UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q /A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
or
[ ] 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
organization) |
(IRS Employer Identification No.) |
|
|
3800 N Central Avenue, Suite 820, Phoenix, AZ
85012 |
85012 |
(Address of principal executive offices) |
(Zip Code) |
480.641.4790
(Registrants telephone number,
including area code)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
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 past 90 days.
[X] YES [ ] NO
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
[X] YES [ ] NO
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a small
reporting company. See the definitions 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 [ ] |
(Do not check if a smaller reporting company)
|
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
[X] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court.
[ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
685,639,724 common shares issued and outstanding as of November 11,
2014.
Explanatory Note
Our company is filing this Form 10-Q/A for the period ended September 30, 2014 to correct a clerical error in Part I, Item 4. Controls and Procedures, which misstated the reference to our principal financial officer and principal accounting officer, and on the Certifications under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 which misstated the name of our principal financial officer and principal financial officer and to revise the Exhibits table with reference to the certifications, accordingly. The above described changes had no effect on our company’s financial position or results of operations. This amended report does not reflect events occurring after the filing of the Form 10-Q on November 19, 2014, nor does it modify or update those disclosures presented therein, expect with regard to the modification described in this Explanatory Note. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as a result of this amended report, the certifications filed and furnished as exhibits to the Form 10-Q pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 have been re-executed and re-filed as of the date of this amended report and are included as exhibits hereto.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014
TABLE OF CONTENTS
2
PART I FINANCIAL INFORMATION
Item 1. |
Financial Statements
|
Our unaudited condensed consolidated financial statements for the three month period ended September 30, 2014 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
3
LITHIUM EXPLORATION GROUP, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
4
Lithium Exploration Group, Inc.
Condensed
Consolidated Balance Sheets
|
|
September 30, |
|
|
June 30, |
|
|
|
2014 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
177,820 |
|
$ |
69,732 |
|
Receivable |
|
22,272 |
|
|
26,419 |
|
Loan receivable |
|
20,000 |
|
|
20,000 |
|
Prepaid expenses |
|
2,886 |
|
|
21,862 |
|
Total current assets |
|
222,978 |
|
|
138,013 |
|
|
|
|
|
|
|
|
Investment in
unconsolidated affiliate (Note 11) |
|
973,176 |
|
|
924,753 |
|
|
|
|
|
|
|
|
Total Assets |
$ |
1,196,154 |
|
$ |
1,062,766 |
|
|
|
|
|
|
|
|
LIABILITIES AND DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable
and accrued liabilities |
$ |
115,911 |
|
$ |
14,520 |
|
Derivative liability
convertible promissory notes (Note 6) |
|
404,937 |
|
|
2,832,989 |
|
Due to related
party (Note 7) |
|
45,332 |
|
|
45,332 |
|
Convertible promissory notes |
|
|
|
|
|
|
(net of discount
of $1,934,881 and $2,797,850) (Note 6) |
|
942,378 |
|
|
450,057 |
|
Accrued interest convertible promissory notes (Note 6) |
|
127,427 |
|
|
75,004 |
|
|
|
|
|
|
|
|
Total Current
Liabilities |
|
1,635,985 |
|
|
3,417,902 |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT |
|
|
|
|
|
|
Lithium Explorations Group, Inc.
Stockholders Deficit |
|
|
|
|
|
|
Capital stock (Note 3) |
|
|
|
|
|
|
Authorized:
100,000,000
preferred shares, $0.001 par
value
2,000,000,000
(June 30, 2014 - 500,000,000) common
shares,
$0.001 par
value
Issued and
outstanding:
Nil
preferred shares (June 30, 2014 Nil) |
|
- |
|
|
- |
|
366,244,918 common shares (June
30, 2014 191,958,118) |
|
366,248 |
|
|
191,961 |
|
Additional paid-in capital |
|
40,079,009 |
|
|
38,381,943 |
|
Accumulated other comprehensive loss |
|
(7,633 |
) |
|
(5,769 |
) |
Accumulated deficit |
|
(40,703,255 |
) |
|
(40,821,871 |
) |
Total Lithium
Exploration Group, Inc. Stockholders Deficit |
|
(265,631 |
) |
|
(2,253,736 |
) |
Non-controlling interest |
|
(174,200 |
) |
|
(101,400 |
) |
Total Deficit |
|
(439,831 |
) |
|
(2,355,136 |
) |
|
|
|
|
|
|
|
Total
Liabilities and Stockholders Deficit |
$ |
1,196,154 |
|
$ |
1,062,766 |
|
5
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Operations And
Comprehensive Income (Loss) |
(Unaudited) |
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Revenue |
$ |
16,067 |
|
$ |
- |
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
Mining (Notes 3 & 5) |
|
15,000 |
|
|
10,128 |
|
Selling, general
and administrative (Notes 3 & 5) |
|
502,629 |
|
|
285,693 |
|
Total operating expenses |
|
517,629 |
|
|
295,821 |
|
|
|
|
|
|
|
|
Loss from operations |
|
(501,562 |
) |
|
(295,821 |
) |
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
Interest expense (Note 6) |
|
(1,562,421 |
) |
|
(258,218 |
) |
Gain (loss) on change in the fair value of
derivative liability (Note 6) |
|
2,458,446 |
|
|
(23,152 |
) |
Fair value of warrants issued |
|
(397,070 |
) |
|
(18,333 |
) |
Equity in income of unconsolidated affiliate |
|
48,423 |
|
|
- |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
45,816 |
|
|
(595,524 |
) |
|
|
|
|
|
|
|
Provision for Income Taxes (Note 4) |
|
- |
|
|
- |
|
|
|
|
|
|
|
|
Net income (loss) |
|
45,816 |
|
|
(595,524 |
) |
Less: Net loss attributable
to the non-controlling interest |
|
(72,800 |
) |
|
- |
|
Net Income (Loss) attributable to Lithium
Exploration Group, Inc. Common shareholders |
$ |
118,616 |
|
$ |
(595,524 |
) |
Basic and Diluted Income
(Loss) per Common Share |
$ |
0.00 |
|
$ |
(0.01 |
) |
Basic and Diluted Weighted Average Number
of Common Shares Outstanding |
|
253,441,532 |
|
|
60,190,254 |
|
|
|
|
|
|
|
|
Comprehensive income (loss): |
|
|
|
|
|
|
Net income (loss) |
$ |
45,816 |
|
$ |
(595,524 |
) |
Foreign currency translation adjustment |
|
(1,864 |
) |
|
- |
|
Comprehensive income
(loss) |
|
43,952 |
|
|
(595,524 |
) |
Comprehensive loss attributable to
non-controlling interest |
|
(72,800 |
) |
|
- |
|
Comprehensive income
(loss) attributable to Lithium Exploration Group, Inc. |
$ |
116,752 |
|
$ |
(595,524 |
) |
6
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed
Consolidated Statements of Changes in Stockholders Equity (Deficit) |
|
|
Preferred Shares |
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
|
Amount |
|
|
Number of
Shares |
|
|
Amount |
|
|
Additional Paid-in
Capital |
|
|
Accumulated
Other
Comprehensive
Loss |
|
|
Accumulated
Deficit
|
|
|
Non-
controlling
interest |
|
|
Stockholders
Equity
(Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2014 |
|
- |
|
|
- |
|
|
191,958,118 |
|
|
191,962 |
|
|
38,381,942 |
|
|
(5,769 |
) |
|
(40,821,871 |
) |
|
(101,400 |
) |
|
(2,355,136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for consulting fees |
|
- |
|
|
- |
|
|
2,503,817 |
|
|
2,504 |
|
|
84,496 |
|
|
- |
|
|
- |
|
|
- |
|
|
87,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for debt conversion |
|
- |
|
|
- |
|
|
99,674,935 |
|
|
99,675 |
|
|
918,002 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,017,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for exercise of
warrants |
|
- |
|
|
- |
|
|
72,108,048 |
|
|
72,108 |
|
|
694,568 |
|
|
- |
|
|
- |
|
|
- |
|
|
766,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,864 |
) |
|
- |
|
|
- |
|
|
(1,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
118,616 |
|
|
(72,800 |
) |
|
45,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2014 |
|
- |
|
$ |
- |
|
|
366,244,918 |
|
$ |
366,248 |
|
$ |
40,079,008 |
|
$ |
(7,633 |
) |
$ |
(40,703,255 |
) |
$ |
(174,200 |
) |
$ |
(439,831 |
) |
7
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Cash Flows |
(Unaudited) |
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
|
|
Net income (loss) |
$ |
45,816 |
|
$ |
(595,524 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Equity in income (loss) of unconsolidated affiliate |
|
(48,423 |
) |
|
- |
|
Common shares issued for consulting fees |
|
87,000 |
|
|
82,167 |
|
Common shares issued for interest expenses |
|
31,642 |
|
|
- |
|
Interest expense |
|
1,478,356 |
|
|
258,218 |
|
(Gain) loss on change in the fair value of derivative
liability |
|
(2,458,446 |
) |
|
23,152 |
|
Fair value of warrants issued |
|
397,070 |
|
|
18,333 |
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Receivable |
|
4,147 |
|
|
- |
|
Prepaid expenses |
|
18,976 |
|
|
2,412 |
|
Accrued interest |
|
52,423 |
|
|
- |
|
Accounts payable and accrued liabilities |
|
101,391 |
|
|
816 |
|
Net cash used in operating activities |
|
(290,048 |
) |
|
(210,426 |
) |
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
Deposit applied for
acquisition of subsidiary |
|
- |
|
|
(343,740 |
) |
Net cash used in investing activities |
|
- |
|
|
(343,740 |
) |
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
Proceed from issuance of
convertible promissory notes |
|
400,000 |
|
|
425,000 |
|
Net cash provided by financing activities |
|
400,000 |
|
|
425,000 |
|
|
|
|
|
|
|
|
Effect of foreign exchange |
|
(1,864 |
) |
|
- |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
108,088 |
|
|
(129,166 |
) |
Cash and cash equivalents - beginning of period |
|
69,732 |
|
|
248,624 |
|
Cash and cash equivalents - end of period |
$ |
177,820 |
|
$ |
119,458 |
|
|
|
|
|
|
|
|
Supplementary disclosure of cash flow
information: |
|
|
|
|
|
|
Cash paid during the period
for: |
|
|
|
|
|
|
Interest |
$ |
- |
|
$ |
- |
|
Income taxes |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
Supplementary non- cash
Investing and Financing Activities: |
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Common stock issued for debt
conversion |
$ |
986,034 |
|
$ |
572,681 |
|
Transfer of beneficial conversion feature to
fair value of note |
$ |
215,385 |
|
$ |
- |
|
Common stock issued on cashless
exercise of warrants |
$ |
766,675 |
|
$ |
- |
|
8
The accompanying notes are an integral part of these
unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 Companys 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.
9
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
2. Significant Accounting
Policies
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America.
These interim financial statements as of and for the three
months ended September 30, 2014 and 2013 are unaudited; however, in the opinion
of management, such statements include all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position, results
of operations and cash flows of the Company for the periods presented. The
results for the three months ended September 30, 2014 are not necessarily
indicative of the results to be expected for the year ending June 30, 2015 or
for any future period. All references to September 30, 2014 and 2013 in these
footnotes are unaudited.
These unaudited condensed consolidated financial statements
should be read in conjunction with our audited financial statements and the
notes thereto for the year ended June 30, 2014, included in the Companys annual
report on Form 10-K filed with the SEC on October 14, 2014.
The condensed balance sheet as of June 30, 2014 has been
derived from the audited financial statements at that date but do not include
all disclosures required by the 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 unaudited condensed 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 Companys periodic filings with the Securities
and Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and markets that could affect the financial
statements and future operations of the Company. Significant estimates that may
materially change in the near term include the valuation of derivative
liabilities and the underlying warrants, as well as fair value of investments.
10
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 $177,820 and $69,732 in cash and cash equivalents at
September 30, 2014 and June 30, 2014, 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 September 30, 2014 and June
30, 2014, the Company had $Nil and $Nil, 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.
11
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 Companys 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 Companys
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 Companys 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 September 30, 2014 and June 30, 2014.
12
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 Companys 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 Companys 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 period
ended September 30, 2014 closing rate at 0.8922 CND$:US$, average rate at
0.91804 CND$: US$ and for year ended June 30, 2014 closing rate at 0.9367 CND$:
US$ average rate at 0.9341 CND$: US$
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. As at September 30, 2014
and 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.
13
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
2. Significant Accounting Policies - Continued
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 condensed
consolidated statements of operations.
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 instruments
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 Companys 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 Companys Level 3 financial liabilities consist of the
liability of the Companys 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.
14
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
2. Significant Accounting Policies Continued
Revenue Recognition
The Company has generated little revenues to date. It is the
Companys 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 Companys 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 Companys share of net income from its unconsolidated
affiliate is reflected in the Consolidated Statements of Operations and
Comprehensive Loss and Equity investment in Unconsolidated Affiliate.
Recent Accounting Pronouncements
15
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
2. Significant Accounting Policies - Continued
FASB Statements:
In June 2009 the FASB established the Accounting Standards
Codification ("Codification" or "ASC") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with generally accepted
accounting principles in the United States ("GAAP"). Rules and interpretive
releases of the Securities and Exchange Commission ("SEC") issued under
authority of federal securities laws are also sources of GAAP for SEC
registrants. Existing GAAP was not intended to be changed as a result of the
Codification, and accordingly the change did not impact our financial
statements. The ASC does change the way the guidance is organized and presented.
Accounting Standards Updates ("ASUs") through ASU No. 2014-08
which contain technical corrections to existing guidance or affect guidance to
specialized industries or entities were recently issued. These updates have no
current applicability to the Company or their effect on the financial statements
would not have been significant.
3. Capital Stock
Authorized Stock
At inception, the Company authorized 100,000,000 common shares
and 100,000,000 preferred shares, both with a par value of $0.001 per share.
Each common share entitles the holder to one vote, in person or proxy, on any
matter on which action of the stockholders of the corporation is sought.
Effective April 8, 2009, the Company increased the number of
authorized shares to 600,000,000 shares, of which 500,000,000 shares are
designated as common stock par value $0.001 per share, and 100,000,000 shares
are designated as preferred stock, par value $0.001 per share.
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
Companys 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.
On October 17, 2014, the Company amended its Articles of
Incorporation, which amendment was filed with the Nevada Secretary of State on
October 17, 2014, to increase the authorized capital of its common shares from
500,000,000 common shares, par value $0.001 to 2,000,000,000 common shares, par
value $0.001. The Companys authorized capital consists of 2,000,000,000 common
shares and 100,000,000 preferred shares, all with a par value of $0.001.
16
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances
Common Stock Issuance
For the period ended September 30, 2014:
On July 1, 2014, the Company issued 199,557 common shares at a
market price of $0.05 per share for consulting fees.
On July 4, 2014, the Company issued 541,517 common shares at a
market price of $0.06 per share for consulting fees.
On July 9, 2014, the Company issued 9,713,996 common shares at
a deemed price of $0.01 per share for warrants exercise of $117,962 (Note 6).
On July 16, 2014, the Company issued 1,800,000 common shares at
a deemed price of $0.002 per share for promissory note and interest conversion
of $46,769 (Note 6).
On July 30, 2014, the Company issued 18,113,654 common shares
at a deemed price of $0.02 per share for warrants exercise of $386,433 (Note 6).
On August 1, 2014, the Company issued 1,062,687 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $25,000 (Note 6).
On August 1, 2014, the Company issued 245,232 common shares at
a market price of $0.04 per share for consulting fees.
On August 5, 2014, the Company issued 20,645,463 common shares
at a deemed price of $0.002 per share for warrants exercise of $41,244 (Note 6).
On August 8, 2014, the Company issued 8,904,569 common shares
at a deemed price of $0.02 per share for warrants exercise of $136,555 (Note 6).
On August 12, 2014, the Company issued 3,200,066 common shares
at a deemed price of $0.02 per share for warrants exercise of $59,953 (Note 6).
On August 28, 2014, the Company issued 10,390,546 common shares
at a deemed price of $0.01 per share for promissory note and interest conversion
of $205,984 (Note 6).
On September 1, 2014, the Company issued 350,195 common shares
at a market price of $0.03 per share for consulting fees.
On September 1, 2014, the Company issued 1,167,316 common
shares at a market price of $0.03 per share for consulting fees.
On September 3, 2014, the Company issued 3,000,000 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $42,135 (Note 6).
On September 3, 2014, the Company issued 500,000 common shares
at a deemed price of $0.01 per share for promissory note and interest conversion
of $9,717 (Note 6).
17
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances - Continued
On September 4, 2014, the Company issued 909,091 common shares
at a deemed price of $0.01 per share for promissory note and interest conversion
of $20,000 (Note 6).
On September 4, 2014, the Company issued 583,333 common shares
at a deemed price of $0.003 per share for warrants exercise of $2,322 (Note 6).
On September 8, 2014, the Company issued 1,106,273 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $20,510 (Note 6).
On September 10, 2014, the Company issued 6,734,235 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $62,375 (Note 6).
On September 10, 2014, the Company issued 1,538,462 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $20,000 (Note 6).
On September 11, 2014, the Company issued 2,607,721 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $30,777 (Note 6).
On September 11, 2014, the Company issued 5,599,010 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $39,712 (Note 6).
On September 11, 2014, the Company issued 1,652,893 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $20,000 (Note 6).
On September 12, 2014, the Company issued 9,900,990 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $100,000 (Note 6).
On September 12, 2014, the Company issued 2,869,240 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $30,781(Note 6).
On September 15, 2014, the Company issued 5,584,158 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $54,804 (Note 6).
On September 15, 2014, the Company issued 1,914,321 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $20,529 (Note 6).
On September 15, 2014, the Company issued 10,946,967 common
shares at a deemed price of $0.002 per share for warrants exercise of $22,207
(Note 6).
On September 16, 2014, the Company issued 3,810,301 common
shares at a deemed price of $0.01 per share for promissory note and interest
conversion of $40,447 (Note 6).
On September 17, 2014, the Company issued 1,414,141 common
shares at a deemed price of $0.005 per share for promissory note and interest
conversion of $14,000 (Note 6).
On September 23, 2014, the Company issued 1,477,873 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $9,311 (Note 6).
18
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances - Continued
On September 23, 2014, the Company issued 3,846,154 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $25,000 (Note 6).
On September 23, 2014, the Company issued 1,818,181 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $7,692 (Note 6).
On September 23, 2014, the Company issued 10,000,000 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $55,000 (Note 6).
On September 24, 2014, the Company issued 9,090,909 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $48,585 (Note 6).
On September 29, 2014, the Company issued 6,047,749 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $37,050 (Note 6).
On September 29, 2014, the Company issued 5,000,000 common
shares at a deemed price of $0.003 per share for promissory note and interest
conversion of $31,500 (Note 6).
19
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances - Continued
As at September 30, 2014, 16,061,592 (June 30, 2014 - 13,557,775) were issued to directors and officers of the Company. 18,516,037 (June 30, 2014 - 18,516,037) were issued to independent investors. 872,375 (June 30, 2014 - 872,375) were issued for mining expenses. 768,840 (June 30, 2014 - 768,840) were issued for related party consulting expenses. 948,604 (June 30, 2014 - 948,604) were issued for investor relation expenses. 200,000 (June 30, 2014 - 200,000) were issued for debt settlement. 43,001,127 (June 30, 2014 - 43,001,127) were issued for debenture and interest conversion. 1,028,113 (June 30, 2014 - 1,028,113) were issued for exercise of warrants attached to convertible debentures. 120,940,746 (June 30, 2014 - 21,265,811) were issued for promissory note and interest conversions. 81,307,589 (June 30, 2014 - 9,193,541) were issued for exercise of warrants attached to convertible promissory notes. 954,461 (June 30, 2014 - 954,461) were issued for note payable conversion. 2,000,000 (June 30, 2014 - 2,000,000) were issued for a mining option settlement. 20,000,000 (June 30, 2014 - 20,000,000) were issued for the conversion of Series A Convertible Preferred shares. 59,645,434 (June 30, 2014 - 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 6).
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.
20
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 September 30, 2014 of approximately $11,850,000 will begin
to expire in 2026. Accordingly, deferred tax assets were offset by the valuation
allowance that increased by approximately $418,562 and $536,536 during the
periods ended September 30, 2014 and June 30, 2014, 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 September 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
September 30, 2014. The Companys 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, 2014, June 30, 2013, June 30, 2012 and
June 30, 2011 are still open for examination by the Internal Revenue Service
(IRS).
21
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
4. Provision for Income Taxes - Continued
|
|
For
the three months ended September 30, 2014 |
|
|
|
Amount |
|
|
Tax
Effect (35%) |
|
|
|
|
|
|
|
|
Net income |
$ |
(45,816 |
) |
$ |
(16,036 |
) |
|
|
|
|
|
|
|
Shares issued for consulting fees, mining
expenses, investor relation and director fees |
|
(87,000 |
) |
|
(30,450 |
) |
Shares issued for interest expenses |
|
(31,642 |
) |
|
(11,075 |
) |
Accretion of beneficial conversion feature |
|
(1,478,355 |
) |
|
(517,425 |
) |
Gain on change in the fair value of derivative liability
and fair |
|
|
|
|
|
|
value of warrant issued |
|
2,061,376 |
|
|
721,482 |
|
|
|
|
|
|
|
|
Total |
|
418,562 |
|
|
146,497 |
|
|
|
|
|
|
|
|
Valuation allowance |
|
(418,562 |
) |
|
(146,497 |
) |
|
|
|
|
|
|
|
Net deferred tax asset (liability) |
$ |
- |
|
$ |
- |
|
|
|
For
the three months ended September 30, 2013 |
|
|
|
Amount |
|
|
Tax
Effect (35%) |
|
|
|
|
|
|
|
|
Net loss |
$ |
595,524 |
|
$ |
1208,433 |
|
|
|
|
|
|
|
|
Shares issued for consulting fees, mining
expenses, investor relation and director fees |
|
(82,167 |
) |
|
(28,758 |
) |
Accretion of beneficial conversion feature |
|
(258,218 |
) |
|
(90,376 |
) |
Gain on derivative liability |
|
41,485 |
|
|
14,520 |
|
|
|
|
|
|
|
|
Total |
|
296,624 |
|
|
103,818 |
|
|
|
|
|
|
|
|
Valuation allowance |
|
(296,624 |
) |
|
(103,818 |
) |
|
|
|
|
|
|
|
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.
22
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 assignors 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 Companys
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.
23
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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
Internationals 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.
24
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
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 Promissory Notes
Summary of convertible promissory note at September 30, 2014
and June 30, 2014 is as follows:
|
|
June
30, |
|
|
Fair
value |
|
|
Fair
value |
|
|
Fair
value |
|
|
September |
|
|
|
2014 |
|
|
issued |
|
|
converted |
|
|
repaid |
|
|
30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 13, 2013 |
$ |
461,754 |
|
$ |
- |
|
$ |
(147,469 |
) |
$ |
- |
|
$ |
314,285 |
|
February 27, 2014 |
|
200,000 |
|
|
- |
|
|
(200,000 |
) |
|
- |
|
|
- |
|
February 27, 2014 |
|
150,000 |
|
|
- |
|
|
(36,000 |
) |
|
- |
|
|
114,000 |
|
February 28, 2014 |
|
100,000 |
|
|
- |
|
|
(90,250 |
) |
|
- |
|
|
9,750 |
|
February 28, 2014 |
|
200,000 |
|
|
- |
|
|
(45,000 |
) |
|
- |
|
|
155,000 |
|
February 28, 2014 |
|
220,000 |
|
|
- |
|
|
(55,000 |
) |
|
- |
|
|
165,000 |
|
March 3, 2014 |
|
100,000 |
|
|
- |
|
|
(100,000 |
) |
|
- |
|
|
- |
|
March 3, 2014 |
|
200,000 |
|
|
- |
|
|
(100,000 |
) |
|
- |
|
|
100,000 |
|
March 3, 2014 |
|
100,000 |
|
|
- |
|
|
(94,810 |
) |
|
- |
|
|
5,190 |
|
March 3, 2014 |
|
230,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
230,000 |
|
March 3, 2014 |
|
440,000 |
|
|
- |
|
|
(109,812 |
) |
|
- |
|
|
330,188 |
|
March 15, 2014 |
|
846,154 |
|
|
- |
|
|
(7,692 |
) |
|
- |
|
|
838,462 |
|
July 22, 2014 |
|
- |
|
|
461,538 |
|
|
- |
|
|
|
|
|
461,538 |
|
August 22, 2014 |
|
- |
|
|
153,846 |
|
|
- |
|
|
|
|
|
153,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,247,908 |
|
$ |
615,384 |
|
$ |
(986,033 |
) |
$ |
- |
|
$ |
2,877,259 |
|
Less: Debt discount |
|
2,797,850 |
|
|
|
|
|
|
|
|
|
|
|
1,934,881 |
|
Net Convertible
promissory Note |
|
450,057 |
|
|
|
|
|
|
|
|
|
|
|
942,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion |
$ |
450,057 |
|
|
|
|
|
|
|
|
|
|
$ |
942,378 |
|
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 September 30, 2014, total net proceeds of $675,000 (June
30, 2014 - $675,000) were received with an issuance discount of $67,500 (June
30, 2014 - $67,500) for an aggregate face value of $742,500 (June 30, 2014 -
$742,500). During the period ended September 30, 2014, $109,375 (June 30, 2014 -
$419,272) in face value of the note including interest was converted to
11,461,697 (June 30, 2014 -14,164,584) common shares in accordance with the
terms of the agreement.
25
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
There is no guarantee the investor will make additional
payments. The note of $314,286 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 period ended September 30, 2014, an interest
expense of $5,977 (June 30, 2014 - $7,409) 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 $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 period ended September 30, 2014, $105,984
(June 30, 2014 - $Nil) in face value of the note including interest was
converted to 10,390,546 (June 30, 2014 - Nil) common shares in accordance with
the terms of the agreement. The note was fully converted during the period.
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 period ended September 30, 2014, $57,697
(June 30, 2014 - $Nil) in face value of the note including interest was
converted to 10,544,536 (June 30, 2014 - Nil) common shares in accordance with
the terms of the agreement. During the period ended September 30, 2014, an
interest expense of $18,500 (June 30, 2014 - $1,667) was accrued.
26
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
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 investors 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 period ended September 30, 2014, $19,050 (June
30, 2014 - $Nil) in face value of the note including interest was converted to
6,047,749 (June 30, 2014 - Nil) common shares in accordance with the terms of
the agreement. During the period ended September 30, 2014, an interest expense
of $1,425 (June 30, 2014 -$2,500) 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 $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 period ended
September 30, 2014, $22,500 (June 30, 2014 - $Nil) in face value of the note
including interest was converted to 5,384,616 (June 30, 2014 - Nil) common
shares in accordance with the terms of the agreement. During the period ended
September 30, 2014, an interest expense of $3,750 (June 30, 2014 - $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 period ended September 30, 2014, $27,500 (June 30, 2014 -
$Nil) in face value of the note including interest was converted to 10,000,000
(June 30, 2014 - Nil) common shares in accordance with the terms of the
agreement. During the period ended September 30, 2014, an interest expense of
$5,657 (June 30, 2014 - $7,543) was accrued.
27
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. 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 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 investors 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 period ended September 30, 2014, $52,596 (June
30, 2014 - $Nil) in face value of the note including interest was converted to
8,497,555 (June 30, 2014 - Nil) common shares in accordance with the terms of
the agreement. The note was fully converted during the period.
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 period ended September 30, 2014, $50,000 (June
30, 2014 - $Nil) in face value of the note including interest was converted to
9,900,990 (June 30, 2014 - Nil) common shares in accordance with the terms of
the agreement. During the period ended September 30, 2014, an interest expense
of $2,000 (June 30, 2014 - $4,000) was accrued.
28
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. 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 investors 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 period ended September 30, 2014, $47,405 (June
30, 2014 - $Nil) in face value of the note including interest was converted to
10,453,998 (June 30, 2014 - Nil) common shares in accordance with the terms of
the agreement. During the period ended September 30, 2014, an interest expense
of $43 (June 30, 2014 - $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 period ended September 30, 2014, an interest expense of
$4,313 (June 30, 2014 - $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 period ended September 30, 2014, $58,200
(June 30, 2014 - $Nil) in face value of the note including interest was
converted to 15,175,067 (June 30, 2014 - Nil) common shares in accordance with
the terms of the agreement. During the period ended September 30, 2014, an
interest expense of $4,400 (June 30, 2014 -$8,800) was accrued.
29
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
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 period ended September 30, 2014, $5,000
(June 30, 2014 - $Nil) in face value of the note including interest was
converted to 1,818,181 (June 30, 2014 - Nil) common shares in accordance with
the terms of the agreement. During the period ended September 30, 2014, an
interest expense of $20,438(June 30, 2014 - $24,063) was accrued.
Effective July 22, 2014, 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 $600,000 due on January 22, 2016 and carries an interest rate of 12% per
annum over the term of the note, with an effective interest rate of 230.27% .
As of September 30, 2014, total net proceeds of $300,000 were
received. There is no guarantee the investor will make additional payments. The
note is convertible at the lowerof 65% of the lowest reported sale price for
the20 trading days immediately prior to (i) the closing date on July 22, 2014 or
(ii) 65% of the lowest reported sale price for the 20 days prior the 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 $923,077.
During the period ended September 30, 2014, an interest expense of $6,990 was
accrued.
Effective August 22, 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 February 23, 2016 and carries an interest rate of
12% per annum over the term of the note, with an effective interest rate of
219.75% . The note is convertible at the lowerof 65% of the lowest reported sale
price for the20 trading days immediately prior to (i) the closing date on July
22, 2014 or (ii) 65% of the lowest reported sale price for the 20 days prior the
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 $153,846. During the period ended September 30, 2014, an interest
expense of $1,514 was accrued.
30
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. 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 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.
31
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
Along with the promissory note entered on July 22, 2014, the
Company issued warrants to acquire a total of 16,800,000 shares of the Company
for a period of five years at an exercise price of $0.0400.
Along with the promissory note entered on August 22, 2014, the
Company issued warrants to acquire a total of 4,303,571 shares of the Company
for a period of five years at an exercise price of $0.2800.
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, April 16,
2014, July 22, 2014, August 22, 2014 totaled $58,966, $938,833, $1,732,432,
$1,267,156, $199,917, $634,669, and $162,401 respectively.
On July 9, 2014, 2,777,778 warrants were exercised for
9,713,996 common shares of the Company at a deemed price of $0.01 in accordance
with the terms of the agreement. A gain on change in fair value of derivative
liability of $15,276 was recorded when the warrants were valued prior to the
warrants exercise.
On July 30, 2014, 10,312,500 warrants were exercised for
18,113,654 common shares of the Company at a deemed price of $0.02 in accordance
with the term of the agreement. A gain on change in fair value of derivative
liability of $108,275 was recorded when the warrants were valued prior to the
warrants exercise.
On August 5, 2014, 1,083,333 warrants were exercised for
20,645,463 common shares of the Company at a deemed price of $0.002 in
accordance with the term of the agreement. A gain on change in fair value of
derivative liability of $10,725 was recorded when the warrants were valued prior
to the warrants exercise.
On August 8, 2014, 3,703,704 warrants were exercised for
8,904,569 common shares of the Company at a deemed price of $0.01 in accordance
with the term of the agreement. A gain on change in fair value of derivative
liability of $41,112 was recorded when the warrants were valued prior to the
warrants exercise.
On August 12, 2014, 1,666,667 warrants were exercised for
3,200,066 common shares of the Company at a deemed price of $0.02 in accordance
with the terms of the agreement. A gain on change in fair value of derivative
liability of $20,000 was recorded when the warrants were valued prior to the
warrants exercise.
On September 4, 2014, 100,000 warrants were exercised for 583,333 common shares of the Company at a deemed price of $0.003 in accordance with the terms of the agreement. A gain on change in fair value of derivative liability of $1,490 was recorded when the warrants were valued prior to the warrants exercise.
On September 15, 2014, 583,333 warrants were exercised for
10,946,967 common shares of the Company at a deemed price of $0.002 in
accordance with the terms of the agreement. A gain on change in fair value of
derivative liability of $5,777 was recorded when the warrants were valued prior
to the warrants exercise.
32
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
The Company used the Lattice Model for valuing warrants using
the following assumptions:
|
September 30, 2014 |
June
30, 2014 |
|
|
|
Risk-free interest rates |
1.55% - 1.85% |
1.39% - 1.77% |
|
|
|
Term |
180 days 5 years |
180 days 5 years |
|
|
|
Dividend yield |
0% |
0% |
|
|
|
Underlying stock prices |
$0.42 |
$0.42 |
|
|
|
Volatilities |
278% - 489% |
278% - 489% |
At September 30, 2014, the warrants were valued at $404,937
(June 30, 2014 - $2,832,989) resulting in a gain of $2,255,791 (June 30, 2014 -
$2,650,532). 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 September 30, 2014, an
accretion of $492,321 (June 30, 2014 - $412,447) was recognized as interest
expense.
|
|
Warrants |
|
|
Weighted |
|
|
Weighted |
|
|
|
Outstanding |
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
|
|
|
|
Price |
|
|
life |
|
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 |
|
Warrants issued |
|
21,103,571 |
|
|
0.088 |
|
|
4.84 years |
|
Exercised |
|
(20,227,315 |
) |
|
0.065 |
|
|
- |
|
Cancelled |
|
- |
|
|
- |
|
|
- |
|
Expired |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014 |
|
61,692,793 |
|
$ |
0.097 |
|
|
3.48
years |
|
33
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
The following table provides a summary of changes in fair value
of the Companys Level 3 financial liabilities as of September 30, 2014 and June
30, 2014:
|
|
Derivative |
|
|
|
Liability |
|
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 |
|
Initial fair value of warrant derivatives at note issuances |
|
797,070 |
|
Fair value of warrant exercised |
|
(766,675 |
) |
Mark-to-market at
September 30, 2014 - Embedded debt derivatives |
|
(2,458,446 |
) |
Balance, September 30, 2014 |
$ |
404,937 |
|
|
|
|
|
Net gain for the period included in earnings relating to
the liabilities held at September 30, 2014 |
$ |
2,458,446 |
|
7. Related Party Transactions
During the period ended September 30, 2014, the Company
incurred consulting fees of $36,000 (September 30, 2013 - $61,000) with directors
and officers.
As of September 30, 2014, the Company was obligated to a
director for a non-interest bearing demand loan with a balance of $45,332 (June
30, 2014 - $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.
34
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
8. Going Concern and Liquidity
Considerations
The accompanying unaudited condensed 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 September
30, 2014, the Company had a working capital deficiency of $1,413,007 (June 30,
2014 - $3,279,889) and an accumulated deficit of $40,703,255 (June 30, 2014 -
$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
Companys ability to continue as a going concern. The accompanying unaudited
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
9. 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 Companys
common stock.
Consulting Agreements
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). |
35
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
9. Commitments and Contingencies - Continued
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 Agents documented
efforts prior to the date of termination.
On January 1, 2014, the Company entered in a consulting
agreement with an consultants to provide services as members of the Board of
Directors in regards to the Companys 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 Companys
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 Companys 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 Companys 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.
36
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
9. Commitments and Contingencies - Continued
In April 2014, the Company signed a release and settlement
agreement with OHare Energy Services Inc. (OHare) 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 OHare:
|
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 September 30, 2014, the Company paid $62,500 (June 30, 2014 - $50,000) of the $100,000 acquisition severance payment and has not exercise the option to purchase additional investment in Tero.
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.
10. 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. The agreement has been executed, however, the delivery of the prototype has not yet been fulfilled.
37
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
11. 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 $500,000 by February 28, 2015.
Summary financial results of Tero for the three months ended
September 30, 2014 are as follows:
Operations |
|
|
|
|
|
|
|
|
CDN$ |
|
|
US$ |
|
|
|
|
|
|
|
|
Disposal Well Revenues |
$ |
443,905 |
|
$ |
406,358 |
|
Operating expense |
|
(327,188 |
) |
|
(299,512 |
) |
|
|
116,717 |
|
|
106,846 |
|
Provision for Income Taxes |
|
(10,924 |
) |
|
(10,000 |
) |
Net income |
$ |
105,793 |
|
$ |
96,846 |
|
|
|
|
|
|
|
|
Equity in income of
unconsolidated affiliate |
$ |
52,897 |
|
$ |
48,423 |
|
Summary financial position for Tero as at September 30, 2014
follows:
Financial Position
|
|
CDN$ |
|
|
US$ |
|
Cash |
$ |
38,888 |
|
$ |
34,858 |
|
Other current assets |
|
370,129 |
|
|
331,776 |
|
Property and equipment |
|
442,115 |
|
|
396,302 |
|
Total Assets |
$ |
851,132 |
|
$ |
762,936 |
|
|
|
|
|
|
|
|
Current liabilities |
$ |
253,799 |
|
$ |
227,500 |
|
Long term debt |
|
595,007 |
|
|
533,352 |
|
Total Liabilities |
|
848,806 |
|
|
760,852 |
|
|
|
|
|
|
|
|
Capital stock |
|
5 |
|
|
5 |
|
Retained earnings |
|
2,321 |
|
|
2,079 |
|
Total Equity |
|
2,326 |
|
|
2,084 |
|
Total Liabilities and Equity |
$ |
851,32 |
|
$ |
762,936 |
|
|
|
|
|
|
|
|
Investment in unconsolidated
affiliate: |
|
|
|
|
|
|
Balance at June 30, 2014 |
|
|
|
$ |
924,753 |
|
Equity in income |
|
|
|
|
48,423 |
|
Balance at September 30, 2014 |
|
|
|
$ |
973,176 |
|
38
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
12. Subsequent Events
Issuances of Common Shares
On October 1, 2014, the Company issued 240,964 common shares at a market price of $0.0064 per share for consulting fees.
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.
On October 9, 2014, the Company issued 6,666,667 common shares at a deemed price of $0.0058 per share for promissory note conversion
On October 13, 2014, the Company issued 13,636,363 common shares at a deemed price of $0.0022 per share for promissory note conversion.
On October 13, 2014, the Company issued 10,681,818 common shares at a deemed price of $0.0022 per share for promissory note conversion.
On October 16, 2014, the Company issued 7,317,073 common shares at a deemed price of $0.00205 per share for promissory note conversion.
On October 20, 2014, the Company issued 11,111,111 common shares at a deemed price of $0.0018 per share for promissory note conversion.
On October 21, 2014, the Company issued 10,000,000 common shares at a deemed price of $0.0015 per share for promissory note conversion.
On October 21, 2014, the Company issued 20,000,000 common shares at a deemed price of $0.00145 per share for promissory note conversion.
On October 22, 2014, the Company issued 7,630,987 common shares at a market price of $0.0038 per share for consulting fees.
On October 22, 2014, the Company issued 19,000,000 common shares at a deemed price of $0.001450 per share for promissory note conversion.
On October 23, 2014, the Company issued 5,882,353 common shares at a deemed price of $0.0042 per share for promissory note conversion.
On October 24, 2014, the Company issued 8,823,529 common shares at a deemed price of $0.0017 per share for promissory note conversion.
39
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial
Statements |
September 30, 2014 |
(Unaudited) |
12. Subsequent Events - Continued
On October 27, 2014, the Company issued 22,008,309 common shares at a deemed price of $0.00155 per share for promissory note conversion.
On October 27, 2014, the Company issued 20,000,000 common shares at a deemed price of $0.0015 per share for promissory note conversion.
On October 27, 2014, the Company issued 3,345,769 common shares at a deemed price of $0.0016 per share for promissory note conversion.
On October 27, 2014, the Company issued 22,713,104 common shares at a deemed price of $0.00145 per share for promissory note conversion.
On October 27, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.00145 per share for promissory note conversion.
On October 31, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.0027 per share for promissory note conversion.
On October 31, 2014, the Company issued 12,500,000 common shares at a deemed price of $0.0027 per share for promissory note conversion.
On November 3, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.0028 per share for promissory note conversion.
On November 4, 2014, the Company issued 17,391,304 common shares at a deemed price of $0.0028 per share for promissory note conversion.
On November 6, 2014, the Company issued 19,900,000 common shares at a deemed price of $0.0028 per share for promissory note conversion.
The Company has evaluated subsequent events from July 1, 2014, through the date of this report, and determined there are no other items to disclosed
40
Item 2. |
Managements Discussion and Analysis of
Financial Condition and Results of Operations |
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, that may cause our or our
industrys actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited condensed consolidated financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States
Generally Accepted Accounting Principles. The following discussion should be
read in conjunction with our financial statements and the related notes that
appear elsewhere in this quarterly 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 quarterly report.
Unless otherwise specified in this quarterly report, all dollar
amounts are expressed in United States dollars and all references to common
stock refer to shares of our common stock.
As used in this quarterly 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 subsidiary, 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 the 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.
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.
41
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. As a
result of the share purchase agreement, Tero is now a partially owned (50%)
subsidiary of our company.
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.
On October 17, 2014, we amended our Articles of Incorporation, which amendment was filed with the Nevada Secretary of State on October 17, 2014, to increase the authorized capital of our common shares from 500,000,000 common shares, par value $0.001 to 2,000,000,000 common shares, par value $0.001. Our authorized capital consists of 2,000,000,000 common shares and 100,000,000 preferred shares, all with a par value of $0.001.
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.
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 companys 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.
42
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-USAs 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.
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-USAs 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 Internationals
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.
43
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 Internationals 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.
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 Internationals 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
Internationals 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
Internationals entry into the litigation against Glottech-USA is favorable to
our cause in the litigation.
44
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-USAs 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.
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 Morinvilles 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.
45
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 Morinvilles 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 Morinvilles 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.
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 Morinvilles common shares on a diluted basis) for each
$105,000 funded until Alta Disposal holds an aggregate of 70% of Alta Disposal
Morinvilles 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.
46
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 Morinvilles
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 Morinvilles
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.
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 Teros 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 Teros
facility with a large geographical advantage.
47
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
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.
48
Loan Agreements with JDF Capital Inc.
$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.
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 JDFs 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).
|
49
|
|
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.
On August 8, 2014, we issued 8,904,569 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.
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 100,000 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. |
|
|
On October 2, 2014, we issued 4,545,455 common shares in
conversion of $12,500 payable pursuant to the note. |
|
|
On October 13, 2014, we issued 10,681,818 common shares
in conversion of $23,500 payable pursuant to the note. |
|
|
On October 20, 2014, we issued 11,111,111 common shares
in conversion of $20,000 payable pursuant to the note. |
|
|
On October 21, 2014, we issued 10,000,000 common shares
in conversion of $15,000 payable pursuant to the note. |
|
|
On October 27, 2014, we issued 20,000,000 common shares
in conversion of $30,000 payable pursuant to the note. |
|
|
On November 3, 2014, we issued 17,391,304 common shares
in conversion of $20,000 payable pursuant to the note.
|
As at the date of this report $54,000 remains payable pursuant
to the note.
50
$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 Companys
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.
|
|
On September 23, 2014, we issued 1,818,181 common shares
in conversion of $5,000 payable pursuant to this note. |
|
|
On October 3, 2014, we issued 10,000,000 common shares in
conversion of $25,000 payable pursuant to this note. |
|
|
On October 6, 2014, we issued 10,000,000 common shares in
conversion of $25,000 payable pursuant to this note. |
|
|
On October 7, 2014, we issued 11,000,000 common shares in
conversion of $24,200 payable pursuant to this note. |
|
|
On October 13, 2014, we issued 13,636,363 common shares
in conversion of $30,000 payable pursuant to this note. |
|
|
On October 21, 2014, we issued 20,000,000 common shares
in conversion of $29,000 payable pursuant to this note. |
|
|
On October 31, 2014, we issued 15,000,000 common shares
in conversion of $17,250 payable pursuant to this note. |
|
|
On November 10, 2014, we issued 19,809,523 common shares
in conversion of $20,800 payable pursuant to this note.
|
As at the date of this report $373,750 of the note and the full
amount of the warrants remain unconverted and outstanding.
$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.
51
As additional consideration for the proceeds of the convertible
note, we issued to JDF Capital warrants exercisable for 5 years to purchase up
to 16,800,000 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 $400,000 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. |
|
|
On September 3, 2014 we issued 3,000,000 common
shares in conversion of $30,000 payable pursuant to the note. |
|
|
On September 11, 2014 we issued 5,599,010
common shares in conversion of $28,275 payable pursuant to the note.
|
|
|
On October 22, 2014 we issued 19,000,000 common
shares in conversion of $27,550 payable pursuant to the note. |
|
|
On November 6, 2014 we issued 19,900,000 common
shares in conversion of $20,895 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $184,655
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.
52
On August 20, 2014, we issued an aggregate of 3,200,066 common
shares for the conversion of 1,666,667 warrants at a deemed exercise price of
$0.01675 for warrant issued on December 10, 2013.
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.
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|
On August 29, 2014, we issued 10,390,546 common
shares in conversion of $105,984 payable pursuant to the note and interest. |
As at November 11, 2014, there remains no balance unconverted and payable pursuant to the note.
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. 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.
On September 4, 2014, JSJ, Centaurian Fund and our company
agreed to assign the note from Centaurian Fund to JSJ Investments and increase
the principal interest of the note to $74,750 with 12% interest.
|
|
On September 10, 2014, we issued 6,734,235
common shares in conversion of $37,375 payable pursuant to the note and accrued interest. |
|
|
On September 16, 2014, we issued 3,810,301 common shares in conversion of $20,320 payable pursuant to the note. |
As at November 11, 2014, there remains a balance of $17,055
unconverted and payable pursuant to the note.
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. As at the date of this
report we have made the following issuances of common stock in conversion of the
February 27, 2014 note:
53
|
|
On September 29, 2014, we issued 6,047,749
common shares in conversion of $19,051 payable pursuant to the note.
|
|
|
On October 27, 2014, we issued 22,008,309
common shares in conversion of $34,113 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $24,711
unconverted and payable pursuant to the note.
Loan Agreement with St. George Investments LLC
On February 28, 2014, we entered into a securities purchase
agreement with St. George Investments LLC, pursuant to which St. George
Investments provided our company with an aggregate investment of $100,000 in
consideration of our issuance of convertible promissory notes and common share
purchase warrants. We issued St. George Investments a convertible promissory
note of $125,500 including 15% prepaid interest due August 28, 2015 and
convertible into common shares on a cashless basis at a price of 50% of the
lower of lowest closing bid price of our common shares during the prior 20
trading days prior to 1) the date of the purchase agreement or 2) the day of the
notice for conversion. The fair value of the note at issuance was $200,000. As
at the date of this report we have made the following issuances of common stock
in conversion of the February 28, 2014 note:
|
|
On September 10, 2014, we issued 1,538,462
common shares in conversion of $10,000 payable pursuant to the note.
|
|
|
On September 23, 2014, we issued 3,846,154
common shares in conversion of $12,500 payable pursuant to the note.
|
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|
On October 9, 2014, we issued 6,666,667 common
shares in conversion of $15,000 payable pursuant to the note. |
|
|
On October 16, 2014, we issued 7,317,073 common
shares in conversion of $15,000 payable pursuant to the note. |
|
|
On October 24, 2014, we issued 8,823,529 common
shares in conversion of $15,000 payable pursuant to the note. |
|
|
On October 31, 2014, we issued 12,500,000
common shares in conversion of $15,000 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $43,000
unconverted and payable pursuant to the note.
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. As at the date of this report, we have made the following
issuances of common stock in conversion of the February 28, 2014 note:
54
|
|
On September 23, 2014, we issued 10,000,000
common shares in conversion of $27,500 payable pursuant to the note.
|
|
|
On October 27, 2014, we issued 15,000,000
common shares in conversion of $21,750 payable pursuant to the note.
|
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|
On November 3, 2014, we issued 15,000,000
common shares in conversion of $17,250 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $33,500
unconverted and payable pursuant to the note.
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.
On August 20, 2014, we issued an aggregate of 18,113,654 common
shares for the cashless conversion of warrants issued on February 28, 2014.
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 $50,000 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 $100,000. As at the date of this report, we have made
the following issuances of common stock in conversion of the February 28, 2014
note:
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|
On September 8, 2014, we issued 1,106,273
common shares in conversion of $10,510 payable pursuant to the note.
|
|
|
On September 11, 2014, we issued 2,607,721
common shares in conversion of $15,777 payable pursuant to the note.
|
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On September 12, 2014, we issued 2,869,240
common shares in conversion of $15,781 payable pursuant to the note.
|
|
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On September 15, 2014, we issued 1,914,321
common shares in conversion of $10,529 payable pursuant to the note.
|
As at November 11, 2014, there remains no balance unconverted and payable pursuant to the note.
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
55
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. As
at the date of this report, we have made the following issuances of common stock
in conversion of the March 3, 2014 note:
|
|
On September 12, 2014, we issued 9,900,990
common shares in conversion of $50,000 payable pursuant to the note. |
|
|
On October 23, 2014, we issued 5,882,353 common
shares in conversion of $10,000 payable pursuant to the note. |
As at November 11, 2014, there remains a principal balance of
$40,000 unconverted and payable pursuant to the note.
In addition, we issued an aggregate of 2,000,000 warrants to
Iconic in consideration for purchasing the note. Subject to adjustments, these
warrants are convertible into common shares at a price of $0.05 and expire after
a term of three years.
Loan Agreement with Adar Bays, LLC
On March 3, 2014, we entered into a securities purchase
agreement with Adar Bays, LLC, pursuant to which Adar provided our company with
an aggregate investment of $50,000 in consideration of our issuance of
convertible promissory notes and common share purchase warrants. We issued Adar
a convertible promissory note of $50,000 with 10% interest due March 4, 2015 and
convertible into common shares on a cashless basis at a price per share of 50%
of the lowest closing bid price of our common shares during the prior 20 trading
days including the delivery of any related conversion notice. The fair value of
the note at issuance was $100,000. As at the date of this report, we have made
the following issuances of common stock in conversion of the March 3, 2014
note:
|
|
On September 4, 2014, we issued 909,091 common
shares in conversion of $10,000 payable pursuant to the note. |
|
|
On September 11, 2014, we issued 1,652,893
common shares in conversion of $10,250 payable pursuant to the note. |
|
|
On September 17, 2014, we issued 1,414,141
common shares in conversion of $7,000 payable pursuant to the note. |
|
|
On September 23, 2014, we issued 1,477,873
common shares in conversion of $4,655 payable pursuant to the note. |
|
|
On September 29, 2014, we issued 5,000,000 common shares in conversion of $15,750 payable pursuant to the note. |
|
|
On October 27, 2014, we issued 3,345,769 common
shares in conversion of $5,353 payable pursuant to the note. |
As at November 11, 2014, there remains no balance unconverted and payable pursuant to the note.
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
56
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.
As at the date of this report, we have made the following
issuances of common stock in conversion of the March 3, 2014 note:
|
|
On October 22, 2014, we issued 22,713,104
common shares in conversion of $30,000 payable pursuant to the note.
|
As at November 11, 2014, there remains a principal balance of
$85,000 unconverted and payable pursuant to the note.
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. As at the date of this report, we have made the following issuances of
common stock in exercise of the March 3, 2014 warrants:
|
|
On August 5, 2014, we issued 20,645,463 common
shares for the exercise of 1,083,333 warrants. |
|
|
On September 25, 2014, we issued 10,946,967
common shares for the exercise of 583,333 warrants. |
As at November 11, 2014, there remains no warrants remaining
pursuant to the securities purchase agreement.
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.
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 note 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.
57
Loan Agreement with Cardinal Capital Group,
Inc.
On October 31, 2014, we entered into a securities purchase
agreement with Cardinal Capital Group, Inc., pursuant to which Cardinal Capital
provided our company with an aggregate investment of $50,000 in consideration of
our issuance of a convertible promissory note. We issued Cardinal Capital a
convertible promissory note of $59,500 comprised of $6,000 in interest and
$3,500 in legal fees and due in two years. The note was convertible into shares
of our common stock at the lesser of $0.005 or 65% of the lowest trade price of
our common stock during the 20 trading days immediately preceding a conversion
date.
Loan Agreement with InLight Capital Partners,
LLC.
On August 22, 2014, we entered into a securities purchase
agreement with InLight Capital Partners, LLC, pursuant to which InLight Capital
provided our company with an aggregate investment of $100,000 in consideration
of our issuance of a convertible promissory note and warrants to purchase common
shares of our company with an aggregate exercise price of $120,500. The note was
funded by InLight Capital in the amount of $100,000 and shall include $20,500 in
respect of pre-paid interest calculated in advance at the rate of 12% per annum
for 18 months plus expenses of the Purchaser. InLight Capital delivered to us
funds in the amount of $50,000 on the effective date and $50,000 on September
19, 2014.
In addition on August 22, 2014, we issued an aggregate of 4,303,571 warrants to InLight Capital Partners, LLC in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.28 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.
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. Sales transactions occurring under Mr. Walshs 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 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.
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.
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 companys common stock. The
employment agreement also provides for liability insurance and any travel and
out-of-pocket expenses incurred and approved by our company.
58
Effective May 30, 2014, we entered into a consulting agreement
with Robert Gomer. Pursuant to this agreement, Mr. Gomer is to assist us with
the current business of testing ultrasonic generator technology and performing
services customary expected of a consultant for a term of six months. In
exchange for these services that are to be provided to us, we agreed to issue an
aggregate of $10,000 per month, payable in two sums of $30,000 and in our S-8
Shares with a deemed price per share equal to the volume weighted average
trading close price of the Shares in the five trading days immediately preceding
the amending agreement. As a result, we issued Mr. Gomer an aggregate of
1,167,316 S-8 shares on September 1, 2014.
Effective August 1, 2014, we entered into a consultant
agreement with TEN Associates LLC. Pursuant to this agreement, TEN Associates is
to provide advice relative to corporate and business services and to perform
other related activities as directed by us. In exchange for these services that
are to be provided to us, we agreed to issue 2,000,000 common shares of our
company to TEN Associates.
Effective October 22, 2014, we entered into an amending
agreement with International Compass. Pursuant to this amending agreement, the
term of the agreement dated January 1, 2014 with International Compass was
reduced from 12 months to 10 months. As consideration to International Compass
for agreeing to enter into the amending agreement, we agreed to pay Mr.
Kleinlein an aggregate of $30,000, payable in our S-8 Shares with a deemed price
per share equal to the volume weighted average trading close price of the Shares
in the five trading days immediately preceding the amending agreement. As a
result, we issued Mr. Kleinlein an aggregate of 7,630,987 S-8 shares on October
22, 2014. Further, Mr. Kleinlein resigned as our Chief Financial Officer as of
November 1, 2014.
Results of Operations
We have not generated significant revenues since inception and
have incurred $517,629 and $295,821 respectively, in operating expenses for the three
month periods ended September 30, 2014 and 2013.
The following provides selected financial data about our
company for the three month periods ended September 30, 2014 and 2013.
Three months ended September 30, 2014 and 2013.
|
|
Three months |
|
|
Three months |
|
|
|
ended |
|
|
ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
Revenue |
$ |
16,067 |
|
$ |
Nil |
|
Operating expenses |
$ |
(517,629 |
) |
$ |
(295,821 |
) |
Other income (expenses): |
|
|
|
|
|
|
Interest expense |
$ |
(1,562,421 |
) |
$ |
(258,218 |
) |
Gain (loss) on derivative
liability |
$ |
2,458,446 |
|
$ |
(23,152 |
) |
Fair value of warrants issued |
|
(397,070 |
) |
|
(18,333 |
) |
Equity in income (loss) of unconsolidated
affiliate |
$ |
48,423 |
|
$ |
Nil |
|
Net income (loss) |
$ |
45,816 |
|
$ |
(595,524 |
) |
Operating expenses for the three months ended September 30, 2014 increased as a result of increases in mining and selling and general and administrative expenses.
59
Liquidity and Capital Resources
The following table provides selected financial data about our
company as of September 30, 2014, and June 30, 2014, respectively.
Working Capital
|
|
As at |
|
|
As at |
|
|
|
September 30, |
|
|
June 30, |
|
|
|
2014 |
|
|
2014 |
|
Total current assets |
$ |
222,978 |
|
$ |
138,013 |
|
Total current liabilities |
$ |
1,635,985 |
|
$ |
3,417,902 |
|
Working capital (deficit) |
$ |
(1,413,007 |
) |
$ |
(3,279,889 |
) |
Cash Flows
|
|
Three Months |
|
|
Three Months |
|
|
|
ended |
|
|
ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
Net cash used in operating
activities |
$ |
(290,048 |
) |
$ |
(210,426 |
) |
Net cash used in investing activities |
$ |
Nil |
|
$ |
(343,740 |
) |
Net cash provided by
financing activities |
$ |
400,000 |
|
$ |
425,000 |
|
Effect of foreign exchange on cash |
$ |
(1,864 |
) |
$ |
Nil |
|
Increase (Decrease) in cash |
$ |
108,088 |
|
$ |
(129,166 |
) |
We had cash and cash equivalents of $177,820 as of September 30, 2014 compared to cash and cash equivalents of $69,732 as of June 30, 2014. We had a working capital deficit of $1,413,007 as of September 30, 2014 compared to a working capital deficit of $3,279,889 as of June 30, 2014.
The report of our auditors on our audited consolidated
financial statements for the fiscal year ended June 30, 2014, contains a going
concern qualification as we have suffered losses since our inception. We have
minimal assets and have achieved no operating revenues since our inception. We
have depended on loans and sales of equity securities to conduct operations.
Unless and until we commence material operations and achieve material revenues,
we will remain dependent on financings to continue our operations.
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 |
|
60
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.
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.
Inflation
The amounts presented in our financial statements do not
provide for the effect of inflation on our operations or financial position. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation adjustments.
Critical Accounting Policies and Estimates
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 unaudited condensed 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
companys 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.
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 $177,829 and $69,732 in cash and cash equivalents at September
30, 2014 and June 30, 2014, 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 September 30, 2014 and June
30, 2014, our company had $Nil and $Nil, respectively, in deposits in excess of
federally insured limits in its US bank. Our 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.
61
Prepaid Expenses
Prepaid expenses mainly consist of legal retainers and deposit
paid to obtain a license on patent rights. Legal retainers will be expensed in
the period when services are completed.
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 its planned
operations. It is primarily engaged in the acquisition, exploration, and
development of mining properties. Mineral property acquisition and exploration
costs are expensed as incurred. When it has been determined that a mineral
property can be economically developed as a result of establishing proven and
probable reserves, the costs incurred to develop such property are capitalized.
Such costs will be amortized using the units-of-production method over the
estimated life of the probable reserves.
Concentrations of Credit Risk
Our companys 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. Our 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. Our companys
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
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.
Foreign Currency Translations
Our companys functional and reporting currency is the US
dollar. All transactions initiated in other currencies are translated into US
dollars using the exchange rate prevailing on the date of transaction. Monetary
assets and liabilities denominated in foreign currencies are translated into the
US dollar at the rate of exchange in effect at the balance sheet date.
Unrealized exchange gains and losses arising from such transactions are deferred
until realization and are included as a separate component of stockholders
equity (deficit) as a component of comprehensive income or loss. Upon
realization, the amount deferred is recognized in income in the period when it
is realized.
No significant realized exchange gain or losses were recorded
from inception (May 31, 2006) to September 30, 2014.
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 period ended September 30, 2014 closing rate at 0.8922 CND$:US$, average rate at 0.91804 CND$: US$ and for year ended June 30, 2014 closing rate at 0.9367 CND$: US$ average rate at 0.9341 CND$: US$
62
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. As at September 30, 2014 and June 30, 2014, our company had no material 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.
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 condensed consolidated statement of
operations.
Convertible Debentures
We value our convertible debentures with provisions resulting
in beneficial conversion features from the embedded derivative at fair value
according to ASC-840-10-25-14, rather than have its conversion feature
bifurcated and reported separately due to ASC-815-15-25-1b. Because the value of
the derivative related to the warrant exceeds the proceeds of the loan, 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 835-30-35-2. Unaccreted debt discount on the date of conversion
is accreted to interest expense on that date.
63
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 instruments
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 companys 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 companys Level 3 financial liabilities consist of the
derivative liability of our companys 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 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.
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.
Investment in Unconsolidated Affiliate
Investments in affiliates that are not controlled by our company, but over which we have 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 and Equity investment in Unconsolidated Affiliate.
64
Recent Accounting Pronouncements
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 3. |
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 4. |
Controls and Procedures
|
Managements Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. 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 have engaged 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.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the quarterly period covered by this report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
65
PART II OTHER INFORMATION
Item 1. |
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.
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-USAs 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 Internationals
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.
66
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 Internationals 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.
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 Internationals 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
Internationals 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
Internationals 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.
67
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-USAs 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.
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.
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 2. |
Unregistered Sales of Equity Securities and
Use of Proceeds |
Loan Agreements with JDF Capital Inc.
$250,000 Loan of September 2013
On September 16, 2013, we entered into a securities purchase
agreement with JDF Capital Inc., pursuant to which JDF provided us with an
aggregate investment of $250,000 in consideration of our issuance of convertible
promissory notes and common share purchase warrants. On July 16, 2014, we issued
9,713,996 common shares at a deemed price of $0.039 per share for the warrants
cashless exercise.
68
$250,000 Loan of October 2013
On October 15, 2013, we entered into a securities purchase
agreement with JDF, pursuant to which JDF provided us with an aggregate
investment of $250,000 in consideration of our issuance of convertible
promissory notes and common share purchase warrants. On August 8, 2014, we
issued 8,904,569 common shares at a deemed price of $0.0369 per share for the
warrants cashless exercise.
$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.
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 100,000 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. |
|
|
On October 2, 2014, we issued 4,545,455 common shares in
conversion of $12,500 payable pursuant to the note. |
|
|
On October 13, 2014, we issued 10,681,818 common shares
in conversion of $23,500 payable pursuant to the note. |
|
|
On October 20, 2014, we issued 11,111,111 common shares
in conversion of $20,000 payable pursuant to the note. |
|
|
On October 21, 2014, we issued 10,000,000 common shares
in conversion of $15,000 payable pursuant to the note. |
|
|
On October 27, 2014, we issued 20,000,000 common shares
in conversion of $30,000 payable pursuant to the note. |
|
|
On November 3, 2014, we issued 17,391,304 common shares
in conversion of $20,000 payable pursuant to the note.
|
As at the date of this report $54,000 remains payable pursuant
to the note.
69
$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 Companys
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.
|
|
On September 23, 2014, we issued 1,818,181
common shares in conversion of $5,000 payable pursuant to this note.
|
|
|
On October 3, 2014, we issued 10,000,000 common
shares in conversion of $25,000 payable pursuant to this note. |
|
|
On October 6, 2014, we issued 10,000,000 common
shares in conversion of $25,000 payable pursuant to this note. |
|
|
On October 7, 2014, we issued 11,000,000 common
shares in conversion of $24,200 payable pursuant to this note. |
|
|
On October 13, 2014, we issued 13,636,363
common shares in conversion of $30,000 payable pursuant to this note.
|
|
|
On October 21, 2014, we issued 20,000,000
common shares in conversion of $29,000 payable pursuant to this note.
|
|
|
On October 31, 2014, we issued 15,000,000
common shares in conversion of $17,250 payable pursuant to this note.
|
|
|
On November 10, 2014, we issued 19,809,523
common shares in conversion of $20,800 payable pursuant to this note.
|
As at the date of this report $373,750 of the note and the full
amount of the warrants remain 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:
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|
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.
|
70
|
|
On December 4, 2013, we issued 1,435,345 common
shares in conversion of $81,846 payable pursuant to the note. |
|
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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. |
|
|
On September 3, 2014 we issued 3,000,000 common
shares in conversion of $30,000 payable pursuant to the note. |
|
|
On September 11, 2014 we issued 5,599,010
common shares in conversion of $28,275 payable pursuant to the note.
|
|
|
On October 22, 2014 we issued 19,000,000 common
shares in conversion of $27,550 payable pursuant to the note. |
|
|
On November 6, 2014 we issued 19,900,000 common
shares in conversion of $20,895 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $184,655
unconverted and payable pursuant to the note.
On August 20, 2014, we issued an aggregate of 3,200,066 common
shares for the conversion of 1,666,667 warrants at a deemed exercise price of
$0.01675 for warrant issued on December 10, 2013.
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. As at the date of this report we
have made the following issuances of common stock in conversion of the February
27, 2014 note:
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|
On September 29, 2014, we issued 6,047,749
common shares in conversion of $19,051 payable pursuant to the note.
|
|
|
On October 27, 2014, we issued 22,008,309
common shares in conversion of $34,113 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $24,711
unconverted and payable pursuant to the note.
Loan Agreement with St. George Investments LLC
On February 28, 2014, we entered into a securities purchase
agreement with St. George Investments LLC, pursuant to which St. George
Investments provided our company with an aggregate investment of $100,000 in
consideration of our issuance of convertible promissory notes and common share
purchase warrants. We issued St. George Investments a convertible promissory
note of $125,500 including 15% prepaid interest due August 28, 2015 and convertible into common shares on a cashless basis at a price
of 50% of the lower of lowest closing bid price of our common shares during the
prior 20 trading days prior to 1) the date of the purchase agreement or 2) the
day of the notice for conversion. The fair value of the note at issuance was
$200,000. As at the date of this report we have made the following issuances of
common stock in conversion of the February 28, 2014 note:
71
|
|
On September 10, 2014, we issued 1,538,462
common shares in conversion of $10,000 payable pursuant to the note.
|
|
|
On September 23, 2014, we issued 3,846,154
common shares in conversion of $12,500 payable pursuant to the note.
|
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|
On October 9, 2014, we issued 6,666,667 common
shares in conversion of $15,000 payable pursuant to the note. |
|
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On October 16, 2014, we issued 7,317,073 common
shares in conversion of $15,000 payable pursuant to the note. |
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On October 24, 2014, we issued 8,823,529 common
shares in conversion of $15,000 payable pursuant to the note. |
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|
On October 31, 2014, we issued 12,500,000
common shares in conversion of $15,000 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $43,000
unconverted and payable pursuant to the note.
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. As at the date of this report, we have made the following
issuances of common stock in conversion of the February 28, 2014 note:
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|
On September 23, 2014, we issued 10,000,000
common shares in conversion of $27,500 payable pursuant to the note.
|
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|
On October 27, 2014, we issued 15,000,000
common shares in conversion of $21,750 payable pursuant to the note.
|
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|
On November 3, 2014, we issued 15,000,000
common shares in conversion of $17,250 payable pursuant to the note.
|
As at November 11, 2014, there remains a balance of $33,500
unconverted and payable pursuant to the note.
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.
On August 20, 2014, we issued an aggregate of 18,113,654 common
shares for the cashless conversion of warrants issued on February 28, 2014.
72
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 $50,000 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 $100,000. As at the date of this report, we have made
the following issuances of common stock in conversion of the February 28, 2014
note:
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|
On September 8, 2014, we issued 1,106,273
common shares in conversion of $10,510 payable pursuant to the note.
|
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|
On September 11, 2014, we issued 2,607,721
common shares in conversion of $15,777 payable pursuant to the note.
|
|
|
On September 12, 2014, we issued 2,869,240
common shares in conversion of $15,781 payable pursuant to the note.
|
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|
On September 15, 2014, we issued 1,914,321
common shares in conversion of $10,529 payable pursuant to the note.
|
As at November 11, 2014, there remains no principal balance unconverted and payable pursuant to the note.
Loan Agreement with Iconic Holdings, LLC
On March 3, 2014, we entered into a securities purchase
agreement with Iconic Holdings, LLC, pursuant to which Iconic provides our
company with an aggregate investment of $100,000 in consideration of our
issuance of convertible promissory notes and common share purchase warrants. We
issued Iconic a convertible promissory note of $100,000 with 12% interest due
September 3, 2014 and convertible into common shares on a cashless basis at a
price of 50% of the lower of lowest closing bid price of our common shares
during the prior 20 trading days prior to 1) the date of the purchase agreement
or 2) the day of the notice for conversion. The fair value of the note at
issuance was $100,000. As at the date of this report, we have made the following
issuances of common stock in conversion of the March 3, 2014 note:
|
|
On September 12, 2014, we issued 9,900,990
common shares in conversion of $50,000 payable pursuant to the note. |
|
|
On October 23, 2014, we issued 5,882,353 common
shares in conversion of $10,000 payable pursuant to the note. |
As at November 11, 2014, there remains a principal balance of
$40,000 unconverted and payable pursuant to the note.
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. As at the date of this report, we have made
the following issuances of common stock in conversion of the March 3, 2014
note:
73
|
|
On September 4, 2014, we issued 909,091 common
shares in conversion of $10,000 payable pursuant to the note. |
|
|
On September 11, 2014, we issued 1,652,893
common shares in conversion of $10,250 payable pursuant to the note. |
|
|
On September 17, 2014, we issued 1,414,141
common shares in conversion of $7,000 payable pursuant to the note. |
|
|
On September 23, 2014, we issued 1,477,873
common shares in conversion of $4,655 payable pursuant to the note. |
|
|
On September 29, 2014, we issued 5,000,000 common shares in conversion of $15,750 payable pursuant to the note. |
|
|
On October 27, 2014, we issued 3,345,769 common
shares in conversion of $5,353 payable pursuant to the note. |
As at November 11, 2014, there remains no principal balance unconverted and payable pursuant to the note.
Loan Agreement with Black Mountain Equities, Inc.
On March 3, 2014, we entered into a securities purchase
agreement with Black Mountain Equities, Inc., pursuant to which Black Mountain
provided our company with an aggregate investment of $100,000 in consideration
of our issuance of original issue discount convertible promissory notes and
common share purchase warrants. We issued Black Mountain a convertible
promissory note of $115,000 with 15% prepaid interest due April 1, 2015 and
convertible into common shares on a cashless basis at the lesser price per share
of $0.06 or 50% of the lowest trade price of our common shares during the prior
20 trading days immediately preceding the delivery of any related conversion
notice. The fair value of the note at issuance was $230,000.
As at the date of this report, we have made the following
issuances of common stock in conversion of the March 3, 2014 note:
|
|
On October 22, 2014, we issued 22,713,104
common shares in conversion of $30,000 payable pursuant to the note.
|
As at November 11, 2014, there remains a principal balance of
$85,000 unconverted and payable pursuant to the note.
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. As at the date of this report, we have made the following issuances of
common stock in exercise of the March 3, 2014 warrants:
|
|
On August 5, 2014, we issued 20,645,463 common
shares for the exercise of 1,083,333 warrants. |
|
|
On September 25, 2014, we issued 10,946,967
common shares for the exercise of 583,333 warrants. |
As at November 11, 2014, there remains no warrants remaining
pursuant to the securities purchase agreement.
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. 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.
74
On September 4, 2014, JSJ, Centaurian Fund and our company
agreed to assign the note from Centaurian Fund to JSJ Investments and increase
the principal interest of the note to $74,750 with 12% interest.
|
|
On September 10, 2014, we issued 6,734,235
common shares in conversion of $37,375 payable pursuant to the note and accrued interest. |
|
|
On September 16, 2014, we issued 3,810,301 common shares in conversion of $20,320 payable pursuant to the note. |
As at November 11, 2014, there remains a balance of $17,055
unconverted and payable pursuant to the note.
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.
|
|
On August 29, 2014, we issued 10,390,546 common
shares in conversion of $105,984 payable pursuant to the note. |
As at November 11, 2014, there remains no balance unconverted and payable pursuant to the note.
From July 1, 2014 to November 11, 2014, we issued an aggregate
of 493,681,606 common shares of our company to 11 people on reliance on the
exemption from registration for accredited investors contained in Rule 506 of
Regulation D of the Securities Act of 1933.
Item 3. |
Defaults Upon Senior Securities
|
None.
Item 4. |
Mine Safety Disclosures
|
Not applicable.
Item 5. |
Other Information |
None.
75
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* |
Certificate of Amendment dated October 17, 2014 |
3.6 |
Articles of Merger dated November 17, 2010 (incorporated
by reference to our Current Report on Form 8-K filed on December 7, 2010) |
3.7 |
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) |
3.8 |
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) |
3.9 |
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) |
3.10 |
Certificate of Incorporation of 1617437 Alberta Ltd.
(incorporated by reference to our Current Report on Form 8-K filed on
October 24, 2013) |
3.11 |
Articles of Amendment of Alta Disposal Ltd. (incorporated
by reference to our Current Report on Form 8-K filed on October 24, 2013) |
3.12 |
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) |
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) |
76
Exhibit |
Description |
Number |
|
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 |
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) |
10.26 |
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) |
10.27 |
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) |
10.28 |
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) |
10.29 |
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) |
10.30 |
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) |
10.31 |
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) |
10.32 |
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) |
10.33 |
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)
|
10.34 |
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) |
10.35 |
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) |
10.36 |
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)
|
77
Exhibit |
Description |
Number |
|
10.37 |
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) |
10.38 |
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) |
10.39 |
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)
|
10.40 |
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) |
10.41 |
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)
|
10.43 |
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) |
10.44 |
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) |
10.45 |
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)
|
10.45 |
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) |
10.46 |
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) |
10.47 |
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) |
10.48 |
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) |
10.49 |
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) |
10.50 |
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) |
10.51 |
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) |
10.52 |
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) |
10.53 |
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) |
10.54 |
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) |
10.55 |
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) |
10.56 |
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)
|
10.57 |
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) |
10.58 |
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) |
10.59 |
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)
|
10.60 |
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) |
10.61 |
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) |
10.62 |
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) |
10.63 |
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) |
78
Exhibit |
Description |
Number |
|
10.64 |
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) |
10.65 |
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) |
10.66 |
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) |
10.67 |
Consulting Agreement with Brandon Colker dated April 28,
2014 (incorporated by reference to our Annual Report on Form 10-K filed on
October 14, 2014) |
10.68 |
2014 Stock Option Plan (incorporated by reference to our
Current Report on Form 8-K filed on August 6, 2014) |
10.69 |
Form of Stock Option Agreement (incorporated by reference
to our Current Report on Form 8-K filed on August 6, 2014) |
10.70 |
Form of Stock Grant Agreement (incorporated by reference
to our Current Report on Form 8-K filed on August 6, 2014) |
10.71 |
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) |
10.72 |
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) |
10.73 |
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) |
10.74 |
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) |
10.75* |
Consultant Agreement dated May 30, 2014 between our
company and Robert Gomer. |
10.76* |
Consultant Agreement dated August 1, 2014 between our
company and TEN Associates LLC. |
10.77* |
Amending Agreement dated October 22, 2014 between
International Compass, LLC and our company. |
(14) |
Code of Ethics |
14.1 |
Code of Ethics (Incorporated by reference to our Annual
Report on Form 10-KSB on September 28, 2007) |
(20) |
Other Documents or Statements to Security Holders |
20.1* |
Financial Statements of Tero Oilfield Services as at September 30, 2014 |
(21) |
Subsidiaries of the Registrant |
21.1 |
Alta Disposal Ltd., an Alberta, Canada corporation
(wholly-owned) |
21.2 |
Tero Oilfield Services Ltd., an Alberta, Canada
corporation (50% 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, 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, 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 |
79
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
LITHIUM EXPLORATION GROUP, INC. |
|
(Registrant) |
|
|
|
|
|
|
Date: December 2, 2014 |
/s/Alexander Walsh |
|
Alexander Walsh |
|
President, Chief Executive Officer, Secretary,
Treasurer |
|
and Director |
|
(Principal Executive Officer, Principal
Financial Officer |
|
and Principal Accounting Officer)
|
80
Consultant Agreement
This agreement dated August 1, 2014 is made by and between
Lithium Exploration Group, Inc., whose address is 3800 North Central Avenue,
Suite 820, Phoenix, AZ 85012 referred to as "Company", and TEN Associates
LLC, whose address is 1681O East Avenue of the Fountains, Suite 224, Fountain
Hills, AZ 85268, referred to as "Consultant."
RECITALS
WHEREAS, Company desires to retain Consultant to provide advice
relative to corporate and business services for a period of two months from the
date of this Agreement; and
WHEREAS, the Company recognizes that the Consultant is not in
the business of stock brokerage, investment advice, activities which require
registration under either the Securities Act of 1933 (hereinafter "the Act") or
the Securities and Exchange Act of 1934 (hereinafter "the Exchange Act"),
underwriting, banking, is not an insurance Company, nor does it offer services
to the Company which may require regulation under federal or state securities
laws; and
WHEREAS, Consultant has agreed to perform consulting work for
the Company in providing general corporate and business consulting services and
other related activities as directed by the Company;
NOW, THEREFORE, the parties hereby agree as follows:
1. Consultant's Services. The company hereby retains the
consultant to perform the services in accordance with the terms and conditions
set forth in this agreement: The consultant will consult with the officers of
the company concerning matters relating to the business of the Company.
2. Consideration. Company shall pay Consultant 2,000,000
restricted common shares in lieu of monetary compensation and Company agrees all
shares shall be deemed to have fully been earned by Consultant as of the date of
this agreement.
3. Piggyback Registration Rights. If the Company proposes to
register any equity securities under the Securities Act, whether for its own
account or for the account of other security holders, or both, on each such
occasion, the Company will give written notice to Consultant, no less than
fifteen (15) business days prior to the anticipated filing date, of its
intention to do so and to register any of Consultant's registerable securities.
The Company will cause the registerable securities as to which registration
shall have been so requested to be included in the securities to be covered by
the Registration Statement proposed to be filed by the Company, on the same
terms and conditions as any similar securities included therein, all to the
extent requisite to permit the sale or other disposition by the Consultant of
such registerable securities so registered.
4. indepern:ient Contractor. Nothing herein shall be construed
to create an employer- employee relationship between the Company and Consultant.
Consultant is an independent contractor and not an employee of the Company or
any of its subsidiaries or affiliates. The consideration set forth in Section 2
shall be the sole consideration due Consultant for the services rendered
hereunder. It is understood that the Company will not withhold any amounts for
payment of taxes from the compensation of Consultant hereunder. Consultant will
not represent to be or hold herself out as an employee of the Company.
5. Confidentiality. The Consultant agrees that any information
received by the Consultant during any furtherance of the Consultant's
obligations in accordance with this contract, which concerns the personal,
financial or other affairs of the company will be treated by the Consultant in
full confidence and will not be revealed to any other persons, firms or
organizations.
6. Term. This Agreement shall commence on the above date and
shall terminate six months thereafter, unless earlier terminated by either party
hereto. Either party may terminate this Agreement upon Thirty (30) days prior
written notice. This Agreement shall automatically renew for an additional Four
(4) month term on the same terms and conditions as set forth herein by giving
notice to Company of such intent to renew on or before termination.
7.Miscellaneous.
7.1 Entire Agreement and Amendments. This Agreement
constitutes the entire agreement of the parties with regard to the subject
matter hereof, and replaces and supersedes all other agreements or
understandings, whether written or oral. No amendment or extension of the
Agreement shall be binding unless in writing and signed by both parties.
7.2 Binding Effect, Assignment. This Agreement shall be
binding upon and shall inure to the benefit of Consultant and the Company and to
the Company's successors and assigns. Nothing in this Agreement shall be
construed to permit the assignment by Consultant of any of its rights or
obligations hereunder, and such assignment is expressly prohibited without the
prior written consent of the Company.
7.3 Governing Law, Severabi!ity. This Agreement shall be
governed by the laws of the State of Arizona. The invalidity or unenforceability
of any provision of the Agreement shall not affect the validity or
enforceability of any other provision.
WHEREFORE, the parties have executed this Agreement as of the
date first written above.
Lithium Exploration Group, Inc.
By: |
|
Alex Walsh, CEO |
TEN Associates LLC
By: |
|
Thomas Nelson, President |
THIS AMENDING AGREEMENT is effective as of the 22nd day
of October, 2014.
BETWEEN:
LITHIUM EXPLORATION GROUP, INC., with an office at
3800 North Central Avenue, Suite 820, Phoenix, Arizona, 85012. |
|
(the Company) |
AND:
INTERNATIONAL COMPASS, LLC with an address at
P.O. Box 80936, Phoenix, Arizona 85060. |
|
(the Contractor) |
WHEREAS:
A. |
the Company and the Contractor have previously entered
into a consulting agreement on January 1, 2014 (the Consulting
Agreement); and |
|
|
B. |
the Company and the Contractor wish to make certain
amendments to the provisions of the Consulting
Agreement. |
NOW THEREFORE THIS AMENDING AGREEMENT WITNESSETH that in
consideration for the premises and mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is also hereby acknowledged by each of the parties hereto,
the parties hereto hereby agree as follows:
1. |
All capitalized terms not otherwise defined herein shall
have the meanings set out in the Consulting Agreement, as
applicable. |
|
|
2. |
Section 3.1 of the Consulting Agreement is deleted in its
entirety and replaced with the following: |
Compensation. The Contractor
shall receive payment of USD$12,000 per month, payable on the 1st of every month
for the term of this Agreement, as compensation for providing the Services
pursuant to the terms of this Agreement (the Compensation) and an
additional aggregate of USD$30,000 payable as of October 22, 2014 (the
Bonus). The Compensation will, at the sole discretion of the Company,
be paid in cash and/or common shares of the Company registered with the
Securities and Exchange Commission on Form S-8 (the Compensation
Shares). Any Compensation Shares issued shall be issued to the Contractor
on a going forward, monthly basis provided that this Agreement remains in force
at such time and has not been terminated by the parties hereto. The Bonus will
also be paid in common shares of the Company registered with the Securities and
Exchange Commission on Form S-8 (the Bonus Shares). The number of any
Compensation Shares and Bonus Shares issued to the Contractor shall be based on
the volume weighted average trading close price of the Companys common shares
in the five (5) trading days immediately preceding the applicable dates upon
which the Compensation Shares or the Bonus Shares become due. The Compensation
Shares, if any, shall be registered to Bryan Kleinlein.
3. |
Section 4.1 of the Consulting Agreement is deleted in its
entirety and replaced with the following: |
2
Effective Date. This Agreement
shall become effective as of January 1, 2014 (the Effective Date), and
shall continue for a period of 10 months thereafter (the Term) or until
earlier terminated pursuant to the terms of this Agreement.
4. |
In all other respects the terms and conditions of the
Consulting Agreement shall continue in full force and effect and the
parties hereby agrees and confirms that the Consulting Agreement is in
good standing and each of the parties hereto is not in default of any of
its obligations under the Consulting Agreement. |
|
|
5. |
Each of the parties hereto agrees to do and/or execute
all such further and other acts, deeds, things, devices, documents and
assurances as may be required in order to carry out the true intent and
meaning of this Amending Agreement. |
|
|
6. |
This Amending Agreement shall enure to the benefit of and
be binding upon the parties hereto and each of their successors and
permitted assigns, as the case may be. |
|
|
7. |
This Amending Agreement may be executed in counterparts
and by electronic or facsimile transmission, each of which shall be deemed
to be an original and all of which shall constitute one and the same
document. |
IN WITNESS WHEREOF, the parties hereto have executed
this Amending Agreement as of the day and year first above written.
LITHIUM EXPLORATION GROUP, INC.
Per: |
Name: Alexander Walsh |
Title: President and Director |
INTERNATIONAL COMPASS, LLC
Per: |
Name: Bryan Kleinlein |
Title:
President |
Tero Oilfield Services Ltd.
Condensed Financial Statements
September 30, 2014 and 2013
Tero Oilfield Services Ltd.
|
Condensed Balance Sheets |
|
|
|
|
|
|
|
|
|
September |
|
|
June 30, |
|
|
|
30, 2014 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash |
$ |
34,858 |
|
$ |
21,208 |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
312,283 |
|
|
202,359 |
|
Other current
assets |
|
19,493 |
|
|
20,376 |
|
Total current assets |
|
366,634 |
|
|
243,943 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
396,302 |
|
|
427,712 |
|
TOTAL ASSETS |
$ |
762,936 |
|
$ |
671,655 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT) |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities |
|
94,267 |
|
$ |
71,174 |
|
Current maturities of long-term debt |
|
87,846 |
|
|
91,925 |
|
Due to
shareholders |
|
45,387 |
|
|
47,494 |
|
Total current liabilities |
|
227,500 |
|
|
210,593 |
|
|
|
|
|
|
|
|
Notes payable, less current
maturities |
|
274,220 |
|
|
286,952 |
|
Asset retirement obligations |
|
259,132 |
|
|
271,164 |
|
TOTAL LIABILITIES |
|
760,852 |
|
|
768,709 |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
(DEFICIT) |
|
2,084 |
|
|
(97,054 |
) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY (DEFICIT) |
$ |
762,936 |
|
$ |
920,447 |
|
The accompanying notes are an integral part of these condensed
financial statements.
2
Tero Oilfield Services Ltd.
|
Condensed Statements of Income
and Shareholders Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
REVENUE |
$ |
406,358 |
|
$ |
293,069 |
|
COST OF GOODS SOLD |
|
163,460 |
|
|
207,235 |
|
|
|
|
|
|
|
|
Gross profit |
|
242,898 |
|
|
85,834 |
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
Selling and marketing |
|
2,063 |
|
|
2,102 |
|
Depreciation |
|
21,751 |
|
|
24,215 |
|
General and administrative |
|
106,599 |
|
|
112,751 |
|
TOTAL OPERATING EXPENSES |
|
130,413 |
|
|
139,068 |
|
|
|
|
|
|
|
|
Operating income (loss) |
|
112,485 |
|
|
(53,234 |
) |
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
Interest expense, net |
|
(5,639 |
) |
|
(2,396 |
) |
TOTAL OTHER EXPENSES |
|
(5,639 |
) |
|
(2,396 |
) |
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
106,846 |
|
|
(55,630 |
) |
Provision for income taxes |
|
10,000 |
|
|
-- |
|
NET INCOME (LOSS) |
|
96,846 |
|
|
(55,630 |
) |
Other Comprehensive Income: |
|
|
|
|
|
|
Cumulative translation adjustment |
|
2,292 |
|
|
(205 |
) |
COMPREHENSIVE INCOME
(LOSS) |
$ |
99,138 |
|
$ |
(55,835 |
) |
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
(DEFICIT): |
|
|
|
|
|
|
Shareholders equity (deficit) Beginning of
period |
$ |
(97,054 |
) |
$ |
13,716 |
|
Net income (loss) |
|
96,846 |
|
|
(55,630 |
) |
Cumulative Translation Adjustment |
|
2,292 |
|
|
(205 |
) |
Shareholders equity
(deficit) End of period |
$ |
2,084 |
|
$ |
(42,119 |
) |
The accompanying notes are an integral part of these condensed
financial statements.
3
Tero Oilfield Services Ltd.
Condensed Statements of Cash
Flows
|
|
For the Three Months Ended |
|
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
Net income (loss) |
$ |
96,846 |
|
$ |
(55,630 |
) |
Adjustments to reconcile
net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation |
|
21,751 |
|
|
24,215 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Short-term investments |
|
-- |
|
|
(1,870 |
) |
Accounts receivable |
|
(109,923 |
) |
|
(103,246 |
) |
Other current assets |
|
883 |
|
|
2,651 |
|
Accounts payable and
accrued liabilities |
|
23,093 |
|
|
43,254 |
|
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITES |
|
32,650 |
|
|
(90,626 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchase of property
and equipment |
|
(8,920 |
) |
|
(3,475 |
) |
NET CASH USED IN INVESTING ACTIVITIES |
|
(8,920 |
) |
|
(3,475 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Debt retired |
|
-- |
|
|
(3,706 |
) |
NET CASH USED IN FINANCING ACTIVITIES |
|
-- |
|
|
(3,706 |
) |
|
|
|
|
|
|
|
Effects of currency translation on cash and
cash equivalents |
|
(10,080 |
) |
|
4,165 |
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH |
|
13,650 |
|
|
(93,642 |
) |
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
21,208 |
|
|
56,138 |
|
CASH (BANK OVERDRAFT) AT END
OF PERIOD |
$ |
34,858 |
|
$ |
(37,504 |
) |
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the periods for: |
|
|
|
|
|
|
Interest |
$ |
-- |
|
$ |
-- |
|
Income taxes |
$ |
-- |
|
$ |
-- |
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING |
|
|
|
|
|
|
ACTIVITIES: |
$ |
-- |
|
$ |
-- |
|
The accompanying notes are an integral part of these condensed
financial statements.
4
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
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, Albertas 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 Lithium in exchange
for an aggregate of $1,500,000 Canadian.
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 $1,000,000 Canadian.
Lithium has been granted an option to acquire an additional 25%
of the shares in Tero for $500,000 Canadian by February 28, 2015.
5
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
Basis of Presentation
The accompanying condensed financial statements are unaudited.
The unaudited interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") and
pursuant to the rules and regulations of the Securities and Exchange Commission
(the SEC). Certain information and note disclosures normally included in
annual financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information not
misleading.
These interim financial statements as of and for the three
months ended September 30, 2014 and 2013 are unaudited; however, in the opinion
of management, such statements include all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position, results
of operations and cash flows of the Company for the periods presented. The
results for the three months ended September 30, 2014 are not necessarily
indicative of the results to be expected for the year ending December 31, 2014
or for any future period. All references to September 30, 2014 and 2013 in these
footnotes are unaudited.
The condensed balance sheet as of June 30, 2014 has been
derived from the audited financial statements at that date but do not include
all disclosures required by the accounting principles generally accepted in the
United States of America.
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 Condensed Financial
Statements
September 30, 2014 and 2013
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 managements estimate of the uncollectible trade accounts receivable based on
historical collection experience and managements 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 September 30, 2014 and did not record an allowance for
doubtful accounts because of the assurance of collectability of those
receivables. The Companys allowance for doubtful accounts at September 30, 2013
was $1,601.
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 three months ended September 30, 2014 and 2013.
Revenue Recognition
It is the Companys policy that revenue from product sales or
services will be recognized in accordance with ASC 605Revenue 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.
7
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
Asset Retirement Obligation
The liability for the fair value of environmental and site
restoration obligations are 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.
Cost of Goods Sold
Cost of goods sold for the quarters ended September 30, 2014
and 2013 consisted of the following:
|
|
2014 |
|
|
2013 |
|
Fuel & oil disposal |
$ |
22,399 |
|
$ |
11,507 |
|
Insurance |
|
10,697 |
|
|
10,042 |
|
Repairs and maintenance |
|
32,236 |
|
|
91,520 |
|
Skim oil processing fees |
|
12,929 |
|
|
8,040 |
|
Solids processing |
|
55,984 |
|
|
30,680 |
|
Subcontract trucking |
|
9,063 |
|
|
10,112 |
|
Utilities |
|
6,533 |
|
|
9,059 |
|
Other |
|
13,619 |
|
|
36,275 |
|
TOTAL COST OF GOODS SOLD |
$ |
163,460 |
|
$ |
207,235 |
|
|
|
|
|
|
|
|
Advertising
The Company expenses the costs associated with advertising when
incurred. Advertising expense totaled $2,063 and $2,102 for the quarters ended
September 30, 2014 and 2013, respectively.
Foreign currency translation
The Companys reporting is the US Dollar and the functional
currency is Canadian Dollars. The accounts of the Company 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.
8
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
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
September 30, 2014, the Company had no material items of other comprehensive
income except for the foreign currency translation adjustment.
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 September 30, 2014 and 2013.
The Company grants credit to its customers throughout Canada
and generally do not require collateral. Consequently, the companys 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 September 30, 2014 and June 30, 2014
consisted of the following:
|
|
|
September |
|
|
June 30, |
|
|
|
|
30,
2014 |
|
|
2014
|
|
|
Accounts receivable |
$ |
312,283 |
|
$ |
202,359 |
|
|
Less allowance for doubtful accounts |
|
--
|
|
|
- |
|
|
|
$ |
312,283 |
|
$ |
202,359 |
|
9
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2014 and June 30, 2014
consisted of the following:
|
|
|
September |
|
|
June 30, 2014 |
|
|
|
|
30,
2014 |
|
|
|
|
|
Vehicles |
$ |
365,277 |
|
$ |
382,238 |
|
|
Disposal wells |
|
497,053 |
|
|
520,131 |
|
|
Machinery and equipment |
|
957,800 |
|
|
992,992 |
|
|
|
|
1,820,130 |
|
|
1,895,361 |
|
|
Less accumulated depreciation |
|
(1,423,828 |
) |
|
(1,467,649 |
) |
|
Net book value |
$ |
396,302 |
|
$ |
427,712 |
|
Depreciation expense for property and equipment was $21,751 and
$24,215 for the quarters ended September 30, 2014 and 2013.
NOTE 5 INCOME TAXES
The Company is treated as a Canadian controlled private
corporation for federal and provincial taxes. Earnings (losses) before income
taxes were $106,846 and $(55,630) for the quarters ending September 30, 2014 and
2013.
Tax Rate Reconciliation |
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Federal statutory rate |
|
38.0 % |
|
|
38.0 % |
|
Statutory deductions |
|
(23.9 |
) |
|
38.0 |
|
Provincial statutory rate, net of federal
tax benefit |
|
.5 |
|
|
-- |
|
Effective tax rate |
|
14.6
% |
|
|
-- %
|
|
Provision for Income Taxes |
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Federal |
$ |
9,425 |
|
$ |
-- |
|
Provincial |
|
575
|
|
|
--
|
|
Total |
$ |
10,000 |
|
$ |
-- |
|
NOTE 5 SHAREHOLDER ADVANCES
Shareholder advances consisted of $45,387 and $47,494 at
September 30, 2014 and June 30, 2014, respectively. The advances do not bear
interest, have a specified due date or require collateral.
10
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
NOTE 6 LONG-TERM DEBT
Long-Term Debt at September 30, 2014 and June 30, 2014
consisted of the following:
|
|
September |
|
|
June 30, |
|
|
|
30,
2014 |
|
|
2014
|
|
Note for share redemption
payable in annual installments
of $95,087 with the first installment due
on March 1, 2014
including accrued interest at 2%. |
$ |
362,066 |
|
$ |
378,877 |
|
Less current maturities |
|
(87,846 |
) |
|
(91,925 |
) |
|
$ |
274,220 |
|
$ |
286,952 |
|
Future principal payments on the note payable are scheduled as
follows:
Year Ending September 30,
|
|
2014 |
|
2015 |
$ |
87,846 |
|
2016 |
|
89,588 |
|
2017 |
|
91,394 |
|
2018 |
|
93,238 |
|
2019 |
|
-- |
|
|
$ |
362,066 |
|
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 or make deposits equal to the estimated costs of well and surface
facility abandonment and reclamation.
|
|
September |
|
|
June 30, |
|
|
|
30,
2014 |
|
|
2014 |
|
Asset retirement obligation
at beginning of year |
$ |
287,260 |
|
$ |
259,667 |
|
Accretion expense |
|
-- |
|
|
- |
|
Change due to foreign
currency translation |
|
(28,128 |
) |
|
11,497 |
|
Asset retirement obligation |
$ |
259,132 |
|
$ |
271,164 |
|
11
Tero Oilfield Services Ltd.
Notes to Condensed Financial
Statements
September 30, 2014 and 2013
NOTE 8 COMMITMENTS AND CONTINGENCIES
Litigation
The Company is not involved in any litigation and Management is
not aware of any outstanding contingencies.
Leases and Obligations
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 $2,420 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
$259,132 and $271,164 at September 30, 2014 and June 30, 2014, respectively.
NOTE 9 MAJOR CUSTOMERS AND VENDORS
The Company has four customers that represent approximately 65%
of its revenue for the quarters ended September 30, 2014. The Company has six
customers that represent approximately 80% of its accounts receivable at
September 30, 2014. The Company is not reliant on any specific vendor for its
equipment purchases and can establish additional relationships with minimal
disruption.
12
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 quarterly report on Form 10-Q/A 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: December 2, 2014
/s/ Alexander
Walsh
Alexander Walsh
President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial
Officer and 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 Quarterly Report on Form 10-Q/A of Lithium
Exploration Group, Inc. for the period ended September 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: December 2, 2014
|
/s/
Alexander Walsh |
|
Alexander Walsh |
|
President, Secretary, Treasurer and Director
|
|
(Principal Executive 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.