidiary, and 514742 B.C.
Ltd., pursuant to which 514742 B.C. provided Alta Disposal with an aggregate
investment of CAD$330,000 (US$298,518) in consideration of our issuance of
secured promissory notes and common share purchase warrants.
On March 3, 2014, 514742 B.C. funded an aggregate investment of
CAD$333,000 to Alta Disposal. Therefore, Alta Disposal issued 514742 B.C. a
secured promissory note of Alta Disposal CAD$333,000 with 20% interest due June
1, 2014. The note is secured by all present and after acquired property of Alta
Disposal. Effective April 14, 2014 the company paid a total of CAD$346,274
(US$316,355) in principle and interest to settle this debt.
In addition on March 3, 2014, we issued an aggregate of
2,200,000 warrants to 514742 B.C. 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.
17
Loan Agreement with Asher Enterprises, Inc.
On January 2, 2014, we entered into a securities purchase
agreement with Asher Enterprises, Inc., pursuant to which Asher provided our
company with an aggregate investment of $68,000 in consideration of our issuance
of a convertible promissory notes and common share purchase warrants. We issued
Asher a convertible promissory note of $68,000 accruing interest of 8% per annum
from the issue date until the maturity date of October 6, 2014. Thereafter, the
note was to accrue default interest at the rate of 22% per annum until paid. The
note was convertible into shares of our common stock at a 50% discount to the
average of the lowest three trading prices of our common stock during the ten
trading day period ending on the latest complete trading day prior to the
conversion date. On April 11, 2014 we paid $83,191.77 to Asher in full
settlement of the note which amount included $68,000 in respect of principal,
$1,326.47 in respect of accrued interest, and a 20% prepayment penalty on
principal and interest.
Other Business Matters
On October 24, 2012, we entered into a share exchange agreement
dated October 18, 2012, with Alexander Walsh, our president and director.
Pursuant to the agreement, on October 25, 2012 we issued to Mr. Walsh 20,000,000
Series A Convertible Preferred shares in our capital stock in consideration of
the cancellation and return to treasury of 20,000,000 shares of our common stock
held by Mr. Walsh. The Series A Convertible Preferred Shares have a par value of
$0.001 per share and are convertible on a one for one basis into shares of our
common stock after a one year hold period. There are no other preferential
rights attached to the Series A Convertible Preferred Shares. Mr. Walsh
established a series of a 10b5-1 Sales Plans in connection with an overall asset
diversification strategy. As of the date of this report Mr. Walsh has sold an
aggregate of 680,000 shares of our common stock under the plans. Sales
transactions occurring under Mr. Walsh’s 10b5-1 Plans were disclosed publicly
through Form 4 filings with the SEC and are subject to the restrictions and
filing requirements of Rule 144.
On May 1, 2013, we entered into a consulting agreement with
Alexander Koretsky whereby, Mr. Koretsky agreed to provide certain consulting
duties and services as requested by our company. The agreement was effective May
1, 2013 continued for a period of eight months. As compensation, our company has
agreed to pay to Mr. Koretsky a salary of $8,333.33 per month in cash, common
shares of our company, or in both cash and common shares of our company, at the
sole discretion of our company. Where Mr. Koretsky is paid in common shares of
our company, such shares have been previously registered on a Form S-8
registration statement, filed with the United States Securities and Exchange
Commission on January 30, 2013. The term of the agreement has expired and our
company does not intend to renew this agreement.
On July 25, 2013, we entered into a consulting agreement with
Advanced Capital Trading, LLC, pursuant to which Advanced Capital performed
financial consulting services for our company for a period of three months with
an extension of an additional three months based on performance, such services
commenced effective August 1, 2013. Compensation payable to Advanced Capital of
$10,000 was paid upon execution of the consulting agreement.
On September 16, 2013, our company and Advanced Capital entered
into an expanded services agreement which extended the term of the commitment
for an additional three months through January 2014. Our company does not intend
to renew this agreement.
Effective January 1, 2014, we entered into a consulting
agreement for a term of 12 months with International Compass, LLC for the
services of Bryan Kleinlein as chief financial officer of our company. As
compensation, we agreed to pay to International Compass $12,000 per month during
the term of the agreement payable in cash and/or common shares of our company
that were previously registered on Form S-8 at our sole discretion. The value of
the shares of our company issued as compensation, if any, shall be based on the
volume weighted average trading closing price of the shares of our company in
the five (5) trading days immediately preceding the date(s) which the shares are
due. Mr. Kleinlein was first appointed as our chief financial officer on May 15,
2012.
18
Effective January 12, 2014, we entered into an employment
agreement with Alexander Walsh for provision of services as our president and
chief executive officer. The employment agreement will terminate on January 12,
2016. Pursuant to the terms of the employment agreement, Mr. Walsh will receive
an annual salary of $120,000 payable in monthly cash installments or, in the
event cash is unavailable, in shares of our company’s common stock. The
employment agreement also provides for liability insurance and any travel and
out-of-pocket expenses incurred and approved by our company.
Competition
The mineral exploration industry is highly competitive. We are
a new exploration-stage company and have a weak competitive position in the
industry. We compete with junior and senior mineral exploration companies,
independent producers and institutional and individual investors who are
actively seeking to acquire mineral exploration properties throughout the world
together with the equipment, labor and materials required to operate on those
properties. Competition for the acquisition of mineral exploration interests is
intense with many mineral exploration leases or concessions available in a
competitive bidding process in which we may lack the technological information
or expertise available to other bidders.
Many of the mineral exploration companies with which we compete
for financing and for the acquisition of mineral exploration properties have
greater financial and technical resources than those available to us.
Accordingly, these competitors may be able to spend greater amounts on acquiring
mineral exploration interests of merit or on exploring or developing their
mineral exploration properties. This advantage could enable our competitors to
acquire mineral exploration properties of greater quality and interest to
prospective investors who may choose to finance their additional exploration and
development. Such competition could adversely impact our ability to attain the
financing necessary for us to acquire further mineral exploration interests or
explore and develop our current or future mineral exploration properties.
We also compete with other junior mineral exploration companies
for financing from a limited number of investors that are prepared to invest in
such companies. The presence of competing junior mineral exploration companies
may impact our ability to raise additional capital in order to fund our
acquisition or exploration programs if investors perceive that investments in
our competitors are more attractive based on the merit of their mineral
exploration properties or the price of the investment opportunity. In addition,
we compete with both junior and senior mineral exploration companies for
available resources, including, but not limited to, professional geologists,
land specialists, engineers, camp staff, helicopters, float planes, mineral
exploration supplies and drill rigs.
General competitive conditions may be substantially affected by
various forms of energy legislation and/or regulation introduced from time to
time by the governments of the United States and other countries, as well as
factors beyond our control, including international political conditions,
overall levels of supply and demand for mineral exploration.
In the face of competition, we may not be successful in
acquiring, exploring or developing profitable mineral properties or interests,
and we cannot give any assurance that suitable oil and gas properties or
interests will be available for our acquisition, exploration or development.
Despite this, we hope to compete successfully in the mineral exploration
industry by:
- keeping our costs low;
- relying on the strength of our management’s contacts; and
- using our size and experience to our advantage by adapting quickly to
changing market conditions or responding swiftly to potential opportunities.
Intellectual Property
We have the trademark “Lithium Exploration Group” for the use
of mining exploration, namely, lithium exploration services, in class 42 (U.S.
CLS. 100 and 101). The registration number is 4,075,565 and was registered on
December 20, 2011. We do not have any other intellectual property
19
Government Regulation
Any operations at our Lithium properties will be subject to
various federal and state laws and regulations in Canada which govern
prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, protection of the environment, mine safety,
hazardous substances and other matters. We will be required to obtain those
licenses, permits or other authorizations currently required to conduct
exploration and other programs. There are no current orders or directions
relating to us or to our lithium properties with respect to the foregoing laws
and regulations. Such compliance may include feasibility studies on the surface
impact of our proposed operations, costs associated with minimizing surface
impact, water treatment and protection, reclamation activities, including
rehabilitation of various sites, on-going efforts at alleviating the mining
impact on wildlife and permits or bonds as may be required to ensure our
compliance with applicable regulations. It is possible that the costs and delays
associated with such compliance could become so prohibitive that we may decide
to not proceed with exploration, development, or mining operations on any of our
mineral properties. We are not presently aware of any specific material
environmental constraints affecting our properties that would preclude the
economic development or operation of property in Canada.
Environmental Regulations
We are not aware of any material violations of environmental
permits, licenses or approvals that have been issued with respect to our
operations. We expect to comply with all applicable laws, rules and regulations
relating to our business, and at this time, we do not anticipate incurring any
material capital expenditures to comply with any environmental regulations or
other requirements.
While our intended projects and business activities do not
currently violate any laws, any regulatory changes that impose additional
restrictions or requirements on us or on our potential customers could adversely
affect us by increasing our operating costs or decreasing demand for our
products or services, which could have a material adverse effect on our results
of operations.
Employees
We currently employ two individuals: Alexander Walsh as chief
executive officer and Shanon Chilson as an administrative assistant and
controller. Bryan Kleinlein, a consultant, is serving as our chief financial
officer. Outside consultants have been engaged for administrative duties and
industry specialties. We also have one other director, Brandon Colker, who
spends approximately 15 hours per month on various company activities. Mr.
Colker’s primary role is to work with management on research and networking with
global industry contacts and capital sources. Mr. Colker is responsible for
shaping the direction of our company and assist with the submission of corporate
filings.
Research and Development
We have not spent any amounts which have been classified as
research and development activities in our financial statements during the last
two fiscal years.
Going Concern
We anticipate that additional funding will be required in the
form of equity financing from the sale of our common stock. At this time, we
cannot provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock or through a loan from our
directors to exit the exploration phase of our company and reach development and
revenue. We do not have enough cash on hand to meet our obligations over the
next twelve months. We do not have any arrangements in place for any future
equity financing.
20
Subsidiaries
We have one wholly-owned subsidiary, Alta Disposal Ltd., a
company incorporated in the province of Alberta, Canada on July 8, 2011. This
subsidiary was formed to stake MAIM (Metallic and Industrial Mineral) rights in
Alberta directly from the government. Alta Disposal Ltd. presently holds
approximately 550,000 acres of MAIM rights in Alberta that were staked between
July and December of 2011. We also have a partially owned subsidiary, Alta
Disposal Morinville Ltd., an Alberta, Canada corporation, and a partially owned
investment, Tero Oilfield Services Ltd., an Alberta, Canada corporation.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our
stockholders but will voluntarily send an annual report, together with our
annual audited financial statements upon request. We are required to file
annual, quarterly and current reports, proxy statements, and other information
with the Securities and Exchange Commission. Our Securities and Exchange
Commission filings are available to the public over the Internet at the SEC's
website at http://www.sec.gov.
The public may read and copy any materials filed by us with the
SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The Internet address of the site is http://www.sec.gov.
Item 1A. Risk
Factors
Much of the information included in this annual report includes
or is based upon estimates, projections or other “forward-looking statements.”
Such forward-looking statements include any projections and estimates made by us
and by our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other “forward-looking
statements” involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other “forward-looking statements.”
Risks Related to Our Business
We have a limited operating history and as a result there is
no assurance we can operate on a profitable basis.
We have a limited operating history. Our company's operations
will be subject to all the uncertainties arising from the absence of a
significant operating history. Potential investors should be aware of the
difficulties normally encountered by resource exploration companies and the high
rate of failure of such enterprises. The likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the exploration of the properties that we
plan to undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The expenditures to be made by us in
the exploration of our properties may not result in the discovery of reserves.
Problems such as unusual or unexpected formations of rock or land and other
conditions are involved in resource exploration and often result in unsuccessful
exploration efforts. If the results of our exploration do not reveal viable
commercial reserves, we may decide to abandon our claims and acquire new claims
for new exploration or cease operations. The acquisition of additional claims
will be dependent upon us possessing capital resources at the time in order to
purchase such claims. If no funding is available, we may be forced to abandon
our operations. There can be no assurance that we will be able to operate on a
profitable basis.
21
If we do not obtain additional financing, our business will
fail and our investors could lose their investment.
We had cash in the amount of $69,732 and working capital
deficiency (current liabilities exceeding current assets) of $3,279,889 as of
the year ended June 30, 2014. We currently do not generate much revenue from our
operations. Any direct acquisition of a claim under lease or option is subject
to our ability to obtain the financing necessary for us to fund and carry out
exploration programs on potential properties. The requirements are substantial.
Obtaining additional financing would be subject to a number of factors,
including market prices for resources, investor acceptance of our properties and
investor sentiment. These factors may negatively affect the timing, amount,
terms or conditions of any additional financing available to us. The most likely
source of future funds presently available to us is through the sale of equity
capital and loans. Any sale of share capital will result in dilution to existing
shareholders.
Because of the speculative nature of exploration of mineral
properties, we may never discover a commercially exploitable quantity of
minerals, our business may fail and investors may lose their entire
investment.
We are in the very early exploration stage and cannot guarantee
that our exploration work will be successful, or that any minerals will be
found, or that any production of minerals will be realized. The search for
valuable minerals as a business is extremely risky. Substantial investment will
be required to move our company toward the production of minerals. This may
require bringing in a partner to make the necessary investment, but there are no
plans at this time for any form of partnership or merger. We can provide
investors with no assurance that exploration on our properties will establish
that commercially exploitable reserves of minerals exist on our property.
Additional potential problems that may prevent us from discovering any reserves
of minerals on our property include, but are not limited to, unanticipated
problems relating to exploration and additional costs and expenses that may
exceed current estimates. If we are unable to establish the presence of
commercially exploitable reserves of minerals on our property, our ability to
fund future exploration activities will be impeded, we will not be able to
operate profitably and investors may lose all of their investment in our
company.
We have no known mineral reserves and we may not find any
lithium and, even if we find lithium, it may not be in economic quantities. If
we fail to find any lithium or if we are unable to find lithium in economic
quantities, we will have to suspend operations.
We have no known mineral reserves. Additionally, even if we
find lithium in sufficient quantity to warrant recovery, it ultimately may not
be recoverable. Finally, even if any lithium is recoverable, we do not know that
this can be done at a profit. Failure to locate lithium in economically
recoverable quantities will cause us to suspend operations.
Supplies needed for exploration may not always be available.
If we are unable to secure exploration supplies we may have to delay our
anticipated business operations.
Competition and unforeseen limited sources of supplies needed
for our proposed exploration work could result in occasional spot shortages of
supplies of certain products, equipment or materials. There is no guarantee we
will be able to obtain certain products, equipment and/or materials as and when
needed, without interruption, or on favorable terms. Such delays could affect
our anticipated business operations and increase our expenses.
Because of the unique difficulties and uncertainties
inherent in mineral exploration ventures, we face a high risk of business
failure.
Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
failure of such enterprises. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that we
plan to undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The expenditures to be made by us in
the exploration of the mineral claim may not result in the discovery of mineral
deposits. Problems such as unusual or unexpected formations and other conditions
are involved in mineral exploration and often result in unsuccessful exploration
efforts. If the results of our exploration do not reveal viable commercial
mineralization, we may decide to abandon our claims. If this happens, our
business will likely fail.
22
The marketability of natural resources will be affected by
numerous factors beyond our control, which may result in us not receiving an
adequate return on invested capital to be profitable or viable.
The marketability of natural resources, which may be acquired
or discovered by us, will be affected by numerous factors beyond our control.
These factors include market fluctuations in lithium pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of mineral resources and environmental protection
regulations. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in us not receiving an adequate
return on invested capital to be profitable or viable.
Exploration and production activities are subject to certain
environmental regulations, which may prevent or delay the commencement or
continuation of our operations.
In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuation of a given operation. Specifically, we may be subject to
legislation regarding emissions into the environment, water discharges and
storage and disposition of hazardous wastes. In addition, legislation has been
enacted which requires well and facility sites to be abandoned and reclaimed to
the satisfaction of state authorities. However, such laws and regulations are
frequently changed and we are unable to predict the ultimate cost of compliance.
Generally, environmental requirements do not appear to affect us any differently
or to any greater or lesser extent than other companies in the industry.
Any change to government regulation/administrative practices
may have a negative impact on our ability to operate and our profitability.
The business of mineral exploration and development is subject
to substantial regulation under various countries’ laws relating to the
exploration for, and the development, upgrading, marketing, pricing, taxation,
and transportation of mineral resources and related products and other matters.
Amendments to current laws and regulations governing operations and activities
of mineral exploration and development operations could have a material adverse
impact on our business. In addition, there can be no assurance that income tax
laws, royalty regulations and government incentive programs related to the
properties and the mineral exploration industry generally will not be changed in
a manner which may adversely affect our progress and cause delays, inability to
explore and develop or abandonment of these interests.
Permits, leases, licenses, and approvals are required from a
variety of regulatory authorities at various stages of exploration and
development. There can be no assurance that the various government permits,
leases, licenses and approvals sought will be granted in respect of our
activities or, if granted, will not be cancelled or will be renewed upon expiry.
There is no assurance that such permits, leases, licenses, and approvals will
not contain terms and provisions, which may adversely affect our exploration and
development activities.
If we are unable to hire and retain key personnel, we may
not be able to implement our business plan.
Our success is largely dependent on our ability to hire highly
qualified personnel. This is particularly true in highly technical businesses
such as resource exploration. These individuals are in high demand and we may
not be able to attract the personnel we need. In addition, we may not be able to
afford the high salaries and fees demanded by qualified personnel, or may lose
such employees after they are hired. Failure to hire key personnel when needed,
or on acceptable terms, would have a significant negative effect on our
business.
Our independent certified public accounting firm, in their
report on the audited financial statements for the year ended June 30, 2014,
states that there is a substantial doubt that we will be able to continue as a
going concern.
As of June 30, 2014, we have experienced significant losses
since inception. Failure to arrange adequate financing on acceptable terms and
to achieve profitability would have an adverse effect on our financial position,
results of operations, cash flows and prospects. Accordingly, there is
substantial doubt that we will be able to continue as a going concern.
23
Risks Relating to the Industry in General
Planned exploration, and if warranted, development and
mining activities involve a high degree of risk.
We cannot assure you of the success of our planned operations.
Exploration costs are not fixed, and resources cannot be reliably identified
until substantial development has taken place, which entails high exploration
and development costs. The costs of mining, processing, development and
exploitation activities are subject to numerous variables, which could result in
substantial cost overruns. Mining for base or precious metals may involve
unprofitable efforts, not only from dry properties, but from properties that are
productive but do not produce sufficient net revenues to return a profit after
accounting for mining, operating and other costs.
Our operations may be curtailed, delayed or cancelled as a
result of numerous factors, many of which are beyond our control, including
economic conditions, mechanical problems, title problems, weather conditions,
compliance with governmental requirements and shortages or delays of equipment
and services.
We do not insure against all risks associated with our business
because insurance is either unavailable or its cost of coverage is prohibitive.
The occurrence of an event that is not covered by insurance could have a
material adverse effect on our financial condition.
The impact of government regulation could adversely affect
our business.
Our business is subject to applicable domestic and foreign laws
and regulations, including laws and regulations on taxation, exploration, and
environmental and safety matters. Many laws and regulations govern the spacing
of mines, rates of production, prevention of waste and other matters. These laws
and regulations may increase the costs and timing of planning, designing,
drilling, installing, operating and abandoning our mines and other facilities.
In addition, our operations are subject to complex environmental laws and
regulations adopted by domestic and foreign jurisdictions where we operate. We
could incur liability to governments or third parties for any unlawful discharge
of pollutants into the air, soil or water, including responsibility for remedial
costs.
The submission and approval of environmental impact
assessments may be required.
Environmental legislation is evolving in a manner which means
stricter standards; enforcement, fines and penalties for noncompliance are more
stringent. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers and employees.
The cost of compliance with changes in governmental regulations has a potential
to reduce the profitability of operations.
Because the requirements imposed by these laws and regulations
frequently change, we cannot assure you that laws and regulations enacted in the
future, including changes to existing laws and regulations, will not adversely
affect our business.
Decline in mineral prices may make it commercially
infeasible for us to develop our property and may cause our stock price to
decline.
The value and price of your investment in our common shares,
our financial results, and our exploration, development and mining activities
may be significantly adversely affected by declines in the price of minerals and
other precious metals. Mineral prices fluctuate widely and are affected by
numerous factors beyond our control, such as interest rates, exchange rates,
inflation or deflation, fluctuation in the value of the United States dollar and
foreign currencies, global and regional supply and demand, and the political and
economic conditions of mineral-producing countries throughout the world. The
price of minerals fluctuates in response to many factors, which are beyond
anyone’s prediction abilities. The prices used in making the estimates in our
plans differ from daily prices quoted in the news media. Because mining occurs
over a number of years, it may be prudent to continue mining for some periods
during which cash flows are temporarily negative for a variety of reasons. Such
reasons include a belief that the low price is temporary, and/or the expense
incurred is greater when permanently closing a mine.
24
We may not have access to all of the supplies and materials
we need to begin exploration, which could cause us to delay or suspend
operations.
Competition and unforeseen limited sources of supplies in the
industry could result in occasional spot shortages of supplies such as dynamite
as well as certain equipment like bulldozers and excavators that we might need
to conduct exploration. If we cannot obtain the necessary supplies, we will have
to suspend our exploration plans until we do obtain such supplies.
Risks Associated with Our Common Stock
Trading on the OTC Bulletin Board may be volatile and
sporadic, which could depress the market price of our common stock and make it
difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Bulletin Board service of
the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC
Bulletin Board is often thin and characterized by wide fluctuations in trading
prices, due to many factors that may have little to do with our operations or
business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a
quotation system like NASDAQ or a stock exchange like NYSE or Amex. Accordingly,
shareholders may have difficulty reselling any of the shares.
Penny stock rules will limit the ability of our stockholders
to sell their stock.
The Securities and Exchange Commission has adopted regulations
which generally define “penny stock” to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors.” The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission, which provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer’s confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
25
The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a shareholder's ability
to buy and sell our stock.
In addition to the penny stock rules described above, FINRA has
adopted rules that require that, in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative, low-priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that
speculative, low-priced securities will not be suitable for at least some
customers. FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock and have an adverse effect on the market for
its shares.
We do not intend to pay dividends and there will thus be
fewer ways in which you are able to make a gain on your investment.
We have never paid dividends and do not intend to pay any
dividends for the foreseeable future. To the extent that we may require
additional funding currently not provided for in our financing plan, our funding
sources may prohibit the declaration of dividends. Because we do not intend to
pay dividends, any gain on your investment will need to result from an
appreciation in the price of our common stock. There will therefore be fewer
ways in which you are able to make a gain on your investment.
Because the SEC imposes additional sales practice
requirements on brokers who deal in shares of penny stocks, some brokers may be
unwilling to trade our securities. This means that you may have difficulty
reselling your shares, which may cause the value of your investment to
decline.
Our shares are classified as penny stocks and are covered by
Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which
imposes additional sales practice requirements on brokers-dealers who sell our
securities in this offering or in the aftermarket. For sales of our securities,
broker-dealers must make a special suitability determination and receive a
written agreement from you prior to making a sale on your behalf. Because of the
imposition of the foregoing additional sales practices, it is possible that
broker-dealers will not want to make a market in our common stock. This could
prevent you from reselling your shares and may cause the value of your
investment to decline.
Other Risks
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our common stock.
Item
1B. Unresolved Staff Comments
As a “smaller reporting company,” we are not required to
provide the information required by this Item.
Item
2. Properties
We currently rent an office totaling approximately 1,400 square
feet located at 3800 North Central Avenue, No. 820, Phoenix, AZ 85012 for
$2,904.42 a month. We also currently rent an office at a business center at 840
6th Avenue SW, Suite 300, Calgary, AB T2P 3E5 for $998 a month. Our telephone
number in Phoenix is (480) 641-4790. Our telephone number in Calgary is (403)
930-1925.
26
Valleyview Property
On December 16, 2010, we entered into an assignment agreement
with Lithium Exploration VIII Ltd. to acquire an undivided 100% right, title and
interest in the Valleyview Property. Lithium Exploration VIII Ltd. and Golden
Virtue Resources Inc. (formerly First Lithium Resources Inc.) had entered into
an underlying option agreement dated October 6, 2010, which option agreement and
interest have been assigned to our company.
On December 31, 2012, our company entered into an amending
agreement to amend an original payment requirement of the assignment agreement
of CAD$100,000 due on January 1, 2013 to the following payments:
| 1. |
CAD$20,000 (USD$20,000) cash payment due on January 1,
2013; and |
| 2. |
CAD$80,000 (USD$80,000) by a 15% one year promissory note
starting January 1, 2013. |
The note was interest free until March 31, 2013. After March
31, 2013, interest accrued on the principal balance then in arrears at the rate
of 15% per annum. No payments were due and payable until December 31, 2013.
Further, at any time, Lithium Exploration VIII and Golden Virtue may have
elected to convert the remaining balance of the Note and accrued interest into
common shares of our company at 75% of the closing market price of our company’s
common shares on the election day.
On July 3, 2013, Lithium Exploration VIII and Golden Virtue
elected to convert the note and accrued interest in the combined aggregate
amount of CAD$83,057.53 (USD$78,743) into common shares of our company. Pursuant
to this election, we issued an aggregate of 954,461 shares of our common stock
pursuant to the note and election referred to above at the price of USD$0.0825.
On January 1, 2014, we forfeited the originally optioned lands
from Golden Virtue (formerly First Lithium Resources Inc.).
On February 23, 2014, the Valleyview property was forfeited due
to our failure to incur sufficient exploration expenditures (during the two year
time period from staking) as required by the Province of Alberta.
Item
3. Legal Proceedings
Other than as set out below, we know of no material, existing
or pending legal proceedings against us, nor are we involved as a plaintiff in
any material proceeding or pending litigation. There are no proceedings in which
any of our directors, officers or affiliates, or any registered or beneficial
shareholder, is an adverse party or has a material interest adverse to our
company.
On June 12, 2012, we filed a complaint against Glottech-USA in
the Court of Common Pleas of Chester County, Pennsylvania, alleging that
Glottech-USA misused our funds and was in breach of our agreements that called
for Glottech-USA to deliver one initial unit of the mechanical ultrasound
technology. We further alleged that Glottech-USA was financially insolvent and
unable to fulfill its promises to us.
On June 12, 2012, we filed a complaint with the Court of Common
Pleas of Chester County, Pennsylvania against Glottech-USA, LLC, Eldredge, Inc.,
and the Eldredge Companies, Inc. Pursuant to an unopposed motion, the Eldredge
parties were dismissed in October of 2012. The complaint initially sought an
order of the Court granting possession of the initial unit.
Effective August 14, 2012, we entered into an option agreement
with GD Glottech International to protect our license and distribution rights in
the event that Glottech-USA became unable to perform and honor its obligations
to us.
27
Pursuant to the terms of the option agreement, we were required
to provide an initial amount 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. On
September 1, 2012, Glottech-USA’s license to the technology expired and also on
September 1, 2012, we exercised this option agreement and released the funds to
GD Glottech International.
On October 1, 2012, we entered into a license agreement and a
sales agency agreement with GD Glottech, regarding GD Glottech International’s
proprietary and patented mechanical ultrasound technology for use in water
purification in the process of separation of salt and other minerals from
lithium bearing brine produced from oil and gas operations. The license
agreement and sales agency agreement expands and replaces all prior agreements
among our company, GD Glottech International and Glottech-USA, LLC regarding our
rights to use and sell the mechanical ultrasound technology, included in our
letter of intent dated November 18, 2011, and our option agreement dated August
14, 2012.
Pursuant to the sales agency agreement we were appointed as
sales agent for the patented mechanical ultrasound technology within Canada. Our
appointment is exclusive within the field of non petro-chemical mining and
non-exclusive in all other fields of use. In consideration of the sales agency
rights, we agreed to issue to GD Glottech International 2,000,000 common shares
of our capital stock, which obligation has been satisfied through the transfer
to GD Glottech International of 2,000,000 shares held by our officer and
director, Alexander Walsh. It was the explicit intention of the parties that
this share transfer fulfills the prior obligations of Alexander Walsh and our
company with respect to the option contemplated in the March and November 2011
agreements with Glottech-USA. We will receive a royalty in respect of sales of
the technology secured by us. The term of the initial agreement will be for 5
years with the possibility of extension if sales targets are achieved.
Pursuant to the license agreement, we obtained the exclusive
right to use the mechanical ultrasound technology within the field of
non-petro-chemical mining within the territory of Canada. We may also sublicense
our rights under the license in respect of one or more units of the technology
to any entity operating within the field of use in which we own or beneficially
own at least a 20% equity interest. GD Glottech International agreed to supply
us with up to 5 technology units per 12-month period from the effective date of
the license term, which will start from the month of delivery of the unit of the
technology. The first unit of the technology provided under the license to be
provided at no additional cost to us and subsequent units shall be subject to a
fee based on the then current retail price of the units. If we sublicense any of
our rights, the term of the applicable license will be for 5 years from the date
the applicable unit is delivered. Pursuant to the license agreement, GD Glottech
International shall provide ongoing technical assistance and training in respect
of our use of the technology at our cost.
In consideration of the license, we will pay to GD Glottech
International a royalty based on the tonnage of water produced by our use of the
technology in accordance with the agreement. A minimum annual royalty will be
applicable. The term of the license agreement shall be for an initial period of
5 years and shall be renewable for additional terms of 5 years provided that we
satisfy the minimum royalty requirements during each period.
GD Glottech International’s technology is designed to separate
suspended solids from water (brine), which is one step in the process that we
are taking to produce commercially viable minerals. The technology produces
extremely high temperatures, which destroy organic substances such as bacteria
and other toxic agents. We believe that GD Glottech International's technology
can provide lower costs of operation as well as reduced time for site clean-up
than traditional methods of water treatment. We anticipate using this
application to extract dissolved solids like lithium, potassium, and magnesium
from oil field brine. The disposal of produced water (brine) from oil and gas
production in Alberta is a significant environmental issue for the province and
presents a considerable economic issue for producers. We intend to use the
technology on our Valleyview Property in Alberta, in cooperation with oil and
gas producers, to treat and dispose of their produced water while monetizing the
minerals that are contained within that produced water stream that is being
brought to the surface during the oil and gas production process. As we own the
MAIM (Metals and Industrial Minerals) claims to the minerals on the Valleyview
Property, the minerals contained in their produced water stream fall under our
rights. While we have had discussions with oil and gas consultants and oil
operators regarding their difficulties in treating the brine at some of their
fields, we have no formal agreements in place.
28
The technical process is based on the use of mechanical
ultrasound generated through the production of a series of cavitations.
Mechanical ultrasound is a machine-produced sound of a frequency above the upper
limit of the normal range of human hearing. Cavitations are the rapid formation
and collapse of bubbles in liquids, caused by the movement of something such as
a propeller or by waves of high-frequency sound. The production of mechanical
ultrasound allows GD Glottech International’s technology to distill the fluid
stock. Using mechanical ultrasound for distillation has been attempted before,
but the external energy requirement needed to produce the mechanical ultrasound
was far too expensive to make it commercially viable. GD Glottech
International’s technology uses the energy released during the cavitations in
order to make it commercially viable from an economic perspective. During these
cavitations, a millisecond of energy is released. During this release,
temperatures can reach 5,000 degrees centigrade.
On August 27, 2012, we filed a motion to amend our complaint to
include claims of breach of trust and fiduciary duty, breach of good faith and
fair dealing, breach of contract, conversion of funds, fraud, and the imposition
of a constructive trust. We believe that this action was necessary to protect
our interests against possible misuse of funds by Glottech-USA, LLC and its
principals. We will also seek damages as appropriate.
On October 19, 2012, GD Glottech International moved to
intervene as an interested party in the litigation pending against Glottech-USA.
GD Glottech International cited its role as owner of the patents as a basis for
intervening in the litigation against Glottech-USA. We believe GD Glottech
International’s entry into the litigation against Glottech-USA is favorable to
our cause in the litigation.
On October 22, 2012, the Court of Common Pleas in Chester
County, Pennsylvania, granted our motion to amend our complaint against
Glottech-USA to add claims for fraud and damages reflective of the malfeasance
which we allege against Glottech-USA and its officers.
On December 12, 2012, GD Glottech International removed the
management of Glottech-USA and appointed itself as the manager of Glottech-USA.
On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to
dissolve Glottech-USA in Mississippi on the basis that Glottech-USA was unable
to meet its financial obligations and could not finish or deliver the unit to
us.
On December 19, 2012, an attorney purportedly acting on behalf
of Glottech-USA filed a motion in the lawsuit pending in Chester County,
Pennsylvania, seeking possession of the unit. In addition, Glottech-USA filed a
counterclaim seeking possession of the unit.
GD Glottech International immediately filed a motion to quash
Glottech-USA’s motion and for sanctions against the law firm that filed the
motion. We also filed a motion, seeking disqualification of the law firm that
purported to represent Glottech-USA on the basis that the new management for
Glottech-USA had fired the law firm and, as such, the law firm no longer had
authority to represent Glottech-USA.
On April 25, 2013, we attended a hearing on the motions pending
in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on
any of the motions and, instead, stayed the case as to Glottech-USA until
December of 2013 pending the outcome of the lawsuit seeking dissolution of
Glottech-USA. The matter in Pennsylvania is no longer stayed. An attorney
purporting to represent Glottech-USA and the receiver appointed in Mississippi
has filed motions and other documents that may move the matter forward. We have
pending preliminary objections to the counterclaim, including a request for a
determination of which group is in control of Glottech-USA.
Certain members of Glottech-USA continue to pursue dissolution
of the company in Mississippi. The members of Glottech-USA who seek dissolution
have stated in court filings that it is not practicable for Glottech-USA to
continue as an ongoing business. In addition, Sulzer filed suit against
Glottech-USA Texas for unfulfilled obligations.
We do not believe that Glottech-USA has sufficient capital to
continue as an ongoing business. We have provided full consideration to
Glottech-USA and complied with all other agreed upon terms. We believe any
assertions against us to lack merit.
29
Given pending litigation against Glottech-USA, and the
uncertainties naturally inherent of any litigation (particularly as to outcome
and timing thereof), we have moved to assure continuity of our licensing rights
through entering into, and exercising, the option to contract directly with the
technology inventor and patents owner, GD Glottech International. Thus,
regardless of the outcome of the litigation, or indeed any action or inaction of
Glottech-USA, our interest in the technology is assured.
Item
4. Mine Safety Disclosures
Not applicable.
PART II
Item
5. Market for Registrant's
Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is quoted on the OTC Bulletin Board under the
Symbol "LEXG".
The high and low bid prices of our common stock for the periods
indicated below are as follows:
| OTC Bulletin Board |
| Quarter Ended (1) |
High |
Low |
| June 30, 2014 |
$0.762 |
$0.04 |
| March 31, 2014 |
$0.192 |
$0.032 |
| December 31, 2013 |
$0.1245 |
$0.0326 |
| September 30, 2013 |
$0.26 |
$0.0901 |
| June 30, 2013 |
$0.2275 |
$0.12 |
| March 31, 2013 |
$0.406 |
$0.155 |
| December 31, 2012 |
$0.38 |
$0.18 |
| September 30, 2012 |
$0.625 |
$0.23 |
| June 30, 2012 |
$1.20 |
$0.38 |
Our common shares are issued in registered form. VStock
Transfer, 77 Spruce St, Suite 201, Cedarhurst, New York 11516 (Telephone:
(212)-828-8436; Facsimile: (646) 536-3179) is the registrar and transfer agent
for our common shares.
On October 8, 2014, the list of stockholders for our shares of
common stock showed 15 registered stockholders and 398,972,192 shares of common
stock outstanding.
Dividends
We have not declared any dividends on our common stock since
the inception of our company on March 8, 2006. There is no restriction in our
Articles of Incorporation and Bylaws that will limit our ability to pay
dividends on our common stock. However, we do not anticipate declaring and
paying dividends to our shareholders in the near future.
Equity Compensation Plan Information
As of June 30, 2014, we have not adopted an equity compensation
plan under which our common stock is authorized for issuance.
30
Purchase of Equity Securities by the Issuer and Affiliated
Purchasers
We did not purchase any of our shares of common stock or other
securities during the year ended June 30, 2014.
Recent Sales of Unregistered Securities
We did not sell any equity securities which were not registered
under the Securities Act during the year ended June 30, 2014 that were not
otherwise disclosed on our quarterly reports on Form 10-Q or our current reports
on Form 8-K filed during the year ended June 30, 2014.
Item
6. Selected Financial Data
As a “smaller reporting company”, we are not required to
provide the information required by this Item.
Item
7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our
audited financial statements and the related notes for the years ended June 30,
2014 and June 30, 2013 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 21 of this annual report.
Our audited financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.
Plan of Operation
Capital Expenditures
We do not intend to invest in capital expenditures during the
twelve-month period ending June 30, 2015.
General and Administrative Expenses
We expect to spend $300,000 during the twelve-month period
ending June 30, 2015 on general and administrative expenses including legal and
auditing fees, rent, office equipment, consulting fees, salaries, and other
administrative related expenses.
Product Research and Development
We do not anticipate expending any funds on research and
development, manufacturing and engineering over the twelve months ending June
30, 2015.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the
twelve months ending June 30, 2015.
31
Results of Operations for the Years Ended June 30, 2014 and
2013
The following summary of our results of operations should be
read in conjunction with our audited financial statements for the years ended
June 30, 2014 and 2013.
Our operating results for the years ended June 30, 2014 and
2013 are summarized as follows:
| |
|
|
Year Ended |
|
| |
|
|
June 30, |
|
| |
|
|
2014 |
|
|
2013 |
|
| |
|
|
|
|
|
|
|
| |
Revenue |
$ |
35,285 |
|
$ |
Nil |
|
| |
Operating Expenses |
$ |
2,221,704 |
|
$ |
2,369,562 |
|
| |
Interest Expense |
$ |
5,320,995 |
|
$ |
3,792,131 |
|
| |
(Gain) on change in the fair value of
derivative liability |
$ |
(2,650,532 |
) |
$ |
(1,123,384 |
) |
| |
Fair value of warrants issued |
$ |
3,193,462 |
|
$ |
Nil |
|
| |
(Gain) on change in the fair value of
convertible preferred stock |
$ |
(331,127 |
) |
$ |
Nil |
|
| |
Equity in income of
unconsolidated affiliate |
$ |
18,053 |
|
$ |
Nil |
|
| |
Net Loss |
$ |
(7,701,164 |
) |
$ |
(5,038,309 |
) |
Revenues
We have not earned revenues since our inception.
Operating Expenses
Our operating expenses for the years ended June 30, 2014 and
June 30, 2013 are outlined in the table below:
| |
|
Year Ended |
|
| |
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
|
|
|
|
|
| Mining expenses |
$ |
67,653 |
|
$ |
922,658 |
|
| Selling, general and administrative |
$ |
1,770,813 |
|
$ |
1,446,904 |
|
| Goodwill Impairment |
$ |
383,238 |
|
$ |
Nil |
|
The decrease in operating expenses for the year ended June 30,
2014, compared to the same period in fiscal 2013, was mainly due to the
significant decrease in mining expenses resulting from the decrease in our
mineral exploration activities during fiscal 2014.
32
Liquidity and Financial Condition
Working Capital
| |
|
As at |
|
|
As at |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| Total current assets |
$ |
138,013 |
|
$ |
292,646 |
|
| Total current liabilities |
$ |
3,417,902 |
|
$ |
1,768,670 |
|
| Working capital (deficit) |
$ |
(3,279,889 |
) |
$ |
(1,476,024 |
)
|
As of June 30, 2014, our total current assets were $138,013 and
our total current liabilities were $3,417,902 and we had a working capital
deficit of $3,279,889. Our financial statements report a net loss of $7,701,164
for the year ended June 30, 2014 and an accumulated deficit of $40,821,871 for
the period from May 31, 2006 (date of inception) to June 30, 2014.
We have suffered recurring losses from operations. The
continuation of our company is dependent upon our company attaining and
maintaining profitable operations and raising additional capital as needed. In
this regard we have raised additional capital through equity offerings and loan
transactions.
Cash Flows
| |
|
At |
|
|
At |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| Net Cash (Used in) Operations
|
$ |
(1,563,333 |
) |
$ |
(1,730,809 |
) |
| Net Cash Provided by (Used In) Investing
Activities |
$ |
(1,038,217 |
) |
$ |
(10,170 |
) |
| Net Cash Provided by
Financing Activities |
$ |
2,450,000 |
|
$ |
750,000 |
|
| Cash (decrease) increase during the
year |
$ |
(178,892 |
) |
$ |
(990,979 |
) |
We had cash in the amount of $69,732 as of June 30, 2014 as
compared to $248,624 as of June 30, 2013. We had a working capital deficit of
$3,279,889 as of June 30, 2014 compared to working capital deficit of $1,476,024
as of June 30, 2013.
Our principal sources of funds have been from sales of our
common stock and the issuance of convertible debentures.
Anticipated Cash Requirements
We estimate that our expenses over the next 12 months will be
approximately $1,550,000 as described in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from shareholders or other sources.
| Description |
|
Estimated |
|
|
Estimated |
|
| |
|
Completion |
|
|
Expenses |
|
| |
|
Date |
|
|
($) |
|
| General and administrative
|
|
12 months |
|
$ |
300,000 |
|
| Mining expenses (mainly technology related)
|
|
12 months |
|
$ |
150,000 |
|
| Tero acquisition expenses |
|
12 months |
|
$ |
500,000 |
|
| Morinville expansion |
|
12 months |
|
$ |
400,000 |
|
| Legal and accounting |
|
12 months |
|
$ |
200,000 |
|
| Total |
|
|
|
$ |
1,550,000 |
|
33
We intend to meet our cash requirements for the next 12 months
through the use of the cash we have on hand and through equity financing, debt
financing, or other sources, which may result in further dilution in the equity
ownership of our shares. We currently do not have any other arrangements in
place to complete any private placement financings and there is no assurance
that we will be successful in completing any such financings on terms that will
be acceptable to us.
Contractual Obligations
As a “smaller reporting company,” we are not required to
provide tabular disclosure obligations.
Going Concern
The audited financial statements included with this annual
report have been prepared on the going concern basis which assumes that adequate
sources of financing will be obtained as required and that our assets will be
realized and liabilities settled in the ordinary course of business.
Accordingly, the audited financial statements do not include any adjustments
related to the recoverability of assets and classification of assets and
liabilities that might be necessary should we be unable to continue as a going
concern.
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 is material to
stockholders.
Critical Accounting Policies
Our audited financial statements and accompanying notes are
prepared in accordance with generally accepted accounting principles used in the
United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our financial statements is critical to an
understanding of our financial statements.
Principal of Consolidation
The consolidated financial statements include the accounts of
our 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 consolidated 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. Our 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 our 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.
34
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. Our company had $69,732 and $248,624 in cash and cash equivalents at June
30, 2014 and 2013, respectively.
Concentration of Risk
Our 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 June 30, 2014 and 2013, our
company had $Nil and $25,935, respectively, in deposits in excess of federally
insured limits in our US bank. Our company has not experienced any losses with
regard to its bank accounts and we believe we are 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 service term.
Start-Up Costs
In accordance with FASC 720-15-20 “Start-Up Costs,” our
company expenses all costs incurred in connection with the start-up and
organization of our company.
Mineral Acquisition and Exploration Costs
Our company has been in the exploration stage since its
formation on May 31, 2006 and has not yet realized any revenue from our planned
operations. We are 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
Our company’s financial instruments that are exposed to
concentrations of credit risk primarily consist of our cash and cash equivalents
and related party payables we will likely incur in the near future. Our company
places our cash and cash equivalents with financial institutions of high credit
worthiness. At times, our cash and cash equivalents with a particular financial
institution may exceed any applicable government insurance limits. Our company’s
management plans to assess the financial strength and credit worthiness of any
parties to which we extend funds, and as such, we believe that any associated
credit risk exposures are limited.
Net Income or (Loss) per Share of Common Stock
Our 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.
35
Foreign Currency Translations
Our 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 as of June 30, 2014 and 2013.
Translation of Foreign Operations
The financial results and position of foreign operations whose
functional currency is different from our company’s presentation currency are
translated as follows:
- assets and liabilities are translated at
period-end exchange rates prevailing at that reporting date;
and
- income and expenses are translated at average exchange
rates for the period.
Exchange differences arising on translation of foreign
operations are transferred directly to our company’s accumulated other
comprehensive loss in the consolidated balance sheets. Transaction gains and
losses arising from exchange rate fluctuation on transactions denominated in a
currency other than the functional currency are included in the consolidated
statements of operations.
The relevant translation rates are as follows: For the year
ended June 30, 2014 closing rate at 0.9367 US$: CND$, average rate at 0.9341
US$: CND$ and for the year ended June 30, 2013 closing rate at 0.9513 US$: CND$,
average rate at 0.9954 US$: CND$.
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 June 30 2014, our company had no items of other comprehensive income
except for foreign currency translation adjustment.
Risks and Uncertainties
Our 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 our 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 our company
vary greatly and are not predictable. Our 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.
36
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 statement 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-480-10-25-14, 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, our 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 ASC 835-30-35-2.
Unaccreted debt discount on the date of conversion is accreted to interest
expense on that date.
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 our 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.
Our company’s Level 3 financial liabilities consist of the
liability of our 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. Our 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.
37
Revenue Recognition
Our company has generated little revenues to date. It is our
company’s policy that revenue from product sales or services will be recognized
in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectability of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. Our company will defer any revenue for
which the product/services was not delivered or is subject to refund until such
time that our company and the customer jointly determine that the
product/service has been delivered or no refund will be required.
Sales comprise the fair value of the consideration received or
receivable for the sale of goods and rendering of services in the ordinary
course of our company’s activities. Sales are presented, net of tax, rebates and
discounts, and after eliminating intercompany sales. Our company recognizes
revenue when the amount of revenue and related cost can be reliably measured and
it is probable that the collectability of the related receivables is reasonably
assured.
Receivables
Trade and other receivables are customer obligations due under
normal trade terms and are recorded at face value less any provisions for
uncollectible amounts considered necessary. Our company includes any balances
that are determined to be uncollectible in its overall allowance for doubtful
accounts.
Investments in unconsolidated affiliates
Investments in affiliates that are not controlled by our
company, but over which it has significant influence, are accounted for using
the equity method. Our company’s share of net income from its unconsolidated
affiliate is reflected in the Consolidated Statements of Operations and
Comprehensive Loss as Equity in Income of Unconsolidated Affiliate.
Recent Accounting Pronouncements
Our company has adopted Accounting Standards Update (ASU) No.
2014-10, Development Stage Entities (Topic 915): Elimination of Certain
Financial Reporting Requirements, Including an Amendment to Variable Interest
Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove
all incremental financial reporting requirements from U.S. GAAP for development
stage entities, including the removal of Topic 915, Development Stage Entities,
from the FASB Accounting Standards Codification.
A development stage entity is one that devotes substantially
all of its efforts to establishing a new business and for which: (a) planned
principal operations have not commenced; or (b) planned principal operations
have commenced, but have produced no significant revenue. For example, many
start-ups or even long-lived organizations that have not yet begun their
principal operations or do not have significant revenue would be identified as
development stage entities.
For public business entities, the presentation and disclosure
requirements in Topic 915 will no longer be required for the first annual period
beginning after December 15, 2014. The revised consolidation standards are
effective one year later, in annual periods beginning after December 15, 2015.
Early adoption is permitted.
Recent accounting pronouncements that are listed below did not,
and are not currently expected to, have a material effect on our company’s
financial statements, but will be implemented in our company’s future financial
reporting when applicable.
38
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. 2014-15
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 our company or their effect on the financial statements
would not have been significant.
Item
7A. Quantitative and Qualitative
Disclosures About Market Risk
As a “smaller reporting company,” we are not required to
provide the information required by this Item.
Item
8. Financial Statements
and Supplementary Data
Our audited financial statements are stated in United States
dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.
39
LITHIUM EXPLORATION GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Lithium Exploration Group, Inc.
We have audited the accompanying consolidated balance sheet of Lithium Exploration Group, Inc. (the “Company”), a as of June 30, 2014 and the related statements of operations, equity and cash flows for the year ended June 30, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to the above present fairly, in all material respects, the financial position of Lithium Exploration Group, Inc. as of June 30, 2014, and the results of operations, equity and cash flows for the year ended June 30, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 10 to the accompanying consolidated financial statements, the Company and has not commenced its planned principal operations, is incapable of generating sufficient cash flow to sustain its operations without securing additional financing, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM LLP
New York, New York
October 14, 2014
41
| |
|
|
|
| |
|
|
|
| Russell E. Anderson, CPA |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM |
| Russ Bradshaw, CPA |
|
|
|
| William R. Denney, CPA |
|
|
|
| |
|
|
To The Board of Directors and Stockholders of |
| |
|
|
Lithium Exploration Group, Inc. |
| |
|
|
|
| |
|
|
|
|
|
|
We have audited the accompanying consolidated balance
sheet of Lithium Exploration Group, Inc. (the Company) as of June 30,
2013, and the related consolidated statements of operations, changes in
stockholders’ equity (deficit), and cash flows for the year ended June 30,
2013. 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 audit. |
| |
|
|
|
|
|
|
We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United States of
America). 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 audit provides a reasonable basis for our opinion. |
| |
|
|
|
|
|
|
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Lithium Exploration Group, Inc. as of June 30, 2013, and the
results of its operations and its cash flows for the year ended June 30,
2013, in conformity with accounting principles generally accepted in the
United States of America. |
| |
|
|
|
5296 S. Commerce Dr
Suite 300
Salt Lake City, Utah
84107
USA
(T) 801.281.4700
(F) 801.281.4701
Suite A, 5/F
Max Share Center
373 Kings Road
North Point
Hong Kong
(T) 852.21.555.333
(F) 852.21.165.222
abcpas.net |
|
|
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Note 10 to the consolidated financial statements, the Company has an
accumulated deficit and has suffered recurring losses from operations.
These factors, among others, raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to
this matter are also described in Note 10. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Anderson Bradshaw PLLC
Salt Lake City, Utah
September 30,
2013 |
42
| Lithium Exploration Group, Inc. |
| Consolidated Balance Sheets |
| As of June
30, 2014 |
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013
|
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
69,732 |
|
$ |
248,624
|
|
| Receivable |
|
26,419 |
|
|
- |
|
|
Loan receivable |
|
20,000
|
|
|
- |
|
| Prepaid expenses |
|
21,862 |
|
|
44,022 |
|
| Total current assets |
|
138,013
|
|
|
292,646 |
|
| |
|
|
|
|
|
|
| Deposit on Alta Disposal
Morinville Ltd. |
|
- |
|
|
10,170 |
|
| Investment in unconsolidated affiliate (Note 14) |
|
924,753 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total Assets |
$ |
1,062,766 |
|
$ |
302,816 |
|
| |
|
|
|
|
|
|
| LIABILITIES AND DEFICIT |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
14,520 |
|
$ |
2,928 |
|
| Note payable
convertible (Note 5) |
|
- |
|
|
105,410 |
|
|
Derivative liability – convertible promissory notes (Note 7) |
|
2,832,989
|
|
|
513,375 |
|
| Due to related
party (Note 9) |
|
45,332 |
|
|
45,332 |
|
|
Convertible debentures (Note 6) |
|
- |
|
|
1,063,077 |
|
Convertible
promissory notes (net of discount of
$2,797,850
and
$1,475,247) (Note 7) |
|
450,057 |
|
|
37,610 |
|
| Accrued interest – convertible
promissory notes (Note 7) |
|
75,004 |
|
|
938 |
|
| |
|
|
|
|
|
|
| Total Current Liabilities |
|
3,417,902 |
|
|
1,768,670 |
|
| |
|
|
|
|
|
|
| Commitments and
contingencies |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| DEFICIT |
|
|
|
|
|
|
| Lithium Explorations Group, Inc.
Stockholders’ Deficit |
|
|
|
|
|
|
| Capital stock (Note 3) |
|
|
|
|
|
|
|
Authorized:
100,000,000
preferred shares, $0.001 par
value
500,000,000
common shares, $0.001 par value
Issued and
outstanding:
Nil
preferred shares (June 30, 2013 – 20,000,000) |
|
- |
|
|
20,000 |
|
|
191,958,118 common shares (June 30, 2013 – 54,882,422) |
|
191,961
|
|
|
54,885 |
|
| Additional paid-in capital |
|
38,381,943 |
|
|
31,916,501 |
|
| Accumulated other
comprehensive loss |
|
(5,769 |
) |
|
- |
|
| Accumulated deficit |
|
(40,821,871 |
) |
|
(33,457,240 |
) |
| Total Lithium Exploration Group, Inc. Stockholders’ Deficit
|
|
(2,253,736 |
) |
|
(1,465,854 |
) |
| Non-controlling interest |
|
(101,400 |
) |
|
- |
|
| Total Deficit |
|
(2,355,136 |
) |
|
(1,465,854 |
) |
| |
|
|
|
|
|
|
| Total Liabilities and Stockholders’ Deficit |
$ |
1,062,766 |
|
$ |
302,816 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
43
| Lithium Exploration Group, Inc. |
| Consolidated
Statements of Operations And Comprehensive Loss
|
| |
|
Years ended June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Revenue |
$ |
35,285 |
|
$ |
- |
|
| |
|
|
|
|
|
|
| Operating Expenses: |
|
|
|
|
|
|
| Mining (Notes 3 & 5) |
|
67,653 |
|
|
922,658 |
|
| Selling, general
and administrative (Notes 3 & 5) |
|
1,770,813 |
|
|
1,446,904 |
|
| Goodwill impairment (Note 13) |
|
383,238 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total operating expenses |
|
2,221,704 |
|
|
2,369,562 |
|
| |
|
|
|
|
|
|
| Loss from operations |
|
(2,186,419 |
) |
|
(2,369,562 |
) |
| |
|
|
|
|
|
|
| Other income (expenses) |
|
|
|
|
|
|
| Interest expense (Note 7) |
|
(5,320,995 |
) |
|
(3,792,131 |
) |
| Gain on change in the fair value of
derivative liability (Note 7) |
|
2,650,532 |
|
|
1,123,384 |
|
| Fair value of warrants issued |
|
(3,193,462 |
) |
|
- |
|
| Gain on change in the fair value of
convertible preferred stock (Note 3) |
|
331,127 |
|
|
- |
|
| Equity in income of
unconsolidated affiliate |
|
18,053 |
|
|
- |
|
| |
|
|
|
|
|
|
| Loss before income
taxes |
|
(7,701,164 |
) |
|
(5,038,309 |
) |
| |
|
|
|
|
|
|
| Provision for Income Taxes
(Note 4) |
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
| Net loss |
|
(7,701,164 |
) |
|
(5,038,309 |
) |
| Less: Net loss attributable to the
non-controlling interest |
|
(336,533 |
) |
|
- |
|
| Net loss attributable to
Lithium Exploration Group, Inc. Common shareholders |
$ |
(7,364,631 |
) |
$ |
(5,038,309 |
) |
| Basic and Diluted Loss per Common
Share |
$ |
(0.07 |
) |
$ |
(0.10 |
) |
| Basic and Diluted Weighted
Average Number of Common Shares Outstanding |
|
112,997,439 |
|
|
48,566,900 |
|
| |
|
|
|
|
|
|
| Comprehensive loss: |
|
|
|
|
|
|
| Net loss |
$ |
(7,701,164 |
) |
$ |
(5,038,309 |
) |
| Foreign currency translation
adjustment |
|
(12,187 |
) |
|
- |
|
| Comprehensive loss |
|
(7,713,351 |
) |
|
(5,038,309 |
) |
| Comprehensive loss
attributable to non-controlling interest |
|
(336,533 |
) |
|
- |
|
| |
|
|
|
|
|
|
| Comprehensive loss
attributable to Lithium Exploration Group, Inc. |
$ |
(7,376,818 |
) |
$ |
(5,038,309 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
44
| Lithium Exploration Group, Inc. |
| Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
|
| |
|
Preferred Shares |
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated Other |
|
|
|
|
|
Non- |
|
|
Stockholders’ |
|
| |
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Paid-in |
|
|
Comprehensive |
|
|
Deficit |
|
|
controlling |
|
|
Equity |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Accumulated |
|
|
interest |
|
|
(Deficit) |
|
| Balance – June 30, 2012
(Restated) |
|
- |
|
$ |
- |
|
|
54,416,272 |
|
$ |
54,417 |
|
$ |
27,406,774 |
|
$ |
- |
|
$ |
(28,418,931 |
) |
$ |
- |
|
$ |
(957,740 |
) |
| Common shares issued for consulting fees |
|
- |
|
|
|
|
|
867,397 |
|
|
868 |
|
|
156,132 |
|
|
- |
|
|
- |
|
|
- |
|
|
157,000 |
|
| Common shares issued for
director fees |
|
- |
|
|
- |
|
|
300,000 |
|
|
300 |
|
|
53,700 |
|
|
- |
|
|
- |
|
|
- |
|
|
54,000 |
|
| Common shares issued for investor relations |
|
- |
|
|
- |
|
|
648,604 |
|
|
649 |
|
|
131,351 |
|
|
- |
|
|
- |
|
|
- |
|
|
132,000 |
|
| Common shares issued for
mining expenses |
|
- |
|
|
- |
|
|
372,375 |
|
|
373 |
|
|
89,627 |
|
|
- |
|
|
- |
|
|
- |
|
|
90,000 |
|
| Common shares issued for debt conversion |
|
- |
|
|
- |
|
|
17,249,661 |
|
|
17,250 |
|
|
2,807,670 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,824,920 |
|
| Common shares issued for
exercise of warrants |
|
- |
|
|
- |
|
|
1,028,113 |
|
|
1,028 |
|
|
1,271,247 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,272,275 |
|
| Common shares exchanged for preferred shares |
|
20,000,000 |
|
|
20,000 |
|
|
(20,000,000 |
) |
|
(20,000 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
| Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(5,038,309 |
) |
|
- |
|
|
(5,038,309 |
) |
| Balance – June 30, 2013 |
|
20,000,000 |
|
|
20,000 |
|
|
54,882,422 |
|
|
54,885 |
|
|
31,916,501 |
|
|
- |
|
|
(33,457,240 |
) |
|
- |
|
|
(1,465,854 |
) |
| Preferred shares issued for
debt settlement |
|
1,134,500 |
|
|
1,135 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,135 |
|
| Common shares issued for consulting fees |
|
- |
|
|
- |
|
|
3,193,415 |
|
|
3,194 |
|
|
248,973 |
|
|
- |
|
|
- |
|
|
- |
|
|
252,167 |
|
| Common shares issued for debt
conversion |
|
- |
|
|
- |
|
|
45,037,306 |
|
|
45,038 |
|
|
2,047,374 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,092,412 |
|
| Common shares issued for exercise of warrants |
|
- |
|
|
- |
|
|
9,199,541 |
|
|
9,200 |
|
|
589,116 |
|
|
- |
|
|
- |
|
|
- |
|
|
598,316 |
|
| Common shares issued for
preferred shares conversion |
|
(21,134,500 |
) |
|
(21,135 |
) |
|
79,645,434 |
|
|
79,645 |
|
|
3,579,978 |
|
|
- |
|
|
- |
|
|
- |
|
|
3,638,488 |
|
| Non-controlling interest |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
6,418 |
|
|
- |
|
|
235,133 |
|
|
241,551 |
|
| Foreign exchange translation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(12,187 |
) |
|
- |
|
|
- |
|
|
(12,187 |
) |
| Net loss for the period |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(7,364,631 |
) |
|
(336,533 |
) |
|
(7,701,164 |
) |
| Balance – June 30,
2014 |
|
- |
|
$ |
- |
|
|
191,958,118 |
|
$ |
191,962 |
|
$ |
38,381,942 |
|
$ |
(5,769 |
) |
$ |
(40,821,871 |
) |
$ |
(101,400 |
) |
$ |
(2,355,136 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
45
| Lithium Exploration Group, Inc. |
| Consolidated
Statements of Cash Flows |
| |
|
Year Ended |
|
|
Year Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
|
|
|
|
|
| Cash Flows from Operating Activities
|
|
|
|
|
|
|
| Net loss |
$ |
(7,701,164 |
) |
$ |
(5,038,309 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
Equity in income (loss) of unconsolidated affiliate |
|
(18,053 |
) |
|
- |
|
|
Common shares issued for mining expenses and related finder’s
|
|
|
|
|
|
|
| fees
|
|
- |
|
|
90,000 |
|
|
Common shares issued for director fees |
|
- |
|
|
54,000 |
|
|
Non-cash expenses |
|
- |
|
|
304,060 |
|
|
Unrealized foreign exchange gain on note payable |
|
- |
|
|
(4,315 |
) |
|
Common shares issued for investor relations |
|
- |
|
|
132,000 |
|
|
Common shares issued for consulting fees |
|
252,167 |
|
|
157,000 |
|
|
Goodwill impairment |
|
383,238 |
|
|
- |
|
|
Common stock issued for interest expenses |
|
24,967 |
|
|
- |
|
|
Interest expense |
|
5,207,155 |
|
|
3,792,131 |
|
|
Gain on change in the fair value of derivative liability |
|
(2,650,532 |
) |
|
(1,123,384 |
) |
| Gain
on change in the fair value of convertible preferred stock |
|
(331,127 |
) |
|
- |
|
|
Fair value of warrants issued |
|
3,193,462 |
|
|
- |
|
| |
|
|
|
|
|
|
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
Receivable |
|
(26,419 |
) |
|
- |
|
|
Other assets |
|
6,268 |
|
|
- |
|
| Loan
receivable |
|
(20,000 |
) |
|
- |
|
|
Prepaid expenses |
|
31,872 |
|
|
(44,022 |
) |
|
Accrued interest |
|
74,066 |
|
|
- |
|
|
Accounts payable and accrued liabilities |
|
10,767 |
|
|
(49,970 |
) |
| Net cash used
in operating activities |
|
(1,563,333 |
) |
|
(1,730,809 |
)
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Cash Flows from Investing Activities
|
|
|
|
|
|
|
| Investment |
|
(906,700 |
) |
|
- |
|
| Acquisition of
subsidiary, net of cash acquired |
|
(141,687 |
) |
|
- |
|
|
Deposit applied for acquisition of subsidiary |
|
10,170 |
|
|
(10,170 |
)
|
| Net cash used in investing activities |
|
(1,038,217 |
) |
|
(10,170 |
) |
| |
|
|
|
|
|
|
| Cash Flows from Financing Activities
|
|
|
|
|
|
|
| Repayment of convertible
promissory note |
|
(68,000 |
) |
|
- |
|
| Proceed from issuance of
convertible promissory notes |
|
2,518,000 |
|
|
750,000 |
|
| Net cash
provided by financing activities |
|
2,450,000 |
|
|
750,000 |
|
| |
|
|
|
|
|
|
| Effect of foreign exchange |
|
(27,342 |
) |
|
- |
|
| |
|
|
|
|
|
|
| Decrease in cash and cash equivalents |
|
(178,892 |
) |
|
(990,979 |
) |
| Cash and cash equivalents - beginning of period |
|
248,624 |
|
|
1,239,603 |
|
| Cash and cash
equivalents - end of period |
$ |
69,732 |
|
$ |
248,624 |
|
| Supplementary disclosure of cash flow
information: |
|
|
|
|
|
|
| Cash paid during the period for: |
|
|
|
|
|
|
| Interest |
$ |
29,675 |
|
$ |
- |
|
| Income taxes |
$ |
- |
|
$ |
- |
|
| |
|
|
|
|
|
|
| Supplementary non- cash Investing and Financing
Activities: |
|
|
|
|
|
|
| Non-cash
investing and financing activities: |
|
|
|
|
|
|
|
Common stock issued for debt conversion |
$ |
4,111,447 |
|
$ |
2,824,920 |
|
|
Common stock issued for preferred stock conversion |
$ |
20,000 |
|
$ |
- |
|
|
Deposit applied for acquisition of subsidiary |
$ |
10,170 |
|
$ |
- |
|
|
Transfer of beneficial conversion feature to fair value of
note |
$ |
2,146,510 |
|
$ |
704,524 |
|
|
Common stock issued on cashless exercise of warrants |
$ |
598,316 |
|
$ |
1,272,276 |
|
|
Assets and liabilities acquired in acquisition of subsidiary:
|
|
|
|
|
|
|
|
Asset acquired |
$ |
305,922 |
|
$ |
- |
|
|
Less: Liabilities acquired |
$ |
825 |
|
$ |
- |
|
|
Net Asset acquired |
$ |
305,097 |
|
$ |
- |
|
|
Less: Non-controlling interest |
$ |
235,133 |
|
$ |
- |
|
|
Less: Fair value of consideration paid |
$ |
453,204 |
|
$ |
- |
|
|
Goodwill |
$ |
383,238 |
|
$ |
- |
|
The accompanying notes are an integral part of these
consolidated financial statements.
46
|
Lithium Exploration Group, Inc.
|
|
Notes to Consolidated Financial Statements
|
|
June 30, 2014 and 2013
|
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 engaged 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.
47
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
2. Significant Accounting Policies
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Principal of Consolidation
The consolidated 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 consolidated 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 convertible debt, 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 $69,732 and $248,624 in cash and cash equivalents at June 30, 2014 and 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 June 30, 2014 and 2013, the Company had $Nil 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 and deposit for office lease. Legal retainers and deposit for office lease will be expensed in the period when services are completed.
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.
48
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
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. 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 as June 30, 2014 and 2013.
49
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
2. Significant Accounting Policies -
Continued
Foreign Currency Translations – Continued
Translation of Foreign Operations
The financial results and position of foreign operations whose
functional currency is different from the Company’s presentation currency are
translated as follows:
- assets and liabilities are translated at period-end
exchange rates prevailing at that reporting date; and
- income and expenses
are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign
operations are transferred directly to the Company’s accumulated other
comprehensive loss in the consolidated balance sheets. Transaction gains and
losses arising from exchange rate fluctuation on transactions denominated in a
currency other than the functional currency are included in the consolidated
statements of operations.
The relevant translation rates are as follows: For the year
ended June 30, 2014 closing rate at 0.9367 US$: CND$, average rate at 0.9341
US$: CND$ and for the year ended June 30, 2013 closing rate at 0.9513 US$: CND$,
average rate at 0.9954 US$: CND$.
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 June 30, 2014, the Company had no material items of other
comprehensive income except for the foreign currency translation
adjustment.
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
The Company values its warrants with provisions resulting in
derivative liabilities at fair value using the lattice model according to
ASC-815-10-55. The Company revalue its warrants at the end of every period at
fair value and record the difference in other income (expense) in the
consolidated statements of operations.
50
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
2. Significant Accounting Policies - Continued
Convertible Debentures and Convertible Promissory Notes
The Company values its convertible debentures and convertible promissory notes with provisions resulting in beneficial conversion features from the embedded derivative at fair value according to ASC-480-10-25-14, 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 ASC 835-30-35-2. Unaccreted debt discount on the date of conversion is accreted to
interest expense on that date.
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 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 fair value 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.
51
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
2. Significant Accounting Policies – Continued
Revenue Recognition
The Company has generated little revenues to date. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on
management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product/services was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the
product/service has been delivered or no refund will be required.
Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Company’s activities. Sales are presented, net of tax, rebates and discounts, and after
eliminating intercompany sales. The Company recognizes revenue when the amount of revenue and related cost can be reliably measured and it is probable that the collectability of the related receivables is reasonably assured.
Receivables
Trade and other receivables are customer obligations due under normal trade terms and are recorded at face value less any provisions for uncollectible amounts considered necessary. The Company includes any balances that are determined to be
uncollectible in its overall allowance for doubtful accounts.
Investment in Unconsolidated Affiliate
Investments in affiliates that are not controlled by the Company, but over which it has significant influence, are accounted for using the equity method. The Company’s share of net income from its unconsolidated affiliate is reflected in the
Consolidated Statements of Operations and Comprehensive Loss as Equity in Income of Unconsolidated Affiliate.
Recent Accounting Pronouncements
The Company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards
Codification.
A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced
no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities.
For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in
annual periods beginning after December 15, 2015. Early adoption is permitted.
52
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
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. 2014-15 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.
On October 25, 2012, the Company designated 20,000,000 series A convertible preferred stock with a par value of $0.001 per share and stated value of $100 per share. The designated preferred stock is convertible at the option of the holder,
at any time beginning one year from the date such shares are issued, into common stock of the Company with a par value of $0.001. All shares of common stock of the Company, shall be of junior rank to all series A preferred stock in respect to
the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. All other shares of preferred stock shall be of junior rank to all series A preferred shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of the Company.
On January 3, 2014, the Company designated 2,000,000 series B convertible 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. The series B convertible preferred stock shall be subordinate to and rank junior to all
indebtedness of the Company now or hereafter outstanding.
Share Issuances
Common Stock Issuance
For the year ended June 30, 2014:
On July 1, 2013, the Company issued 80,000 common shares at a market price of $0.10 per share for consulting fees.
53
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock – Continued
Share Issuances - Continued
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.
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 $44,326 (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 $63,000
(Note 6).
54
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
4. Capital Stock – Continued
Share
Issuances - Continued
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 (Note
6).
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.
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 $76,500
(Note 6).
On October 24, 2013, the Company issued 501,355 common shares
at a deemed price of $0.04 per share for warrants exercise of $21,553 (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 $60,000
(Note 6).
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.
55
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock – Continued
Share Issuances - Continued
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 December 31, 2013, the Company issued 238,806 common shares
at a market price of $0.0670 per share for related party consulting fees.
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 of
$81,846 (Note 7).
On January 6, 2014, the Company issued 3,000,000 common shares
at a deemed price of $0.02261 per share for debenture conversion of $67,830
(Note 6).
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 $52,200
(Note 7).
On January 16, 2014, the Company issued 3,500,000 common shares
at a deemed price of $0.02261 per share for debenture conversion of $79,135
(Note 6).
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 $11,310 (Note
7).
On February 11, 2014, the Company issued 3,000,000 common
shares at a deemed price of $0.0160 per share for convertible preferred shares
of $96,000.
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 of
$62,921 (Note 7).
On February 14, 2014, the Company issued 3,300,000 common
shares at a deemed price of $0.0224 per share for debenture conversion of
$73,920 (Note 6).
On February 24, 2014, the Company issued 2,000,000 common
shares at a deemed price of $0.040 per share for convertible preferred shares of
$80,000.
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 of $59,849
(Note 7).
On March 3, 2014, the Company issued 3,472,734 common shares at
a deemed price of $0.0224 per share for debenture conversion of $77,789 (Note
6).
On March 5, 2014, the Company issued 2,500,000 common shares at
a deemed price of $0.0960 per share for convertible preferred shares of
$240,000.
56
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock - Continued
Share Issuances - Continued
On March 6, 2014, the Company issued 6,250,000 common shares at a deemed price of $0.080 per share for convertible preferred shares of $500,000.
On March 6, 2014, the Company issued 5,999,000 common shares at a deemed price of $0.080 per share for convertible preferred shares of $479,920.
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 $40,080 (Note 7).
On March 7, 2014, the Company issued 6,000,000 common shares at a deemed price of $0.0780 per share for convertible preferred shares of $468,600.
On March 12, 2014, the Company issued 745,856 common shares at a deemed price of $0.0579 per share for convertible preferred shares of $43,200.
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 $22,098 (Note 7).
On March 17, 2014, the Company issued 6,750,000 common shares at a deemed price of $0.0506 per share for convertible preferred shares of $342,090.
On March 21, 2014, the Company issued 1,736,372 common shares at a deemed price of $0.0629 per share for convertible preferred shares of $109,245.
On March 31, 2014, the Company issued 359,821 common shares at a market price of $0.0667 per share for related party consulting fees.
On April 8, 2014, the Company issued 6,948,913 common shares at a deemed price of $0.0230 per share for convertible preferred shares of $343,943.
On April 30, 2014, the Company issued 170,213 common shares at a market price of $0.0470 per share for related party consulting fees.
On May 14, 2014, the Company issued 7,000,000 common shares at a deemed price of $0.0214 per share for convertible preferred shares of $374,500.
On June 2, 2014, the Company issued 3,352,941 common shares at a deemed price of $0.0212 per share for convertible preferred shares of $171,000.
On June 2, 2014, the Company issued 7,362,352 common shares at a deemed price of $0.0212 per share for convertible preferred shares of $391,125.
On June 10, 2014, the Company issued 1,600,000 common shares at a deemed price of $0.0213 per share for promissory note conversion of $47,752 (Note 7).
On June 27, 2014, the Company issued 1,700,000 common shares at a deemed price of $0.0185 per share for promissory note conversion of $44,171 (Note 7).
On April 1, 2014, the Company issued 134,933 common shares at a market price of $0.0667 per share for consulting fees.
57
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock - Continued
Share Issuances - Continued
On May 1, 2014, the Company issued 191,490 common shares at a market price of $0.0470 per share for consulting fees.
On June 1, 2014, the Company issued 163,044 common shares at a market price of $0.0552 per share for consulting fees.
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).
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.
58
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock - Continued
Share Issuances - Continued
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.
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.
59
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
3. Capital Stock - Continued
Share Issuances - Continued
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.
As at June 30, 2014, 13,557,775 were issued to directors and officers of the Company. 18,516,037 were issued to independent investors. 872,375 were issued for mining expenses. 768,840 were issued for related party consulting 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. 24,128,498 were issued
for promissory note and interest conversions. 66,577,223 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. 59,645,434 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).
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.
As at June 30, 2014, all of the Series B Preferred Shares issued on the January 3, 2014 debt settlement agreement were converted into 59,645,434 common shares of the Company for a total fair value of $3,639,623 of which a gain of $331,127
was recorded.
60
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
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 June 30, 2014 of approximately $11,309,000 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately
$536,536 and $1,283,428 during the periods ended June 30, 2014 and 2013, 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.
The Company has no tax position at June 30, 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 June 30, 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).
61
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
4. Provision for Income Taxes - Continued
| |
|
2014 |
|
| |
|
Amount |
|
|
Tax
Effect (35%) |
|
| |
|
|
|
|
|
|
| Net loss |
$ |
7,701,164 |
|
$ |
2,693,810 |
|
| |
|
|
|
|
|
|
| Shares issued for consulting
fees, mining expenses, investor relation and director fees |
|
(252,167 |
) |
|
(88,258 |
) |
| Accretion of beneficial conversion feature |
|
(5,320,995 |
) |
|
(1,862,348 |
) |
| Gain on change in the fair
value of derivative liability and fair value of warrant issued |
|
(542,930 |
) |
|
(190,026 |
) |
| Gain on change in the fair value of
convertible preferred stock |
|
331,127 |
|
|
115,894 |
|
| Goodwill impairment |
|
(383,238 |
) |
|
(134,133 |
) |
| |
|
|
|
|
|
|
| Total |
|
1,532,961 |
|
|
536,536 |
|
| |
|
|
|
|
|
|
| Valuation allowance |
|
(1,532,961 |
) |
|
(536,536 |
) |
| |
|
|
|
|
|
|
| Net deferred tax asset
(liability) |
$ |
- |
|
$ |
- |
|
| |
|
2013 |
|
| |
|
Amount |
|
|
Tax
Effect (35%) |
|
| |
|
|
|
|
|
|
| Net loss |
$ |
5,038,309 |
|
$ |
1,763,408 |
|
| |
|
|
|
|
|
|
| Shares issued for consulting
fees, mining expenses, investor relation and director fees |
|
(433,000 |
) |
|
(151,550 |
) |
| Accretion of beneficial conversion feature |
|
(2,061,755 |
) |
|
(721,614 |
) |
| Gain on derivative liability |
|
1,123,384 |
|
|
393,184 |
|
| |
|
|
|
|
|
|
| Total |
|
3,666,938 |
|
|
1,283,428 |
|
| |
|
|
|
|
|
|
| Valuation allowance |
|
(3,666,938 |
) |
|
(1,283,428 |
) |
| |
|
|
|
|
|
|
| Net deferred tax asset
(liability) |
$ |
- |
|
$ |
- |
|
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.
62
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
5. Mineral Property Costs - Continued
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 during the year ended June 30, 2011.
Mineral Permit
On December 16, 2010, the Company entered into an Assignment
Agreement to acquire the following:
| |
a.) |
An undivided 100% right, title and interest in and to
certain mineral permits located in the Province of Alberta,
Canada. |
| |
b.) |
All of the assignor’s right, title and interest in and to
the Option Agreement. |
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 ‘v’ 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:
| |
i.) |
CDN $40,000 (paid) upon execution of the
agreement; |
| |
ii.) |
CDN $60,000 (paid) on or before January 1,
2012; |
| |
iii.) |
CDN $100,000 on or before January 1, 2013
(amended); |
| |
iv.) |
CDN $300,000 on or before January 1, 2014; and |
| |
v.) |
Paying all such property payments as may be required to
maintain the mineral permits in good standing. |
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 CDN$100,000 (US$95,008) (consisting
of cash payment of CDN$20,000 (US$19,164) and note payable of CDN$80,000
(US$75,844) 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 CDN$106,667
(US$101,125) as of June 30, 2013. An additional $26,667 was charged to mining
expense during the year June 30, 2013. 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.
63
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
5. Mineral Property Costs - Continued
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.
To acquire the unit, the Company must make the following
payments:
| |
a) |
US$25,000 upon execution of the agreement
(paid); |
| |
b) |
US$75,000 within 180 days of execution of the agreement
(paid); |
| |
c) |
US$700,000 within 10 days of receipt of invoice from
Glottech –USA LLC if the payment in b) is made (paid). |
| |
d) |
The Company also granted an option to acquire 2,000,000
shares for $1.00 to Glottech – USA upon receipt of the operational
ultrasonic generator that they are building for Lithium Exploration Group.
The 2,000,000 shares are to be paid from outstanding shares owned by Alex
Walsh, company CEO. During the year ended June 30, 2011, the option
resulting in additional mining expenses of $4,940,000 was valued using the
fair market value of the shares to be issued. On October 1, 2012, Alex
Walsh and GD International entered into an agreement to transfer 2,000,000
common shares owned by Alex Walsh to GD International. The shares were
received by GD International on October 29, 2012. |
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.
64
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
5. Mineral Property Costs - Continued
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:
| |
a) |
US$20,000 within three days of execution of the agreement
(paid); |
| |
b) |
US$30,000 within three days upon the testing of the unit
has been successfully completed. |
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 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.
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. The debenture was extended on July 23, 2013 for 12 months and will
expire on May 15, 2014.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. 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.
65
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
6. Convertible Debenture - Continued
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 June 30, 2014, the debenture has been fully converted to
common shares.
7. Convertible Promissory Notes
Summary of convertible promissory note at June 30, 2014 and
2013 is as follows:
| |
|
June
30, |
|
|
Fair
value |
|
|
Fair
value |
|
|
Fair
value |
|
|
June
30, |
|
| |
|
2013 |
|
|
issued |
|
|
converted |
|
|
repaid |
|
|
2014 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| February 13, 2013 |
$ |
392,857 |
|
$ |
667,857 |
|
$ |
(598,960 |
) |
$ |
- |
|
$ |
461,754 |
|
| March 1, 2013 |
|
1,120,000 |
|
|
224,000 |
|
|
(1,344,000 |
) |
|
- |
|
|
- |
|
| September 1, 2013 |
|
- |
|
|
500,000 |
|
|
(500,000 |
) |
|
- |
|
|
- |
|
| January 1, 2014 |
|
- |
|
|
136,000 |
|
|
- |
|
|
(136,000 |
) |
|
- |
|
| February 27, 2014 |
|
- |
|
|
200,000 |
|
|
- |
|
|
- |
|
|
200,000 |
|
| February 27, 2014 |
|
- |
|
|
150,000 |
|
|
- |
|
|
- |
|
|
150,000 |
|
| February 28, 2014 |
|
- |
|
|
100,000 |
|
|
- |
|
|
- |
|
|
100,000 |
|
| February 28, 2014 |
|
- |
|
|
200,000 |
|
|
- |
|
|
- |
|
|
200,000 |
|
| February 28, 2014 |
|
- |
|
|
220,000 |
|
|
- |
|
|
- |
|
|
220,000 |
|
| March 3, 2014 |
|
- |
|
|
100,000 |
|
|
- |
|
|
- |
|
|
100,000 |
|
| March 3, 2014 |
|
- |
|
|
200,000 |
|
|
- |
|
|
- |
|
|
200,000 |
|
| March 3, 2014 |
|
- |
|
|
100,000 |
|
|
- |
|
|
- |
|
|
100,000 |
|
| March 3, 2014 |
|
- |
|
|
230,000 |
|
|
- |
|
|
- |
|
|
230,000 |
|
| March 3, 2014 |
|
- |
|
|
440,000 |
|
|
- |
|
|
- |
|
|
440,000 |
|
| March 15, 2014 |
|
- |
|
|
846,154 |
|
|
- |
|
|
- |
|
|
846,154 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
$ |
1,512,857 |
|
$ |
4,314,011 |
|
$ |
(2,442,960 |
) |
$ |
(136,000 |
) |
$ |
3,247,908 |
|
| Less: Debt discount |
|
1,475,247 |
|
|
|
|
|
|
|
|
|
|
|
2,797,850 |
|
| Net Convertible promissory Note |
|
37,610 |
|
|
|
|
|
|
|
|
|
|
|
450,057 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current portion |
$ |
37,610 |
|
|
|
|
|
|
|
|
|
|
$ |
450,057 |
|
| Long term portion |
$ |
- |
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
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.
As of June 30, 2014, total net proceeds of $675,000 (2013 -
$250,000) were received with an issuance discount of $67,500 (2013 - $25,000)
for an aggregate face value of $742,500 (2013 - $275,000). During the year ended
June 30, 2014, $419,272 (2013 - $Nil) in face value of the note including
interest was converted to 14,164,584 common shares in accordance with the terms
of the agreement.
66
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
There is no guarantee the investor will make additional payments. The note of $323,228 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 $1,060,714. During the year ended June 30, 2014, an interest expense of $7,409 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 January 3, 2014
$18,000 in face value of the note was converted to convertible Series B Preferred Shares (Note 3). As of June 30, 2014, $150,000 in face value of the note was converted to 7,101,227 common shares at a price in accordance with the term of the
agreement.
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.
67
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
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.
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 and accrued interest of $56,250.
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 and accrued interest of $56,250.
68
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
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.
On January 3, 2014 the Company entered into a convertible debt settlement agreement. 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 from the March 1, 2013 and September 13, 2013 securities purchase agreement.
Effective January 13, 2014, the Company entered into another 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 $68,000 due
on October 14, 2014 and carries an interest rate of 8% per annum. The note is convertible at a discount rate of 50% of the average of the lowest 3 trading prices during the 10 trading period ending on the latest complete trading day prior to the
conversion date subject to various prescribed conditions. The fair value at issuance was $136,000. The $68,000 note was fully repaid during the year along with interest of $14,807.
Effective February 27, 2014, the Company entered into another 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 $100,000
due on August 27, 2014 and carries an interest rate of 12% per annum over the term of note, with an effective interest rate of 1220.64%. The note is convertible at the lower of 50% discount to the average of the three lowest bids on the 20 days
before the date this note executed and 50% discount to the average of the three lowest bids during the 20 days 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 $200,000. During the year ended June 30, 2014, an interest expense of $4,000 was accrued.
Effective February 28, 2014, the Company entered into another 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 $50,000
due on August 28, 2015 and carries a one-time interest rate of 15% over the term of note, with an effective interest rate of 268.24%. 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 $100,000. During the year ended June 30, 2014, an interest expense of $1,667 was accrued.
Effective February 27, 2014, the Company entered into another 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 $75,000
due on February 27, 2015 and carries an interest rate of 10% per annum over the term of the note, with an effective interest rate of 1303.72%. The convertible note is convertible at the investor’s option at any time after 180 days at a price
equal to 50% of the lowest bids price for the 20 days 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 $150,000. During the year ended June 30, 2014, an interest expense of $2,500 was accrued.
69
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
Effective February 28, 2014, the Company entered into another 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 $125,500
with 15% prepaid interest per annum, resulting in $100,000 net proceeds to the Company due on August 28, 2015, with an effective interest rate of 227.33%. The note is convertible at the lower of 50% discount of the lowest closing price for the
20 days prior to date of the purchase agreement or the voluntary 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 $200,000. During the year ended June 30, 2014, an interest expense of $5,000 was accrued.
Effective February 28, 2014, the Company entered into another 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 $110,000,
at an issuance discount of $10,000; resulting in $100,000 net proceeds to the Company. The note is due on September 1, 2014 and carries a one-time interest rate of 12% over the term of the note, with an effective interest rate of 781.10%.
The note is convertible at the lower of $0.075 or 50% of the lowest trade during the 25 consecutive trading days immediately 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 $220,000. During the year ended June 30, 2014, an interest expense of $7,543 was accrued.
Effective March 3, 2014, the Company entered into another 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 $50,000 due on
March 5, 2015 and carries an interest rate of 10% per annum over the term of the note, with an effective interest rate of 1303.72%. The convertible note is convertible at the investor’s option at any time after 180 days at a price equal to
50% of the lowest closing bid price for the 20 days 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 $100,000. During the year ended June 30, 2014, an interest expense of $1,667 was accrued.
Effective March 3, 2014, the Company entered into another 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 $100,000 due
on September 3, 2014 and carries an interest rate of 12% per annum over the term of the note, with an effective interest rate of 1220.64%. The note is convertible at a 50% discount of the lowest closing price for the 20 days prior to date of the
purchase agreement or the voluntary 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 $200,000. During the year ended June 30, 2014, an interest expense of $4,000 was accrued.
70
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
Effective March 3, 2014, the Company entered into another 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 $50,000 due on
March 4, 2015 and carries an interest rate of 10% per annum over the term of the note, with an effective interest rate of 1303.72%. The convertible note is convertible at the investor’s option at any time after 180 days at a price equal to
50% of the lowest closing bid price for the 20 days 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 $100,000. During the year ended June 30, 2014, an interest expense of $1,667 was accrued.
Effective March 3, 2014, the Company entered into another 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 $115,000, at
an issuance discount of $15,000; resulting in $100,000 net proceeds to the Company. The note is due on April 1, 2015 and carries an interest rate of 15% per annum over the term of the note, with an effective interest rate of 361.67%. The
note is convertible at the lower of $0.06 or 50% of the lowest trade during the 20 consecutive trading days immediately 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 $230,000. During the year ended June 30, 2014, an interest expense of $5,750 was accrued.
Effective March 3, 2014, the Company entered into another 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 $220,000, at
an issuance discount of $20,000; resulting in $200,000 net proceeds to the Company. The note is due on September 3, 2014 and carries an interest rate of 12% per annum over the term of the note, with an effective interest rate of 1220.64%.
The note is convertible at a 50% discount of the lowest closing price for the 20 trading days immediately prior to (i) date of the purchase agreement, or (ii) the voluntary conversion 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 $440,000. During the year ended June 30, 2014, an interest expense of $8,800 was accrued.
Effective March 15, 2014, the Company entered into another 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 $550,000, at
an issuance discount of $50,000; resulting in $500,000 net proceeds to the Company. The note is due on September 15, 2015 and carries an interest rate of 15% per annum over the term of the note, with an effective interest rate of 207.18%.
The note is convertible at a 35% discount of the lowest closing price for the 20 trading days immediately prior to (i) date of the purchase agreement, or (ii) the voluntary conversion 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 $846,154. During the year ended June 30, 2014, an interest expense of $24,063 was accrued.
71
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
Warrants issued along with Convertible Promissory Notes
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, 334,821 shares of the Company at an exercise
price of $0.224 expiring August 14, 2018, 1,666,667 shares of the Company at an exercise price of $0.0600 expiring December 10, 2018, 714,285 shares of the Company at an exercise price of $0.0700 expiring February 20, 2019 and 3,809,524
shares of the Company at an exercise price of $0.0525 expiring April 16, 2019 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 for 2,777,778 shares of the Company at an exercise price of $0.090 and warrants for 3,703,704 shares of the Company at an exercise price of $0.068 for
a period of five years.
Along with the promissory note entered on February 27, 2014, the Company issued warrants to acquire a total of 1,111,111 shares of the Company for a period of five years at an exercise price of $0.090.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 5,156,250 shares of the Company for a period of 180 days at an exercise price of $0.060.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 1,481,481 shares of the Company for a period of five years at an exercise price of $0.0675.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 10,312,500 shares of the Company for a period of five years at an exercise price of $0.0600.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 941,619 shares of the Company for a period of five years at an exercise price of $0.0531.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 2,000,000 shares of the Company for a period of three years at an exercise price of $0.0500.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 941,619 shares of the Company for a period of five years at an exercise price of $0.0531.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 1,666,666 shares of the Company for a period of five years at an exercise price of $0.0600.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 4,000,000 shares of the Company for a period of three years at an exercise price of $0.0500.
Along with the promissory note entered on March 15, 2014, the Company issued warrants to acquire a total of 18,333,333 shares of the Company for a period of three years at an exercise price of $0.0600.
72
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
Derivative Liability
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 $669,682, $1,126,054, $709,074 for warrants
issued along with the promissory note on February 28, 2013, March 1, 2013, and
September 16, 2013 respectively. Fair values at issuance for warrants issued on
February 27, 2014, February 28, 2014, March 3, 2014, March 15, 2014 totaled
$58,966, $938,833, $1,732,432, and $1,267,156 respectively.
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 $0.04 in accordance
with the term of the agreement. A gain of $4,763 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 $18,452 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 $0.02 in accordance with the
terms of the agreement. A loss of $80 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 $52,902 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:
| |
June
30, 2014 |
June
30, 2013 |
| |
|
|
| Risk-free interest rates |
1.39% - 1.77% |
0.72% |
| Term |
180 days – 5 years |
5 years |
| Dividend yield |
0% |
0% |
| Underlying stock prices |
$0.42 |
$0.42 |
| Volatilities |
278% - 489% |
274%
|
73
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
7. Convertible Promissory Notes - Continued
At June 30, 2014, the warrants were valued at $2,832,989
resulting in a gain of $2,650,532 for the year ended June 30, 2014. The
corresponding debt discount of the promissory notes was accreted to interest
expense over the terms of notes of 3 years, 1 year, 18 months and 6 months
respectively. During the period ended June 30, 2014, an accretion of $412,447
was recognized as interest expense.
|
|
|
Warrants |
|
|
Weighted |
|
|
Weighted |
|
| |
|
Outstanding |
|
|
Average |
|
|
Average |
|
| |
|
|
|
|
Exercise |
|
|
Remaining |
|
| |
|
|
|
|
Price |
|
|
life |
|
| Balance, June 30, 2012 |
|
5,140,562 |
|
$ |
0.613 |
|
|
4.57 years |
|
| Warrants issued |
|
5,133,750 |
|
|
0.180 |
|
|
4.71 years |
|
| Exercised |
|
(5,140,562 |
) |
|
|
|
|
- |
|
| Cancelled |
|
- |
|
|
- |
|
|
- |
|
| Expired |
|
- |
|
|
- |
|
|
- |
|
| Balance, June 30, 2013 |
|
5,133,750 |
|
|
0.180 |
|
|
4.71 years |
|
| Warrants issued
|
|
61,151,358 |
|
|
0.062 |
|
|
2.63 years |
|
| Exercised |
|
(5,468,571 |
) |
|
0.182
|
|
|
- |
|
| Cancelled |
|
- |
|
|
- |
|
|
- |
|
| Expired |
|
- |
|
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Balance, June 30, 2014 |
|
60,816,537 |
|
$ |
0.061 |
|
|
2.62
years |
|
The following table provides a summary of changes in fair value
of the Company’s Level 3 financial liabilities as of June 30, 2014 and 2013:
| |
|
Derivative |
|
| |
|
Liability |
|
| Balance, June 30, 2012 |
$ |
2,159,035
|
|
| Initial fair value of warrant derivatives at note issuances
|
|
1,369,243 |
|
| Extinguished derivative liability |
|
(2,159,035 |
) |
| Mark-to-market at
June 30, 2013 - Embedded debt derivatives |
|
(855,868 |
) |
| Balance, June 30, 2013 |
$ |
513,375
|
|
| Initial fair value of warrant derivatives at note issuances
|
|
5,558,520 |
|
| Fair value of warrant exercised |
|
(588,375 |
) |
| Mark-to-market at
June 30, 2014 - Embedded debt derivatives |
|
(2,650,532 |
) |
| Balance, June 30, 2014 |
$ |
2,832,988 |
|
| |
|
|
|
| Net gain for the period included in
earnings relating to the liabilities held at June 30, 2014 |
$ |
2,650,532 |
|
74
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
8. Note Payable
On March 3, 2014, the Company entered into a Secured Note for a principal amount of CND$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.
Along with the Secured Note entered on March 3, 2014, the Company issued warrants to acquire a total of 2,200,000 shares of the Company for a period of three years at an exercise price of $0.0500. The warrant bears 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 value at issuance totaled $425,566.
As at June 30, 2014, the Secured note was fully repaid for a principal amount of $298,518 and interest of $17,837.
9. Related Party Transactions
During the year ended June 30, 2014, the Company incurred consulting fees of $219,300 (2013 - $88,667) with directors and officers.
As of June 30, 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.
10. Going Concern and Liquidity Considerations
The accompanying consolidated 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 June 30, 2014, the Company had a working capital deficiency of $3,279,889 and an accumulated deficit of $40,821,871. 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.
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 consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
75
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
11. Commitments and Contingencies
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 cash and $8,000 in the Company’s common
stock 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).
The Company agreed to pay the following:
| |
i. |
A cash retainer fee equal to $15,000. |
| |
ii. |
A cash success fee equal to ten percent (10%) of the
total amount of equity raised by Agent for the initial financing
transaction and ten percent (10%) for all follow on equity from the same
or new Prospects (includes common stock, preferred equity, membership or
partnership units and convertible debt). The total amount of the
financing(s) shall mean the fair market value of the consideration
(including without limitation, cash, securities, other assets, and
contingent payments) actually received by the Company in connection with
the financing transaction(s). |
| |
iii. |
A cash success fee equal to five percent (5%) of the
total amount of debt raised by the Agent for the initial financing
transaction and five percent (5%) for all follow on debt from the same or
new Prospects. The total amount of the financing(s) shall mean the fair
market value of the consideration (including without limitation, cash,
securities, other assets, and contingent payments) actually received by
the Company in connection with the financing
transaction(s). |
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.
76
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
11. Commitments and Contingencies- Continued
On January 1, 2014, the Company entered in a consulting
agreement with a consultant 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 will be $12,000 payable monthly in
cash or if the Company does not have available cash, in shares of the Company’s
common stock.
On April 28, 2014, the Company entered into a consulting
agreement with a consultant 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 will be 240,000 common stock of the
Company issuable at May 15, 2014 from an effective date of April 28, 2014 to
April 27, 2015.
On May 15, 2014, the Company entered into a consulting
agreement with a consultant 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 will be $10,000 per month payable
in common stock of the Company from an effective date of May 30, 2014 to May 31,
2016.
Lease Commitment
On May 15, 2014, the Company entered into a sublease agreement
for a term of twenty four and one half months and expiring on May 31, 2016.
Future minimum rental payments required under operating lease (exclusive of
other additional rent payments) are as follows:
| Year ending June 30: |
|
|
|
| 2015 |
$ |
31,996 |
|
| 2016 |
|
30,044 |
|
| Total minimum payments required |
$ |
62,040 |
|
Litigation
The Company filed a complaint against Glottech-USA involving a
dispute over a contract for the assembly and delivery of certain equipment
contractually promised by Glottech-USA, but not timely delivered in a manner
required under the relevant contract(s). Although the Company previously sought
equitable relief, the Company amended its Complaint to assert claims for damages
against Glottech-USA. After a hearing in April of 2013, the Court of Common
Pleas stayed all activity in the lawsuit against Glottech-USA pending
clarification of the dissolution action in Mississippi. The lawsuit was stayed
until December of 2013 and there has been no substantial activity in the case
since that time. There are no claims for damages pending against the Company.
In April 2014, the Company signed a release and settlement
agreement with O’Hare Energy Services Inc. (“O’Hare”) regarding unpaid fees and
termination of a Non-Circumvention, Non-Disclosure and Fee Agreement dated April
19, 2013. Pursuant to the release and settlement agreement, the Company will pay
to O’Hare:
| i. |
$100,000 for acquisition severance payment |
| ii. |
$35,000 within 60 days of the date the option to purchase
additional 25% of Tero Oilfield Services Ltd. (“Tero”) is
exercised |
As of June 30, 2014, the Company paid $50,000 of the $100,000
acquisition severance payment and has not exercise the option to purchase
additional investment in Tero.
77
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
11. Commitments and Contingencies- Continued
From time to time we may be a defendant and plaintiff in various other legal proceedings arising in the normal course of our business. Except as disclosed above, we are currently not a party to any material legal proceedings or government actions,
including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this
Annual Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material
interest adverse to us.
12. Loan Receivable
Secured Bridge Loan Agreement
On December 18, 2013, the Company entered into an agreement with GD Glottech International Ltd (“GDGI”) whereby the Company loaned to GDGI the sum of $20,000. GDGI will repay the total amount of the loan plus interest in the amount
of $333.34 (representing a 10% annual interest rate), within sixty (60) days from the receipt of the loan funds or within five (5) days of Sonic Cavitation, LLC receiving a 5% Capital Contribution.
On April 21, 2014, the Company entered into an amended agreement with Sonic Cavitation, whereby Sonic Cavitation agreed to facilitate the construction of one sonic cavitation generator. The Company agreed to pay Sonic Cavitation a consulting fee of
$20,000 upon execution of the agreement and forgive the sum of $20,000 debt upon delivery of the prototype by Sonic Cavitation.
78
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
13. Acquisition of Alta Disposal Morinville Ltd. (formerly
Blue Tap Resources Inc.)
From July 25, 2013 date of payment of first CDN$150,000 and
October 18, 2013 date of last payment of CDN$150,000, the Company paid $453,204
(CDN$466,547) in cash, in exchange for 510,000 shares of Alta Disposal
Morinville Ltd. (formerly Blue Tap Resources Inc.) common stock in accordance
with the terms of the Agreements. This investment represents a 51% equity
interest in the common stock of Alta Disposal Morinville Ltd. The shares are
owned by the Company 100% owned subsidiary Alta Disposal Ltd.
The acquisition was accounted for as a business combination
under the acquisition method of accounting in accordance with generally accepted
accounting principles.
Fair Value of Consideration Transferred and Recording of
Assets Acquired, Liabilities Assumed and Non-controlling Interests
The following table summarizes the acquisition date fair value
of the consideration transferred, identifiable assets acquired, liabilities
assumed and non-controlling interests including an amount for goodwill:
Consideration:
| Cash |
$ |
453,204 |
|
| |
|
|
|
| Fair value of total consideration
transferred |
$ |
453,204 |
|
| |
|
|
|
| Recognized amount of identifiable assets
acquired and liabilities assumed: |
|
|
|
| Financial assets (CDN$314,932 x $0.9714) |
$ |
305,925 |
|
| |
|
|
|
| Financial liabilities (CDN$850 x $0.9714) |
|
(826 |
) |
| |
|
|
|
| Total identifiable net assets |
|
305,099 |
|
| Non-controlling interest |
|
(235,133 |
) |
| Goodwill |
|
383,238 |
|
| |
|
|
|
| |
$ |
453,204 |
|
Goodwill represents the future economic benefit arising from
other assets acquired that could not be individually identified and separately
recognized. The goodwill arising from the acquisition is attributable to the
general reputation of Blue Tap’s founding owner and expected synergies. The
goodwill is not expected to be deductible for tax purposes.
79
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
13. Acquisition of Alta Disposal Morinville Ltd. (formerly
Blue Tap Resources Inc.) - Continued
Below is a summary of the methodologies and significant
assumptions used in estimating the fair value of non-controlling interests.
- Non-controlling interest — The fair value of the non-controlling
interest of $235,133 (CDN$242,056) was determined based upon the $453,204
(CDN$466,547) fair value of consideration transferred to acquire our 51%
interest, less adjustments for lack of control and lack of marketability that
market participants would consider when estimating the fair value of the
non-controlling interest in Blue Tap.
| |
Support for NCI calculation: |
|
|
|
|
|
|
|
|
|
|
| |
$453,204 paid for 51% |
$ |
453,204/.51 |
|
$ |
888,635 |
|
|
|
|
Implied enterprise value |
| |
|
|
|
|
|
435,431 |
|
|
|
|
49% subject interest |
| |
|
|
|
|
|
(43,543 |
) |
|
|
|
Discount for lack of control
10% |
| |
|
|
|
|
|
391,888 |
|
|
|
|
Fair value, non-controlling, marketable |
| |
|
|
|
|
|
(156,755 |
) |
|
|
|
40% discount for lack or
marketability |
| |
|
|
|
|
|
|
|
|
|
|
Fair value, non-controlling, non- |
| |
|
|
|
|
$ |
235,133 |
|
|
|
|
marketable |
Goodwill Impairment
Goodwill represents the excess of cost over fair value of
assets of businesses acquired. Goodwill acquired in a business combination is
not amortized. The Company evaluates the carrying amount of goodwill for
impairment annually on June 30 and whenever events or circumstances indicate
impairment may have occurred.
When evaluating whether goodwill is impaired, the Company
compares the fair value of the reporting unit to which the goodwill is assigned
to the reporting unit’s carrying amount, including goodwill. The fair value of
the reporting unit is estimated using a combination of the income, or discounted
cash flows, approach and the market approach, which utilizes comparable
companies’ data. If the carrying amount of a reporting unit exceeds its fair
value, then the amount of the impairment loss must be measured. The impairment
loss would be calculated by comparing the implied fair value of reporting unit
goodwill to its carrying amount. In calculating the implied fair value of
reporting unit goodwill, the fair value of the reporting unit is allocated to
all of the other assets and liabilities of that unit based on their fair values.
The excess of the fair value of a reporting unit over the amount assigned to its
other assets and liabilities is the implied fair value of goodwill. An
impairment loss would be recognized when the carrying amount of goodwill exceeds
its implied fair value
Due to the inability to meet anticipated sales growth, the
Company assessed the acquired goodwill associated with its related business
units for impairment as of June 30, 2014. Based on the discounted cash flows
model utilizing estimated future earnings and cash flows, the fair value of the
reporting units was less than the carrying value of the acquired goodwill. The
Company’s evaluation of goodwill resulted in a total impairment charge of
$383,238 for the year ended June 30, 2014; of which all was attributed to Alta
Disposal Morinville Ltd.
80
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
14. Investment in Affiliate
Tero Oilfield Services Ltd (“Tero”)
On March 1, 2014, the Company acquired a 50% interest in Tero
Oilfield Services Ltd. (“Tero”), a private company, in exchange for an aggregate
of CDN$1,000,680 (US$906,700).
The Company has been granted an option to acquire an additional
25% of the shares in Tero for $500,000 by February 28, 2015.
Summary financial results of Tero for the period March 1, 2014
to June 30, 2014 are as follows:
Operations
| |
|
CDN$ |
|
|
US$ |
|
| |
|
|
|
|
|
|
| Disposal Well Revenues |
$ |
447,889 |
|
$ |
408,714 |
|
| Operating expense |
|
(398,323 |
) |
|
(363,483 |
) |
| |
|
49,566 |
|
|
45,231 |
|
| Provision for Income Taxes |
|
(10,000 |
) |
|
(9,126 |
) |
| Net income |
$ |
39,566 |
|
$ |
36,105 |
|
| |
|
|
|
|
|
|
| Equity in income of unconsolidated
affiliate |
$ |
19,783 |
|
$ |
18,053 |
|
Summary financial position for Tero as at June 30, 2014
follows:
Financial Position
| |
|
CDN$ |
|
|
US$ |
|
| Cash |
$ |
22,610 |
|
$ |
21,208 |
|
| Other current assets |
|
237,458 |
|
|
222,735 |
|
| Property and equipment |
|
455,983 |
|
|
427,712 |
|
| Total Assets |
$ |
716,051 |
|
$ |
671,655 |
|
| |
|
|
|
|
|
|
| Current liabilities |
$ |
224,513 |
|
$ |
210,593 |
|
| Long term debt |
|
595,007 |
|
|
558,115 |
|
| Total Liabilities |
|
819,520 |
|
|
768,708 |
|
| |
|
|
|
|
|
|
| Capital stock |
|
5 |
|
|
5 |
|
| Retained earnings |
|
(103,474 |
) |
|
(97,058 |
) |
| Total Equity |
|
(103,469 |
) |
|
(97,053 |
) |
| Total Liabilities and Equity |
$ |
716,051 |
|
$ |
671,655 |
|
| |
|
|
|
|
|
|
| Investment in unconsolidated affiliate |
|
|
|
|
|
|
| Purchase price |
|
|
|
$ |
906,700 |
|
| Equity in income |
|
|
|
|
18,053 |
|
| |
|
|
|
$ |
924,753 |
|
An equipment appraisal was done as of September 30, 2013 on
Tero’s Property and equipment. The fair market value was estimated at
CDN$2,000,000 to CDN$2,400,000 (US$1,940,000 to US$2,328,480). The fair market
value of Tero’s outstanding common stock was estimated to be CDN$1,730,000
(US$1,678,446).
81
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
15. Subsequent Events
Issuances of Common Shares
On July 1, 2014, the Company issued 199,557 common shares at a
market price of $0.0451 per share for consulting fees.
On July 4, 2014, the Company issued 541,517 common shares at a
market price of $0.0554 per share for consulting fees.
On July 16, 2014, the Company issued 9,713,996 common shares at
a market price of $0.0390 per share for warrants exercise.
On July 16, 2014, the Company issued 1,800,000 common shares at
a deemed price of $0.0390 per share for promissory note conversion.
On August 1, 2014, the Company issued 1,062,687 common shares
at a deemed price of $0.0367 per share for promissory note conversion.
On August 1, 2014, the Company issued 245,232 common shares at
a market price of $0.0367 per share for consulting fees.
On August 5, 2014, the Company issued 20,645,463 common shares
at a market price of $0.0032 per share for warrants exercise.
On August 8, 2014, the Company issued 8,904,569 common shares
at a market price of $0.0369 per share for warrants exercise.
On August 12, 2014, the Company issued 3,200,066 common shares at a market price of $0.016750 per share for warrants exercise.
On August 29, 2014, the Company issued 18,113,654 common shares at a market price of $0.0342 per share for warrants exercise.
On August 29, 2014, the Company issued 10,390,546 common shares at a deemed price of $.0102 per share for promissory note conversion.
On September 1, 2014, the Company issued 1,167,316 common shares at a deemed price of $0.0257 per share for consulting fees.
On September 1, 2014, the Company issued 350,195 common shares at a deemed price of $0.0257 per share for consulting fees.
On September 3, 2014, the Company issued 3,000,000 common shares at a deemed price of $0.010000 per share for promissory note conversion.
On September 3, 2014 the Company issued 500,000 common shares in conversion of $5,000 payable pursuant to the note.
On September 4, 2014 the Company issued 583,333 common shares in full cashless exercise of the 4,000,000 warrants issued in connection with the note.
On September 04, 2014, the Company issued 909,091 common shares at a deemed price of $0.011 per share for promissory note conversion.
On September 8, 2014, the Company issued 1,106,273 common shares at a deemed price of $0.0095 per share for promissory note conversion.
On September 10, 2014, the Company issued 6,734,235 common shares at a deemed price of $0.00555 per share for promissory note conversion.
On September 10, 2014, the Company issued 1,538,462 common shares at a deemed price of $0.0065 per share for promissory note conversion.
On September 11, 2014, the Company issued 2,607,721 common shares at a deemed price of $0.00605 per share for promissory note conversion.
On September 11, 2014, the Company issued 5,599,010 common shares at a deemed price of $0.005050 per share for promissory note conversion.
On September 11, 2014, the Company issued 1,652,893 common shares at a deemed price of $0.00605 per share for promissory note conversion.
On September 12, 2014, the Company issued 9,900,990 common shares at a deemed price of $0.00505 per share for promissory note conversion.
On September 12, 2014, the Company issued 2,869,240 common shares at a deemed price of $0.0055 per share for promissory note conversion.
On September 15, 2014 the Company issued 5,584,185 common shares in conversion of $28,200 payable pursuant to the note.
On September 15, 2014, the Company issued 1,914,321 common shares at a deemed price of $0.0055 per share for promissory note conversion.
On September 16, 2014, the Company issued 3,810,301 common shares at a deemed price of $0.005333 per share for promissory note conversion.
On September 17, 2014, the Company issued 1,414,141 common shares at a deemed price of $0.00495 per share for promissory note conversion.
On September 23, 2014, the Company issued 10,000,000 common shares at a deemed price of $0.00275 per share for promissory note conversion.
On September 23, 2014, the Company issued 1,477,873 common shares at a deemed price of $0.00315 per share for promissory note conversion.
On September 23, 2014, the Company issued 3,846,154 common shares at a deemed price of $0.00325 per share for promissory note conversion.
82
| Lithium Exploration Group, Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2014 and 2013 |
On September 24, 2014 the Company issued 9,090,909 common shares in conversion of $25,000 payable pursuant to the note.
On September 25, 2014, the Company issued 10,946,967 common shares at a deemed price of $0.0181 per share for promissory note conversion.
On September 26, 2014, the Company issued 5,000,000 common shares at a deemed price of $0.00325 per share for promissory note conversion.
On September 29, 2014, the Company issued 6,047,749 common shares at a deemed price of $0.00315 per share for promissory note conversion.
On October 2, 2014, the Company issued 4,545,455 common shares at a deemed price of $0.00275 per share for promissory note conversion.
On October 3, 2014, the Company issued 10,000,000 common shares at a deemed price of $0.0025 per share for promissory note conversion.
On October 6, 2014, the Company issued 10,000,000 common shares at a deemed price of $0.0025 per share for promissory note conversion.
On October 7, 2014, the Company issued 11,000,000 common shares at a deemed price of $0.0022 per share for promissory note conversion.
Stock Plan
On July 22, 2014 the Company adopted a Stock Plan allowing the
issuance of up to 20,000,000 shares of the Company’s common stock to directors,
officers, employees and consultants.
Issuance of Convertible Promissory Note
On August 6, 2014, the Company entered into another 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 $708,000, which amount includes the purchase price of $600,000 plus 18 months
prepaid interest at the rate of 12% per annum, due on January 22, 2016. The
convertible note is convertible whole or in part into common stock at price per
share equal to 65% of the lowest reported sale price of our common shares during
the 20 trading days prior to July 22, 2014 ($0.04) or prior to the applicable
conversion date. Our company will have the option to prepay the note within 60
days subject to a 10% penalty, within the subsequent 60 days subject to a 20%
penalty, or anytime thereafter prior to maturity subject to a 30% penalty.
Along with the convertible promissory note, the Company issued
warrants exercisable for 5 years to purchase up to 17,700,000 shares of the
Company at an exercise price of $0.04 per share, subject to cashless exercise
provisions.
On August 6, 2014, the Company entered into a securities purchase agreement with JDF Capital Inc. (“JDF”) dated July 22, 2014 pursuant to which the Company issued to JDF a convertible promissory note in the aggregate principal amount of $708,000, which amount includes the purchase price of $600,000 plus 18 months prepaid interest at the rate of 12% per annum. The convertible note has a maturity date of January 22, 2016 and is convertible in whole or in part into shares of our common stock at price per share equal to 65% of the lowest reported sale price of our common shares during the 20 trading days prior to July 22, 2014 ($0.04) or prior to the applicable conversion date. The Company will have the option to prepay the note within 60 days subject to a 10% penalty, within the subsequent 60 days subject to a 20% penalty, or anytime thereafter prior to maturity subject to a 30% penalty. The purchase price of the promissory note is payable in six installments beginning upon the effective date of the agreement (which amount has been paid) and monthly thereafter beginning on August 22, 2014. The promissory note is secured in first position against all assets of the Company’s subsidiary, Alta Disposal Ltd., pursuant to a general security agreement between Alta Disposal and JDF.
As additional consideration for the proceeds of the convertible note, the Company issued to JDF warrants exercisable for 5 years to purchase up to 17,700,000 shares of the Company’s common stock at an exercise price of $0.04 per share, subject to cashless exercise provisions.
As at the date of this report $200,000 has been funded pursuant to the note which amount remains unconverted and outstanding.
On September 15, 2014, Northern Hunter Energy Inc. entered into a conveyance agreement with Tero dated June 1, 2014. Pursuant to this agreement, Northern Hunter Energy will transfer a 10% working interest in certain assets of the Morinville, Alberta property, which was previously acquired from Valeura, to Tero effective June 1, 2014 for the sum of $10,000. As of the date of this annual report, the transfer has not been completed and the sum of $10,000 has not been paid.
The Company has evaluated subsequent events from July 1, 2014,
through the date of this report, and determined there are no other items to
disclose.
83
Item
9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure
On August 11, 2014, we notified Anderson Bradshaw PLLC that it
was dismissed as our company’s independent registered public accounting firm.
The decision to dismiss Anderson Bradshaw PLLC as our company’s independent
registered public accounting firm was approved by our company’s Board of
Directors on August 11, 2014. Except as noted in the paragraph immediately
below, the reports of Anderson Bradshaw PLLC on our company’s financial
statements for the years ended June 30, 2013 and 2012 and for the period May 31,
2006 (date of inception of exploration stage) through June 30, 2013 did not
contain an adverse opinion or disclaimer of opinion, and such reports were not
qualified or modified as to uncertainty, audit scope, or accounting
principle.
The reports of Anderson Bradshaw PLLC on our company’s
financial statements as of and for the years ended June 30, 2013 and 2012 and
for the period May 31, 2006 (date of inception of exploration stage) though June
30, 2013 contained explanatory paragraphs which noted that there was substantial
doubt as to our company’s ability to continue as a going concern as our company
has an accumulated deficit negative cash flow that raises doubt about its
ability to continue as a going concern.
During the years ended June 30, 2013 and 2012 and the period
May 31, 2006 (date of inception of exploration stage) through June 30, 2013, our
company has not had any disagreements with Anderson Bradshaw PLLC on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to Anderson
Bradshaw PLLC’s satisfaction, would have caused them to make reference thereto
in their reports on the Company’s financial statements for such periods.
During the years ended June 30, 2013 and 2012 and the period
May 31, 2006 (date of inception of exploration stage) through June 30, 2013 and
through August 11, 2014, there were no reportable events, as defined in Item
304(a)(1)(v) of Regulation S-K.
On August 11, 2014, our company engaged RBSM LLP as our
company’s independent registered public accounting firm for our company’s fiscal
year ended June 30, 2014. The decision to engage RBSM LLP as our company’s
independent registered public accounting firm was approved by our company’s
Board of Directors.
During the two most recent fiscal years and through August 11,
2014, our company has not consulted with RBSM LLP regarding either (1) the
application of accounting principles to any specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our company’s financial statements, and neither a written report was provided to
our company nor oral advice was provided RBSM LLP concluded was an important
factor considered by our company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (2) any matter that was either the
subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of
Regulation S-K and the related instructions thereto) or a reportable event (as
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).
Item 9A. Controls
and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our
management evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of June 30, 2014.
84
Our management, with the participation of our president (our
principal executive officer) and our chief financial officer (our principal
accounting officer and principal financial officer), evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of the end of the period covered by this report. Based on
this evaluation, our president (our principal executive officer) and our chief
financial officer (principal accounting officer and principal financial officer)
have concluded that, as of the end of such period, our disclosure controls and
procedures were not effective to ensure that information that is required to be
disclosed by us in the reports we file or submit under the Exchange Act is (i)
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms and (ii) accumulated and communicated to our
management, including our president (our principal executive officer) and our
chief financial officer (our principal accounting officer and principal
financial officer), as appropriate, to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial
reporting is a process designed by, or under the supervision of, our president
(our principal executive officer) and our chief financial officer (our principal
accounting officer and principal financial officer), to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements in accordance with GAAP. Internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of our company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that receipts
and expenditures of our company are being made only in accordance with
authorizations of management and directors of our company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our company’s assets that could have a
material effect on the financial statements. Because of its inherent
limitations, internal control over financial reporting may not provide absolute
assurance that a misstatement of our financial statements would be prevented or
detected.
Further, the evaluation of the effectiveness of internal
control over financial reporting was made as of a specific date, and continued
effectiveness in future periods is subject to the risks that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management has conducted, with the participation of our
president (our principal executive officer) and our chief financial officer (our
principal accounting officer and principal financial officer), an evaluation of
the effectiveness of our internal control over financial reporting as of June
30, 2014 in accordance with the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control
— Integrated Framework. Based on this assessment, management concluded that as
of June 30, 2014, our company’s internal control over financial reporting was
not effective based on present company activity. Our company is in the process
of adopting specific internal control mechanisms with our board and officers’
collaboration to ensure effectiveness as we grow. We are presently engaging an
outside consultant to assist in adopting new measures to improve upon our
internal controls. Future controls, among other things, will include more checks
and balances and communication strategies between the management and the board
to ensure efficient and effective oversight over company activities as well as
more stringent accounting policies to track and update our financial reporting.
This annual report does not include an attestation report from
our registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit us to provide only the management’s report in this annual
report.
Change in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting that occurred during our last fiscal year that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
85
Item 9B. Other
Information
On January 10, 2014, Mr. Jonathan Jazwinski resigned as a
director of our company. Mr. Jazwinski’s resignation was not the result of any
disagreement with our company regarding our operations, policies, practices or
otherwise.
On January 31, 2014, the consulting agreement we entered into
with Alexander Koretsky dated May 1, 2013 expired and our company did not renew
the agreement. Effective February 1, 2014, upon expiration of the consulting
agreement, Mr. Koretsky ceased to act as our chief operating officer.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
All of the directors of our company hold office until the next
annual meeting of the stockholders or until their successors have been elected
and qualified. Our officers are appointed by our board of directors and hold
office until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
Name |
Positions Held with the
Company |
Age |
Date First Elected
or
Appointed |
| Alexander Walsh |
President, Chief Executive
Officer and Director |
34 |
November 4, 2010 |
| Brandon Colker |
Director |
42 |
January 21, 2011 |
| Bryan A. Kleinlein |
Chief Financial Officer |
41 |
May 15, 2012 |
Business Experience
The following is a brief account of the education and business
experience of each director and executive officer during at least the past five
years, indicating each person's principal occupation during the period, and the
name and principal business of the organization by which he was employed.
Alexander Walsh – President, Chief Executive Officer,
Secretary, Treasurer and Director
Mr. Walsh was appointed president, chief executive officer,
secretary, treasurer, and director of our company in November 2010. From May
2008 to November of 2010, Alex Walsh was a management consultant at AW
Enterprises, LLC. AW Enterprises was established as a management consulting firm
assisting small and middle market businesses in expanding their revenue and
profits through strategic partnerships. Mr. Walsh’s efforts included strategic
planning for companies looking to raise capital and assisting clients with
forming strategic partnerships that could increase their revenue and profits.
From May 2006 to May 2008, Mr. Walsh was a small business consultant and
managing partner for Business Strategies Group. Business Strategies Group is a
highly specialized team focusing on providing employee benefits, retirement
programs, and insurance products to small and middle market companies.
Mr.Walsh attended DePauw University in Greencastle, Indiana
where he majored in economics and management.
Mr. Walsh was chosen as one of our directors due to his
background in venture capital, investor relations and corporate development.
86
Bryan Kleinlein – Chief Financial Officer
Bryan Kleinlein was appointed chief financial officer on May
15, 2012. Mr. Kleinlein is a consultant to our company who is serving as our
chief financial officer. Mr. Kleinlein has over 15 years of finance and treasury
experience with a specialty in global business. Mr. Kleinlein has been
responsible for managing $1 billion of global capital expenditures as well as
leading strategic financial planning, analysis and international expansion
efforts of other multi-national companies. From 2006 to 2011, Mr. Kleinlein was
director of International Finance and Treasury for FreeLife International, Inc.
in Phoenix, Arizona.
Mr. Kleinlein holds an MBA from Thunderbird – School of Global
Management. He acquired his Bachelors in Finance from Illinois State University,
where he received scholastic and athletic honors.
Brandon Colker – Director
Mr. Colker became a director in January 2011. Brandon Colker is
the chief executive officer of Sustainable Venture Capital, a company involved
in private financial funding. Mr. Colker has been involved in real estate and
corporate finance throughout his career. In 2002, Mr. Colker founded Meridian
Capital and ran that operation until 2008. In 2008 he formed CFT Capital as a
real estate and project financing entity and in 2009 he formed Sustainable
Venture Capital focusing efforts on capital financing for sustainable
technologies.
In May 1997, Mr. Colker graduated from the University of
California at Santa Barbara with a degree in Economics.
Mr. Colker is an independent director based on the definition
of independence in the listing standards of the NYSE Corporate Governance Rules.
Family Relationships
There are no family relationships among our directors or
officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or
executive officers has, during the past ten years:
| 1. |
been convicted in a criminal proceeding or been subject
to a pending criminal proceeding (excluding traffic violations and other
minor offences); |
| 2. |
had any bankruptcy petition filed by or against the
business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive
officer, either at the time of the bankruptcy filing or within two years
prior to that time; |
| 3. |
been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or temporarily
enjoining, barring, suspending or otherwise limiting, his involvement in
any type of business, securities, futures, commodities, investment,
banking, savings and loan, or insurance activities, or to be associated
with persons engaged in any such activity; |
| 4. |
been found by a court of competent jurisdiction in a
civil action or by the SEC or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated; |
| 5. |
been the subject of, or a party to, any federal or state
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any settlement
of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease- and-desist order, or removal or
prohibition order, or any law or regulation prohibiting mail or wire fraud
or fraud in connection with any business entity; or |
| 6. |
been the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of
any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any
registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act
(7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons
associated with a member.
|
87
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during the year ended June 30, 2014, all filing requirements
applicable to its officers, directors and greater than 10% percent beneficial
owners were complied with, with the exception of the following:
Name |
Number of Late Reports |
Number of Transactions
Not
Reported on a Timely
Basis |
Failure to File
Requested Forms |
| Alexander Walsh(1) |
4 |
31 |
Nil |
| Brian Kleinlein(1) |
4 |
26 |
Nil |
| Brandon Colker(1) |
1 |
7 |
Nil |
| |
(1) |
The named officer, director or greater than 10%
stockholder, as applicable, filed a late Form 4 – Statement of Changes of
Beneficial Ownership of Securities. |
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that it does not have a
member of its audit committee that qualifies as an "audit committee financial
expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent"
as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities
Exchange Act of 1934, as amended.
We believe that the members of our board of directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. We
believe that retaining an independent director who would qualify as an "audit
committee financial expert" would be overly costly and burdensome and is not
warranted in our circumstances given the early stages of our development and the
fact that we have not generated any material revenues to date. In addition, we
currently do not have nominating, compensation or audit committees or committees
performing similar functions nor do we have a written nominating, compensation
or audit committee charter. Our board of directors does not believe that it is
necessary to have such committees because it believes the functions of such
committees can be adequately performed by our board of directors.
Code of Ethics
We have adopted a Code of Ethics that applies to, among other
persons, our company’s principal executive officers and senior financial
executives, as well as persons performing similar functions. As adopted, our
Code of Ethics sets forth written policies to promote:
- honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships;
- full, fair, accurate, timely and understandable disclosure in all reports
and documents that the Corporation files with, or submits to, the Securities
and Exchange Commission ("SEC") and in other public communications made by the
Corporation that are within the Senior Officer’s area of responsibility;
- compliance with applicable governmental laws, rules and regulations;
88
- the prompt internal reporting of violations of the Code; and
- accountability for adherence to the Code.
Our Code of Ethics and Business Conduct was filed with the
Securities and Exchange Commission as Exhibit 14.1 to our annual report on Form
10-KSB on September 28, 2007. We will provide a copy of the Code of Ethics and
Business Conduct to any person without charge, upon request. Requests can be
sent to: Lithium Exploration Group, Inc. 3200 N. Hayden Road, Suite 235,
Scottsdale, AZ 85251.
Item 11. Executive
Compensation
The particulars of the compensation paid to the following
persons:
| |
(a) |
our principal executive officer; |
| |
(b) |
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the years
ended June 30, 2014 and 2013; and |
| |
(c) |
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at the end of the years ended
June 30, 2014 and 2013, |
who we will collectively refer to as the named executive
officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer,
other than our principal executive officers, whose total compensation did not
exceed $100,000 for the respective fiscal year:
| SUMMARY COMPENSATION
TABLE |
Name
and Principal
Position |
Year |
Salary
($) |
Bonus
($) |
Stock
Awards
($) |
Option
Awards
($) |
Non-Equity
Incentive Plan
Compensation
($) |
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) |
All
Other
Compensation
($) |
Total
($) |
Alexander
Walsh(1)
President,
Chief
Executive
Officer and
Director |
2014
2013
|
120,000
120,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
120,000
120,000
|
Bryan A.
Kleinlein(2)
Chief
Financial
Officer |
2014
2013
|
36,000
81,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
36,000
81,000
|
Alexander
Koretsky(3)
Former
Chief
Operating
Officer |
2014
2013
|
26,800
83,333.40
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
26,800
83,333.40
|
| (1) |
Alexander Walsh was appointed president, chief executive
officer, chief financial officer and director on November 4,
2010. |
| (2) |
Bryan A. Kleinlein was appointed Chief Financial Officer
on May 15, 2012. |
| (3) |
Alexander Koretsky was appointed Chief Operating Officer
on May 1, 2012 and, pursuant to the terms of a consulting agreement
between our company and Mr. Koretsky, his position ceased on February 1,
2014. |
89
2014 Stock Option Plan
On July 22, 2014, our directors approved the adoption of the
2014 Stock Plan which permits our company to issue up to 20,000,000 shares of
our common stock to directors, officers, employees and consultants of our
company.
Stock Options/SAR Grants
During the period from inception to June 30, 2014, we did not
grant any stock options to our executive officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Values
There were no options exercised during our fiscal year ended
June 30, 2014 and 2013 by any officer or director of our company.
Outstanding Equity Awards at Fiscal Year End
No equity awards were outstanding as of the year ended June 30,
2014.
Compensation of Directors
We reimburse our directors for expenses incurred in connection
with attending board meetings. We paid $Nil in directors fees in our fiscal year
ending June 30, 2014 and $54,000 in directors fees in our fiscal year ending
June 30, 2013.
We have no formal plan for compensating our directors for their
service in their capacity as directors. Directors are entitled to reimbursement
for reasonable travel and other out-of-pocket expenses incurred in connection
with attendance at meetings of our board of directors. Our board of directors
may award special remuneration to any director undertaking any special services
on our behalf other than services ordinarily required of a director.
Employment Contracts and Termination of Employment and
Change in Control Arrangements
Effective January 12, 2012, we entered into an employment
agreement with Alexander Walsh for provision of services as our president and
chief executive officer. The employment agreement will terminate on January 12,
2014. Pursuant to the terms of the employment agreement, Mr. Walsh will receive
an annual salary of $120,000 payable in monthly cash installments or, in the
event cash is unavailable, in shares of our company’s common stock. The
employment agreement also provides for liability insurance and any travel and
out-of-pocket expenses incurred and approved by our company.
Also on January 12, 2012, we entered into consulting
agreements, effective April 27, 2011, with our director, Brandon Colker, and
Jonathan Jazwinski, a former director of our company, to provide services on
behalf of our company. Pursuant to the terms of the consulting agreements, Mr.
Colker and Mr. Jazwinski received compensation payable of 150,000 shares of our
company's common stock issuable at the beginning of every year served during the
term of their agreements. Mr. Colker’s consulting agreement terminated on April
27, 2014. Mr. Jazwinski resigned as a director of our company on January 10,
2014 and, consequently, his consulting agreement terminated.
On May 1, 2013, we entered into a consulting agreement with
Alexander Koretsky whereby, Mr. Koretsky has agreed to provide consulting duties
and services in the capacity as chief operating officer of our company and any
other consulting duties and services as may be requested by our company. As
compensation, our company has agreed to pay to Mr. Koretsky a salary of
$8,333.33 per month in cash, common shares of our company, or in both cash and
common shares of our company, at the sole discretion of our company. This
consulting agreement expired on January 31, 2014 and our company did not renew
this agreement. As a result, effective February 1, 2014, Mr. Koretsky no long
acts as chief operating officer of our company. Mr. Koretsky currently provides
consulting services to our company on a month to month basis and has since
received $26,800 in compensation as at June 30, 2014.
90
On January 1, 2014, we entered into a consulting agreement
effective January 1, 2014 for a term of 12 months with International Compass,
LLC for the services of Bryan Kleinlein as chief financial officer of our
company. As compensation, we agreed to pay to International Compass $12,000 per
month during the term of the agreement payable in cash and/or common shares of
our company that were previously registered on Form S-8 at our sole discretion.
The value of the shares of our company issued as compensation, if any, shall be
based on the volume weighted average trading closing price of the shares of our
company in the five (5) trading days immediately preceding the date(s) which the
shares are due. The January 1, 2014 consulting agreement with International
Compass replaces and supersedes our agreement with Mr. Kleinlein dated May 15,
2013 which was disclosed in our report on Form 8-K filed on March 29, 2013.
On April 28, 2014, we entered into a consulting agreement, with
our director, Brandon Colker, to provide services on behalf of our company.
Pursuant to the terms of the consulting agreement, Mr. Colker will receive
compensation of $12,000 in unregistered restricted common shares of our
company's common stock at a deemed value of $0.05 per share and issuable on May
15, 2014. Our company has not yet issued these shares. This consulting agreement
supersedes and replaces the consulting agreement with Mr. Colker dated January
12, 2012 which expired on April 27, 2014.
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. Our
directors and executive officers may receive stock options at the discretion of
our board of directors in the future. We do not have any material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers, except that stock options may be
granted at the discretion of our board of directors.
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The following table sets forth, as of October 8, 2014, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial
Owner(1) |
Percentage of
Class |
Alexander Walsh(2)
320 E. Fairmont Dr.,
Tempe, AZ, 85282 |
8,379,259 common
|
2.10%
|
Brandon Colker(3)
3800 N Central Avenue, Suite 820,
Phoenix, AZ 85012 |
Nil
common
|
0%
|
Bryan A. Kleinlein(4)
3800 N Central Avenue, Suite 820,
Phoenix, AZ 85012 |
3,855,422 common
|
*
|
| All Officers and Directors As a Group |
12,234,681 common |
3.07% |
*represents an amount less than 1%
| |
(1) |
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the person’s actual
ownership or voting power with respect to the number of shares of common
stock actually outstanding on October 8, 2014. As of October 8, 2014,
there were 398,972,192 shares of our company’s common stock issued and
outstanding. |
91
| |
(2) |
Alexander Walsh is our company’s president, chief
executive officer, chief financial officer and director. |
| |
(3) |
Brandon Colker is a director of our company. |
| |
(4) |
Bryan A. Kleinlein is our company’s chief financial
officer. |
Changes in Control
We are unaware of any contract or other arrangement or
provisions of our Articles or Bylaws the operation of which may at a subsequent
date result in a change of control of our company. There are not any provisions
in our Articles or Bylaws, the operation of which would delay, defer, or prevent
a change in control of our company.
Item 13. Certain
Relationships and Related Transactions, and Director Independence
Except as disclosed herein, there have been no transactions or
proposed transactions in which the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year-end for the
last three completed fiscal years in which any of our directors, executive
officers or beneficial holders of more than 5% of the outstanding shares of our
common stock, or any of their respective relatives, spouses, associates or
affiliates, has had or will have any direct or material indirect interest.
The promoters of our company are our directors and
officers.
Director Independence
We currently act with two directors, consisting of Alexander
Walsh and Brandon Colker. We have determined that Brandon Colker is an
“independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
We do not have a standing audit, compensation or nominating
committee, but our entire board of directors act in such capacity. We believe
that our directors are capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting. Our directors do not believe that it is necessary to have an audit
committee because we believe that the functions of an audit committee can be
adequately performed by the board of directors. In addition, we believe that
retaining additional independent directors who would qualify as an “audit
committee financial expert” would be overly costly and burdensome and is not
warranted in our circumstances given the early stages of our development.
Item 14. Principal
Accounting Fees and Services
The aggregate fees billed for the most recently completed
fiscal year ended June 30, 2014 and for fiscal year ended June 30, 2013 for
professional services rendered by the principal accountant for the audit of our
annual financial statements and review of the financial statements included in
our quarterly reports on Form 10-Q and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
|
Year Ended
June 30,
|
2014
($) |
2013
($) |
| Audit Fees |
100,500 |
47,500 |
| Audit Related Fees |
Nil |
Nil |
| Tax Fees |
900 |
1,800 |
| All Other Fees |
Nil |
Nil |
| Total |
101,400 |
49,300 |
92
Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.
Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditor’s independence.
PART IV
Item 15. Exhibits,
Financial Statement Schedules
| (a) |
Financial Statements |
| |
|
|
|
(1) |
Financial statements for our company are listed in the
index under Item 8 of this document |
| |
|
|
|
(2) |
All financial statement schedules are omitted because
they are not applicable, not material or the required information is shown
in the financial statements or notes thereto. |
| |
|
|
| (b) |
Exhibits |
| Exhibit |
Description |
| Number |
|
| |
|
| (3) |
(i) Articles of Incorporation; and (ii) Bylaws
|
| |
|
| 3.1 |
Articles of Incorporations (incorporated by reference to
our Registration Statement on Form SB-2 filed on September 20, 2006)
|
| |
|
| 3.2 |
Bylaws (incorporated by reference to our Registration
Statement on Form SB-2 filed on September 20, 2006) |
| |
|
| 3.3 |
Articles of Amendment dated May 31, 2006 (incorporated by
reference to our Current Report on Form 8-K filed on April 21, 2009)
|
| |
|
| 3.4 |
Certificate of Amendment dated April 8, 2009
(incorporated by reference to our Current Report on Form 8- K/A filed on
April 23, 2009) |
| |
|
| 3.5 |
Articles of Merger dated November 17, 2010 (incorporated
by reference to our Current Report on Form 8-K filed on December 7, 2010)
|
| |
|
| 3.6 |
Articles of Incorporation of Alta Disposal Morinville
Ltd. (formerly Blue Tap Resources Inc.) (incorporated by reference to our
Current Report on Form 8-K filed on October 24, 2013) |
| |
|
| 3.7 |
Certificate of Amendment of Alta Disposal Morinville Ltd.
(formerly Blue Tap Resources Inc.) (incorporated by reference to our
Current Report on Form 8-K filed on October 24, 2013) |
| |
|
| 3.8 |
Bylaws of Alta Disposal Morinville Ltd. (formerly Blue
Tap Resources Inc.) (incorporated by reference to our Current Report on
Form 8-K filed on October 24, 2013) |
| |
|
| 3.9 |
Certificate of Incorporation of 1617437 Alberta Ltd.
(incorporated by reference to our Current Report on Form 8-K filed on
October 24, 2013) |
| |
|
| 3.10 |
Articles of Amendment of Alta Disposal Ltd. (incorporated
by reference to our Current Report on Form 8-K filed on October 24, 2013)
|
| |
|
| 3.11 |
Bylaws of Alta Disposal Ltd. (incorporated by reference
to our Current Report on Form 8-K filed on October 24, 2013) |
| |
|
| (4) |
Instruments Defining the Rights of Security Holders,
Including Indentures |
| |
|
| 4.1 |
Certificate of Designation of Series B Preferred Stock
(incorporated by reference to our Current Report on Form 8-K filed on
January 9, 2014) |
| |
|
| (10) |
Material Contracts |
| |
|
| 10.1 |
Assignment Agreement between our company and Lithium
Exploration VIII Ltd. dated December 16, 2010 (incorporated by reference
to our Current Report on Form 8-K filed on January 10, 2011) |
| |
|
| 10.2 |
Letter Agreement between our company and Glottech-USA,
LLC dated March 17, 2011 (incorporated by reference to our Current Report
on Form 8-K filed on May 4, 2011) |
93
| Exhibit |
Description |
| Number |
|
| |
|
| 10.3 |
Securities Purchase Agreement between our company and
Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.4 |
Registration Rights Agreement between our company and
Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.5 |
12% Senior Convertible Debenture between our company and
Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.6 |
Escrow Agreement between our company and Hagen
Investments Ltd. dated June 29, 2011 (incorporated by reference to our
Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.7 |
Guaranty and Pledge Agreement between our company and
Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.8 |
Common Stock Purchase Warrant between our company and
Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 1, 2011) |
| |
|
| 10.9 |
12% Senior Convertible Debenture between our company and
Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 13, 2011) |
| |
|
| 10.10 |
Common Stock Purchase Warrant between our company and
Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 13, 2011) |
| |
|
| 10.11 |
Letter Agreement between our company and Glottech-USA,
LLC dated November 18, 2011 (incorporated by reference to our Current
Report on Form 8-K filed on November 21, 2011) |
| |
|
| 10.12 |
Securities Purchase Agreement between our company and
Hagen Investments Ltd. dated March 28, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on April 3, 2012) |
| |
|
| 10.13 |
Debenture between our company and Hagen Investments Ltd.
dated March 28, 2012 (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2012) |
| |
|
| 10.14 |
Debenture between our company and Hagen Investments Ltd.
dated May 15, 2012 (incorporated by reference to our Current Report on
Form 8-K filed on May 18, 2012) |
| |
|
| 10.15 |
Option Agreement between our company and GD Glottech
International, Limited dated August 14, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on September 5, 2012) |
| |
|
| 10.16 |
Amendment Agreement between our company and Hagen
Investments Ltd. dated September 17, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on September 18, 2012) |
| |
|
| 10.17 |
License Agreement between our company and GD
Glottech-International Ltd. dated October 1, 2012 (incorporated by
reference to our Current Report on Form 8-K filed on October 10, 2012)
|
| |
|
| 10.18 |
Sales Agreement between our company and GD Glottech
International Ltd. dated October 1, 2012 (incorporated by reference to our
Current Report on Form 8-K filed on October 10, 2012) |
| |
|
| 10.19 |
Certificate of Designation, Series A Preferred
Convertible Stock (incorporated by reference to our Current Report on Form
8-K filed on October 29, 2012) |
| |
|
| 10.20 |
Share Exchange Agreement between our company and
Alexander Walsh dated October 18, 2012 (incorporated by reference to our
Current Report on Form 8-K filed on October 29, 2012) |
| |
|
| 10.21 |
Securities Purchase Agreement between our company and JMJ
Financial dated February 13, 2013 (incorporated by reference to our
Current Report on Form 8-K filed on February 15, 2013) |
| |
|
| 10.22 |
Securities Purchase Agreement between our company and JDF
Capital Inc. dated February 19, 2013 (incorporated by reference to our
Current Report on Form 8-K filed on February 25, 2013) |
| |
|
| 10.23 |
Rule 10b5-1 Sales Plan, Client Representations, and Sales
Instructions (incorporated by reference to our Current Report on Form 8-K
filed on March 15, 2013) |
| |
|
| 10.24 |
Letter of Agreement between our company and Alta Disposal
Morinville Ltd. (formerly Blue Tap Resources Inc.) dated June 11, 2013
(incorporated by reference to our Current Report on Form 8-K filed on June
14, 2013) |
| |
|
| 10.25 |
Consulting Agreement between our company and Advanced
Capital Trading, LLC dated July 25, 2013 (incorporated by reference to our
Quarterly Report on Form 10-Q filed on November 14, 2013)
|
94
| Exhibit |
Description |
| Number |
|
| |
|
| 10.26 |
Convertible Debenture Agreement between our company and
Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Inc.) dated
July 29, 2013 (incorporated by reference to our Current Report on Form 8-K
filed on August 5, 2013) |
| |
|
| 10.27 |
Expanded Consulting Agreement with Advanced Capital
Trading, LLC dated September 16, 2013 (incorporated by reference to our
Quarterly Report on Form 10-Q filed on November 14, 2013) |
| |
|
| 10.28 |
Unanimous Shareholders and Management Agreement among
Alta Disposal Ltd., Excel Petroleum Ltd. and Alta Disposal Morinville Ltd.
(formerly Blue Tap Resources Inc.) dated October 18, 2013 2013
(incorporated by reference to our Current Report on Form 8-K filed on
October 24, 2013) |
| |
|
| 10.29 |
Subscription Agreement dated October 18, 2013 between
Alta Disposal Ltd. and Alta Disposal Morinville Ltd. (formerly Blue Tap
Resources Inc.) (incorporated by reference to our Current Report on Form
8-K filed on October 24, 2013) |
| |
|
| 10.30 |
Operating Agreement dated July 9, 2013 between Alta
Disposal Morinville Ltd. (formerly Blue Tap Resources Inc.) and Valeura
Energy Inc. (incorporated by reference to our Current Report on Form 8-K
filed on October 24, 2013) |
| |
|
| 10.31 |
Gross Overriding Royalty Agreement dated June 30, 2013
between Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Inc.)
and Vincent Murphy. (incorporated by reference to our Current Report on
Form 8- K filed on October 24, 2013) |
| |
|
| 10.32 |
Assignment Agreement dated October 31, 2013 between our
company and JDF Capital Inc. (incorporated by reference to our Current
Report on Form 8-K filed on December 30, 2013) |
| |
|
| 10.33 |
Consulting Agreement dated January 1, 2014 between our
company and International Compass, LLC (incorporated by reference to our
Current Report on Form 8-K filed on January 16, 2014) |
| |
|
| 10.34 |
Amendment and Settlement Agreement dated January 3, 2014
between our company and JDF Capital Inc. (incorporated by reference to our
Current Report on Form 8-K filed on January 9, 2014) |
| |
|
| 10.35 |
Securities Purchase Agreement dated as of February 23,
2014 between our company and JSJ Investments Inc. (incorporated by
reference to our Current Report on Form 8-K filed on April 3, 2014)
|
| |
|
| 10.36 |
Form of Convertible Promissory Note between our company
and JSJ Investments Inc. (incorporated by reference to our Current Report
on Form 8-K filed on April 3, 2014) |
| |
|
| 10.37 |
Form of Common Stock Purchase Warrant between our company
and JSJ Investments Inc. (incorporated by reference to our Current Report
on Form 8-K filed on April 3, 2014) |
| |
|
| 10.38 |
Securities Purchase Agreement dated as of February 27,
2014 between our company and Centaurian Fund. (incorporated by reference
to our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.39 |
Form of Convertible Promissory Note between our company
and Centaurian Fund (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.40 |
Form of Common Stock Purchase Warrant between our company
and Centaurian Fund (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.41 |
Securities Purchase Agreement dated as of February 27,
2014 between our company and LG Capital Funding, LLC (incorporated by
reference to our Current Report on Form 8-K filed on April 3, 2014)
|
| |
|
| 10.42 |
Form of Convertible Promissory Note between our company
and LG Capital Funding, LLC (incorporated by reference to our Current
Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.43 |
Securities Purchase Agreement dated as of February 28,
2014 between our company and St. George Investments LLC (incorporated by
reference to our Current Report on Form 8-K filed on April 3, 2014)
|
| |
|
| 10.44 |
Form of Convertible Promissory Note between our company
and St. George Investments LLC (incorporated by reference to our Current
Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.45 |
Form of Common Stock Purchase Warrant between our company
and St. George Investments LLC (incorporated by reference to our Current
Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.46 |
Securities Purchase Agreement dated as of February 28,
2014 between our company and Vista Capital Investments, LLC (incorporated
by reference to our Current Report on Form 8-K filed on April 3, 2014)
|
95
| Exhibit |
Description |
| Number |
|
| |
|
| 10.47 |
Form of Convertible Promissory Note between our company
and Vista Capital Investments, LLC (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.48 |
Form of Common Stock Purchase Warrant between our company
and Vista Capital Investments, LLC (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.49 |
Securities Purchase Agreement dated as of March 3, 2014
between our company and Union Capital, LLC (incorporated by reference to
our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.50 |
Form of Convertible Promissory Note between our company
and Union Capital, LLC (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.51 |
Form of Common Stock Purchase Warrant between our company
and Union Capital, LLC (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.52 |
Securities Purchase Agreement dated as of March 3, 2014
between our company and Iconic Holdings, LLC (incorporated by reference to
our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.53 |
Form of Convertible Promissory Note between our company
and Iconic Holdings, LLC (incorporated by reference to our Current Report
on Form 8-K filed on April 3, 2014) |
| |
|
| 10.54 |
Form of Common Stock Purchase Warrant between our company
and Iconic Holdings, LLC (incorporated by reference to our Current Report
on Form 8-K filed on April 3, 2014) |
| |
|
| 10.55 |
Securities Purchase Agreement dated as of March 3, 2014
between our company and Adar Bays, LLC (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.56 |
Form of Convertible Promissory Note between our company
and Adar Bays, LLC (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.57 |
Form of Common Stock Purchase Warrant between our company
and Adar Bays, LLC (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.58 |
Securities Purchase Agreement dated as of March 3, 2014
between our company and Black Mountain Equities, Inc. (incorporated by
reference to our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.59 |
Form of Convertible Promissory Note between our company
and Black Mountain Equities, Inc. (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.60 |
Form of Common Stock Purchase Warrant between our company
and Black Mountain Equities, Inc. (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.61 |
Securities Purchase Agreement dated as of March 3, 2014
among our company, Alta Disposal Ltd., and 514742 B.C. Ltd. (incorporated
by reference to our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.62 |
Form of Convertible Promissory Note among Alta Disposal
Ltd. and 514742 B.C. Ltd. (incorporated by reference to our Current Report
on Form 8-K filed on April 3, 2014) |
| |
|
| 10.63 |
Form of Common Stock Purchase Warrant between our company
and 514742 B.C. Ltd. (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.64 |
Securities Purchase Agreement dated as of March 3, 2014
between our company and JDF Capital Inc. (incorporated by reference to our
Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.65 |
Form of Convertible Promissory Note between our company
and JDF Capital Inc. (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.66 |
Form of Common Stock Purchase Warrant between our company
and JDF Capital Inc. (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2014) |
| |
|
| 10.67 |
Securities Purchase Agreement dated as of March 1, 2014
between Alta Disposal Ltd. and Tero Oilfield Services Ltd. (incorporated
by reference to our Current Report on Form 8-K filed on April 3, 2014) |
| |
|
| 10.68 |
Employment Agreement with Alexander Walsh dated January
12, 2014 (incorporated by reference to our Current Report on Form 8-K
filed on April 4, 2014) |
| |
|
| 10.69* |
Consulting Agreement with Brandon Colker dated April 28,
2014 |
| |
|
| 10.70 |
2014 Stock Option Plan (incorporated by reference to our
Current Report on Form 8-K filed on August 6, 2014) |
96
| Exhibit |
Description |
| Number |
|
| |
|
| 10.71 |
Form of Stock Option Agreement (incorporated by reference
to our Current Report on Form 8-K filed on August 6, 2014) |
| |
|
| 10.72 |
Form of Stock Grant Agreement (incorporated by reference
to our Current Report on Form 8-K filed on August 6, 2014) |
| |
|
| 10.73 |
Securities Purchase Agreement dated July 22, 2014 between
our company and JDF Capital Inc. Agreement (incorporated by reference to
our Current Report on Form 8-K filed on August 7, 2014) |
| |
|
| 10.74 |
Convertible Promissory Note dated July 22, 2014 between
our company and JDF Capital Inc. (incorporated by reference to our Current
Report on Form 8-K filed on August 7, 2014) |
| |
|
| 10.75 |
Common Stock Purchase Warrant dated July 22, 2014 between
our company and JDF Capital Inc. (incorporated by reference to our Current
Report on Form 8-K filed on August 7, 2014) |
| |
|
| 10.76 |
General Security Agreement dated July 22, 2014 between
Alta Disposal Ltd. and JDF Capital Inc. (incorporated by reference to our
Current Report on Form 8-K filed on August 7, 2014) |
| |
|
| (20) |
Other Documents or Statements to Security Holders |
| |
|
| 20.1* |
Financial Statements of Tero Oilfield Services as at June
30, 2014 |
| |
|
| (21) |
Subsidiaries of the Registrant |
| |
|
| 21.1 |
Alta Disposal Ltd., an Alberta, Canada corporation
(wholly-owned) |
| |
|
| |
Tero Oilfield Services Ltd., an Alberta, Canada
corporation (75% owned) |
| |
|
| (31) |
Rule 13a-14(a)/15d-14(a) Certification |
| |
|
| 31.1* |
Section 302 Certification under the Sarbanes-Oxley Act of
2002 of the Principal Executive Officer |
| |
|
| 31.2* |
Section 302 Certification under the Sarbanes-Oxley Act of
2002 of the Principal Financial Officer and Principal Accounting Officer |
| |
|
| (32) |
Section 1350 Certification |
| |
|
| 32.1* |
Section 906 Certification under the Sarbanes-Oxley Act of
2002 of the Principal Executive Officer |
| |
|
| 32.2* |
Section 906 Certification under the Sarbanes-Oxley Act of
2002 of the Principal Financial Officer and Principal Accounting Officer |
| |
|
| 101* |
Interactive Data Files |
| |
|
| 101.INS |
XBRL Instance Document |
| 101.SCH |
XBRL Taxonomy Extension Schema Document |
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
| * |
Filed herewith. |
| ** |
Furnished herewith. Pursuant to Rule 406T of
Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are
deemed not filed or part of any registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed
not filed for purposes of Section 18 of the Securities and Exchange Act of
1934, and otherwise are not subject to liability under those
sections. |
97
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
| |
LITHIUM EXPLORATION GROUP, INC. |
| |
|
| |
|
| |
|
| Date: October 14, 2014 |
/s/
Alexander Walsh |
| |
Alexander Walsh |
| |
President, Chief Executive Officer, and
Director |
| |
(Principal Executive Officer) |
| |
|
| |
|
| |
|
| Date: October 14, 2014 |
/s/
Bryan A. Kleinlein |
| |
Bryan A. Kleinlein |
| |
Chief Financial Officer |
| |
(Principal Financial Officer and Principal
Accounting |
| |
Officer) |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
| Date: October 14, 2014 |
/s/
Alexander Walsh |
| |
Alexander Walsh |
| |
President, Chief Executive Officer, and
Director |
| |
(Principal Executive Officer) |
| |
|
| |
|
| |
|
| Date: October 14, 2014 |
/s/
Brandon Colker |
| |
Brandon Colker |
| |
Director |
98
CONSULTING AGREEMENT
THIS AGREEMENT is dated and effective on the
28th day of April, 2014.
BETWEEN:
LITHIUM EXPLORATION GROUP, INC.,
with an office at 3800 North Central Avenue, Phoenix, Arizona 85012.
(the “Company”)
AND:
BRANDON COLKER with an address
at 9740 Limar Way, San Diego, California, 92129.
(the “Contractor”)
WHEREAS:
A. the Company desires to retain the Contractor
to provide the Company with the services as a member of the Board of Directors
(the “Services”) in regards to the Company’s management and operations;
and
B. the Contractor has agreed to provide the
Services to the Company on the terms and conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the mutual covenants and promises set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor. The Company hereby
appoints the Contractor to perform the Services for the benefit of the Company
as hereinafter set forth, and the Company hereby authorizes the Contractor to
exercise such powers as provided under this Agreement. The Contractor accepts
such appointment on the terms and conditions herein set forth.
1.2 Performance of Services. The Services hereunder have
been and shall continue to be provided on the basis of the following terms and
conditions:
| |
(a) |
the Contractor shall faithfully, honestly and diligently
serve the Company and cooperate with the Company and utilize maximum
professional skill and care to ensure that all services rendered
hereunder, including the Services, are to the satisfaction of the Company,
acting reasonably, and the Contractor shall provide any other services not
specifically mentioned herein, but which by reason of the Contractor’s
capability the Contractor knows or ought to know to be necessary to
ensure that the best interests of the Company are maintained;
and |
| |
(b) |
the Company shall report the results of the Contractor’s
duties hereunder as may be requested by the Company from time to
time. |
1.3 Authority of Contractor. The Contractor shall have
no right or authority, express or implied, to commit or otherwise obligate the
Company in any manner whatsoever except to the extent specifically provided
herein or specifically authorized in writing by the Company.
1.4 Independent Contractor. In performing the Services,
the Contractor shall be an independent contractor and not an employee or agent
of the Company, except that the Contractor shall be the agent of the Company
solely in circumstances where the Contractor must be the agent to carry out its
obligations as set forth in this Agreement. Nothing in this Agreement shall be
deemed to require the Contractor to provide the Services exclusively to the
Company and the Contractor hereby acknowledges that the Company is not required
and shall not be required to make any remittances and payments required of
employers by statute on the Contractor’s behalf and the Contractor or any of its
agents shall not be entitled to the fringe benefits provided by the Company to
its employees.
ARTICLE 2
CONTRACTOR’S AGREEMENTS
2.1 Expense Statements. The Contractor may incur
expenses in the name of the Company as agreed in advance in writing by the
Company, provided that such expenses relate solely to the carrying out of the
Services. The Contractor will immediately forward all invoices for expenses
incurred on behalf of and in the name of the Company and the Company agrees to
pay said invoices directly on a timely basis. The Contractor agrees to obtain
approval from the Company in writing for any individual expense of $500 or
greater or any aggregate expense in excess of $2,000 incurred in any given month
by the Contractor in connection with the carrying out of the Services.
2.2 Regulatory Compliance. The Contractor agrees to
comply with all applicable securities legislation and regulatory policies in
relation to providing the Services, including but not limited to United States
securities laws (in particular, Regulation FD) and the policies of the United
States Securities and Exchange Commission.
2.3 Prohibition Against Insider Trading. The Contractor
hereby acknowledges that the Contractor is aware, and further agrees that the
Contractor will advise those of its directors, officers, employees and agents
who may have access to Confidential Information, that United States securities
laws prohibit any person who has material, non-public information about a
company from purchasing or selling securities of such a company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
ARTICLE 3
COMPANY’S AGREEMENTS
3.1 Compensation Shares. The compensation for agreeing
to enter into this Agreement and provide the Services to be rendered by the
Contractor pursuant to this Agreement shall be $12,000 (the
“Compensation”) in unregistered restricted common shares of the Company
(the “Shares”) as consulting fees for the term of this Agreement (the
“Compensation Shares”) issuable on May 15, 2014. The deemed value
of the Compensation Shares issued to the Contractor under this Agreement shall
be $0.05 (the “Deemed Value”). As a result, the number of
Compensation Shares issued to the Contractor under this Agreement will equal the
amount of the Compensation to be satisfied divided by the Deemed Value.
3.2 Clawback of Unpaid Compensation Shares. The
Contractor acknowledges and agrees that any assessable Compensation Shares will
be subject to cancellation in the event that this Agreement is terminated for
any reason before such Compensation Shares have been paid fully for by the
provision of Services, and that the Company’s obligation to issue the balance of
the Compensation Shares which have not been fully paid for will terminate
immediately upon early termination of this Agreement. If the Agreement is
terminated prior to the end of the one year period, the number of Compensation
Shares that the Contractor is entitled to receive in respect of such period
shall be calculated by reference to the following formula:
240,000 X A
365
where A = the number of days of the period up to and including
the date of termination.
3.3 Voting of Compensation Shares. The Contractor
covenants and agrees that, with respect to the Compensation Shares that it
receives, it shall, at all times that it is the beneficial owner of such shares,
vote such shares on all matters coming before it as a stockholder of the Company
in the same manner as the majority of the board of directors of the Company
shall recommend.
3.4 Information. Subject to the terms of this Agreement,
including without limitation Article 5 hereof, and
provided that the Contractor agrees that it will not disclose any material
non-public information to any person or entity, the Company shall make available
to the Contractor such information and data and shall permit the Contractor to
have access to such documents as are reasonably necessary to enable it to
perform the Services under this Agreement. The Company also agrees that it will
act reasonably and promptly in reviewing materials submitted to it from time to
time by the Contractor and inform the Contractor of any material inaccuracies or
omissions in such materials.
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date. This Agreement shall become
effective as of April 28, 2014 (the “Effective Date”), and shall continue
to April 27, 2015 (the “Term”) or until earlier terminated pursuant to
the terms of this Agreement.
4.2 Termination. Without prejudicing any other rights
that the Company may have hereunder or at law or in equity, the Company may
terminate this Agreement immediately upon it election to do so, or if it so
elects, upon delivery of written notice to the Contractor if:
| |
(a) |
the Contractor breaches section 2.2
of this Agreement; |
| |
|
|
| |
(b) |
the Contractor breaches any other material term of this
Agreement and such breach is not cured to the reasonable satisfaction of
the Company within thirty (30) days after written notice describing the
breach in reasonable detail is delivered to the Contractor; |
| |
|
|
| |
(c) |
the Company acting reasonably determines that the
Contractor has acted, is acting or is likely to act in a manner
detrimental to the Company or has violated or is likely to violate the
confidentiality of any information as provided for in this
Agreement; |
| |
(d) |
the Contractor is unable or unwilling to perform the
Services under this Agreement; |
| |
|
|
| |
(e) |
upon delivery of 30 days notice to the Contractor;
or |
| |
|
|
| |
(f) |
the Contractor commits fraud, serious neglect or
misconduct in the discharge of the Services. |
4.3 Duties Upon Termination. Upon termination of this
Agreement for any reason, the Contractor shall upon receipt of all sums due and
owing, promptly deliver the following in accordance with the directions of the
Company:
| |
(a) |
a final accounting, reflecting the balance of expenses
incurred on behalf of the Company as of the date of termination;
and |
| |
|
|
| |
(b) |
all documents pertaining to the Company or this
Agreement, including but not limited to, all books of account,
correspondence and contracts in his possession, provided that the
Contractor shall be entitled thereafter to inspect, examine and copy all
of the documents which it delivers in accordance with this provision at
all reasonable times upon three (3) days’ notice to the
Company. |
4.4 Compensation of Contractor on Termination. Upon
termination of this Agreement, the Contractor shall be entitled to receive as
its full and sole compensation in discharge of obligations of the Company to the
Contractor under this Agreement all sums due and payable under this Agreement to
the date of termination and the Contractor shall have no right to receive any
further payments; provided, however, that the Company shall have the right to
offset against any payment owing to the Contractor under this Agreement any
damages, liabilities, costs or expenses suffered by the Company by reason of the
fraud, negligence or wilful act of the Contractor, to the extent such right has
not been waived by the Company.
ARTICLE 5
CONFIDENTIALITY AND NON-COMPETITION
5.1 Maintenance of Confidential Information. The
Contractor acknowledges that in the course of its appointment hereunder the
Contractor will, either directly or indirectly, have access to and be entrusted
with information (whether oral, written or by inspection) relating to the
Company or its respective affiliates, associates or customers (the
“Confidential Information”). For the purposes of this Agreement,
“Confidential Information” includes, without limitation, any and all
Developments (as defined herein), trade secrets, inventions, innovations,
techniques, processes, formulas, drawings, designs, products, systems,
creations, improvements, documentation, data, specifications, technical reports,
customer lists, supplier lists, distributor lists, distribution channels and
methods, retailer lists, reseller lists, employee information, financial
information, sales or marketing plans, competitive analysis reports and any
other thing or information whatsoever, whether copyrightable or uncopyrightable
or patentable or unpatentable. The Contractor acknowledges that the Confidential
Information constitutes a proprietary right, which the Company is entitled to
protect. Accordingly the Contractor covenants and agrees that during the Term
and thereafter until such time as all the Confidential Information becomes
publicly known and made generally available through no action or inaction of the
Contractor, the Contractor will keep in strict confidence the Confidential
Information and shall not, without prior written consent of the Company in each
instance, disclose, use or otherwise disseminate the Confidential Information,
directly or indirectly, to any third party.
5.2 Exceptions. The general prohibition contained in
Section 5.1 against the unauthorized disclosure, use or
dissemination of the Confidential Information shall not apply in respect of any
Confidential Information that:
| |
(a) |
is available to the public generally in the form
disclosed; |
| |
|
|
| |
(b) |
becomes part of the public domain through no fault of the
Contractor; |
| |
|
|
| |
(c) |
is already in the lawful possession of the Contractor at
the time of receipt of the Confidential Information; or |
| |
|
|
| |
(d) |
is compelled by applicable law to be disclosed, provided
that the Contractor gives the Company prompt written notice of such
requirement prior to such disclosure and provides assistance in obtaining
an order protecting the Confidential Information from public
disclosure. |
5.3 Developments. Any information,
data, work product or any other thing or documentation whatsoever which the
Contractor, either by itself or in conjunction with any third party, conceives,
makes, develops, acquires or acquires knowledge of during the Contractor’s
appointment with the Company or which the Contractor, either by itself or in
conjunction with any third party, shall conceive, make, develop, acquire or
acquire knowledge of (collectively, the “Developments”) during the Term
or at any time thereafter during which the Contractor is engaged by the Company
that is related to the business of mining property acquisition and exploration
shall automatically form part of the Confidential Information and shall become
and remain the sole and exclusive property of the Company. Accordingly, the
Contractor does hereby irrevocably, exclusively and absolutely assign, transfer
and convey to the Company in perpetuity all worldwide right, title and interest
in and to any and all Developments and other rights of whatsoever nature and
kind in or arising from or pertaining to all such Developments created or
produced by the Contractor during the course of performing this Agreement,
including, without limitation, the right to effect any registration in the world
to protect the foregoing rights. The Company shall have the sole, absolute and
unlimited right throughout the world, therefore, to protect the Developments by
patent, copyright, industrial design, trademark or otherwise and to make, have
made, use, reconstruct, repair, modify, reproduce, publish, distribute and sell
the Developments, in whole or in part, or combine the Developments with any
other matter, or not use the Developments at all, as the Company sees fit.
5.4 Protection of Developments. The Contractor does
hereby agree that, both before and after the termination of this Agreement, the
Contractor shall perform such further acts and execute and deliver such further
instruments, writings, documents and assurances (including, without limitation,
specific assignments and other documentation which may be required anywhere in
the world to register evidence of ownership of the rights assigned pursuant
hereto) as the Company shall reasonably require in order to give full effect to
the true intent and purpose of the assignment made under Section 5.3 hereof. If
the Company is for any reason unable, after reasonable effort, to secure
execution by the Contractor on documents needed to effect any registration or to
apply for or prosecute any right or protection relating to the Developments, the
Contractor hereby designates and appoints the Company and its duly authorized
officers and agents as the Contractor’s agent and attorney to act for and in the
Contractor’s behalf and stead to execute and file any such document and do all
other lawfully permitted acts necessary or advisable in the opinion of the
Company to effect such registration or to apply for or prosecute such right or
protection, with the same legal force and effect as if executed by the
Contractor.
5.5 Remedies. The parties to this Agreement recognize
that any violation or threatened violation by the Contractor of any of the
provisions contained in this Article 5 will result in
immediate and irreparable damage to the Company and that the Company
could not adequately be compensated for such damage by monetary award alone.
Accordingly, the Contractor agrees that in the event of any such violation or
threatened violation, the Company shall, in addition to any other remedies
available to the Company at law or in equity, be entitled as a matter of right
to apply to such relief by way of restraining order, temporary or permanent
injunction and to such other relief as any court of competent jurisdiction may
deem just and proper.
5.6 Reasonable Restrictions. The Contractor agrees that
all restrictions in this Article 5 are reasonable and
valid, and all defenses to the strict enforcement thereof by the Company are
hereby waived by the Contractor.
ARTICLE 6
DEVOTION TO CONTRACT
6.1 Devotion to Contract. During the term of this
Agreement, the Contractor shall devote sufficient time, attention, and ability
to the business of the Company, and to any associated company, as is reasonably
necessary for the proper performance of the Services pursuant to this Agreement.
Nothing contained herein shall be deemed to require the Contractor to devote its
exclusive time, attention and ability to the business of the Company. During the
term of this Agreement, the Contractor shall, and shall cause each of its agents
assigned to performance of the Services on behalf of the Contractor, to:
| |
(a) |
at all times perform the Services faithfully, diligently,
to the best of its abilities and in the best interests of the
Company; |
| |
|
|
| |
(b) |
devote such of its time, labour and attention to the
business of the Company as is necessary for the proper performance of the
Services hereunder; and |
| |
|
|
| |
(c) |
refrain from acting in any manner contrary to the best
interests of the Company or contrary to the duties of the Contractor as
contemplated herein. |
6.2 Other Activities. The Contractor shall not be
precluded from acting in a function similar to that contemplated under this
Agreement for any other person, firm or company.
ARTICLE 7
PRIVATE PLACEMENT OF COMPENSATION SHARES
7.1 Documents Required from Contractor. The Contractor
shall complete, sign and return to the Company as soon as possible, on request
by the Company, such additional documents, notices and undertakings as may be
required by regulatory authorities and applicable law.
7.2 Acknowledgements of Contractor The Contractor
acknowledges and agrees that:
| |
(a) |
the Contractor agrees and acknowledges that none of the
Compensation Shares have been registered under the Securities Act of 1933
or under any state securities or “blue sky” laws of any state of the
United States, and, unless so registered, may not be offered or sold in
the United States or, directly or indirectly, to U.S. Persons (as that
term is defined in Regulation S under the Securities Act of 1933), except
in accordance with the provisions of Regulation S, pursuant to an
effective registration statement under the Securities Act of 1933, or
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933 and in each case
only in accordance with applicable state securities laws. However, the
parties acknowledge that the Company shall register the Compensation Shares within
one year from the date of this Agreement; |
| |
(b) |
the Contractor has not acquired the Compensation Shares
as a result of, and will not itself engage in, any “directed selling
efforts” (as defined in Regulation S under the 1933 Act) in the United
States in respect of any of the Securities which would include any
activities undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the United
States for the resale of any of the Compensation Shares; provided,
however, that the Contractor may sell or otherwise dispose of any of the
Compensation Shares pursuant to registration thereof under the 1933 Act
and any applicable state securities laws or under an exemption from such
registration requirements; |
| |
|
|
| |
(c) |
the Compensation Shares will be subject in the United
States to a hold period from the date of issuance of the Compensation
Shares unless such Compensation Shares are registered with the Securities
and Exchange Commission (“SEC”); |
| |
|
|
| |
(d) |
the decision to execute this Agreement and purchase the
Compensation Shares agreed to be purchased hereunder has not been based
upon any oral or written representation as to fact or otherwise made by or
on behalf of the Company other than those made by the Company in the
information the Company has filed with the SEC; |
| |
|
|
| |
(e) |
it will indemnify and hold harmless the Company and,
where applicable, its directors, officers, employees, agents, advisors and
shareholders from and against any and all loss, liability, claim, damage
and expense whatsoever (including, but not limited to, any and all fees,
costs and expenses whatsoever reasonably incurred in investigating,
preparing or defending against any claim, lawsuit, administrative
proceeding or investigation whether commenced or threatened) arising out
of or based upon any representation or warranty of the Contractor
contained herein or in any document furnished by the Contractor to the
Company in connection herewith being untrue in any material respect or any
breach or failure by the Contractor to comply with any covenant or
agreement made by the Contractor to the Company in connection
therewith; |
| |
|
|
| |
(f) |
the issuance and sale of the Compensation Shares to the
Contractor will not be completed if it would be unlawful; |
| |
|
|
| |
(g) |
the Compensation Shares are not listed on any stock
exchange or subject to quotation and no representation has been made to
the Contractor that the Compensation Shares will become listed on any
other stock exchange or subject to quotation on any other quotation system
except that market makers are currently making markets in the Company’s
common stock on the OTC Bulletin Board; |
| |
|
|
| |
(h) |
no securities commission or similar regulatory authority
has reviewed or passed on the merits of the Compensation Shares; |
| |
|
|
| |
(i) |
there is no government or other insurance covering the
Compensation Shares; |
| |
|
|
| |
(j) |
there are risks associated with an investment in the
Compensation Shares, including the risk that the Contractor could lose all
of its investment; |
| |
(k) |
the Contractor and the Contractor’s advisor(s) have had a
reasonable opportunity to ask questions of and receive answers from the
Company in connection with the distribution of the Compensation Shares
hereunder, and to obtain additional information, to the extent possessed
or obtainable without unreasonable effort or expense, necessary to verify
the accuracy of the information about the Company; |
| |
|
|
|
| |
(l) |
the books and records of the Company were available upon
reasonable notice for inspection, subject to certain confidentiality
restrictions, by the Contractor during reasonable business hours at its
principal place of business, and all documents, records and books in
connection with the distribution of the Compensation Shares hereunder have
been made available for inspection by the Contractor, the Contractor’s
lawyer and/or advisor(s); |
| |
|
|
|
| |
(m) |
the Company will refuse to register any transfer of the
Compensation Shares not made in accordance with the provisions of
Regulation S, pursuant to an effective registration statement under the
1933 Act or pursuant to an available exemption from the registration
requirements of the 1933 Act; |
| |
|
|
|
| |
(n) |
the statutory and regulatory basis for the exemption
claimed for the offer of the Compensation Shares, although in technical
compliance with Regulation S, would not be available if the offering is
part of a plan or scheme to evade the registration provisions of the 1933
Act; and |
| |
|
|
|
| |
(o) |
the Contractor has been advised to consult the
Contractor’s own legal, tax and other advisors with respect to the merits
and risks of an investment in the Compensation Shares and with respect to
applicable resale restrictions, and it is solely responsible (and the
Company is not in any way responsible) for compliance with: |
| |
|
|
|
| |
|
(i) |
any applicable laws of the jurisdiction in which the
Contractor is resident in connection with the distribution of the
Compensation Shares hereunder, and |
| |
|
|
|
| |
|
(ii) |
applicable resale restrictions. |
7.3 Representations, Warranties and Covenants of the
Contractor. The Contractor hereby represents and warrants to and covenants
with the Company (which representations, warranties and covenants shall survive
the end of the expiry of the Term or early termination of this Agreement) that:
| |
(a) |
The Contractor is a U.S. Person and is an “accredited
investor” as that term is defined in Rule 501 of Regulation D promulgated
under the 1933 Act; |
| |
|
|
| |
(b) |
the Contractor is not acquiring the Compensation Shares
for the account or benefit of, directly or indirectly, any other U.S.
Person; |
| |
|
|
| |
(c) |
the sale of the Compensation Shares to the Contractor as
contemplated in this Agreement complies with or is exempt from the
applicable securities legislation of the jurisdiction of residence of the
Contractor; |
| |
|
|
| |
(d) |
the Contractor is acquiring the Compensation Shares for
investment only and not with a view to distribution and, in particular, it
has no intention to distribute either directly or indirectly any of the
Compensation Shares in the United States or to U.S.
Persons; |
| |
(e) |
the Contractor is executing this Agreement and is
acquiring the Compensation Shares as principal for the Contractor’s own
account, for investment purposes only, and not with a view to, or for,
distribution or fractionalisation thereof, in whole or in part, and no
other person has a direct or indirect beneficial interest in such
Compensation Shares; |
| |
|
|
|
| |
(f) |
the entering into of this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Contractor; |
| |
|
|
|
| |
(g) |
the entering into of this Agreement and the transactions
contemplated thereby will not result in the violation of any of the terms
and provisions of any law applicable to the Contractor, or of any
agreement, written or oral, to which the Contractor may be a party or by
which the Contractor is or may be bound; |
| |
|
|
|
| |
(h) |
the Contractor has duly executed and delivered this
Agreement and it constitutes a valid and binding agreement of the
Contractor enforceable against the Contractor in accordance with its
terms; |
| |
|
|
|
| |
(i) |
the Contractor has the requisite knowledge and experience
in financial and business matters as to be capable of evaluating the
merits and risks of the prospective investment in the Compensation Shares
and the Company; |
| |
|
|
|
| |
(j) |
the Contractor is not an underwriter of, or dealer in,
the common shares of the Company, nor is the Contractor participating,
pursuant to a contractual agreement or otherwise, in the distribution of
the Compensation Shares; |
| |
|
|
|
| |
(k) |
the Contractor is not aware of any advertisement of
pertaining to the Company or any of the Compensation Shares; and |
| |
|
|
|
| |
(l) |
no person has made to the Contractor any written or oral
representations: |
| |
|
|
|
| |
|
(i) |
that any person will resell or repurchase any of the
Compensation Shares; |
| |
|
|
|
| |
|
(ii) |
that any person will refund the purchase price of any of
the Compensation Shares; |
| |
|
|
|
| |
|
(iii) |
as to the future price or value of any of the
Compensation Shares; or |
| |
|
|
|
| |
|
(iv) |
that any of the Compensation Shares will be listed and
posted for trading on any stock exchange or automated dealer quotation
system or that application has been made to list and post any of the
Compensation Shares of the Company on any stock exchange or automated
dealer quotation system, except that currently certain market makers make
market in the common shares of the Company on the OTC Bulletin
Board. |
7.4 Legending of Compensation Shares. The Contractor
hereby acknowledges that upon the issuance thereof, and until such time as the
same is no longer required under the applicable securities laws and regulations,
the certificates representing any of the Compensation Shares will bear a legend
in substantially the following form:
NONE OF THE SECURITIES REPRESENTED
HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES
LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE
1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933
ACT. “UNITED STATES” AND “U.S.
PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.
7.5 The Contractor hereby acknowledges and agrees to the
Company making a notation on its records or giving instructions to the registrar
and transfer agent of the Company in order to implement the restrictions on
transfer set forth and described in this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices required or allowed to be given
under this Agreement shall be made either personally by delivery to or by
facsimile transmission to the address as set forth above or to such other
address as may be designated from time to time by such party in writing.
8.2 Independent Legal Advice. The Contractor
acknowledges that:
| |
(a) |
this Agreement was prepared by counsel for the
Company; |
| |
|
|
| |
(b) |
counsel received instructions from the Company and does
not represent the Contractor; |
| |
|
|
| |
(c) |
the Contractor has been requested to obtain his own
independent legal advice on this Agreement prior to signing this
Agreement; |
| |
|
|
| |
(d) |
the Contractor has been given adequate time to obtain
independent legal advice; |
| |
|
|
| |
(e) |
by signing this Agreement, the Contractor confirms that
he fully understands this Agreement; and |
| |
|
|
| |
(f) |
by signing this Agreement without first obtaining
independent legal advice, the Contractor waives his right to obtain
independent legal advice. |
8.3 Change of Address. Any party may, from time to time,
change its address for service hereunder by written notice to the other party in
the manner aforesaid.
8.4 Entire Agreement. As of from the date hereof, any
and all previous agreements, written or oral between the parties hereto or on
their behalf relating to the appointment of the Contractor by the Company are
null and void. The parties hereto agree that they have expressed herein their
entire understanding and agreement concerning the subject matter of this
Agreement and it is expressly agreed that no implied covenant, condition, term
or reservation or prior representation or warranty shall be read into this
Agreement relating to or concerning the subject matter hereof or any matter or
operation provided for herein.
8.5 Further Assurances. Each party hereto will promptly
and duly execute and deliver to the other party such further documents and
assurances and take such further action as such other party may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Agreement and to establish
and protect the rights and remedies created or intended to be created hereby.
8.6 Waiver. No provision hereof shall be deemed waived
and no breach excused, unless such waiver or consent excusing the breach is made
in writing and signed by the party to be charged with such waiver or consent. A
waiver by a party of any provision of this Agreement shall not be construed as a
waiver of a further breach of the same provision.
8.7 Amendments in Writing. No amendment, modification or
rescission of this Agreement shall be effective unless set forth in writing and
signed by the parties hereto.
8.8 Assignment. Except as herein expressly provided, the
respective rights and obligations of the Contractor and the Company under this
Agreement shall not be assignable by either party without the written consent of
the other party and shall, subject to the foregoing, enure to the benefit of and
be binding upon the Contractor and the Company and their permitted successors or
assigns. Nothing herein expressed or implied is intended to confer on any person
other than the parties hereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
8.9 Severability. In the event that any provision
contained in this Agreement shall be declared invalid, illegal or unenforceable
by a court or other lawful authority of competent jurisdiction, such provision
shall be deemed not to affect or impair the validity or enforceability of any
other provision of this Agreement, which shall continue to have full force and
effect.
8.10 Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not affect the construction
or interpretation of this Agreement.
8.11 Number and Gender. Wherever the singular or
masculine or neuter is used in this Agreement, the same shall be construed as
meaning the plural or feminine or a body politic or corporate and vice versa
where the context so requires.
8.12 Time. Time shall be of the essence of this
Agreement. In the event that any day on or before which any action is required
to be taken hereunder is not a business day, then such action shall be required
to be taken at or before the requisite time on the next succeeding day that is a
business day. For the purposes of this Agreement, “business day” means a day
which is not Saturday or Sunday or a statutory holiday in Scottsdale, Arizona,
U.S.A.
8.13 Enurement. This Agreement is intended to bind and
enure to the benefit of the Company, its successors and assigns, and the
Contractor and the personal legal representatives of the Contractor.
8.14 Counterparts. This Agreement may be executed in
several counterparts, each of which will be deemed to be an original and all of
which will together constitute one and the same instrument.
8.15 Currency. Unless otherwise provided, all dollar
amounts referred to in this Agreement are in lawful money of the United States
of America.
8.16 Electronic Means. Delivery of an executed copy of
this Agreement by electronic facsimile transmission or other means of electronic
communication capable of producing a printed copy will be deemed to be execution
and delivery of this Agreement as of the effective date of this Agreement.
8.17 Proper Law. This Agreement will be governed by and
construed in accordance with the law of Nevada. The parties hereby attorn to the
jurisdiction of the Courts in the State of Nevada.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
LITHIUM EXPLORATION GROUP, INC.
| Per: |
 |
|
| |
Alexander Walsh |
|
THE CONTRACTOR
Per:
| Per: |
 |
|
| |
Brandon Colker |
|
Tero Oilfield Services Ltd.
Financial Statements
June 30, 2014
Tero Oilfield Services Ltd.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Tero Oilfield Services Ltd,
We have audited the accompanying balance sheet of Tero Oilfield
Services Ltd (the “Company”), as of June 30, 2014 and the related statements of
operations, shareholders’ deficit and cash flows for the four months period
ended June 30, 2014. 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 audit. We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United
States of America). 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 includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to the above
present fairly, in all material respects, the financial position of Tero
Oilfield Services Ltd. as of June 30, 2014, and the results of operations,
shareholders’ deficit and cash flows for the four months period ended June 30,
2014 in conformity with accounting principles generally accepted in the United
States of America.
/s/ RBSM LLP
New York, New York
October 14, 2014
2
Tero Oilfield Services Ltd.
Balance Sheet
| |
|
June
30, |
|
| |
|
2014
|
|
| ASSETS |
|
|
|
| CURRENT ASSETS: |
|
|
|
| Cash |
$ |
21,208 |
|
| Accounts receivable, net |
|
202,359 |
|
| Other current
assets |
|
20,376 |
|
| Total current assets |
|
243,943 |
|
| |
|
|
|
| Property and equipment, net |
|
427,712 |
|
| TOTAL ASSETS |
$ |
671,655 |
|
| |
|
|
|
| LIABILITIES AND SHAREHOLDERS’
DEFICIT |
|
|
|
| |
|
|
|
| CURRENT LIABILITIES: |
|
|
|
| Accounts payable and accrued
liabilities |
$ |
71,174 |
|
| Current
maturities of long-term debt |
|
91,925 |
|
| Due to shareholders |
|
47,494 |
|
| Total current liabilities |
|
210,593 |
|
| |
|
|
|
| LONG-TERM DEBT: |
|
|
|
| Notes payable, less current
maturities |
|
286,952 |
|
| Asset retirement
obligations |
|
271,164 |
|
| TOTAL LIABILITIES |
|
768,709 |
|
| |
|
|
|
| SHAREHOLDERS’ DEFICIT |
|
(97,054 |
)
|
| |
|
|
|
| TOTAL LIABILITIES AND SHAREHOLDER’S DEFICIT |
$ |
671,655 |
|
The accompanying notes are an integral part of these financial
statements.
3
Tero Oilfield Services Ltd.
Statement of Income and
Shareholders’ Deficit
| |
|
Four Months Ended June 30,
|
|
| |
|
2014
|
|
| REVENUE |
$ |
408,714 |
|
| COST OF GOODS SOLD |
|
185,052 |
|
| |
|
|
|
| |
|
|
|
| Gross profit |
|
223,662 |
|
| |
|
|
|
| OPERATING EXPENSES: |
|
|
|
| Selling and marketing |
|
11,390 |
|
| Depreciation |
|
28,910 |
|
| General and administrative |
|
127,634 |
|
| TOTAL OPERATING EXPENSES |
|
167,934 |
|
| |
|
|
|
| Operating income |
|
55,728 |
|
| |
|
|
|
| OTHER INCOME (EXPENSES): |
|
|
|
| Interest expense, net |
|
(10,497 |
)
|
| TOTAL OTHER EXPENSES |
|
(10,497 |
) |
| |
|
|
|
| Earnings before income taxes |
|
45,231 |
|
| Provision for income taxes |
|
9,126
|
|
| NET INCOME |
|
36,105 |
|
| Other Comprehensive Income: |
|
|
|
| Cumulative translation adjustment |
|
(4,681 |
) |
| COMPREHENSIVE INCOME |
$ |
40,786 |
|
| |
|
|
|
| SHAREHOLDERS’ DEFICIT: |
|
|
|
| Shareholders’ deficit – Beginning of period
|
$ |
(128,478 |
) |
| Net income |
|
36,105 |
|
| Cumulative Translation Adjustment |
|
(4,681 |
) |
| Shareholders’ deficit – End of period |
$ |
(97,054 |
)
|
The accompanying notes are an integral part of these financial
statements.
4
Tero Oilfield Services Ltd.
Statements of Cash Flows
| |
|
Four Months Ended June 30,
|
|
| |
|
2014
|
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| Net income |
$ |
36,105 |
|
| Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
|
| Depreciation |
|
28,910 |
|
| Changes in operating assets and
liabilities: |
|
|
|
| Short-term investments |
|
7,879 |
|
| Accounts receivable |
|
13,292 |
|
| Inventory |
|
42,983 |
|
| Other current assets |
|
(20,376 |
) |
| Accounts payable |
|
21,270 |
|
| Accrued liabilities |
|
(68,712 |
) |
| NET CASH PROVIDED BY OPERATING ACTIVITES |
|
61,351 |
|
| |
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
| Purchase of property and equipment
|
|
(18,683 |
) |
| Proceeds from sale of property and equipment |
|
7,364
|
|
| NET CASH USED IN INVESTING ACTIVITIES |
|
(11,319 |
) |
| |
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| Long-term debt retired |
|
(86,496 |
)
|
| NET CASH USED IN FINANCING ACTIVITIES |
|
(86,496 |
) |
| |
|
|
|
| Effects of currency translation on cash and
cash equivalents |
|
6,546 |
|
| |
|
|
|
| NET DECREASE IN CASH |
|
(29,918 |
) |
| |
|
|
|
| CASH AT BEGINNING OF PERIOD |
|
51,126 |
|
| CASH AT END OF PERIOD |
$ |
21,208 |
|
| |
|
|
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
| Cash paid during the periods for: |
|
|
|
| Interest |
$ |
10,499 |
|
| Income taxes |
$ |
27,103 |
|
| |
|
|
|
The accompanying notes are an integral part of these financial
statements.
5
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Tero Oilfield Services Ltd, Inc. (“the Company”, “Tero”) was
incorporated in the State of Alberta on January 31, 1997.
Tero Oilfield Services Ltd., an energy services company,
provides specialized services to upstream oil and natural gas companies
operating in the Western Canadian Sedimentary Basin. Through the exploration and
production of oil and gas a significant regular stream of waste is generated by
the oil and gas producers. The oil and gas producers are required to dispose of
this waste in an environmentally approved manner as stipulated by Alberta
Energy, Alberta’s energy regulator.
The Company assists upstream oil and natural gas companies with
the disposal fluids and solids and/or treatment of by-products. To dispose of
liquid wastes, oil and gas producers are required to inject them into approved
permitted injection wells. An injection well disposes of the waste fluids deep
into the ground into porous rock formations outside of known oil and gas
production zones and well as underground aquifers. The company owns and operates
a full Class 1B liquid and sold oilfield waste handling facility in Wardlow,
Alberta, Canada. This class of well is approved for the disposal of produced
water, specific common oilfield waste streams and waste streams meeting specific
criteria.
On August 20, 2012, the Company entered into a letter of intent
with Lithium Exploration Group, Inc (Lithium) pursuant to which Tero agreed to
sell to 75% of its issued and outstanding common shares of to Lithium in
exchange for an aggregate of $1,500,000,
On March 1, 2014, Alta Disposal Ltd. (Alta), a wholly-owned
subsidiary of Lithium, completed a share purchase agreement with Tero and Garry
Hofmann, the sole shareholder of Tero. Pursuant to the agreement, Mr. Hofmann
agreed to sell and Lithium agreed to purchase 50% of the issued and outstanding
common shares of Tero in exchange for an aggregate of
Lithium has been granted an option to acquire an additional 25%
of the shares in Tero for $500,000 by February 28, 2015.
Use of Estimates
In preparing financial statements in conformity with accounting
principles generally accepted in the United States of America, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash
For the purpose of the statement of cash flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less at date of acquisition to be cash equivalents.
Short-Term Investments
The Company invests excess cash in GST accounts with maturities
typically at one year.
6
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
Accounts Receivable
Accounts receivable arise in the normal course of business and
are reported net of an allowance for doubtful accounts. The allowance is based
on management’s estimate of the uncollectible trade accounts receivable based on
historical collection experience and management’s evaluation of the
collectability of outstanding accounts receivable. Contractual terms and payment
history determine when receivables are delinquent. The Company evaluated its
accounts receivable at June 30, 2014 and did not record an allowance for
doubtful accounts because of the assurance of collectability of those
receivables.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount may not be recoverable.
If the sum of the expected future undiscounted cash flow is less than the
carrying amount of the asset, a loss is recognized for the difference between
the fair value and carrying value of the asset. There were no impairment losses
taken for the period ended June 30, 2014.
Revenue recognition
It is the Company’s policy that revenue from product sales or
services will be recognized in accordance with ASC 605 “Revenue Recognition”.
Four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectability is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded. The Company will defer
any revenue for which the product was not delivered or is subject to refund
until such time that the Company and the customer jointly determine that the
product has been delivered or no refund will be required.
The Company generates revenue by handling waste generated by
oil and gas producers in the area. Specifically, the waste streams handled by
the Company can be classified into the following categories:
- Fluids Disposal -Fluid disposal consists of the disposal of rig
tank and workover water, produced water and frac water.
- Solids Disposal-Solid waste is produced in drilling, production,
well servicing, and vessel cleaning. It is generally brought to waste disposal
facilities mixed with liquids is then separated, tested, dewatered, then sent
to a landfill for disposal.
- Oil Skimming-Through a process of heating and the use of various
chemicals, the Company processes oilfield waste to separate to solids, water
and oil. The oil is stored on site temporarily until sufficient volumes are
accumulated to be shipped through pipeline.
Asset retirement obligation
The liability for the fair value of environmental and site
restoration obligations is recorded when the obligations are incurred and the
fair value can be reasonably estimated. The obligations are normally incurred at
the time the related assets are brought into production. The fair value of the
obligation is based on the estimated cash flows required to settle the
obligations discounted using an estimate of the Company's finanCing rate. The
fair value of the obligations is recorded as a liability with the same amount
recorded as an increase in capitalized costs. The amounts included in
capitalized costs are amortized using an amortization rate of 10%. The liability
is adjusted for accretion expense representing the increase in the fair value of
the obligations due to the passage of time.
7
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
Cost of Goods Sold
Cost of goods sold for the four months ended June 30, 2014
consisted of the following:
|
Subcontract trucking |
$ |
12,561 |
|
|
Utilities |
|
16,718 |
|
|
Insurance |
|
14,218 |
|
|
Fuel & oil disposal |
|
33,817 |
|
|
Skim oil processing fees |
|
21,809 |
|
| Solids
processing |
|
37,375 |
|
|
Repairs and maintenance |
|
41,813 |
|
| Other
|
|
6,741
|
|
| TOTAL COST OF GOODS
SOLD |
$ |
185,052 |
|
| |
|
|
|
Advertising
The Company expenses the costs associated with advertising when
incurred. Advertising expense totaled $11,390 for the four months ended June 30,
2014.
Foreign currency translation
The Company’s reporting is US Dollar and functional currency is
Canadian Dollars. The accounts of the are maintained using the local currency
(Canadian Dollar) as the functional currency. All assets and liabilities are
translated into U.S. Dollars at balance sheet date, shareholders’ equity is
translated at historical rates and revenue and expense accounts are translated
at the average exchange rate for the year or the reporting period. The
translation adjustments are deferred as a separate component of stockholders’
equity, captioned as accumulated other comprehensive (loss) gain. Transaction
gains and losses arising from exchange rate fluctuation on transactions
denominated in a currency other than the functional currency are included in the
consolidated statements of operations.
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 to June
30, 2014, the Company had no material items of other comprehensive income except
for the foreign currency translation adjustment.
8
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
NOTE 2 – CONCENTRATIONS OF CREDIT RISK
The Company maintains cash balances in bank deposit accounts
which, at times, may exceed Canadian federally insured limits. The Company has
not experienced any losses in such accounts and management believes it is not
exposed to any significant credit risks associated with these accounts. There
was no excess of the deposit liabilities over the amounts covered by federal
insurance at June 30, 2014.
The Company grants credit to its customers throughout Canada
and generally does not require collateral. Consequently, the company’s ability
to collect the amounts due from customers is affected by economic fluctuations
in the oil and gas industry.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 2014 consisted of the
following:
| |
|
2014
|
|
| Accounts receivable |
$ |
202,359 |
|
| Less allowance for doubtful accounts |
|
--
|
|
| |
$ |
202,359 |
|
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2014 consisted of the
following:
| |
|
2014
|
|
| Vehicles |
$ |
382,238 |
|
| Disposal wells |
|
520,131 |
|
| Machinery and equipment |
|
992,992 |
|
| |
|
1,895,361 |
|
| Less accumulated depreciation |
|
(1,467,649 |
) |
| Net book value |
$ |
427,712 |
|
Depreciation expense for property and equipment totaled $28,910
for the four months ended June 30, 2014.
9
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
NOTE 5 – INCOME TAXES
The Company is treated as a Canadian controlled private
corporation for federal and provincial taxes. Earnings before income taxes were
$45,231 for the four months ending June 30, 2014.
| Tax Rate Reconciliation |
|
2014
|
|
| Federal statutory rate |
|
15.0% |
|
| Statutory deductions |
|
(11.8 |
) |
| Provincial statutory rate |
|
10.0 |
|
| Effective tax rate |
|
13.2%
|
|
| Provision for Income Taxes |
|
2014
|
|
| Federal |
$ |
5,461 |
|
| Provincial |
|
3,664
|
|
| Total |
$ |
9,125 |
|
NOTE 5 – SHAREHOLDER ADVANCES
Shareholder advances consisted of $47,494 at June 30, 2014. The
advances do not bear interest, have a specified due date or require
collateral.
NOTE 6 – LONG-TERM DEBT
Long-Term Debt at June 30, 2014 consists of the following:
| Note for share redemption payable in annual installments of
$106,079 with the first installment due on March 1, 2014 including accrued
interest at 2%. |
|
|
|
| |
$ |
378,877 |
|
| Less current maturities |
|
(91,925 |
)
|
| |
$ |
286,952 |
|
Future principal payments on the note payable are scheduled as
follows:
| Year Ending June 30, |
|
|
|
|
2015 |
$ |
91,925 |
|
|
2016 |
|
93,748 |
|
|
2017 |
|
95,638 |
|
|
2018 |
|
97,566 |
|
| |
$ |
378,877 |
|
10
Tero Oilfield Services Ltd.
Notes to Financial Statements
June 30, 2014
NOTE 7 – ASSET RETIREMENT OBLIGATION
The Company owns and operates a full Class 1B liquid and solid
oilfield waste handling facility in Wardlow, Alberta, Canada. Annual inspections
are performed by the Waste Management and Liability Management Departments of
the Alberta Energy Regulator (AER). AER requires the Company to secure Letters
of Credit make deposits equal to the estimated costs of well and surface
facility abandonment and reclamation.
| |
|
2014
|
|
| Asset retirement obligation at beginning of
year |
$ |
259,667 |
|
| Accretion expense |
|
-- |
|
| Change due to foreign currency translation
|
|
11,497 |
|
| Asset retirement obligation at June 30, 2014 |
$ |
271,164 |
|
NOTE 8 – COMMITMENTS AND CONTINGENCIES
LITIGATION:
The Company is not involved in any litigation and Management is
not aware of any outstanding contingencies.
LEASES:
The Company entered into a surface easement lease for road
usage through an agreement dated September 27, 1997 and amended on April 28,
2005 which permits use of 5.432 acres for $2,464 per year. The lease is renewed
annually.
The Company has obtained Letters of Credit from its bank to
satisfy its legal obligations to remediate well and surface abandonment as
explained in Note 7. The outstanding balances of the Letters of Credit were
$271,164 at June 30, 2014.
NOTE 9 – MAJOR CUSTOMERS AND VENDORS
The Company has five customers that represent approximately 75%
of its revenue for the four months ended June 30, 2014. The Company has four
customers that represent approximately 57.92% of its accounts receivable at June
30, 2014. The Company is not reliant on any specific vendor for its equipment
purchases and can establish additional relationships with minimal disruption.
11
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS
ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander Walsh, certify that:
1. I have
reviewed this Annual Report on Form 10-K of Lithium Exploration Group, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
| |
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
| |
|
|
| |
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
| |
|
|
| |
(c) |
Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
| |
|
|
| |
(d) |
Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and |
5. The
registrant's other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
| |
(a) |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and |
| |
|
|
| |
(b) |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial
reporting. |
Date: October 14, 2014
| /s/ Alexander
Walsh |
|
| Alexander Walsh |
|
| President, Chief Executive Officer, and Director |
|
| (Principal Executive Officer) |
|
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS
ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bryan A. Kleinlein, certify that:
1. I have
reviewed this Annual Report on Form 10-K of Lithium Exploration Group, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
| |
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
| |
|
|
| |
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
| |
|
|
| |
(c) |
Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
| |
|
|
| |
(d) |
Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and |
5. The
registrant's other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
| |
(a) |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and |
| |
|
|
| |
(b) |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial
reporting. |
Date: October 14, 2014
| /s/ Bryan A.
Kleinlein |
|
| Bryan A. Kleinlein |
|
| Chief Financial Officer |
|
| (Principal Financial Officer, Principal Accounting |
|
| Officer) |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander Walsh, hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
| (1) |
the Annual Report on Form 10-K of Lithium Exploration
Group, Inc. for the year ended June 30, 2014 (the "Report") fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| |
|
| (2) |
the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of Lithium Exploration Group, Inc. |
Dated: October 14, 2014
| |
/s/
Alexander Walsh |
| |
Alexander Walsh |
| |
President, Chief Executive Officer, and
Director |
| |
(Principal Executive Officer) |
| |
Lithium Exploration Group, Inc.
|
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Lithium
Exploration Group, Inc. and will be retained by Lithium Exploration Group, Inc.
and furnished to the Securities and Exchange Commission or its staff upon
request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Bryan A. Kleinlein, hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
| (1) |
the Annual Report on Form 10-K of Lithium Exploration
Group, Inc. for the year ended June 30, 2014 (the "Report") fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| |
|
| (2) |
the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of Lithium Exploration Group, Inc. |
Dated: October 14, 2014
| |
/s/
Bryan A. Kleinlein |
| |
Bryan A. Kleinlein |
| |
Chief Financial Officer |
|
(Principal Financial Officer and Principal
Accounting Officer) |
| |
Lithium Exploration Group, Inc.
|
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Lithium
Exploration Group, Inc. and will be retained by Lithium Exploration Group, Inc.
and furnished to the Securities and Exchange Commission or its staff upon
request.