UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 February 17,
2015.
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2014
TABLE OF CONTENTS
2
PART I FINANCIAL INFORMATION
Item 1. |
Financial Statements
|
Our unaudited condensed consolidated financial statements for
the three and six month periods ended December 31, 2014 form part of this
quarterly report. They are stated in United States Dollars (US$) and are
prepared in accordance with United States generally accepted accounting
principles.
3
LITHIUM EXPLORATION GROUP, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2014
(Unaudited)
Lithium Exploration Group, Inc.
Condensed Consolidated Balance Sheets
|
|
December 31, |
|
|
June 30, |
|
|
|
2014 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
82,762 |
|
$ |
69,732 |
|
Receivable |
|
28,168 |
|
|
26,419 |
|
Loan receivable |
|
20,000
|
|
|
20,000 |
|
Prepaid expenses |
|
2,788 |
|
|
21,862 |
|
Total current assets |
|
133,718
|
|
|
138,013 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliate (Note 11) |
|
930,898 |
|
|
924,753 |
|
|
|
|
|
|
|
|
Total Assets |
$ |
1,064,616 |
|
$ |
1,062,766 |
|
|
|
|
|
|
|
|
LIABILITIES AND
DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable
and accrued liabilities |
$ |
77,017 |
|
$ |
14,520 |
|
Derivative liability convertible promissory notes (Note 6) |
|
44,806
|
|
|
2,832,989 |
|
Due to related
party (Note 7) |
|
- |
|
|
45,332 |
|
Convertible
promissory notes (net of discount of $1,372,291 and $2,797,850) (Note 6)
|
|
551,030
|
|
|
450,057 |
|
Accrued interest convertible
promissory notes (Note 6) |
|
102,953 |
|
|
75,004 |
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
775,806 |
|
|
3,417,902 |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT |
|
|
|
|
|
|
Lithium Explorations
Group, Inc. Stockholders Equity 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) |
|
- |
|
|
- |
|
1,571,669,638 common shares (June 30, 2014 191,958,118) |
|
1,571,673 |
|
|
191,961 |
|
Additional paid-in capital
|
|
40,480,515 |
|
|
38,381,943 |
|
Accumulated other comprehensive loss |
|
(13,603 |
) |
|
(5,769 |
) |
Accumulated deficit |
|
(41,510,250 |
) |
|
(40,821,871 |
) |
Total Lithium Exploration Group, Inc. Stockholders Equity Deficit |
|
528,335 |
|
|
(2,253,736 |
) |
Non-controlling interest |
|
(239,525 |
) |
|
(101,400 |
) |
Total Equity (Deficit) |
|
288,810 |
|
|
(2,355,136 |
) |
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity Deficit |
$ |
1,064,616 |
|
$ |
1,062,766 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Operations And Comprehensive
Loss |
(Unaudited) |
|
|
Three Months |
|
|
Three Months |
|
|
Six Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
Ended December
|
|
|
Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
25,233 |
|
$ |
- |
|
$ |
41,300 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining (Notes 3 & 5) |
|
- |
|
|
- |
|
|
15,000 |
|
|
10,128 |
|
Selling, general
and administrative (Notes 3 & 5) |
|
406,287
|
|
|
583,200 |
|
|
908,916
|
|
|
868,893 |
|
Goodwill |
|
- |
|
|
362,317 |
|
|
- |
|
|
362,317 |
|
Total operating
expenses |
|
406,287
|
|
|
945,517 |
|
|
923,916
|
|
|
1,241,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(381,054 |
) |
|
(945,517 |
) |
|
(882,616 |
) |
|
(1,241,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Note 6) |
|
(1,109,119 |
) |
|
(592,267 |
) |
|
(2,671,540 |
) |
|
(850,485 |
) |
Gain (loss) on change in the
fair value of derivative liability (Note 6) |
|
360,131
|
|
|
278,523 |
|
|
2,818,577
|
|
|
255,371
|
|
Fair value of warrants issued |
|
300,000 |
|
|
(74,075 |
) |
|
(97,070 |
) |
|
(92,408 |
) |
Equity in income (loss) of
unconsolidated affiliate |
|
(42,278 |
) |
|
- |
|
|
6,145 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
(872,320 |
) |
|
(1,333,336 |
) |
|
(826,504 |
) |
|
(1,928,860 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
(Note 4) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
period |
|
(872,320 |
) |
|
(1,333,336 |
) |
|
(826,504 |
) |
|
(1,928,860 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net loss attributable
to the non-controlling interest |
|
(65,325 |
) |
|
(297,647 |
) |
|
(138,125 |
) |
|
(297,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to
Lithium Exploration Group, Inc. Common shareholders |
|
(806,995 |
) |
|
(1,035,689 |
) |
|
(688,379 |
) |
|
(1,631,213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per
Common Share |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
$ |
(0.00 |
) |
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Weighted
Average Number of |
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Outstanding |
|
840,776,824 |
|
|
89,169,818 |
|
|
547,109,178 |
|
|
74,720,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(872,320 |
) |
|
(1,333,336 |
) |
|
(826,504 |
) |
|
(1,928,860 |
) |
Foreign currency translation adjustment |
|
(5,970 |
) |
|
- |
|
|
(7,834 |
) |
|
- |
|
Comprehensive loss |
|
(878,290 |
) |
|
(1,333,336 |
) |
|
(834,338 |
) |
|
(1,928,860 |
) |
Comprehensive loss attributable to
non-controlling interest |
|
(65,325 |
) |
|
(297,647 |
) |
|
(138,125 |
) |
|
(297,647 |
) |
Comprehensive loss
attributable to Lithium Exploration Group, Inc. |
|
(812,965 |
) |
|
(1,035,689 |
) |
|
(696,213 |
) |
|
(1,631,213 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated
Statements of Changes in Stockholders Equity (Deficit)
(Unaudited) |
|
|
Preferred
Shares |
|
|
Common
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Paid-in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Non-controlling
|
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
interest |
|
|
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 |
|
- |
|
|
- |
|
|
10,375,768 |
|
|
10,376 |
|
|
108,614 |
|
|
- |
|
|
- |
|
|
- |
|
|
118,990 |
|
Common shares issued
for debt conversion |
|
- |
|
|
- |
|
|
1,297,227,704 |
|
|
1,297,227 |
|
|
1,295,391 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,592,618 |
|
Common shares issued for exercise of
warrants |
|
- |
|
|
- |
|
|
72,108,048 |
|
|
72,108 |
|
|
694,568 |
|
|
- |
|
|
- |
|
|
- |
|
|
766,676 |
|
Foreign exchange translation
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(7,834 |
) |
|
- |
|
|
- |
|
|
(7,834 |
) |
Net income (loss) for the period |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(688,379 |
) |
|
(138,125 |
) |
|
(826,504 |
) |
Balance December 31,
2014 |
|
- |
|
$ |
- |
|
|
1,571,669,638 |
|
$ |
1,571,673 |
|
$ |
40,480,515 |
|
$ |
(13,603 |
) |
$ |
(41,510,250 |
) |
$ |
(239,525 |
) |
$ |
288,810 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Cash Flows |
(Unaudited) |
|
|
Six Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Cash Flows from Operating
Activities |
|
|
|
|
|
|
Net income (loss) |
$ |
(826,504 |
) |
$ |
(1,928,860 |
) |
Adjustments to reconcile
net loss to net cash used in
operating activities: |
|
|
|
|
|
|
Equity in income (loss) of unconsolidated
affiliate |
|
(6,145 |
) |
|
- |
|
Common shares issued for consulting fees |
|
118,990 |
|
|
150,167 |
|
Goodwill impairment |
|
|
|
|
362,317 |
|
Common shares issued for interest expenses |
|
99,567 |
|
|
- |
|
Interest expense |
|
2,544,024
|
|
|
850,485 |
|
(Gain) loss on change in the fair value of derivative
liability |
|
(2,818,577 |
) |
|
(162,963 |
) |
Fair value of warrants issued |
|
97,070
|
|
|
- |
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Receivable |
|
(1,749 |
) |
|
(9,164 |
) |
Loan receivable |
|
- |
|
|
(20,000 |
) |
Prepaid expenses |
|
19,074 |
|
|
19,282 |
|
Accrued interest |
|
27,949
|
|
|
- |
|
Accounts
payable and accrued liabilities |
|
62,497 |
|
|
(1,980 |
) |
Net cash used in operating activities |
|
(683,804 |
) |
|
(740,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
Deposit applied for acquisition of subsidiary |
|
- |
|
|
(38,662 |
) |
Net cash used in investing activities |
|
- |
|
|
(38,662 |
) |
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
Repayment to related party |
|
(45,332 |
) |
|
- |
|
Proceed from issuance of convertible
promissory notes |
|
750,000 |
|
|
775,000 |
|
Net cash provided by financing activities |
|
704,668 |
|
|
775,000 |
|
|
|
|
|
|
|
|
Effect of foreign exchange
|
|
(7,834 |
) |
|
- |
|
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents |
|
13,030
|
|
|
(4,278 |
) |
Cash and cash equivalents - beginning of period |
|
69,732 |
|
|
248,624 |
|
Cash and cash equivalents - end of period |
$ |
82,762 |
|
$ |
244,346 |
|
|
|
|
|
|
|
|
Supplementary disclosure
of cash flow information: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
$ |
2,205 |
|
$ |
- |
|
Income taxes |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
Supplementary non- cash Investing and
Financing Activities: |
|
|
|
|
|
|
Non-cash investing and
financing activities: |
|
|
|
|
|
|
Common stock issued for debt conversion |
$ |
2,493,048 |
|
$ |
1,284,174 |
|
Transfer of beneficial conversion
feature to fair value of note |
$ |
408,962
|
|
$ |
- |
|
Common stock issued on cashless exercise of
warrants |
$ |
766,675 |
|
$ |
- |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements
|
December 31, 2014 |
(Unaudited) |
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 through its 100% subsidiary Alta Disposal Ltd. 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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
2. |
Significant Accounting Policies
|
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
These interim financial statements as of and for the six months ended December 31, 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 six months ended December 31, 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 December 31, 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 Company's 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 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.
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 $82,762 and $69,732 in cash and cash equivalents at December 31, 2014 and June 30, 2014, respectively.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
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 December 31, 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.
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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014 |
(Unaudited) |
2. |
Significant Accounting Policies -
Continued |
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 December 31, 2014 and June 30, 2014.
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 December 31, 2014 closing rate at 0.8620 CND$:US$, average rate at 0.8988
CND$: 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 December 31, 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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
2. |
Significant Accounting Policies - Continued
|
Environmental Expenditures
The operations of the Company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new
regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible
measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred
since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings
over the estimated remaining life of the related business operation, net of expected recoveries.
Warrants
The Company value its warrants with provisions resulting in derivative liabilities at fair value using the lattice model according to ASC-815-10-55. The Company revalue its warrants at the end of every period at fair value and record the difference
in other income (expense) in the consolidated statements of operations.
Convertible Debentures and Convertible Promissory Notes
The Company value 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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
2. |
Significant Accounting Policies - Continued
|
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based
on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial 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.
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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
2. |
Significant Accounting Policies - Continued
|
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 as Equity in Income of Unconsolidated Affiliate.
Recent Accounting Pronouncements
The Company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards
Codification.
A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced
no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities.
For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in
annual periods beginning after December 15, 2015. Early adoption is permitted.
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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
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 Company's authorized capital consists of 2,000,000,000 common shares and 100,000,000 preferred shares, all with a par value of$0.001.
Share Issuances
Common Stock Issuance
For the period ended December 31, 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).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances - Continued
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).
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 $0.08 per share for warrants exercise of $46,439 (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).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances - Continued
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).
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).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances Continued
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).
On October 1, 2014, the Company issued 240,964 common shares at a market price of $0.01 per share for consulting fees.
On October 2, 2014, the Company issued 4,545,455 common shares at a deemed price of $0.003 per share for promissory note and interest conversion of $24,292 (Note 6).
On October 3, 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 $38,462 (Note 6).
On October 6, 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 $38,462 (Note 6).
On October 7, 2014, the Company issued 11,000,000 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $37,231 (Note 6).
On October 9, 2014, the Company issued 6,666,667 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $30,000 (Note 6).
On October 13, 2014, the Company issued 13,636,363 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $46,154 (Note 6).
On October 13, 2014, the Company issued 10,681,818 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $45,669 (Note 6).
On October 16, 2014, the Company issued 7,317,073 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $30,000 (Note 6).
On October 20, 2014, the Company issued 11,111,111 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $38,867 (Note 6).
On October 21, 2014, the Company issued 10,000,000 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $29,150 (Note 6).
On October 21, 2014, the Company issued 20,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $44,615 (Note 6).
On October 22, 2014, the Company issued 7,630,987 common shares at a market price of $0.003 per share for consulting fees.
On October 22, 2014, the Company issued 19,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $38,694 (Note 6).
On October 23, 2014, the Company issued 5,882,353 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $20,000 (Note 6).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances Continued
On October 24, 2014, the Company issued 8,823,529 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $30,000 (Note 6).
On October 27, 2014, the Company issued 22,008,309 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $66,113 (Note 6).
On October 27, 2014, the Company issued 20,000,000 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $58,301 (Note 6).
On October 27, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $43,500 (Note 6).
On October 27, 2014, the Company issued 3,345,769 common shares at a deemed price of $0.002 per share for promissory note and interest conversion of $7,948 (Note 6).
On October 27, 2014, the Company issued 22,713,104 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $62,934 (Note 6).
On October 31, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $26,538 (Note 6).
On October 31, 2014, the Company issued 12,500,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $30,000 (Note 6).
On November 3, 2014, the Company issued 15,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $34,500 (Note 6).
On November 4, 2014, the Company issued 17,391,304 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $38,867 (Note 6).
On November 6, 2014, the Company issued 19,900,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $28,578 (Note 6).
On November 10, 2014, the Company issued 19,809,523 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $32,000 (Note 6).
On November 13, 2014, the Company issued 20,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $27,692 (Note 6).
On November 14, 2014, the Company issued 21,052,632 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $40,000 (Note 6).
On November 17, 2014, the Company issued 15,789,474 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $30,000 (Note 6).
On November 18, 2014, the Company issued 25,641,025 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $30,769 (Note 6).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances Continued
On November 18, 2014, the Company issued 28,773,463 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $47,335 (Note 6).
On November 19, 2014, the Company issued 34,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $37,202 (Note 6).
On December 1, 2014, the Company issued 30,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $32,308 (Note 6).
On December 3, 2014, the Company issued 21,428,571 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $17,500 (Note 6).
On December 4, 2014, the Company issued 30,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $34,980 (Note 6).
On December 5, 2014, the Company issued 27,272,727 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $29,150 (Note 6).
On December 5, 2014, the Company issued 30,000,000 common shares at a deemed price of $0.001 per share for promissory note and interest conversion of $23,077 (Note 6).
On December 8, 2014, the Company issued 26,666,667 common shares at a deemed price of $0.005 per share for promissory note and interest conversion of $23,320 (Note 6).
On December 8, 2014, the Company issued 35,000,000 common shares at a deemed price of $0.0004 per share for promissory note and interest conversion of $18,846 (Note 6).
On December 9, 2014, the Company issued 25,714,286 common shares at a deemed price of $0.0004 per share for promissory note and interest conversion of $17,498 (Note 6).
On December 10, 2014, the Company issued 45,000,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $20,769 (Note 6).
On December 10, 2014, the Company issued 48,300,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $19,818 (Note 6).
On December 10, 2014, the Company issued 34,000,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $20,400 (Note 6).
On December 11, 2014, the Company issued 33,891,200 common shares at a deemed price of $0.0004 per share for promissory note and interest conversion of $22,862 (Note 6).
On December 12, 2014, the Company issued 74,447,489 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $42,334 (Note 6).
On December 15, 2014, the Company issued 50,000,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $23,077 (Note 6).
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
3. |
Capital Stock Continued
|
Share Issuances Continued
On December 16, 2014, the Company issued 37,142,857 common shares at a deemed price of $0.0004 per share for promissory note and interest conversion of $13,000 (Note 6).
On December 17, 2014, the Company issued 61,700,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $25,317 (Note 6).
On December 17, 2014, the Company issued 50,400,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $29,120 (Note 6).
On December 18, 2014, the Company issued 60,000,000 common shares at a deemed price of $0.0003 per share for promissory note and interest conversion of $27,692 (Note 6).
As at December 31, 2014, 23,933,543 (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. 1,318,493,515 (June 30, 2014 - 21,265,811) were issued for
promissory note and interest conversions. 81,307,589 (June 30, 2014 - 9,199,541) 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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014 of approximately $12,100,000 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately
$785,430 and $536,536 during the periods ended December 31, 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 December 31, 2014 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized
tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at December 31, 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).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014 |
(Unaudited) |
4. |
Provision for Income Taxes -
Continued |
|
|
2014 |
|
|
|
Amount |
|
|
Tax Effect (35%) |
|
|
|
|
|
|
|
|
Net income |
$ |
(826,504 |
) |
$ |
(289,276 |
) |
|
|
|
|
|
|
|
Shares issued for consulting fees, mining
expenses, investor relation and director fees |
|
(218,557 |
) |
|
(76,495 |
) |
Accretion of beneficial conversion feature |
|
(2,544,024 |
) |
|
(890,408 |
) |
Gain on change in the fair value of
derivative liability and fair value of warrant issued |
|
2,721,507 |
|
|
952,527 |
|
|
|
|
|
|
|
|
Total |
|
785,430 |
|
|
274,901 |
|
|
|
|
|
|
|
|
Valuation allowance |
|
(785,430 |
) |
|
(274,901 |
) |
|
|
|
|
|
|
|
Net deferred tax asset (liability) |
$ |
- |
|
$ |
- |
|
|
|
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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014 and
June 30, 2014 is as follows:
|
|
June 30, |
|
|
Fair value |
|
|
Fair value |
|
|
Fair value |
|
|
December |
|
|
|
2014 |
|
|
issued |
|
|
converted |
|
|
repaid |
|
|
31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 13, 2013 |
$ |
461,754 |
|
$ |
- |
|
$ |
(284,014 |
) |
$ |
- |
|
$ |
177,740 |
|
February 27, 2014 |
|
200,000 |
|
|
- |
|
|
(200,000 |
) |
|
- |
|
|
- |
|
February 27, 2014 |
|
150,000 |
|
|
- |
|
|
(150,000 |
) |
|
- |
|
|
- |
|
February 28, 2014 |
|
100,000 |
|
|
- |
|
|
(90,250 |
) |
|
- |
|
|
9,750 |
|
February 28, 2014 |
|
200,000 |
|
|
- |
|
|
(200,000 |
) |
|
- |
|
|
- |
|
February 28, 2014 |
|
220,000 |
|
|
- |
|
|
(153,400 |
) |
|
- |
|
|
66,600 |
|
March 3, 2014 |
|
100,000 |
|
|
- |
|
|
(100,000 |
) |
|
- |
|
|
- |
|
March 3, 2014 |
|
200,000 |
|
|
- |
|
|
(200,000 |
) |
|
- |
|
|
- |
|
March 3, 2014 |
|
100,000 |
|
|
- |
|
|
(100,000 |
) |
|
- |
|
|
- |
|
March 3, 2014 |
|
230,000 |
|
|
- |
|
|
(100,000 |
) |
|
- |
|
|
130,000 |
|
March 3, 2014 |
|
440,000 |
|
|
- |
|
|
(440,000 |
) |
|
- |
|
|
- |
|
March 15, 2014 |
|
846,154 |
|
|
- |
|
|
(475,385 |
) |
|
- |
|
|
370,769 |
|
July 22, 2014 |
|
- |
|
|
923,077 |
|
|
- |
|
|
- |
|
|
923,077 |
|
August 22, 2014 |
|
- |
|
|
153,846 |
|
|
- |
|
|
- |
|
|
153,846 |
|
October 31, 2014 |
|
- |
|
|
91,538 |
|
|
- |
|
|
- |
|
|
91,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,247,908 |
|
$ |
1,076,923 |
|
$ |
(986,033 |
) |
$ |
- |
|
$ |
1,923,320 |
|
Less: Debt
discount |
|
2,797,850 |
|
|
|
|
|
|
|
|
|
|
|
1,372,290 |
|
Net Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
promissory Note
|
|
450,057 |
|
|
|
|
|
|
|
|
|
|
|
551,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion |
$ |
450,057 |
|
|
|
|
|
|
|
|
|
|
$ |
551,030 |
|
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 December 31, 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 December 31, 2014, $303,225 (June 30, 2014 -
$419,272) in face value of the note including interest was converted to
194,361,697 (June 30, 2014 -14,164,584) common shares in accordance with the
terms of the agreement.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
6. |
Convertible Promissory Notes - Continued
|
There is no guarantee the investor will make additional payments. The face value of $177,740 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 December 31, 2014, an interest expense of $3,380 (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 December 31, 2014, $205,984 (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 December 31, 2014, $102,822 (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 December 31, 2014, an interest expense of $19,750 (June 30, 2014 - $1,667) was accrued.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, $155,145 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 112,347,258 (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 $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 December 31, 2014, $225,500 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 115,052,787 (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 $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 December 31, 2014, $153,400 (June 30, 2014 - $Nil) in face value of the note including interest was
converted to 74,000,000 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. During the period ended December 31, 2014, an interest expense of $5,657 (June 30, 2014 - $7,543) was accrued.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, $102,596 (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 December 31, 2014, $207,335 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 65,609,438 (June 30, 2014 - Nil) common shares in accordance with the terms
of the agreement. The note was fully converted during the period.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, $102,759 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 13,799,767 (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 $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 December 31, 2014, $105,268 (June 30, 2014 - $Nil) in face value of the note including interest was converted to
97,160,593 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. During the period ended December 31, 2014, an interest expense of $8,625 (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 December 31, 2014, $453,200 (June 30, 2014 - $Nil) in face value of the note
including interest was converted to 198,558,435 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. The note was fully converted during the period.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, $475,384 (June 30, 2014 - $Nil) in face value of the note
including interest was converted to 396,905,092 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. During the period ended December 31, 2014, an interest expense of $17,187 (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 December 31, 2014, total net proceeds of $600,000 were received. There is no guarantee the investor will make additional payments. The note is convertible at the lower of 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 December 31, 2014, an interest expense of $24,990 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 lower of 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 December 31, 2014, an interest expense of $4,929 was accrued.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
6. Convertible Promissory Notes - Continued
|
Effective October 31, 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 $59,500 due
on October 31, 2016 and carries an interest rate of 12% per annum over the term of the note, with an effective interest rate of 202.17%. The note is convertible at the lower of 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 $91,538. During the period ended December 31, 2014, an interest expense of $593 was accrued.
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.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
6. |
Convertible Promissory Notes - Continued
|
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.
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 $0.2800.
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, $634,092, 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 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 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 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 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 of $20,000 was recorded when the warrants were valued prior to
the warrants exercise.
On September 4, 2014, 4,000,000 warrants were exercised for 583,333 common shares of the Company at a deemed price of $0.01 in accordance with the terms of the agreement. A gain of $1,490 was recorded when the warrants were valued prior to
the warrants exercise.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements
|
December 31, 2014 |
(Unaudited) |
6. |
Convertible Promissory Notes -
Continued |
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 of $5,777 was recorded when
the warrants were valued prior to the warrants exercise.
The Company used the Lattice Model for valuing warrants using
the following assumptions:
|
|
December 31, 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 December 31, 2014, the warrants were valued at $44,806 (June
30, 2014 - $2,832,989) resulting in a gain of $2,615,922 (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 December 31, 2014, an
accretion of $100,973 (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 |
|
|
0.289 |
|
|
4.84 years |
|
|
Exercised |
|
(20,227,315 |
) |
|
0.036 |
|
|
- |
|
|
Cancelled |
|
- |
|
|
- |
|
|
- |
|
|
Expired |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2014 |
|
61,792,793 |
|
$ |
0.097 |
|
|
3.22
years |
|
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 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 December 31, 2014 - Embedded debt
derivatives |
|
(2,818,577 |
) |
|
Balance, December 31, 2014 |
$ |
44,806 |
|
|
|
|
|
|
|
Net gain for the period included in earnings relating to
the liabilities held at December 31, 2014 |
$ |
2,818,577 |
|
7. |
Related Party Transactions |
During the period ended December 31, 2014, the Company incurred
consulting fees of $77,990 (June 30, 2014 - $219,300) with directors and
officers out of which $58,990 were paid by issuance of 8,666,935 shares of the Company common stock.
As of December 31, 2014, the Company repaid to a director for a
non-interest bearing demand loan of $47,537 (Note 9) (June 30, 2014 payable
$45,332).
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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, the
Company had a working capital deficiency of $642,088 (June 30, 2014 -
$3,279,889) and an accumulated deficit of $41,510,250 (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 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). |
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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. The consulting agreement was amended on October 22, 2014 to include an additional aggregate of $30,000 payable as of October 22, 2014 in cash or in shares of the Company’s common stock, and changed the term of agreement from 12 months to 10 months. Effective November 1, 2014, the consultant resigned as member of the Board of Directors.
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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 December 31, 2014, the Company paid $50,000 (June 30, 2014 - $50,000) of the $100,000
acquisition severance payment and has not exercise the option to purchase
additional investment in Tero.
On December 23, 2014, a member of the Board of Directors made demand for repayment of the debt by the company. In connection with the assignment of debt agreement and the demand, Mr. Walsh and the Company entered into a settlement agreement dated December 23, 2014 wherein the Company is to repay the debt to Mr. Walsh in full (Note 7). The Company also agreed to pay an aggregate of $150,000 to Mr. Walsh as a performance bonus for the services provided by Mr. Walsh for the period from August 2013 to March 2014 as related to the acquisition of Tero Oilfield Services Ltd. due on the following terms:
|
i. |
an aggregate of $50,000 due immediately; and |
|
ii. |
an aggregate of $100,000 bearing no interest and due on the earlier of: |
|
a. |
at the sole discretion of our company; or |
|
b. |
the date of the sale, merger, amalgamation or other business combination or reorganization of our company. |
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.
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 fulfilled.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 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 $500,000 by February 28, 2015.
Summary financial results of Tero for the period ended December
31, 2014 are as follows:
Operations |
|
|
|
|
|
US$ |
|
|
|
|
|
Disposal Well Revenues |
$ |
681,881 |
|
Operating expense |
|
(669,591 |
) |
|
|
12,290 |
|
Provision for Income Taxes |
|
- |
|
Net income |
$ |
12,290 |
|
|
|
|
|
Equity in income of unconsolidated
affiliate |
$ |
6,145 |
|
Summary financial position for Tero as at December 31, 2014
follows:
Financial Position |
|
|
|
|
|
US$ |
|
Cash |
$ |
- |
|
Other current assets |
|
205,991 |
|
Property and equipment |
|
409,656 |
|
Total Assets |
$ |
615,647 |
|
|
|
|
|
Current liabilities |
$ |
181,140 |
|
Long term debt |
|
511,746 |
|
Total Liabilities |
|
692,886 |
|
|
|
|
|
Capital stock |
|
5 |
|
Retained earnings |
|
77,244 |
|
Total Equity |
|
77,239 |
|
Total Liabilities and Equity |
$ |
615,647 |
|
|
|
|
|
Investment in unconsolidated affiliate: |
|
|
|
Balance at June 30, 2014 |
$ |
924,753 |
|
Equity in income |
|
6,145 |
|
Balance at December 31, 2014 |
$ |
930,898 |
|
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Interim Financial Statements |
December 31, 2014
|
(Unaudited)
|
Issuances of Common Shares
On January 19, 2015, the Company's board of directors consented to effect a reverse stock split of our issued and outstanding shares of common stock on a basis of 20 old shares of common stock for one (I) new share of common stock. Stockholders of
our company originally approved the reverse stock split on October 14, 2014 at a special meeting. The Companys authorized capital will not be affected by the reverse stock split.
The Company has evaluated subsequent events from February 20, 2015, through the date of this report, and determined there are no other items to disclose.
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.
5
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.
On January 19, 2015, we received written consent from our
companys board of directors to effect a reverse stock split of our issued and
outstanding shares of common stock on a basis of 20 old shares of common stock
for 1 new share of common stock. Stockholders of our company originally approved
the reverse stock split on October 14, 2014 at a special meeting. Our authorized
capital will not be affected by the reverse stock split.
The amendment is currently being submitted to the Financial
Industry Regulatory Authority (FINRA) for review. We will announce the
completion of FINRA's review and the effectiveness of the amendment on the
market by filing a Current Report on Form 8-K.
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.
6
On July 3, 2013, Lithium Exploration VIII and Golden Virtue
elected to convert the note and accrued interest in the combined aggregate
amount of CAD$83,057.53 (USD$78,743) into common shares of our company. Pursuant
to this election, we issued an aggregate of 954,461 shares of our common stock
at the price of USD$0.0825 per share.
Glottech
On November 8, 2011, we entered into a letter agreement with
Glottech-USA. Pursuant to the terms of the agreement, we were granted an
exclusive license to use and distribute the technology within the Swan Hills
region of Alberta as well as a non-exclusive right to distribute the technology
within Canada.
We previously made the following payments in association with
the production of a working unit of Glottech-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.
7
Pursuant to the sales agency agreement we were appointed as
sales agent for the patented mechanical ultrasound technology within Canada. Our
appointment is exclusive within the field of non petro-chemical mining and
non-exclusive in all other fields of use. In consideration of the sales agency
rights, we agreed to issue to GD Glottech International 2,000,000 common shares
of our capital stock, which obligation has been satisfied through the transfer
to GD Glottech International of 2,000,000 shares held by our officer and
director, Alexander Walsh. It was the explicit intention of the parties that
this share transfer fulfills the prior obligations of Alexander Walsh and our
company with respect to the option contemplated in the March and November 2011
agreements with Glottech-USA.
We will receive a royalty in respect of sales of the technology
secured by us. The term of the initial agreement will be for 5 years with the
possibility of extension if sales targets are achieved.
Pursuant to the license agreement, we obtained the exclusive
right to use the mechanical ultrasound technology within the field of
non-petro-chemical mining within the territory of Canada. We may also sublicense
our rights under the license in respect of one or more units of the technology
to any entity operating within the field of use in which we own or beneficially
own at least a 20% equity interest. GD Glottech International agreed to supply
us with up to 5 technology units per 12-month period from the effective date of
the license term, which will start from the month of delivery of the unit of the
technology. The first unit of the technology provided under the license to be
provided at no additional cost to us and subsequent units shall be subject to a
fee based on the then current retail price of the units. If we sublicense any of
our rights, the term of the applicable license will be for 5 years from the date
the applicable unit is delivered. Pursuant to the license agreement, GD Glottech
International shall provide ongoing technical assistance and training in respect
of our use of the technology at our cost.
In consideration of the license, we will pay to GD Glottech
International a royalty based on the tonnage of water produced by our use of the
technology in accordance with the agreement. A minimum annual royalty will be
applicable. The term of the license agreement shall be for an initial period of
5 years and shall be renewable for additional terms of 5 years provided that we
satisfy the minimum royalty requirements during each period.
GD Glottech 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.
8
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.
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.
9
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.
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.
10
Any such funds provided to Alta Disposal Morinville will be
repayable from cash flow generated by Alta Disposal Morinville. Funds loaned
prior to June 30, 2014 will not be due and payable until June 30, 2014 and
thereafter will not be due and payable until at least 6 months following the
date of any such loan.
Other terms of the Shareholders Agreement include:
- the board of directors of Alta Disposal Morinville will consist of 3
directors including 2 nominees of Alta Disposal and 1 nominee of Excel.
- Alexander Walsh will serve as chairman of the board of directors,
president and chief executive officer of Alta Disposal Morinville.
- Approval of the shareholders holding not less than 60% of Alta Disposal
Morinville shares will be required to remove or appoint officers of Alta
Disposal Morinville.
- Unanimous approval of the shareholders will be required in order to (i)
effect capital alterations; (ii) declare dividends except following the
completion of a fiscal year end and on a pro-rata basis to all shareholders;
or (iii) wind-up; dissolve; or reorganize the corporation or sell or lease
substantially all of its assets.
- Alta Disposal will otherwise have sole discretion and authority in respect
of any and all management and operational decisions relating to the
corporation.
- Each shareholder of Alta Disposal Morinville will have a right of first
refusal to purchase all shares sought to be sold by the other shareholder.
- Customary restrictions on the encumbrance and disposition of shares.
The Shareholders Agreement additionally provides for the
engagement of Valeura Energy Inc. as the operator of Alta Disposal 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.
11
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.
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 JDF Capital Inc.
$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 at a deemed price of
$0.01 per share for promissory note and interest conversion of $9,717.
- On September 4, 2014, we issued 583,333 common shares at a deemed price of
$0.08 per share for warrants exercise of $46,439.
- On September 15, 2014, we issued 5,584,185 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $54,804.
- On September 24, 2014, we issued 9,090,909 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $48,585.
- On October 2, 2014, we issued 4,545,455 common shares at a deemed price of
$0.003 per share for promissory note and interest conversion of $24,292.
- On October 13, 2014, we issued 10,681,818 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $45,669.
- On October 20, 2014, we issued 11,111,111 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $38,867.
- On October 21, 2014, we issued 10,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $29,150.
- On October 27, 2014, we issued 20,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $58,301.
- On November 4, 2014, we issued 17,391,304 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $38,867.
- On December 4, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $34,980.
- On December 5, 2014, we issued 27,272,727 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $29,150.
12
- On December 8, 2014, we issued 26,666,667 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $23,320.
- On December 9, 2014 we issued 25,714,286 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $17,498.
As at the date of this report there remains no balance
unconverted and payable pursuant to the note.
$500,000 Loan
On March 15, 2014, we entered into a securities purchase
agreement with JDF, pursuant to which JDF provided us with an aggregate
investment of $500,000 in consideration of our issuance of convertible
promissory notes and common share purchase warrants. We issued JDF a 10%
original issue discount convertible promissory note of $550,000 due September
15, 2015 and convertible into common shares on a cashless basis at a price per
share of 35% of the lower of lowest closing bid price of our common shares
during the prior 20 trading days prior to 1) the date of the purchase agreement
or 2) the day of the notice for conversion. The note bears interest, in arrears,
at a rate per annum equal to fifteen percent (15%) accruing on a semi-annual
basis commencing March 15, 2014 in cash or restricted shares of our 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 at a deemed price
of $0.003 per share for promissory note and interest conversion of $7,692.
- On October 3, 2014, we issued 10,000,000 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $38,462.
- On October 6, 2014, we issued 10,000,000 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $38,462.
- On October 7, 2014, we issued 11,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $37,231.
- On October 13, 2014, we issued 13,636,363 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $46,154.
- On October 21, 2014, we issued 20,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $44,615.
- On October 31, 2014, we issued 15,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $26,538.
- On November 10, 2014, we issued 19,809,523 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $32,000.
- On November 13, 2014, we issued 20,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $27,692.
- On November 18, 2014, we issued 25,641,025 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $30,769.
- On December 1, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $32,308.
- On December 5, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $23,077.
- On December 8, 2014, we issued 35,000,000 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $18,846.
- On December 10, 2014, we issued 45,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $20,769.
13
- On December 15, 2014, we issued 50,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $23,077.
- On December 18, 2014, we issued 60,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $27,692.
As at the date of this report $282,250 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.
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 $600,000 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 at a deemed price of
$0.0735 per share for promissory note and interest conversion of $163,693.
- On November 11, 2013, we issued 1,387,500 common shares at a deemed price
of $0.042 per share for promissory note and interest conversion of $81,846.
- On December 4, 2013, we issued 1,435,345 common shares at a deemed price
of $0.0406 per share for promissory note and interest conversion of $81,846.
- On January 6, 2014, we issued 2,553,681 common shares at a deemed price of
$0.02282 per share for promissory note conversion of $81,846.
- On February 14, 2014, we issued 2,000,000 common shares at a deemed price
of $0.0224 per share for promissory note conversion of $62,921.
- On March 3, 2014, we issued 1,902,344 common shares at a deemed price of
$0.0224 per share for promissory note conversion of $59,849.
- On June 10, 2014, we issued 1,600,000 common shares at a deemed price of
$0.0213 per share for promissory note conversion of $47,752.
14
- On June 27, 2014, we issued 1,700,000 common shares at a deemed price of
$0.0185 per share for promissory note conversion of $44,171.
- On July 16, 2014, we issued 1,800,000 common shares at a deemed price of
$0.002 per share for promissory note and interest conversion of $46,769.
- On August 1, 2014, we issued 1,062,687 common shares at a deemed price of
$0.02 per share for promissory note and interest conversion of $25,000.
- On September 3, 2014, we issued 3,000,000 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $42,135.
- On September 11, 2014, we issued 5,599,010 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $39,712.
- On October 22, 2014, we issued 19,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $38,694.
- On November 6, 2014, we issued 19,900,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $28,578.
- On November 19, 2014, we issued 34,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $37,202.
- On December 10, 2014, we issued 48,300,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $19,818.
- On December 17, 2014, we issued 61,700,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $25,317.
As at the date of this report, there remains a balance of
$124,455 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.
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.
- On August 28, 2014, we issued 10,390,546 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $205,984.
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.
15
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 at a deemed price
of $0.01 per share for promissory note and interest conversion of $62,375.
- On September 16, 2014, we issued 3,810,301 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $40,447.
As at the date of this report, 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:
- On September 29, 2014, we issued 6,047,749 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $37,050.
- On October 27, 2014, we issued 22,008,309 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $66,113.
- On December 11, 2014, we issued 33,891,200 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $22,862.
- On December 17, 2014, we issued 50,400,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $29,120.
As at the date of this report, there remains no balance
unconverted and payable pursuant to the note.
16
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 at a deemed price
of $0.01 per share for promissory note and interest conversion of $20,000.
- On September 23, 2014, we issued 3,846,154 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $25,000.
- On October 9, 2014, we issued 6,666,667 common shares at a deemed price of
$0.002 per share for promissory note and interest conversion of $30,000.
- On October 16, 2014, we issued 7,317,073 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $30,000.
- On October 24, 2014, we issued 8,823,529 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $30,000.
- On October 31, 2014, we issued 12,500,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $30,000.
- On November 17, 2014, we issued 15,789,474 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $30,000.
- On December 3, 2014, we issued 21,428,571 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $17,500.
- On December 16, 2014, we issued 37,142,857 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $13,000.
As at the date of this report, there remains no balance
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:
17
- On September 23, 2014, we issued 10,000,000 common shares at a deemed
price of $0.003 per share for promissory note and interest conversion of
$55,000.
- On October 27, 2014, we issued 15,000,000 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $43,500.
- On November 3, 2014, we issued 15,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $34,500.
- On December 10, 2014, we issued 34,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $20,400.
As at the date of this report, there remains a balance of
$23,300 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:
- On September 8, 2014, we issued 1,106,273 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $20,510.
- On September 11, 2014, we issued 2,607,721 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $30,777.
- On September 12, 2014, we issued 2,869,240 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $30,781.
- On September 15, 2014, we issued 1,914,321 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $20,529.
As at the date of this report, 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.
18
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 at a deemed price
of $0.01 per share for promissory note and interest conversion of $100,000.
- On October 23, 2014, we issued 5,882,353 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $20,000.
- On November 14, 2014, we issued 21,052,632 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $40,000.
- On November 18, 2014, we issued 28,773,463 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $47,335.
As at the date of this report, there remains no balance
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 at a deemed price of
$0.01 per share for promissory note and interest conversion of $20,000.
- On September 11, 2014, we issued 1,652,893 common shares at a deemed price
of $0.01 per share for promissory note and interest conversion of $20,000.
- On September 17, 2014, we issued 1,414,141 common shares at a deemed price
of $0.005 per share for promissory note and interest conversion of $14,000.
- On September 23, 2014, we issued 1,477,873 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $9,311.
- On September 29, 2014, we issued 5,000,000 common shares at a deemed price
of $0.003 per share for promissory note and interest conversion of $31,500.
- On October 27, 2014, we issued 3,345,769 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $7,948.
As at the date of this report, there remains no balance
unconverted and payable pursuant to the note.
19
In addition on March 4, 2014, we issued an aggregate of 941,619
warrants to Adar in consideration for purchasing the note. Subject to
adjustments, these warrants are convertible into common shares at a price of
$0.0531 and expire after a term of five years.
Loan Agreement with Black Mountain Equities, Inc.
On March 3, 2014, we entered into a securities purchase
agreement with Black Mountain Equities, Inc., pursuant to which Black Mountain
provided our company with an aggregate investment of $100,000 in consideration
of our issuance of original issue discount convertible promissory notes and
common share purchase warrants. We issued Black Mountain a convertible
promissory note of $115,000 with 15% prepaid interest due April 1, 2015 and
convertible into common shares on a cashless basis at the lesser price per share
of $0.06 or 50% of the lowest trade price of our common shares during the prior
20 trading days immediately preceding the delivery of any related conversion
notice. The fair value of the note at issuance was $230,000.
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 27, 2014, we issued 22,713,104 common shares at a deemed price
of $0.002 per share for promissory note and interest conversion of $62,934.
- On December 12, 2014, we issued 74,447,489 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $42,334.
As at the date of this report, there remains a principal
balance of $65,000 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 at a deemed price of
$0.002 per share for warrants exercise of $41,244.
- On September 25, 2014, we issued 10,946,967 common shares for the exercise
of 583,333 warrants.
As at the date of this report, there remain 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.
20
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 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 is 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.
21
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 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. Mr.
Kleinlein resigned as our chief financial officer as of November 1, 2014.
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.
On April 28, 2014, we entered into a consulting agreement, with
our director, Brandon Colker, to provide services on behalf of our company.
Pursuant to the terms of the consulting agreement, Mr. Colker will receive
compensation of $12,000 in unregistered restricted common shares of our
company's common stock at a deemed value of $0.05 per share and issuable on May
15, 2014. Our company has not yet issued these shares.
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. As of the date of this report the
agreement has not been renewed.
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.
Our company was made aware that a shareholder, who is also a
director and officer of our company, had sold an aggregate amount of shares that
would cause the shareholder to be required to pay our company with respect to a
short swing profit. Our company informed the shareholder that the shareholder
was liable to our company for an aggregate short swing profit of $80,523.58
under Section 16(b) of the Securities Exchange Act of 1934, as amended, for the
profit realized from transactions in our companys common stock. Our company and
the shareholder entered into a settlement agreement dated December 31, 2014
wherein, in exchange for the forbearance of legal action by our company pursuant
to Section 16(b) of the Act, the shareholder agreed to disgorge the short swing
profit to our company as of the effective date of the short swing settlement
agreement. Payment of the short swing profit from the shareholder was received
by our company on December 31, 2014.
On December 15, 2010, Alexander Walsh, a director and officer
of our company, entered into an assignment of debt agreement with Nanuk Warman,
which was also acknowledged by our company, whereby the debt of $47,537 advanced
by Mr. Warman to our company and outstanding as of December 6, 2010, was
assigned to Mr. Walsh.
22
On December 23, 2014, Mr. Walsh made demand for repayment of
the debt by our company. In connection with the assignment of debt agreement and
the demand, Mr. Walsh and our company entered into a settlement agreement dated
December 23, 2014 wherein our company is to repay the debt to Mr. Walsh in full.
Our company also agreed to pay an aggregate of $150,000 to Mr. Walsh as a
performance bonus for the services provided by Mr. Walsh for the period from
August 2013 to March 2014 as related to the acquisition of Tero Oilfield
Services Ltd. due on the following terms:
1. |
an aggregate of $50,000 due immediately; and |
|
|
2. |
an aggregate of $100,000 bearing no interest and due on
the earlier of: |
|
a. |
at the sole discretion of our company; or |
|
|
|
|
b. |
the date of the sale, merger, amalgamation or other
business combination or reorganization of our
company. |
Results of Operations
We have generated minimal revenues since inception and have
incurred $406,287 and $923,916 respectively, in operating expenses for the three
and six month periods ended December 31, 2014.
The following provides selected financial data about our
company for the three and six month periods ended December 31, 2014 and
2013.
Three months ended December 31, 2014 and 2013.
|
|
Three months |
|
|
Three months |
|
|
|
ended |
|
|
ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Revenue |
$ |
25,233 |
|
$ |
Nil |
|
Operating expenses |
$ |
(406,287 |
) |
$ |
(945,517 |
)
|
Other income (expenses): |
|
|
|
|
|
|
Interest expense |
$ |
(1,109,119 |
) |
$ |
(592,267 |
) |
Gain (loss) on change in fair value of
derivative liability |
$ |
360,131 |
|
$ |
278,523 |
|
Fair value of warrants issued |
$ |
300,000 |
|
$ |
(74,075 |
) |
Equity in income (loss) of unconsolidated
affiliate |
$ |
(42,278 |
) |
$ |
Nil |
|
Net loss |
$ |
(872,320 |
) |
$ |
(1,333,336 |
) |
Operating expenses for the three months ended December 31, 2014
increased as a result of decreases in selling, general and administrative
expenses and goodwill.
23
Six months ended December 31, 2014 and 2013.
|
|
Six months |
|
|
Six months |
|
|
|
ended |
|
|
ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Revenue |
$ |
41,300 |
|
$ |
Nil |
|
Operating expenses |
$ |
(923,916 |
) |
$ |
(1,241,338 |
) |
Other income (expenses): |
|
|
|
|
|
|
Interest expense |
$ |
(2,671,540 |
) |
$ |
(850,485 |
) |
Gain (loss) on change in fair value of
derivative liability |
$ |
2,818,577 |
|
$ |
255,371 |
|
Fair value of warrants issued |
$ |
(97,070 |
) |
$ |
(92,408 |
) |
Equity in income (loss) of unconsolidated
affiliate |
$ |
6,145 |
|
$ |
Nil |
|
Net loss |
$ |
(826,504 |
) |
$ |
(1,928,859 |
) |
Operating expenses for the six months ended December 31, 2014
increased as a result of decreases in selling, general and administrative
expenses.
Liquidity and Capital Resources
The following table provides selected financial data about our
company as of December, 2014, and June 30, 2014, respectively.
Working Capital
|
|
As at |
|
|
As at |
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2014 |
|
|
2014 |
|
Total current assets |
$ |
133,718 |
|
$ |
138,013 |
|
Total current liabilities |
$ |
775,806 |
|
$ |
3,417,902 |
|
Working capital (deficit) |
$ |
(642,088 |
) |
$ |
(3,279,889 |
)
|
Cash Flows
|
Six Months |
Six Months |
|
ended |
ended |
|
December 31, |
December 31, |
|
2014 |
2013 |
Net cash used in operating activities |
$ (683,804) |
$ (740,616) |
Net cash used in investing activities |
$ Nil |
$ (38,662) |
Net cash provided by financing activities |
$ 704,668 |
$ 775,000 |
Effect of foreign exchange on cash |
$ (7,834) |
$ Nil |
Increase (Decrease) in cash |
$ 13,030 |
$ (4,728) |
We had cash and cash equivalents of $82,762 as of December 31,
2014 compared to cash and cash equivalents of $69,732 as of June 30, 2014. We
had a working capital deficit of $642,088 as of December 31, 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.
24
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 |
|
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.
25
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 $82,762 and $69,732 in cash and cash equivalents at
December 31, 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 December 31, 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.
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.
26
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
as of December 31, 2014 to June 30, 2014.
Translation of Foreign Operations
The financial results and position of foreign operations whose
functional currency is different from our 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 our 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 December 31, 2014 closing rate at 0.8620 CND$:US$, average rate at 0.8988
CND$: 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 December 31, 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.
27
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.
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.
28
Revenue Recognition
Our company has generated little revenues to date. It is our
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. 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 companys 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 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
Our company has adopted Accounting Standards Update (ASU) No.
2014-10, Development Stage Entities (Topic 915): Elimination of Certain
Financial Reporting Requirements, Including an Amendment to Variable Interest
Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove
all incremental financial reporting requirements from U.S. GAAP for development
stage entities, including the removal of Topic 915, Development Stage Entities,
from the FASB Accounting Standards Codification.
A development stage entity is one that devotes substantially
all of its efforts to establishing a new business and for which: (a) planned
principal operations have not commenced; or (b) planned principal operations
have commenced, but have produced no significant revenue. For example, many
start-ups or even long-lived organizations that have not yet begun their
principal operations or do not have significant revenue would be identified as
development stage entities.
29
For public business entities, the presentation and disclosure
requirements in Topic 915 will no longer be required for the first annual period
beginning after December 15, 2014. The revised consolidation standards are
effective one year later, in annual periods beginning after December 15, 2015.
Early adoption is permitted.
FASB Statement
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.
30
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.
31
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.
32
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.
On November 12, 2014, our company was made aware that a
shareholder, who is also a director and officer of our company, had sold an
aggregate amount of shares that would cause the shareholder to be required to
pay our company with respect to a short swing profit. Our company informed the
shareholder that the shareholder was liable to our company for an aggregate
short swing profit of $80,523.58 (the Short-Swing Profit) under Section 16(b)
of the Securities Exchange Act of 1934, as amended, for the profit realized from
transactions in our companys common stock. Our company and the shareholder
entered into a settlement agreement dated December 22, 2014 wherein, in exchange
for the forbearance of legal action by our company pursuant to Section 16(b) of
the Act, the shareholder agreed to disgorge the short swing profit to our
company as of the effective date of the short swing settlement agreement.
Payment of the short swing profit from the shareholder was received by our
company on December 31, 2014.
On January 31, 2014, attorney representing a shareholder of our
company (the Plaintiff) served us with a notice of lawsuit and request to
waive service of summons in the United States District Court for the Eastern
District of New York. Although the Short-Swing Profit was returned to our
company, this suit by the attorney remains pending until the matter of the
attorneys fee is settled.
33
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 |
We made the following issuances of our common stock, which have
not been previously disclosed, with respect to the conversion amounts pursuant
to convertible notes:
Loan Agreements with JDF Capital Inc.
$220,000 Loan
We issued an aggregate of 25,714,286 shares of our common stock
with respect to the conversion of the remainder of the $220,000 convertible note
with JDF dated March 3, 2014, as follows:
- On December 4, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $34,980
payable pursuant to the note.
- On December 5, 2014, we issued 27,272,727 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $29,150.
- On December 8, 2014, we issued 26,666,667 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $23,320.
- On December 9, 2014 we issued 25,714,286 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $17,498.
As at the date of this report there remains no balance
unconverted and payable pursuant to the note.
$500,000 Loan
We issued an aggregate of 295,641,025 shares of our common
stock with respect to the partial conversion of the $500,000 convertible note
with JDF dated March 15, 2014, as follows:
- On November 13, 2014, we issued 20,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $27,692.
- On November 18, 2014, we issued 25,641,025 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $30,769.
- On December 1, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $32,308.
- On December 5, 2014, we issued 30,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $23,077.
- On December 8, 2014, we issued 35,000,000 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $18,846.
- On December 10, 2014, we issued 45,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $20,769.
- On December 15, 2014, we issued 50,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $23,077.
- On December 18, 2014, we issued 60,000,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $27,692.
As at the date of this report $282,250 of the note and the full
amount of the warrants remain unconverted and outstanding.
34
Loan Agreement with JMJ Financial
We issued an aggregate of 144,000,000 shares of our common
stock with respect to the partial conversion of the $1,100,000 convertible note
with JMJ dated February 13, 2013, as follows:
- On November 19, 2014, we issued 34,000,000 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $37,202.
- On December 10, 2014, we issued 48,300, common shares at a deemed price of
$0.0003 per share for promissory note and interest conversion of $19,818.
- On December 17, 2014, we issued 61,700,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $25,317.
As at the date of this report, there remains a balance of
$124,455 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.
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
We issued an aggregate of 84,291,200 shares of our common stock
with respect to the conversion of the remainder of the $75,000 convertible note
with LG Capital dated February 27, 2014, as follows:
- On December 11, 2014, we issued 33,891,200 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $22,862.
- On December 17, 2014, we issued 50,400,000 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $29,120.
As at the date of this report, there remains no balance
unconverted and payable pursuant to the note.
Loan Agreement with St. George Investments LLC
We issued an aggregate of 74,360,902 shares of our common stock
with respect to the conversion of the remainder of the $125,000 convertible note
with St. George Investments dated February 28, 2014, as follows:
- On November 17, 2014, we issued 15,789,474 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $30,000.
- On December 3, 2014, we issued 21,428,571 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $17,500.
- On December 16, 2014, we issued 37,142,857 common shares at a deemed price
of $0.0004 per share for promissory note and interest conversion of $13,000.
As at the date of this report, there remains no balance
unconverted and payable pursuant to the note.
Loan Agreement with Vista Capital Investments, LLC
We issued 34,000,000 shares of our common stock with respect to
the partial conversion of the $110,000 convertible note with JDF dated February
28, 2014, as follows:
35
- On December 10, 2014, we issued 34,000, common shares at a deemed price of
$0.0003 per share for promissory note and interest conversion of $20,400.
As at the date of this report, there remains a balance of
$23,300 unconverted and payable pursuant to the note.
Loan Agreement with Iconic Holdings, LLC
We issued an aggregate of 49,826,095 shares of our common stock
with respect to the conversion of the remainder of the $100,000 convertible note
with Iconic dated March 3, 2014, as follows:
- On November 14, 2014, we issued 21,052,632 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $40,000.
- On November 18, 2014, we issued 28,773,463 common shares at a deemed price
of $0.001 per share for promissory note and interest conversion of $47,335.
As at the date of this report, there remains no balance
unconverted and payable pursuant to the note.
Loan Agreement with Black Mountain Equities, Inc.
We issued 74,447,489 shares of our common stock with respect to
the partial conversion of the $115,000 convertible note with JDF dated March 3,
2014, as follows:
- On December 12, 2014, we issued 74,447,489 common shares at a deemed price
of $0.0003 per share for promissory note and interest conversion of $42,334.
As at the date of this report, there remains a principal
balance of $65,000 unconverted and payable pursuant to the note.
We issued an aggregate of 856,220,391 common shares of our
company to 7 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 |
Effective February 12, 2015, Brandon Colker resigned as a
director of our company. Mr. Colker's resignation was not the result of any
disagreements with our company regarding our operations, policies, practices or
otherwise.
Our board of directors now consists solely of Alexander Walsh.
36
Exhibit |
|
Number |
Description |
(3) |
(i) Articles of Incorporation; and (ii) Bylaws
|
3.1 |
Articles of Incorporations (incorporated by reference to
our Registration Statement on Form SB-2 filed on September 20, 2006)
|
3.2 |
Bylaws (incorporated by reference to our Registration
Statement on Form SB-2 filed on September 20, 2006) |
3.3 |
Articles of Amendment dated May 31, 2006 (incorporated by
reference to our Current Report on Form 8-K filed on April 21, 2009)
|
3.4 |
Certificate of Amendment dated April 8, 2009
(incorporated by reference to our Current Report on Form 8- K/A filed on
April 23, 2009) |
3.5 |
Articles of Merger dated November 17, 2010 (incorporated
by reference to our Current Report on Form 8-K filed on December 7, 2010)
|
3.6 |
Certificate of Amendment dated October 17, 2014
(incorporated by reference to our Quarterly Report on Form 10-Q/A filed on
December 2, 2014) |
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)
|
37
Exhibit |
|
Number |
Description |
10.9 |
12% Senior Convertible Debenture between our company and
Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 13, 2011) |
10.10 |
Common Stock Purchase Warrant between our company and
Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to
our Current Report on Form 8-K filed on July 13, 2011) |
10.11 |
Letter Agreement between our company and Glottech-USA,
LLC dated November 18, 2011 (incorporated by reference to our Current
Report on Form 8-K filed on November 21, 2011) |
10.12 |
Securities Purchase Agreement between our company and
Hagen Investments Ltd. dated March 28, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on April 3, 2012) |
10.13 |
Debenture between our company and Hagen Investments Ltd.
dated March 28, 2012 (incorporated by reference to our Current Report on
Form 8-K filed on April 3, 2012) |
10.14 |
Debenture between our company and Hagen Investments Ltd.
dated May 15, 2012 (incorporated by reference to our Current Report on
Form 8-K filed on May 18, 2012) |
10.15 |
Option Agreement between our company and GD Glottech
International, Limited dated August 14, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on September 5, 2012) |
10.16 |
Amendment Agreement between our company and Hagen
Investments Ltd. dated September 17, 2012 (incorporated by reference to
our Current Report on Form 8-K filed on September 18, 2012) |
10.17 |
License Agreement between our company and GD
Glottech-International Ltd. dated October 1, 2012 (incorporated by
reference to our Current Report on Form 8-K filed on October 10, 2012)
|
10.18 |
Sales Agreement between our company and GD Glottech
International Ltd. dated October 1, 2012 (incorporated by reference to our
Current Report on Form 8-K filed on October 10, 2012) |
10.19 |
Certificate of Designation, Series A Preferred
Convertible Stock (incorporated by reference to our Current Report on Form
8-K filed on October 29, 2012) |
10.20 |
Share Exchange Agreement between our company and
Alexander Walsh dated October 18, 2012 (incorporated by reference to our
Current Report on Form 8-K filed on October 29, 2012) |
10.21 |
Securities Purchase Agreement between our company and JMJ
Financial dated February 13, 2013 (incorporated by reference to our
Current Report on Form 8-K filed on February 15, 2013) |
10.22 |
Securities Purchase Agreement between our company and JDF
Capital Inc. dated February 19, 2013 (incorporated by reference to our
Current Report on Form 8-K filed on February 25, 2013) |
10.23 |
Rule 10b5-1 Sales Plan, Client Representations, and Sales
Instructions (incorporated by reference to our Current Report on Form 8-K
filed on March 15, 2013) |
10.24 |
Letter of Agreement between our company and Alta Disposal
Morinville Ltd. (formerly Blue Tap Resources Inc.) dated June 11, 2013
(incorporated by reference to our Current Report on Form 8-K filed on June
14, 2013) |
10.25 |
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) |
38
Exhibit |
|
Number |
Description
|
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) |
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) |
39
Exhibit |
|
Number |
Description |
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) |
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)
|
40
Exhibit |
|
Number |
Description |
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 (incorporated by reference to our Quarterly
Report on Form 10-Q/A filed on December 2, 2014) |
10.76 |
Consultant Agreement dated
August 1, 2014 between our company and TEN Associates LLC (incorporated by
reference to our Quarterly Report on Form 10-Q/A filed on December 2,
2014) |
10.77 |
Amending Agreement dated October 22, 2014
between International Compass, LLC and our company (incorporated by
reference to our Quarterly Report on Form 10-Q/A filed on December 2,
2014) |
10.78* |
Short Swing Settlement
Agreement with Alexander R. Walsh dated December 22, 2014 |
10.79* |
Debt Settlement Agreement with Alexander R.
Walsh dated December 23, 2014 |
(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 December 31, 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
|
* Filed herewith.
41
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: February 23, 2015 |
/s/
Alexander Walsh |
|
Alexander Walsh |
|
President, Secretary, Treasurer and Director
|
|
(Principal Executive Officer, Principal
Financial Officer |
|
and Principal Accounting Officer)
|
42
THIS SETTLEMENT AGREEMENT is effective as
of the 31st day of December, 2014. |
|
|
|
|
BETWEEN: |
|
LITHIUM EXPLORATION GROUP, INC., with an
office at 3800 North Central Avenue, Suite 820, Phoenix, Arizona,
85012. |
|
|
|
(the Company) |
|
|
AND: |
|
|
ALEXANDER R. WALSH with an address at
320 East Fairmont Drive, |
|
Tempe, Arizona 85282. |
|
|
|
(the Shareholder) |
WHEREAS the Company has informed the Shareholder that
the Shareholder is liable to the Company for an aggregate amount of $80,523.58
(the Short Swing Profit) under Section 16(b) of the Securities Exchange
Act of 1934, as amended (the Act) for the profit realized from
transactions in the Companys common stock as set forth in Schedule A attached
hereto.
NOW THEREFORE THIS SETTLEMENT 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. |
Disgorgement. In exchange for the forbearance of
legal action by the Company pursuant to Section 16(b) of the Act, the
Shareholder agrees to disgorge the Short Swing Profit to the Company as of
the effective date of this Settlement Agreement. |
|
|
2. |
Governing Law. This agreement and the other
documents issued pursuant to this Agreement shall be governed by the
internal laws of the State of Arizona. |
|
|
3. |
Counterparts; Headings. This Agreement may be
executed in several counterparts, each of which shall be deemed an
original, but such counterparts shall together constitute but one and the
same agreement. The Article and Section headings in this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof. |
|
|
4. |
Entire Agreement. This Agreement and the other
documents referred to herein contain the entire understanding of the
parties with respect to the subject matter hereof. There are no
restrictions, promises, warranties, covenants or undertakings concerning
such subject matter other than those expressly set forth in this
Agreement. This Agreement supersedes all prior negotiations, agreements
and undertakings between the parties with respect to such subject
matter. |
|
|
5. |
Notices. All communications or notices required or
permitted by this Agreement shall be in writing and shall be deemed to
have been given at the earlier of the date when actually delivered to an
individual party or to an officer of a corporate party by personal
delivery or telephonic facsimile transmission or three (3) business days
after being deposited in the United States mail, certified or registered
mail, postage prepaid, and addressed as set forth on the signature pages
hereto, unless and until any of such parties notifies the others in
accordance with this Section of a change of
address. |
6. |
Amendments. This Agreement may be amended if such
amendment is in writing and is signed by the all of the parties
hereto. |
|
|
7. |
Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction. |
|
|
8. |
Interpretation. Unless the context requires
otherwise, all words used in this Agreement in the singular number shall
extend to and include the plural, all words in the plural number shall
extend to and include the singular, and all words in any gender shall
extend to and include all genders. |
|
|
9. |
Assignability; Successors. Each partys right and
liabilities under this Agreement are not assignable or delegable, in whole
or in part, without the prior written consent of the other party. The
provisions of this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the
parties. |
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: |
/s/
Alexander Walsh |
|
|
|
Name: Alexander Walsh |
|
|
|
Title: President and Director |
|
|
|
|
|
|
|
|
|
|
Signed, sealed and delivered by |
) |
|
ALEXANDER WALSH in the presence of: |
) |
|
|
|
) |
|
/s/
Shanon Chilson |
) |
|
Signature of Witness |
) |
/s/Alexander Walsh |
|
|
) |
ALEXANDER WALSH |
Shanon
Chilson |
) |
|
Name of Witness |
) |
|
|
|
) |
|
2
Schedule A
Date of
Trade:
|
Type:
|
Number
of Shares:
|
Price
per share:
|
Aggregate
transaction amount:
|
|
Aggregate
transaction amount at price on Oct. 22/14
|
Short
swing profit:
|
4/29/2014 |
Sale |
121,100 |
$0.0450 |
$5,449.50 |
|
$460.18 |
$4,989.32 |
5/1/2014 |
Sale |
6,400 |
$0.0380 |
$243.20 |
|
$24.32 |
$218.88 |
7/8/2014 |
Sale |
229,800 |
$0.0400 |
$9,192.00 |
|
$873.24 |
$8,318.76 |
7/9/2014 |
Sale |
114,000 |
$0.0390 |
$4,446.00 |
|
$433.20 |
$4,012.80 |
7/10/2014 |
Sale |
52,000 |
$0.03900 |
$2,028.00 |
|
$197.60 |
$1,830.40 |
7/11/2014 |
Sale |
60,000 |
$0.0390 |
$2,340.00 |
|
$228.00 |
$2,112.00 |
7/14/2014 |
Sale |
45,000 |
$0.0390 |
$1,755. 00 |
|
$171.00 |
$1,584.00 |
7/15/2014 |
Sale |
392,180 |
$0.0370 |
$14,510.66 |
|
$1,490.284 |
$13,020.376 |
7/16/2014 |
Sale |
70,000 |
$0.0360 |
$2,520.00 |
|
$266.00 |
$2,254.00 |
7/17/2014 |
Sale |
80,000 |
$0.0370 |
$2,960.00 |
|
$304.00 |
$2,656.00 |
7/18/2014 |
Sale |
120,000 |
$0.0360 |
$4,320.00 |
|
$456.00 |
$3,864.00 |
7/21/2014 |
Sale |
160,000 |
$0.0360 |
$5,760.00 |
|
$608.00 |
$5,152.00 |
7/22/2014 |
Sale |
300,000 |
$0.0350 |
$10,500.00 |
|
$1,140.00 |
$9,360.00 |
7/23/2014 |
Sale |
88,000 |
$0.0360 |
$3,168.00 |
|
$334.40 |
$2,833.60 |
7/24/2014 |
Sale |
39,020 |
$0.0360 |
$1,404.72 |
|
$148.276 |
$1,256.444 |
8/11/2014 |
Sale |
70,000 |
$0.0360 |
$2,520.00 |
|
$266.00 |
$2,254.00 |
8/19/2014 |
Sale |
552,500 |
$0.0306 |
$16,906.50 |
|
$2,099.50 |
$14,807.00 |
Total: |
|
2,500,000 |
|
$90,023.58 |
|
$9,500.00 |
$80,523.58 |
|
10/22/2014 |
Purchase |
2,500,000 |
$0.0038 |
$9,500 |
|
3
THIS SETTLEMENT AGREEMENT is
effective as of the 23rd day of December, 2014. |
|
|
|
|
BETWEEN: |
|
|
|
LITHIUM EXPLORATION GROUP, INC., with an
office at 3800 |
|
North Central Avenue, Suite 820, Phoenix, Arizona, 85012.
|
|
|
|
(the Debtor) |
AND: |
|
|
ALEXANDER R. WALSH with an address at
320 East Fairmont Drive, |
|
Tempe, Arizona 85282. |
|
|
|
(the Creditor) |
|
|
WHEREAS:
|
A. |
the Creditor was originally owed an aggregate of $47,537
(the Debt) on an interest free basis pursuant to an assignment of
debt agreement entered into among the Creditor and Nanuk Warman (the
Creditor) on December 15, 2010 (the Assignment
Agreement) regarding the Debt that was advanced by Warman to the
Debtor and outstanding as of December 6, 2010 and was assigned to the
Creditor payable in full on demand; |
|
|
B. |
the Creditor has demanded repayment of the Debt from the
Debtor (the Demand); and |
|
|
C. |
the Debtor received the Demand. |
NOW THEREFORE THIS SETTLEMENT 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. |
Extension for Repayment. In exchange for full
payment and satisfaction of the Debt of the Creditor, the Debtor agrees to
pay and the Creditor agrees to accept as of December 23, 2014 the payment
of the Debt in full. After this repayment of the Debt pursuant to the
terms of this Agreement, the Company will owe $Nil to the Creditor under
the Assignment Agreement. |
|
|
2. |
Governing Law. This agreement and the other
documents issued pursuant to this Agreement shall be governed by the
internal laws of the State of Arizona. |
|
|
3. |
Counterparts; Headings. This Agreement may be
executed in several counterparts, each of which shall be deemed an
original, but such counterparts shall together constitute but one and the
same agreement. The Article and Section headings in this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof. |
|
|
4. |
Entire Agreement. This Agreement and the other
documents referred to herein contain the entire understanding of the
parties with respect to the subject matter hereof. There are no
restrictions, promises, warranties, covenants or undertakings concerning
such subject matter other than those expressly set forth in this
Agreement. This Agreement supersedes all prior negotiations, agreements
and undertakings between the parties with respect to such subject
matter. |
5. |
Notices. All communications or notices required or
permitted by this Agreement shall be in writing and shall be deemed to
have been given at the earlier of the date when actually delivered to an
individual party or to an officer of a corporate party by personal
delivery or telephonic facsimile transmission or three (3) business days
after being deposited in the United States mail, certified or registered
mail, postage prepaid, and addressed as set forth on the signature pages
hereto, unless and until any of such parties notifies the others in
accordance with this Section of a change of address. |
|
|
6. |
Amendments. This Agreement may be amended if such
amendment is in writing and is signed by the all of the parties
hereto. |
|
|
7. |
Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction. |
|
|
8. |
Interpretation. Unless the context requires
otherwise, all words used in this Agreement in the singular number shall
extend to and include the plural, all words in the plural number shall
extend to and include the singular, and all words in any gender shall
extend to and include all genders. |
|
|
9. |
Assignability; Successors. Each partys right and
liabilities under this Agreement are not assignable or delegable, in whole
or in part, without the prior written consent of the other party. The
provisions of this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the
parties. |
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: |
/s/
Alexander Walsh |
|
|
|
Name: Alexander Walsh |
|
|
|
Title: President and Director |
|
|
|
|
|
|
|
|
|
|
Signed, sealed and delivered by |
) |
|
ALEXANDER WALSH in the presence of: |
) |
|
|
|
) |
|
|
|
) |
|
Signature of Witness |
) |
/s/
Alexander Walsh |
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) |
ALEXANDER WALSH |
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|
) |
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Name of Witness |
) |
|
Tero Oilfield Services Ltd.
Financial Statements
December 31, 2014 and 2013
Tero Oilfield Services Ltd.
Condensed Balance Sheets
|
|
December 31, |
|
|
June 30, |
|
|
|
2014 |
|
|
2014 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash |
$ |
-- |
|
$ |
21,208 |
|
Accounts
receivable, net |
|
194,561 |
|
|
202,359 |
|
Other current assets |
|
11,430 |
|
|
20,376 |
|
Total current assets |
|
205,991 |
|
|
243,943 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
409,656 |
|
|
427,712 |
|
TOTAL ASSETS |
$ |
615,647 |
|
$ |
671,655 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
96,853 |
|
$ |
71,174 |
|
Current maturities
of long-term debt |
|
84,287 |
|
|
91,925 |
|
Due to shareholders |
|
-- |
|
|
47,494 |
|
Total current liabilities |
|
181,140 |
|
|
210,593 |
|
|
|
|
|
|
|
|
Notes payable, less current maturities |
|
263,112 |
|
|
286,952 |
|
Asset retirement obligations
|
|
248,634 |
|
|
271,164 |
|
TOTAL LIABILITIES |
|
692,886 |
|
|
768,709 |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (DEFICIT) |
|
(77,239 |
) |
|
(97,054 |
) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT) |
$ |
615,647 |
|
$ |
671,655 |
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
2
Tero Oilfield Services Ltd.
Condensed Statements of Income
and Shareholders Equity (Deficit)
(unaudited)
|
|
Six Months
Ended |
|
|
Quarter Ended
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
REVENUE |
$ |
681,881
|
|
$ |
694,839
|
|
$ |
275,523
|
|
$ |
401,770 |
|
COST OF GOODS SOLD |
|
416,322 |
|
|
412,864 |
|
|
252,862 |
|
|
205,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
265,559 |
|
|
281,975 |
|
|
22,661 |
|
|
196,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
9,099 |
|
|
11,308 |
|
|
7,036 |
|
|
9,206 |
|
Depreciation |
|
42,746 |
|
|
28,379 |
|
|
20,995 |
|
|
4,164 |
|
General and administrative |
|
192,689 |
|
|
238,218 |
|
|
86,090 |
|
|
125,467 |
|
TOTAL OPERATING EXPENSES |
|
244,534 |
|
|
277,905 |
|
|
114,121 |
|
|
138,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
21,025 |
|
|
4,070 |
|
|
(91,460 |
) |
|
57,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(8,735 |
) |
|
(4,498 |
) |
|
(3,096 |
) |
|
(2,102 |
) |
TOTAL OTHER EXPENSES |
|
(8,735 |
) |
|
(4,498 |
) |
|
(3,096 |
) |
|
(2,102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
12,290 |
|
|
(428 |
) |
|
(94,556 |
) |
|
55,202 |
|
Provision (Benefit) for
(from) income taxes |
|
-- |
|
|
-- |
|
|
(10,000 |
) |
|
-- |
|
NET INCOME (LOSS) |
|
12,290 |
|
|
(428 |
) |
|
(84,556 |
) |
|
55,202 |
|
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment |
|
7,525 |
|
|
(219 |
) |
|
5,233 |
|
|
(14 |
) |
COMPREHENSIVE INCOME
(LOSS) |
$ |
19,815 |
|
$ |
(647 |
) |
|
(79,323 |
) |
$ |
55,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
(DEFICIT): |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity (deficit) Beginning of
period |
$ |
(97,054 |
) |
$ |
13,716 |
|
$ |
2,084 |
|
$ |
(42,120 |
) |
Net income (loss) |
|
12,290 |
|
|
(428 |
) |
|
(84,556 |
) |
|
55,202 |
|
Cumulative Translation Adjustment |
|
7,525 |
|
|
(219 |
) |
|
5,233 |
|
|
(14 |
) |
Shareholders equity
(deficit) End of period |
$ |
(77,239 |
) |
$ |
13,068 |
|
$ |
(77,239 |
) |
$ |
13,068 |
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
3
Tero Oilfield Services Ltd.
Condensed Statements of Cash
Flows
(unaudited)
|
|
Six months
ended December 31, |
|
|
|
2014 |
|
|
2013 |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income (loss) |
$ |
12,290 |
|
$ |
(428 |
)
|
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
|
|
Depreciation |
|
42,746 |
|
|
28,379 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Short-term investments
|
|
-- |
|
|
58,108 |
|
Accounts receivable |
|
7,798 |
|
|
(131,834 |
) |
Other current assets
|
|
8,946 |
|
|
8,530 |
|
Accounts payable and accrued
liabilities |
|
25,666 |
|
|
6,832 |
|
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITES |
|
97,446 |
|
|
(30,413 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
Purchase of property and equipment |
|
(59,597 |
) |
|
(4,306 |
) |
NET CASH USED IN INVESTING
ACTIVITIES |
|
(59,597 |
) |
|
(4,306 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
Repayment to shareholder |
|
(45,221 |
) |
|
(55,412 |
) |
NET CASH USED IN FINANCING
ACTIVITIES |
|
(45,221 |
) |
|
(55,412 |
) |
|
|
|
|
|
|
|
Effects of currency
translation on cash and cash equivalents |
|
(13,836 |
)
|
|
(4,206 |
)
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN
CASH |
|
(21,208 |
)
|
|
(94,337 |
)
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
21,208 |
|
|
56,138 |
|
CASH (BANK OVERDRAFT) AT END OF PERIOD |
$ |
- |
|
$ |
(38,199 |
) |
|
|
|
|
|
|
|
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 unaudited
condensed financial statements.
4
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
December 31, 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 Unaudited Condensed
Financial Statements
December 31, 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 six months
ended December 31, 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 six months ended December 31, 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 December 31, 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 Unaudited Condensed
Financial Statements
December 31, 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 December 31, 2014 and June 30, 2014 and did not record an
allowance for doubtful accounts because of the assurance of collectability of
those receivables.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount may not be recoverable.
If the sum of the expected future undiscounted cash flow is less than the
carrying amount of the asset, a loss is recognized for the difference between
the fair value and carrying value of the asset. There were no impairment losses
taken for the periods ended December 31, 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 Unaudited Condensed
Financial Statements
December 31, 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 six months ended December 31, 2014
and 2013 consisted of the following:
|
|
|
2014 |
|
|
2013 |
|
|
Fuel & oil
disposal |
|
$ 34,625 |
|
|
$ 32,685 |
|
|
Insurance |
|
27,132 |
|
|
19,990 |
|
|
Repairs and
maintenance |
|
177,783 |
|
|
161,459 |
|
|
Skim oil processing fees |
|
31,887 |
|
|
31,406 |
|
|
Solids
processing |
|
84,513 |
|
|
64,345 |
|
|
Subcontract trucking |
|
13,627 |
|
|
19,740 |
|
|
Utilities |
|
18,310 |
|
|
22,757 |
|
|
Other |
|
28,445 |
|
|
60,482 |
|
|
TOTAL COST OF GOODS SOLD |
|
$ 416,322 |
|
|
$ 412,864 |
|
Advertising
The Company expenses the costs associated with advertising when
incurred. Advertising expense totaled $9,099 and $11,308 for the six months
ended December 31, 2014 and 2013, respectively and $7,036 and $9,206 for the
three months ended December 31, 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 Unaudited Condensed
Financial Statements
December 31, 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
December 31, 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 December 31, 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 December 31, 2014 and June 30, 2014
consisted of the following:
|
|
|
December |
|
|
June 30, |
|
|
|
|
31, 2014 |
|
|
2014 |
|
|
Accounts receivable |
$ |
194,561 |
|
$ |
202,359 |
|
|
Less allowance for doubtful accounts |
|
--
|
|
|
--
|
|
|
|
$ |
194,561 |
|
$ |
202,359 |
|
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2014 and June 30, 2014
consisted of the following:
|
|
|
December 31, |
|
|
June 30, |
|
|
|
|
2014 |
|
|
2014 |
|
|
Vehicles |
$ |
350,480 |
|
$ |
382,238 |
|
|
Disposal wells |
|
476,918 |
|
|
520,132 |
|
|
Machinery and equipment |
|
968,844 |
|
|
992,991 |
|
|
|
|
1,796,242 |
|
|
1,895,361 |
|
|
Less accumulated depreciation |
|
(1,386,586 |
) |
|
(1,467,649 |
) |
|
Net book value |
$ |
409,656 |
|
$ |
427,712 |
|
9
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
December 31, 2014 and 2013
Estimated useful lives and depreciation methods are as
follows:
|
|
Estimated Useful Life |
Depreciation Method |
|
Vehicles |
7 Years |
130% Declining Balance |
|
Disposal wells |
15 Years |
110% Declining Balance |
|
Machinery and equipment |
10 Years |
120-125% Declining Balance |
Depreciation expense for property and equipment was $42,746 and
$28,379 for the six months ended December 31, 2014 and 2013, respectively and
$20,995 and $4,164 for the three months ended December 31, 2014 and 2013,
respectively.
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 $12,290 and $(428) for the six months ending December 31, 2014 and
2013.
|
Tax Rate Reconciliation |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Federal statutory rate |
|
38.0 % |
|
|
38.0 % |
|
|
Statutory deductions |
|
38.0 |
|
|
38.0 |
|
|
Provincial statutory rate, net of federal
tax benefit |
|
-- |
|
|
-- |
|
|
Effective tax rate |
|
--
% |
|
|
--
% |
|
|
Provision for Income Taxes |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Federal |
$ |
-- |
|
$ |
-- |
|
|
Provincial |
|
--
|
|
|
--
|
|
|
Total |
$ |
-- |
|
$ |
-- |
|
NOTE 6 SHAREHOLDER ADVANCES
Shareholder advances consisted of $47,494 at June 30, 2014,
respectively. The advances were repaid during the six months ended December 31,
2014. The advances do not bear interest, have a specified due date or require
collateral.
10
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
December 31, 2014 and 2013
NOTE 7 LONG-TERM DEBT
Long-Term Debt at December 31, 2014 and June 30, 2014 consisted
of the following:
|
|
|
December |
|
|
June 30, |
|
|
|
|
31, 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%. |
$ |
347,399
|
|
$ |
378,877
|
|
|
Current maturities |
|
(84,287 |
) |
|
(91,925 |
) |
|
|
$ |
263,112 |
|
$ |
286,952 |
|
Future principal payments on the note payable are scheduled as
follows:
Year Ending December 31,
|
|
|
2014 |
|
|
2015 |
$ |
84,287 |
|
|
2016 |
|
85,959 |
|
|
2017 |
|
87,692 |
|
|
2018 |
|
89,461 |
|
|
|
$ |
347,399 |
|
NOTE 8 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.
|
|
|
December |
|
|
June 30, |
|
|
|
|
31, 2014 |
|
|
2014 |
|
|
Asset retirement obligation at beginning of
year |
$ |
271,164 |
|
$ |
259,667 |
|
|
Accretion expense |
|
-- |
|
|
|
|
|
Change due to foreign currency translation
|
|
(22,530 |
) |
|
11,497 |
|
|
Asset retirement obligation |
$ |
248,634 |
|
$ |
271,164 |
|
11
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
December 31, 2014 and 2013
NOTE 9 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
$248,634 and $271,164 at December 31 and June 2014.
NOTE 10 MAJOR CUSTOMERS AND VENDORS
The Company has five customers that represent approximately 70%
of its revenue for the six months ended December 31, 2014. The Company has five
customers that represent approximately 77% of its accounts receivable at
December 31, 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 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: February 23, 2015 |
|
|
|
|
|
/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 of Lithium Exploration
Group, Inc. for the period ended December 31, 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: February 23, 2015 |
/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.