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 March 31, 2015
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 |
(IRS Employer Identification No.) |
organization) |
|
|
|
3800 N Central Avenue, Suite 820, Phoenix,
|
85012 |
AZ 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 [ ] |
Smaller reporting company [X] |
(Do not check if a smaller reporting company) |
|
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.
668,546,134 common shares issued and outstanding as of May 18, 2015.
LITHIUM EXPLORATION GROUP, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2015
(Unaudited)
Lithium Exploration Group, Inc.
Condensed Consolidated Balance
Sheets
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
58,572 |
|
$ |
69,732 |
|
Receivable |
|
33,831 |
|
|
26,419 |
|
Loan receivable |
|
20,000 |
|
|
20,000 |
|
Prepaid expenses |
|
2,788 |
|
|
21,862 |
|
Total current assets |
|
115,191 |
|
|
138,013 |
|
|
|
|
|
|
|
|
Investment Held for Sale (Note 11) |
|
300,000 |
|
|
924,753 |
|
|
|
|
|
|
|
|
Total Assets |
$ |
415,191 |
|
$ |
1,062,766 |
|
|
|
|
|
|
|
|
LIABILITIES AND
DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable
and accrued liabilities (Note 9) |
$ |
67,488 |
|
$ |
14,520 |
|
Derivative liability convertible promissory notes (Note 6) |
|
164,889 |
|
|
2,832,989 |
|
Due to related
party (Note 7 and 9) |
|
115,000 |
|
|
45,332 |
|
Convertible promissory notes |
|
|
|
|
|
|
(net of discount
of $1,489,384 and $2,797,850) (Note 6) |
|
704,735 |
|
|
450,057 |
|
Accrued interest convertible
promissory notes (Note 6) |
|
178,189 |
|
|
75,004 |
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
1,230,301 |
|
|
3,417,902 |
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT |
|
|
|
|
|
|
Lithium Explorations Group, Inc.
Stockholders Deficit |
|
|
|
|
|
|
Capital stock (Note 3) |
|
|
|
|
|
|
Authorized:
100,000,000 preferred shares, $0.001 par
value 2,000,000,000
(June 30, 2014 500,000,000) common shares, $0.001 par value |
|
|
|
|
|
|
Issued and outstanding: |
|
|
|
|
|
|
Nil preferred
shares (June 30, 2014 Nil) |
|
- |
|
|
- |
|
90,087,220 common shares (June 30, 2014 9,597,906) |
|
90,087 |
|
|
9,598 |
|
Additional paid-in capital |
|
42,014,271 |
|
|
38,564,306 |
|
Accumulated other
comprehensive loss |
|
(27,600 |
) |
|
(5,769 |
) |
Accumulated deficit |
|
(42,640,545 |
) |
|
(40,821,871 |
) |
Total Lithium Exploration Group, Inc. Stockholders Deficit |
|
(563,787 |
) |
|
(2,253,736 |
) |
Non-controlling interest |
|
(251,323 |
) |
|
(101,400 |
) |
Total Deficit |
|
(815,110 |
) |
|
(2,355,136 |
) |
|
|
|
|
|
|
|
Total Liabilities and Stockholders Deficit |
$ |
415,191 |
|
$ |
1,062,766 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Operations And
Comprehensive Loss |
(Unaudited) |
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
Three Months |
|
|
Nine Months |
|
|
Nine Months |
|
|
|
March 31, |
|
|
Ended |
|
|
Ended March 31, |
|
|
Ended |
|
|
|
2015 |
|
|
March 31, 2014 |
|
|
2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
16,176 |
|
$ |
17,882 |
|
$ |
57,476 |
|
$ |
17,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Mining (Notes 3 & 5) |
|
16,212 |
|
|
2,024 |
|
|
31,212 |
|
|
12,152 |
|
Selling, general and administrative (Notes
3 & 5) |
|
399,489 |
|
|
534,818 |
|
|
1,308,405 |
|
|
1,245,523 |
|
Goodwill Impairment |
|
- |
|
|
- |
|
|
- |
|
|
383,238 |
|
Impairment loss |
|
624,429 |
|
|
- |
|
|
624,429 |
|
|
- |
|
Total operating expenses |
|
1,040,130 |
|
|
536,842 |
|
|
1,964,046 |
|
|
1,640,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(1,023,954 |
) |
|
(518,960 |
) |
|
(1,906,570 |
) |
|
(1,623,031 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Note 6) |
|
(146,468 |
) |
|
(1,984,721 |
) |
|
(2,818,008 |
) |
|
(2,835,206 |
) |
Other recovery (Note 7) |
|
80,524 |
|
|
- |
|
|
80,524 |
|
|
- |
|
Gain (loss) on change in the fair value of
derivative liability (Note 6) |
|
819,513 |
|
|
42,768 |
|
|
3,638,090 |
|
|
316,472 |
|
Fair value of warrants issued |
|
(865,239 |
) |
|
(2,309,345 |
) |
|
(962,309 |
) |
|
(2,420,086 |
) |
Equity in income (loss) of unconsolidated
affiliate |
|
(6,469 |
) |
|
5,473 |
|
|
(324 |
) |
|
5,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
(1,142,093 |
) |
|
(4,764,785 |
) |
|
(1,968,597 |
) |
|
(6,556,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes (Note 4) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
(1,142,093 |
) |
|
(4,764,785 |
) |
|
(1,968,597 |
) |
|
(6,556,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net loss attributable to the
non-controlling interest |
|
(11,798 |
) |
|
(55,835 |
) |
|
(149,923 |
) |
|
(290,487 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Lithium
Exploration Group, Inc. Common shareholders |
|
(1,130,295 |
) |
|
(4,708,950 |
) |
|
(1,818,674 |
) |
|
(6,265,891 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common
Share |
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.04 |
) |
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Weighted Average
Number of Common Shares Outstanding |
|
79,863,541 |
|
|
125,915,600 |
|
|
44,636,800 |
|
|
91,509,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(1,142,093 |
) |
|
(4,764,785 |
) |
|
(1,968,597 |
) |
|
(6,556,378 |
) |
Foreign currency translation adjustment |
|
(13,997 |
) |
|
(11,357 |
) |
|
(21,831 |
) |
|
(27,757 |
) |
Comprehensive loss |
|
(1,156,090 |
) |
|
(4,776,142 |
) |
|
(1,990,428 |
) |
|
(6,584,135 |
) |
Comprehensive loss attributable to
non-controlling interest |
|
(11,798 |
) |
|
(55,835 |
) |
|
(149,923 |
) |
|
(290,487 |
) |
Comprehensive loss attributable to Lithium Exploration
Group, Inc. |
|
(1,144,292 |
) |
|
(4,720,307 |
) |
|
(1,840,505 |
) |
|
(6,293,648 |
) |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Changes in
Stockholders Equity (Deficit) |
(Unaudited)
|
|
|
Preferred Shares |
|
|
Common Shares |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
Number |
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
Non- |
|
|
Stockholders |
|
|
|
of |
|
|
|
|
|
of |
|
|
|
|
|
Paid-in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
controlling |
|
|
Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
interest |
|
|
(Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2014 |
|
- |
|
$ |
- |
|
|
9,597,906 |
|
$ |
9,598 |
|
$ |
38,564,306 |
|
$ |
(5,769 |
) |
$ |
(40,821,871 |
) |
$ |
(101,400 |
) |
$ |
(2,355,136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for
consulting fees |
|
- |
|
|
- |
|
|
518,788 |
|
|
519 |
|
|
118,471 |
|
|
- |
|
|
- |
|
|
- |
|
|
118,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for
investor relations |
|
- |
|
|
- |
|
|
100,000 |
|
|
100 |
|
|
4,900 |
|
|
- |
|
|
- |
|
|
- |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for debt
conversion |
|
- |
|
|
- |
|
|
69,028,097 |
|
|
69,028 |
|
|
2,570,114 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,639,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued to
depository trust |
|
- |
|
|
- |
|
|
2,004 |
|
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for
exercise of warrants |
|
- |
|
|
- |
|
|
10,840,425 |
|
|
10,840 |
|
|
756,480 |
|
|
- |
|
|
- |
|
|
- |
|
|
767,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(21,831 |
) |
|
- |
|
|
- |
|
|
(21,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the
period |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,818,674 |
) |
|
(149,923 |
) |
|
(1,968,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31,
2015 |
|
- |
|
$ |
- |
|
|
90,087,220 |
|
$ |
90,087 |
|
$ |
42,014,271 |
|
$ |
(27,600 |
) |
$ |
(42,640,545 |
) |
$ |
(251,323 |
) |
$ |
(815,110 |
) |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Condensed Consolidated Statements of Cash Flows
|
(Unaudited) |
|
|
Nine Months |
|
|
Nine Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
Net income (loss) |
$ |
(1,968,597 |
) |
$ |
(6,556,378 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
Equity in income (loss) of investment held for sale |
|
324 |
|
|
(5,473 |
) |
Non-cash expenses |
|
- |
|
|
44,185 |
|
Common shares issued for investor relations |
|
5,000 |
|
|
- |
|
Common shares issued for consulting fees |
|
118,990 |
|
|
177,167 |
|
Goodwill impairment |
|
- |
|
|
383,238 |
|
Investment impairment |
|
624,429 |
|
|
- |
|
Common shares issued for interest expenses |
|
103,048 |
|
|
- |
|
Interest expense |
|
2,611,775 |
|
|
2,835,206 |
|
(Gain) loss on change in the fair value of derivative
liability |
|
(3,638,090 |
) |
|
(316,472 |
) |
Fair value of warrants issued |
|
962,309 |
|
|
2,420,086 |
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Receivable |
|
(7,412 |
) |
|
(30,490 |
) |
Loan receivable |
|
- |
|
|
(20,000 |
) |
Prepaid expenses |
|
19,074 |
|
|
22,889 |
|
Accrued interest |
|
103,185 |
|
|
- |
|
Accrued expenses related party |
|
115,000 |
|
|
- |
|
Accounts payable and accrued liabilities |
|
52,968 |
|
|
17,847 |
|
Net cash used in operating activities |
|
(897,997 |
) |
|
(1,028,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities |
|
|
|
|
|
|
Investment |
|
- |
|
|
(912,173 |
) |
Deposit
applied for acquisition of subsidiary |
|
- |
|
|
(153,192 |
) |
Deposit |
|
- |
|
|
10,170 |
|
Net cash used in investing activities |
|
- |
|
|
(1,055,195 |
) |
|
|
|
|
|
|
|
Cash Flows from Financing
Activities |
|
|
|
|
|
|
Repayment to
related party |
|
(45,332 |
) |
|
- |
|
Issuance of note payable |
|
- |
|
|
259,077 |
|
Proceed from issuance of
convertible promissory notes |
|
954,000 |
|
|
2,318,000 |
|
Net cash provided by financing activities |
|
908,668 |
|
|
2,577,077 |
|
|
|
|
|
|
|
|
Effect of foreign exchange |
|
(21,831 |
) |
|
(10,780 |
) |
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents |
|
(11,160 |
) |
|
482,907 |
|
Cash and cash equivalents - beginning of period |
|
69,732 |
|
|
248,624 |
|
Cash and cash equivalents - end of period |
$ |
58,572 |
|
$ |
731,531 |
|
|
|
|
|
|
|
|
Supplementary disclosure
of cash flow information: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
$ |
- |
|
$ |
- |
|
Income taxes |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
Supplementary non- cash Investing and
Financing Activities: |
|
|
|
|
|
|
Non-cash investing and
financing activities: |
|
|
|
|
|
|
Common stock issued for debt conversion |
$ |
2,536,097 |
|
$ |
2,004,000 |
|
Deposit applied to acquisition of
subsidiary |
$ |
- |
|
$ |
10,170 |
|
Transfer of beneficial conversion feature to
fair value of note |
$ |
518,808 |
|
$ |
- |
|
Common stock issued on cashless
exercise of warrants |
$ |
779,600 |
|
$ |
- |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
1. Organization
Lithium Exploration Group, Inc. (formerly Mariposa Resources, Ltd.) (the “Company”) was incorporated on May 31, 2006 in the State of Nevada, U.S.A. It is based in Scottsdale, Arizona, USA. The accounting and reporting policies of the
Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.
Effective November 30, 2010, the Company changed its name to “Lithium Exploration Group, Inc.,” by way of a merger with its wholly-owned subsidiary Lithium Exploration Group, Inc., which was formed solely for the change of name.
A wholly owned subsidiary, 1617437 Alberta Ltd. was incorporated in the province of Alberta, Canada on July 8, 2011. Effective October 2, 2013, the subsidiary changed its name to Alta Disposal Ltd.
On October 18, 2013, the Company acquired 51% interest in Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.).
On March 1, 2014, the Company 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 |
March 31, 2015 |
(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 nine months ended March 31, 2015 and 2014 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 nine months ended March 31, 2015 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 March 31, 2015 and 2014 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 Company’s periodic
filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company. Significant estimates
that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of
management, are subject to an insignificant risk of loss in value. The Company had $58,572 and $69,732 in cash and cash equivalents at March 31, 2015 and June 30, 2014, respectively.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 March 31, 2015 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 Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash
equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to
assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Net Income or (Loss) per Share of Common Stock
The Company has adopted FASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
Potentially dilutive securities are not presented in the computation of EPS since their effects are anti-dilutive.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 March 31, 2015 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 March 31, 2015 closing rate at 0.7885 CND$:US$, average rate at 0.8655
CND$: 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 March 31, 2015 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 |
March 31, 2015 |
(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 |
March 31, 2015 |
(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 instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of
the short maturity of these instruments.
The Company’s Level 3 financial liabilities consist of the liability of the Company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible
promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company used a fair value model which incorporates transaction details such
as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.
Revenue Recognition
The Company has generated little revenues to date. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on
management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product/services was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the
product/service has been delivered or no refund will be required.
Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Company’s activities. Sales are presented, net of tax, rebates and discounts, and after
eliminating intercompany sales. The Company recognizes revenue when the amount of revenue and related cost can be reliably measured and it is probable that the collectability of the related receivables is reasonably assured.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 Company’s share of net income from its unconsolidated affiliate is reflected in the
Consolidated Statements of Operations and Comprehensive Loss as Equity in Income of Unconsolidated Affiliate.
Recent Accounting Pronouncements
The Company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards
Codification.
A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced
no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities.
For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in
annual periods beginning after December 15, 2015. Early adoption is permitted.
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 |
March 31, 2015 |
(Unaudited) |
3. Capital Stock
On January 19, 2015, the Company's board of directors consented
to effect a reverse stock split of the Companys issued and outstanding shares
of common stock on a basis of 20 old shares of common stock for one 1 new share
of common stock. The reverse stock split was reviewed and approved for filing by
the FNRA effective February 25, 2015. The Companys authorized capital will not
be affected by the reverse stock split. The split is reflected retrospectively
in the accompanying financial statements.
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 March 31, 2015:
On July 1, 2014, the Company issued 9,978 common shares at a
market price of $1.00 per share for consulting fees.
On July 4, 2014, the Company issued 27,076 common shares at a
market price of $1.20 per share for consulting fees.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances Continued
On July 9, 2014, the Company issued 485,700 common shares at a
deemed price of $0.20 per share for warrants exercise of $117,962 (Note 6).
On July 16, 2014, the Company issued 90,000 common shares at a
deemed price of $0.04 per share for promissory note and interest conversion of
$46,769 (Note 6).
On July 30, 2014, the Company issued 905,683 common shares at a
deemed price of $0.40 per share for warrants exercise of $386,433 (Note 6).
On August 1, 2014, the Company issued 53,134 common shares at a
deemed price of $0.40 per share for promissory note and interest conversion of
$25,000 (Note 6).
On August 1, 2014, the Company issued 12,262 common shares at a
market price of $0.04 per share for consulting fees.
On August 5, 2014, the Company issued 1,032,273 common shares
at a deemed price of $0.04 per share for warrants exercise of $41,244 (Note 6).
On August 8, 2014, the Company issued 445,228 common shares at
a deemed price of $0.40 per share for warrants exercise of $136,555 (Note 6).
On August 12, 2014, the Company issued 160,003 common shares at
a deemed price of $0.40 per share for warrants exercise of $59,953 (Note 6).
On August 28, 2014, the Company issued 519,527 common shares at
a deemed price of $0.20 per share for promissory note and interest conversion of
$205,984 (Note 6).
On September 1, 2014, the Company issued 17,510 common shares
at a market price of $0.03 per share for consulting fees.
On September 1, 2014, the Company issued 58,366 common shares
at a market price of $0.03 per share for consulting fees.
On September 3, 2014, the Company issued 150,000 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $42,135 (Note 6).
On September 3, 2014, the Company issued 25,000 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $9,717 (Note 6).
On September 4, 2014, the Company issued 45,455 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $20,000 (Note 6).
On September 4, 2014, the Company issued 29,167 common shares
at a deemed price of $1.60 per share for warrants exercise of $2,322 (Note 6).
On September 8, 2014, the Company issued 55,314 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $20,510 (Note 6).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances Continued
On September 10, 2014, the Company issued 336,712 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $62,375 (Note 6).
On September 10, 2014, the Company issued 76,923 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $20,000 (Note 6).
On September 11, 2014, the Company issued 130,386 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $30,777 (Note 6).
On September 11, 2014, the Company issued 279,951 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $39,712 (Note 6).
On September 11, 2014, the Company issued 82,645 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $20,000 (Note 6).
On September 12, 2014, the Company issued 495,050 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $100,000 (Note 6).
On September 12, 2014, the Company issued 143,462 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $30,781(Note 6).
On September 15, 2014, the Company issued 279,208 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $54,804 (Note 6).
On September 15, 2014, the Company issued 95,716 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $20,529 (Note 6).
On September 15, 2014, the Company issued 547,348 common shares
at a deemed price of $0.04 per share for warrants exercise of $22,207 (Note 6).
On September 16, 2014, the Company issued 190,515 common shares
at a deemed price of $0.20 per share for promissory note and interest conversion
of $40,447 (Note 6).
On September 17, 2014, the Company issued 70,707 common shares
at a deemed price of $0.10 per share for promissory note and interest conversion
of $14,000 (Note 6).
On September 23, 2014, the Company issued 73,894 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $9,311 (Note 6).
On September 23, 2014, the Company issued 192,308 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $25,000 (Note 6).
On September 23, 2014, the Company issued 90,909 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $7,692 (Note 6).
On September 23, 2014, the Company issued 500,000 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $55,000 (Note 6).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances Continued
On September 24, 2014, the Company issued 454,545 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $48,585 (Note 6).
On September 29, 2014, the Company issued 302,387 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $37,050 (Note 6).
On September 29, 2014, the Company issued 250,000 common shares
at a deemed price of $0.06 per share for promissory note and interest conversion
of $31,500 (Note 6).
On October 1, 2014, the Company issued 12,048 common shares at
a market price of $0.01 per share for consulting fees.
On October 2, 2014, the Company issued 227,273 common shares at
a deemed price of $0.06 per share for promissory note and interest conversion of
$24,292 (Note 6).
On October 3, 2014, the Company issued 500,000 common shares at
a deemed price of $0.06 per share for promissory note and interest conversion of
$38,462 (Note 6).
On October 6, 2014, the Company issued 500,000 common shares at
a deemed price of $0.06 per share for promissory note and interest conversion of
$38,462 (Note 6).
On October 7, 2014, the Company issued 550,000 common shares at
a deemed price of $0.04 per share for promissory note and interest conversion of
$37,231 (Note 6).
On October 9, 2014, the Company issued 333,333 common shares at
a deemed price of $0.04 per share for promissory note and interest conversion of
$30,000 (Note 6).
On October 13, 2014, the Company issued 681,818 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $46,154 (Note 6).
On October 13, 2014, the Company issued 534,091 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $45,669 (Note 6).
On October 16, 2014, the Company issued 365,854 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $30,000 (Note 6).
On October 20, 2014, the Company issued 555,556 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $38,867 (Note 6).
On October 21, 2014, the Company issued 500,000 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $29,150 (Note 6).
On October 21, 2014, the Company issued 1,000,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $44,615 (Note 6).
On October 22, 2014, the Company issued 381,549 common shares
at a market price of $0.06 per share for consulting fees.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock
Continued
Share Issuances Continued
On October 22, 2014, the Company issued 950,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $38,694 (Note 6).
On October 22, 2014, the Company issued 100,000 common shares
at a market price of $0.06 per share for investor relations fees.
On October 23, 2014, the Company issued 294,118 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $20,000 (Note 6).
On October 24, 2014, the Company issued 441,176 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $30,000 (Note 6).
On October 27, 2014, the Company issued 1,100,415 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $66,113 (Note 6).
On October 27, 2014, the Company issued 1,000,000 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $58,301 (Note 6).
On October 27, 2014, the Company issued 750,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $43,500 (Note 6).
On October 27, 2014, the Company issued 167,288 common shares
at a deemed price of $0.04 per share for promissory note and interest conversion
of $7,948 (Note 6).
On October 27, 2014, the Company issued 1,135,655 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $62,934 (Note 6).
On October 31, 2014, the Company issued 750,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $26,538 (Note 6).
On October 31, 2014, the Company issued 625,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $30,000 (Note 6).
On November 3, 2014, the Company issued 750,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $34,500 (Note 6).
On November 4, 2014, the Company issued 869,565 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $38,867 (Note 6).
On November 6, 2014, the Company issued 995,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $28,578 (Note 6).
On November 10, 2014, the Company issued 990,476 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $32,000 (Note 6).
On November 13, 2014, the Company issued 1,000,000 common
shares at a deemed price of $0.02 per share for promissory note and interest
conversion of $27,692 (Note 6).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances Continued
On November 14, 2014, the Company issued 1,052,632 common
shares at a deemed price of $0.02 per share for promissory note and interest
conversion of $40,000 (Note 6).
On November 17, 2014, the Company issued 789,474 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $30,000 (Note 6).
On November 18, 2014, the Company issued 1,282,051 common
shares at a deemed price of $0.02 per share for promissory note and interest
conversion of $30,769 (Note 6).
On November 18, 2014, the Company issued 1,438,673 common
shares at a deemed price of $0.02 per share for promissory note and interest
conversion of $47,335 (Note 6).
On November 19, 2014, the Company issued 1,700,000 common
shares at a deemed price of $0.02 per share for promissory note and interest
conversion of $37,202 (Note 6).
On December 1, 2014, the Company issued 1,500,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $32,308 (Note 6).
On December 3, 2014, the Company issued 1,071,429 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $17,500 (Note 6).
On December 4, 2014, the Company issued 1,500,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $34,980 (Note 6).
On December 5, 2014, the Company issued 1,363,636 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $29,150 (Note 6).
On December 5, 2014, the Company issued 1,500,000 common shares
at a deemed price of $0.02 per share for promissory note and interest conversion
of $23,077 (Note 6).
On December 8, 2014, the Company issued 1,333,333 common shares
at a deemed price of $0.01 per share for promissory note and interest conversion
of $23,320 (Note 6).
On December 8, 2014, the Company issued 1,750,000 common shares
at a deemed price of $0.008 per share for promissory note and interest
conversion of $18,846 (Note 6).
On December 9, 2014, the Company issued 1,285,714 common shares
at a deemed price of $0.008 per share for promissory note and interest
conversion of $17,498 (Note 6).
On December 10, 2014, the Company issued 2,250,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $20,769 (Note 6).
On December 10, 2014, the Company issued 2,415,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $19,818 (Note 6).
On December 10, 2014, the Company issued 1,700,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $20,400 (Note 6).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock Continued
Share Issuances Continued
On December 11, 2014, the Company issued 1,694,560 common
shares at a deemed price of $0.008 per share for promissory note and interest
conversion of $22,862 (Note 6).
On December 12, 2014, the Company issued 3,722,374 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $42,334 (Note 6).
On December 15, 2014, the Company issued 2,500,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $23,077 (Note 6).
On December 16, 2014, the Company issued 1,857,143 common
shares at a deemed price of $0.008 per share for promissory note and interest
conversion of $13,000 (Note 6).
On December 17, 2014, the Company issued 3,085,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $25,317 (Note 6).
On December 17, 2014, the Company issued 2,520,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $29,120 (Note 6).
On December 18, 2014, the Company issued 3,000,000 common
shares at a deemed price of $0.006 per share for promissory note and interest
conversion of $27,692 (Note 6).
On March 11, 2015, the Company issued 2,004 common shares at a
deemed price of $0.02 per share to the depository trust as a result of the
reverse stock split.
On March 16, 2015, the Company issued 7,235,023 common shares
at a deemed price of $0.04 per share for warrants exercise of $12,924 (Note 6).
On March 31, 2015, the Company issued 4,166,712 common shares
at a deemed price of $0.12 per share for promissory note and interest conversion
of $46,524 (Note 6).
As at March 31, 2015, 1,196,677 (June 30, 2014- 677,889) were
issued to directors and officers of the Company. 925,802 (June 30, 2014-
925,802) were issued to independent investors. 43,619 (June 30, 2014- 43,619)
were issued for mining expenses. 38,442 (June 30, 2014 38,442) were issued for
related party consulting expenses. 147,430 (June 30, 2014 47,430) were issued
for investor relation expenses. 10,000 (June 30, 2014- 10,000) were issued for
debt settlement. 2,150,056 (June 30, 2014 2,150,056) were issued for debenture
and interest conversion. 51,406 (June 30, 2014 51,406) were issued for
exercise of warrants attached to convertible debentures. 70,091,388 (June 30,
2014 1,063,291) were issued for promissory note and interest conversions.
11,300,402 (June 30, 2014 459,977) were issued for exercise of warrants
attached to convertible promissory notes. 47,723 (June 30, 2014 47,723) were
issued for note payable conversion. 100,000 (June 30, 2014 - 100,000) were
issued for a mining option settlement. 1,000,000 (June 30, 2014 - 1,000,000)
were issued for the conversion of Series A Convertible Preferred shares.
5,982,272 (June 30, 2014 5,982,272) were issued for the conversion of Series B
Convertible Preferred shares. 2,004 (June 30, 2014 Nil) were issued to
depository trust as a result of the reverse stock split. The Company has no
stock option plan, warrants or other dilutive securities, other than warrants
issued to acquire 1,897,970 shares of the Company regarding convertible
promissory notes (Note 6).
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
3. Capital Stock – Continued Share Issuances – Continued
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 2,982,271 common shares of the Company for a total fair value of $3,639,623 of which a gain of $331,127 was
recorded.
4. Provision for Income Taxes
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under
FASC 740-20-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future
years.
Exploration stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated
during the period from May 31, 2006 (date of inception) through March 31, 2015 of approximately $12,400,000 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately
$947,750 and $536,536 during the periods ended March 31, 2015 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 March 31, 2015 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at March 31, 2015. The Company’s utilization
of any net operating loss carry forward may be unlikely as a result of its intended exploration stage activities. The tax years for June 30, 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 |
March 31, 2015 |
(Unaudited) |
4. Provision for Income Taxes - Continued
|
|
2014 |
|
|
|
Amount |
|
|
Tax
Effect (35%) |
|
|
|
|
|
|
|
|
Net income |
$ |
(1,968,597 |
) |
$ |
(689,009 |
) |
|
|
|
|
|
|
|
Shares issued for consulting fees, mining
expenses, investor relation and director fees |
|
(222,038 |
) |
|
(77,713 |
) |
Accretion of beneficial conversion feature |
|
(2,611,775 |
) |
|
(914,121 |
) |
Loss on change in the fair value of
derivative liability and fair value of warrant issued |
|
2,675,781 |
|
|
936,523 |
|
|
|
|
|
|
|
|
Total |
|
2,126,629 |
|
|
744,320 |
|
|
|
|
|
|
|
|
Valuation allowance |
|
(2,126,629 |
) |
|
(744,320 |
) |
|
|
|
|
|
|
|
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 75,000 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 |
March 31, 2015 |
(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 10,000 common shares of the Company. The shares have been valued at a market
price of $74 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 47,723 common shares of the Company at a price of US$1,.65 per share.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 100,000
shares for $1.00 to Glottech USA upon receipt of the operational
ultrasonic generator that they are building for Lithium Exploration Group.
The 100,000 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 100,000
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 |
March 31, 2015 |
(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 March 31, 2015 and
June 30, 2014 is as follows:
|
|
June
30, |
|
|
Fair
value |
|
|
Fair
value |
|
|
Fair
value |
|
|
March 31, |
|
|
|
2014 |
|
|
issued |
|
|
converted |
|
|
repaid |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
- |
|
|
(143,048 |
) |
|
- |
|
|
86,952 |
|
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 |
|
February 6, 2015 |
|
- |
|
|
115,385 |
|
|
- |
|
|
- |
|
|
115,385 |
|
February 24, 2015 |
|
- |
|
|
153,846 |
|
|
- |
|
|
- |
|
|
153,846 |
|
March 3, 2015 |
|
- |
|
|
44,615 |
|
|
- |
|
|
- |
|
|
44,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,247,908 |
|
$ |
1,482,307 |
|
$ |
(2,536,097 |
) |
$ |
- |
|
$ |
2,194,118 |
|
Less: Debt discount |
|
2,797,850 |
|
|
|
|
|
|
|
|
|
|
|
1,489,384 |
|
Net Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
promissory Note |
|
450,058 |
|
|
|
|
|
|
|
|
|
|
|
704,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion |
$ |
450,058 |
|
|
|
|
|
|
|
|
|
|
$ |
704,734 |
|
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 March 31, 2015, 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 March 31, 2015, $303,225 (June 30, 2014 -
$419,272) in face value of the note including interest was converted to
9,718,085 (June 30, 2014 -708,229) common shares in accordance with the terms of
the agreement.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 $5.00 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 March 31, 2015, 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 March 31, 2015, $205,984 (June 30, 2014 - $Nil) in face value of the note including interest was converted
to 519,527 (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 March 31, 2015, $102,822 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 527,227 (June 30, 2014 - Nil) common
shares in accordance with the terms of the agreement. During the period ended March 31, 2015, an interest expense of $21,000 (June 30, 2014 - $1,667) was accrued.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 investor’s option at any time after 180 days at a price
equal to 50% of the lowest bids price for the 20 days prior to conversion date subject to various prescribed conditions. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion
feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported
separately. The fair value at issuance was $150,000. During the period ended March 31, 2015, $155,145 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 5,617,363 (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 March 31, 2015, $225,500 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 5,752,639 (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 March 31, 2015, $153,400 (June 30, 2014 - $Nil) in face value of the note including interest was converted
to 3,700,000 (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 $55,648 (June 30, 2014 - $7,543) was accrued.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 investor’s option at any time after 180 days at a price equal to
50% of the lowest closing bid price for the 20 days prior to conversion date subject to various prescribed conditions. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion
feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported
separately. The fair value at issuance was $100,000. During the period ended March 31, 2015, $102,596 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 424,878 (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 March 31, 2015, $207,335 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 3,280,472 (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 $50,000 due on
March 4, 2015 and carries an interest rate of 10% per annum over the term of the note, with an effective interest rate of 1303.72% . The convertible note is convertible at the investor’s option at any time after 180 days at a price equal to
50% of the lowest closing bid price for the 20 days prior to conversion date subject to various prescribed conditions. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion
feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14 rather than have its conversion feature bifurcated and reported
separately. The fair value at issuance was $100,000. During the period ended March 31, 2015, $102,759 (June 30, 2014 - $Nil) in face value of the note including interest was converted to 689,988 (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 |
March 31, 2015 |
(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 $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 March 31, 2015, $151,792 (June 30, 2014 - $Nil) in face value of the note including interest was converted to
9,024,742 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. During the period ended March 31, 2015, an interest expense of $10,255 (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 March 31, 2015, $453,200 (June 30, 2014 - $Nil) in face value of the note including
interest was converted to 9,927,922 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. The note was fully converted during the period.
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 March 31, 2015, $475,384 (June 30, 2014 - $Nil) in face value of the note including
interest was converted to 19,845,255 (June 30, 2014 - Nil) common shares in accordance with the terms of the agreement. During the period ended March 31, 2015, an interest expense of $19,479 (June 30, 2014 - $24,063) was accrued.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
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 the 20 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 March 31, 2015, an interest expense of $40,990 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 the 20 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 March 31, 2015, an interest expense of $8,344 was accrued.
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 the 20 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 March 31, 2015, an interest expense of $1,488 was accrued.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
Effective February 6, 2015, 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 August 6, 2016 and carries an interest rate of 12% per annum over the term of the note, with an effective interest rate of 230.27% . The note is convertible at the lower of 65% of the lowest reported sale price for the 20 trading days immediately
prior to (i) the closing date on February 3, 2015 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 $115,385. During the period ended March 31, 2015, an interest expense of $1,500 was accrued.
Effective February 24, 2015, 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 24, 2016 and carries an interest rate of 12% per annum over the term of the note, with an effective interest rate of 230.27% . The note is convertible at the lower of 65% of the lowest reported sale price for the 25 trading days
immediately prior to (i) the closing date on February 24, 2015 or (ii) 65% of the lowest reported sale price for the 25 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 March 31, 2015, an interest expense of $1,500 was accrued.
Effective March 3, 2015, 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 $29,000 due on
March 3, 2016 and carries an interest rate of 10% per annum over the term of the note, with an effective interest rate of 445.74% . The convertible note is convertible at the investor’s option at any time at a price equal to 65% 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 $44,615. During the period ended March 31, 2015, an interest expense of $242 was accrued.
Warrants issued along with Convertible Promissory Notes
Along with the promissory note issued on February 13, 2013, the Company issued warrants for 27,027 shares of the Company at an exercise price of $3.70 expiring February 13, 2018, 13,158 shares of the Company at an exercise price of $3.80 expiring April 24, 2018, 14,881 shares of the Company at an exercise price of $3.36 expiring June 4, 2018, 20,000 shares of the Company at an exercise price of $2.50 expiring June 27, 2018, 16,741 shares of the Company at an exercise price of $4.48 expiring August 14, 2018, 83,333 shares of the Company at an exercise price of $1.20 expiring December 10, 2018, 35,714 shares of the Company at an exercise price of $1.40 expiring February 20, 2019 and 190,476 shares of the Company at an exercise price of $1.05 expiring April 16, 2019 respectively.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
Along with the promissory note entered on September 16, 2013, the Company issued warrants for 138,889 shares of the Company at an exercise price of $1.80 and warrants for 185,185 shares of the Company at an exercise price of $1.36 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 55,555 shares of the Company for a period of five years at an exercise price of $1.80.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 257,813 shares of the Company for a period of 180 days at an exercise price of $1.20.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 74,074 shares of the Company for a period of five years at an exercise price of $1.35.
Along with the promissory note entered on February 28, 2014, the Company issued warrants to acquire a total of 515,625 shares of the Company for a period of five years at an exercise price of $1.20.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 47,081 shares of the Company for a period of five years at an exercise price of $1.06.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 100,000 shares of the Company for a period of three years at an exercise price of $1.00.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 47,081 shares of the Company for a period of five years at an exercise price of $1.06.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 83,333 shares of the Company for a period of five years at an exercise price of $1.20.
Along with the promissory note entered on March 3, 2014, the Company issued warrants to acquire a total of 200,000 shares of the Company for a period of three years at an exercise price of $1.00.
Along with the promissory note entered on March 15, 2014, the Company issued warrants to acquire a total of 916,667 shares of the Company for a period of three years at an exercise price of $1.20.
Along with the promissory note entered on July 22, 2014, the Company issued warrants to acquire a total of 840,000 shares of the Company for a period of five years at an exercise price of $5.60.
Along with the promissory note entered on August 22, 2014, the Company issued warrants to acquire a total of 215,178 shares of the Company for a period of five years at an exercise price of $5.60.
Along with the promissory note entered on February 6, 2015, the Company issued warrants to acquire a total of 2,765,625 shares of the Company for a period of five years at an exercise price of $0.032.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
6. Convertible Promissory Notes - Continued
Derivative Liability
The warrants bear a cashless exercise provision. The warrants also include anti-dilution protection with respect to lower priced issuances of common stock or securities convertible or exchangeable into common stock, which provision resulted in
derivative liability treatment under ASC topic 815-10-55. Fair values at issuance totaled $669,682, $1,126,054, $709,074 for warrants issued along with the promissory note on February 28, 2013, March 1, 2013, and September 16, 2013
respectively. Fair values at issuance for warrants issued on February 27, 2014, February 28, 2014, March 3, 2014, March 15, 2014, April 16, 2014, July 22, 2014, August 22, 2014, February 6, 2015 totaled $58,966, $938,833, $1,732,432,
$1,267,156, $199,917, $634,669, $162,588, and $940,054 respectively.
On July 9, 2014, 35,714 warrants were exercised for 485,700 common shares of the Company at a deemed price of $4.00 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, 515,625 warrants were exercised for 905,683 common shares of the Company at a deemed price of $8.00 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, 54,167 warrants were exercised for 1,032,273 common shares of the Company at a deemed price of $0. 80 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, 185,185 warrants were exercised for 445,228 common shares of the Company at a deemed price of $4.00 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, 83,333 warrants were exercised for 160,003 common shares of the Company at a deemed price of $8.00 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 August 27, 2014, 257,813 warrants expired in accordance with the terms of the agreement.
On September 4, 2014, 5,000 warrants were exercised for 29,167 common shares of the Company at a deemed price of $4.00 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.
On September 15, 2014, 29,167 warrants were exercised for 547,348 common shares of the Company at a deemed price of $0.80 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.
On March 16, 2015, 28,136 warrants were exercised for 361,751 common shares of the Company at a deemed price of $0.40 in accordance with the terms of the agreement. A loss of $12,925 was recorded when the warrants were valued prior to the warrants exercise.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
6. Convertible Promissory Notes -
Continued
The Company used the Lattice Model for valuing warrants using
the following assumptions:
|
March 31, 2015 |
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 March 31, 2015, the warrants were valued at $164,889 (June
30, 2014 - $2,832,989) resulting in a gain of $3,263,964 (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 March 31, 2015, an
accretion of $254,678 (June 30, 2014 - $412,447) was recognized as interest
expense.
|
|
Warrants |
|
|
Weighted |
|
|
Weighted |
|
|
|
Outstanding |
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
|
|
|
|
Price |
|
|
life |
|
Balance, June 30, 2013 |
|
256,688 |
|
|
3.600 |
|
|
4.71 years |
|
Warrants issued |
|
3,057,568 |
|
|
1.240 |
|
|
2.63 years |
|
Exercised |
|
(273,429 |
) |
|
3.640 |
|
|
- |
|
Cancelled |
|
- |
|
|
- |
|
|
- |
|
Expired |
|
- |
|
|
- |
|
|
- |
|
Balance, June 30, 2014 |
|
3,040,827 |
|
$ |
1.220 |
|
|
2.62 years |
|
Warrants issued |
|
3,820,804 |
|
|
1.460 |
|
|
4.71 years |
|
Exercised |
|
(1,039,502 |
) |
|
1.300 |
|
|
- |
|
Cancelled |
|
- |
|
|
- |
|
|
- |
|
Expired |
|
(257,813 |
) |
|
1.200 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31, 2015 |
|
5,564,316 |
|
$ |
0.700 |
|
|
4.00
years |
|
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(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 March 31, 2015 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 |
|
1,737,309 |
|
Fair value of warrant exercised |
|
(767,319 |
) |
Mark-to-market at
March 31, 2015 - Embedded debt derivatives |
|
(3,638,089 |
) |
Balance, March 31, 2015 |
$ |
164,889 |
|
|
|
|
|
Net gain for the period included in earnings relating to
the |
|
|
|
liabilities held
at December 31, 2014 |
$ |
3,638,090 |
|
7. Related Party Transactions
During the period ended March 31, 2015, 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 433,347 shares of the
Company common stock.
On December 22, 2014, the Company entered into an short swing
settlement agreement with a director wherein in exchange for forbearance of
legal action by the Company, the director agreed to disgorge the short swing
profit of the Company as of the effective date of the agreement. As of March 31,
2015, an aggregate amount of $80,523 was paid in settlement for this agreement.
As of March 31, 2015, 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 |
March 31, 2015 |
(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 March 31, 2015, the Company had a working capital deficiency of $1,114,110 (June 30, 2014 - $3,279,889) and an accumulated deficit of $42,640,545 (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 |
March 31, 2015 |
(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 Companys 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. Pursuant to the
terms of the agreement, the consultant will receive compensation of $12,000 in
unregistered restricted common shares of the Company's common stock at a deemed
value of $0.05 per share, issuable on May 15, 2014, effective April 28, 2014 to
April 27, 2015. These shares have not yet been issued.
On May 15, 2014, the Company entered into a consulting
agreement with a consultant to provide services as member of the Board of
Directors in regards to the Companys management and operation. 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.
On August 1, 2014, the Company entered into a consulting
agreement with an consultant to provide advice relative to corporate and
business services and to perform other related activities. Pursuant to the terms
of the agreement, the Company will issue 100,000 common shares of the Company
valued at $5,000. These shares were issued in full effective October 22, 2014.
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 |
|
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
9. Commitments and Contingencies - Continued
Litigation
The Company filed a complaint against Glottech-USA involving a
dispute over a contract for the assembly and delivery of certain equipment
contractually promised by Glottech-USA, but not timely delivered in a manner
required under the relevant contract(s). Although the Company previously sought
equitable relief, the Company amended its Complaint to assert claims for damages
against Glottech-USA. After a hearing in April of 2013, the Court of Common
Pleas stayed all activity in the lawsuit against Glottech-USA pending
clarification of the dissolution action in Mississippi. The lawsuit was stayed
until December of 2013 and there has been no substantial activity in the case
since that time. There are no claims for damages pending against the Company.
In April 2014, the Company signed a release and settlement
agreement with 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 March 31, 2015, the Company paid $75,000 (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 (paid
$35,000) |
|
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. |
On January 29, 2015, a lawsuit was filed against the Company
for reimbursement of costs and disbursements including reasonable attorneys,
accountants and expert witness fees, in relations to the complaint for recovery
of short-swing profits. On March 26, 2015, agreement was reached by all parties
involved that upon payment $15,400, all outstanding claims will be settled and
forever discharged.
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.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
10. Loan Receivable
Secured Bridge Loan Agreement
On December 18, 2013, the Company entered into an agreement with GD Glottech International Ltd (“GDGI”) whereby the Company loaned to GDGI the sum of $20,000. GDGI will repay the total amount of the loan plus interest in the amount
of $333.34 (representing a 10% annual interest rate), within sixty (60) days from the receipt of the loan funds or within five (5) days of Sonic Cavitation, LLC receiving a 5% Capital Contribution.
On April 21, 2014, the Company entered into an amended agreement with Sonic Cavitation, whereby Sonic Cavitation agreed to facilitate the construction of one sonic cavitation generator. The Company agreed to pay Sonic Cavitation a consulting fee of
$20,000 upon execution of the agreement and forgive the sum of $20,000 debt upon delivery of the prototype by Sonic Cavitation. The agreement has been executed, however the delivery of the prototype has not yet fulfilled.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
11. Investment Held for Sale
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.
Based on evaluation of the fair value of the investment less costs to sell, the fair value was less than the carrying value. The Company’s evaluation of the investment resulted in a total impairment charge of US$624,429 for the period ended March 31, 2015.
Summary financial results of Tero for the period ended March
31, 2015 are as follows:
Operations |
|
|
|
|
|
US$ |
|
|
|
|
|
Disposal Well Revenues |
$ |
871,763
|
|
Operating expense |
|
(875,631 |
) |
|
|
(3,868 |
) |
Provision for Income Taxes Recovery |
|
3,220 |
|
Net income |
$ |
(648 |
) |
|
|
|
|
Equity in income of investment held for sale |
$ |
(324 |
) |
Summary financial position for Tero as at March 31, 2015
follows:
Financial Position
|
|
US$ |
|
Cash |
$ |
- |
|
Other current assets |
|
181,267 |
|
Property and equipment |
|
358,652 |
|
Total Assets |
$ |
539,919 |
|
|
|
|
|
Current liabilities |
$ |
230,753 |
|
Long term debt |
|
391,602 |
|
Total Liabilities |
|
622,355 |
|
|
|
|
|
Capital stock |
|
5 |
|
Retained earnings |
|
(82,441 |
) |
Total Equity |
|
(82,436 |
) |
Total Liabilities and Equity |
$ |
539,919 |
|
|
|
|
|
Investment Held for Sale: |
|
|
|
Balance at June 30, 2014 |
$ |
924,753 |
|
Equity in income |
|
(324 |
) |
Impairment |
|
(624,429 |
) |
Balance at March 31, 2015 |
$ |
300,000 |
|
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
12. Subsequent Events
Issuances of Common Shares
On April 1, 2015, the Company issued 3,000,000 common shares at a market price of $0.018 per share for promissory note and interest conversion.
On April 1, 2015, the Company issued 3,822,000 common shares at a market price of $0.018 per share for promissory note and interest conversion.
On April 7, 2015, the Company issued 3,921,568 common shares at a market price of $0.009 per share for promissory note and interest conversion.
On April 7, 2015, the Company issued 4,500,000 common shares at a market price of $0.009 per share for promissory note and interest conversion.
On April 8, 2015, the Company issued 4,367,609 common shares at a market price of $0.008 per share for promissory note and interest conversion.
On April 10, 2015, the Company issued 5,000,000 common shares at a market price of $0.005 per share for promissory note and interest conversion.
On April 14, 2015, the Company issued 5,000,000 common shares at a market price of $0.005 per share for promissory note and interest conversion.
On April 14, 2015, the Company issued 5,000,000 common shares at a market price of $0.005 per share for promissory note and interest conversion.
On April 13, 2015, the Company issued 5,250,000 common shares at a market price of $0.005 per share for promissory note and interest conversion.
On April 16, 2015, the Company issued 8,483,394 common shares at a market price of $0.004 per share for warrants exercise.
On April 20, 2015, the Company issued 5,000,000 common shares at a market price of $0.004 per share for promissory note and interest conversion.
On April 20, 2015, the Company issued 5,000,000 common shares at a market price of $0.004 per share for promissory note and interest conversion.
On April 20, 2015, the Company issued 5,184,405 common shares at a market price of $0.004 per share for promissory note and interest conversion.
On April 20, 2015, the Company issued 6,000,000 common shares at a market price of $0.004 per share for promissory note and interest conversion.
On April 20, 2015, the Company issued 6,200,000 common shares at a market price of $0.004 per share for promissory note and interest conversion.
On April 21, 2015, the Company issued 1,076,923 common shares at a market price of $0.004 per share for warrants exercise.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
12. Subsequent Events - Continued
Issuances of Common Shares
On April 22, 2015, the Company issued 6,000,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 22, 2015, the Company issued 2,958,580 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 24, 2015, the Company issued 7,500,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 23, 2015, the Company issued 6,471,951 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 24, 2015, the Company issued 8,300,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 27, 2015, the Company issued 5,250,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 28, 2015, the Company issued 6,000,000 common shares at a market price of $0.001 per share for promissory note and interest conversion.
On April 28, 2015, the Company issued 7,860,681 common shares at a market price of $0.001 per share for promissory note and interest conversion.
On April 29, 2015, the Company issued 9,000,000 common shares at a market price of $0.001 per share for promissory note and interest conversion.
On April 30, 2015, the Company issued 9,800,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 30, 2015, the Company issued 9,000,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 30, 2015, the Company issued 9,000,000 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 30, 2015, the Company issued 10,839,994 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On April 30, 2015, the Company issued 9,716,815 common shares at a market price of $0.002 per share for promissory note and interest conversion.
On May 1, 2015, the Company issued 10,748,106 common shares at a market price of $0.001 per share for promissory note and interest conversion.
On May 1, 2015, the Company issued 9,800,000 common shares at a market price of $0.001 per share for promissory note and interest conversion.
Lithium Exploration Group, Inc. |
Notes to Condensed Consolidated Interim Financial Statements |
March 31, 2015 |
(Unaudited) |
12. Subsequent Events - Continued
Issuances of Common Shares
On May 1, 2015, the Company issued 21,063,048 common shares at a market price of $0.001 per share for promissory note and interest conversion.
On May 5, 2015, the Company issued 14,727,449 common shares at a market price of $0.0011 per share for promissory note and interest conversion.
On May 5, 2015, the Company issued 15,778,495 common shares at a market price of $0.0011 per share for promissory note and interest conversion.
On May 5, 2015, the Company issued 15,000,000 common shares at a market price of $0.0011 per share for promissory note and interest conversion.
On May 4, 2015, the Company issued 10,000,000 common shares at a market price of $0.0013 per share for promissory note and interest conversion.
On May 7, 2015, the Company issued 18,154,990 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
On May 7, 2015, the Company issued 15,000,000 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
On May 7, 2015, the Company issued 9,800,000 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
On May 7, 2015, the Company issued 15,000,000 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
On May 8, 2015, the Company issued 15,778,495 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 8, 2015, the Company issued 15,000,000 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 8, 2015, the Company issued 18,500,000 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 8, 2015, the Company issued 15,000,000 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 12, 2015, the Company issued 18,154,990 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
On May 11, 2015, the Company issued 18,548,242 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 12, 2015, the Company issued 17,802,198 common shares at a market price of $0.0008 per share for promissory note and interest conversion.
12. Subsequent Events - Continued
Issuances of Common Shares
On May 11, 2015, the Company issued 22,000,000 common shares at a market price of $0.0009 per share for promissory note and interest conversion.
On May 13, 2015, the Company issued 22,227,542 common shares at a market price of $0.0007 per share for promissory note and interest conversion.
On May 13, 2015, the Company issued 24,471,429 common shares at a market price of $0.0007 per share for promissory note and interest conversion.
On May 14, 2015, the Company issued 26,400,000 common shares at a market price of $0.0007 per share for promissory note and interest conversion.
On May 15, 2015, the Company issued 25,000,000 common shares at a market price of $0.0007 per share for promissory note and interest conversion.
Tero Oilfield Services Ltd (“Tero”)
On May 1, 2015, the Company entered into a Share Purchase Agreement with an individual to dispose the 50% interest in Tero for the purchase price of US$300,000. The purchase price shall be paid in two installments, with one installment of US$100,000 paid on the closing date of May 15, 2015 and the balance US$200,000 on or before June 1, 2015.
The Company has evaluated subsequent events from April 1, 2015, through the date of this report, and determined there are no other items to disclose.
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, that may cause our or our
industrys actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited condensed consolidated financial statements are
stated in United States Dollars (US$) 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, 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 then 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.
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. We have subsequently sold our interest in Tero on May 1, 2015 as further described below.
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 company’s 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:
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CAD$20,000 (USD$20,000) cash payment due on January 1, 2013; and
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CAD$80,000 (USD$80,000) by a 15% one year promissory note starting January 1, 2013.
The note was interest free until March 31, 2013. After March 31, 2013, interest accrued on the principal balance then in arrears at the rate of 15% per annum. Payments were due and payable by December 31, 2013. Further, at any time, Lithium
Exploration VIII and Golden Virtue could elect to convert the remaining balance of the note and accrued interest into common shares of our company at 75% of the closing market price of our company’s common shares on the election day.
On July 3, 2013, Lithium Exploration VIII and Golden Virtue elected to convert the note and accrued interest in the combined aggregate amount of CAD$83,057.53 (USD$78,743) into common shares of our company. Pursuant to this election, we issued an aggregate of 954,461 shares of our common stock at the price of USD$0.0825 per share (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock).
Glottech
On November 8, 2011, we entered into a letter agreement with Glottech-USA. Pursuant to the terms of the agreement, we were granted an exclusive license to use and distribute the technology within the Swan Hills region of Alberta as well as a
non-exclusive right to distribute the technology within Canada.
We previously made the following payments in association with the production of a working unit of Glottech-USA’s technology:
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$25,000 on March 21, 2011 in consideration for entering into the letter agreement dated March 17, 2011;
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$75,000 on May 27, 2011 in consideration for continuance of the March 17, 2011 agreement; and
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$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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock), 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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of 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-USA’s license to the technology expired and also on September 1, 2012, we exercised this option agreement and released the funds to GD Glottech International.
On October 1, 2012, we entered into a license agreement and a sales agency agreement with GD Glottech, regarding GD Glottech International’s proprietary and patented mechanical ultrasound technology for use in water purification in the process
of separation of salt and other minerals from lithium bearing brine produced from oil and gas operations. The license agreement and sales agency agreement expands and replaces all prior agreements among our company, GD Glottech International and
Glottech-USA, LLC regarding our rights to use and sell the mechanical ultrasound technology, included in our letter of intent dated November 18, 2011, and our option agreement dated August 14, 2012.
Pursuant to the sales agency agreement we were appointed as sales agent for the patented mechanical ultrasound technology within Canada. Our appointment is exclusive within the field of non petro-chemical mining and non-exclusive in all other fields of use. In consideration of the sales agency rights, we agreed to issue to GD Glottech International 2,000,000 common shares of our capital stock (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock), which obligation has been satisfied through the transfer to GD Glottech International of 2,000,000 shares (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) held by our officer and director, Alexander Walsh. It was the explicit intention of the parties that this share transfer fulfills the prior obligations of Alexander Walsh and our company with respect to the option contemplated in the March and November 2011 agreements with Glottech-USA.
We will receive a royalty in respect of sales of the technology secured by us. The term of the initial agreement will be for 5 years with the possibility of extension if sales targets are achieved.
Pursuant to the license agreement, we obtained the exclusive right to use the mechanical ultrasound technology within the field of non-petro-chemical mining within the territory of Canada. We may also sublicense our rights under the license in
respect of one or more units of the technology to any entity operating within the field of use in which we own or beneficially own at least a 20% equity interest. GD Glottech International agreed to supply us with up to 5 technology units per
12-month period from the effective date of the license term, which will start from the month of delivery of the unit of the technology. The first unit of the technology provided under the license to be provided at no additional cost to us and
subsequent units shall be subject to a fee based on the then current retail price of the units. If we sublicense any of our rights, the term of the applicable license will be for 5 years from the date the applicable unit is delivered. Pursuant to
the license agreement, GD Glottech International shall provide ongoing technical assistance and training in respect of our use of the technology at our cost.
In consideration of the license, we will pay to GD Glottech International a royalty based on the tonnage of water produced by our use of the technology in accordance with the agreement. A minimum annual royalty will be applicable. The term of the
license agreement shall be for an initial period of 5 years and shall be renewable for additional terms of 5 years provided that we satisfy the minimum royalty requirements during each period.
GD Glottech International’s technology is designed to separate suspended solids from water (brine), which is one step in the process that we are taking to produce commercially viable minerals. The technology produces extremely high
temperatures, which destroy organic substances such as bacteria and other toxic agents. We believe that GD Glottech International's technology can provide lower costs of operation as well as reduced time for site clean-up than traditional methods of
water treatment. We anticipate using this application to extract dissolved solids like lithium, potassium, and magnesium from oil field brine. The disposal of produced water (brine) from oil and gas production in Alberta is a significant
environmental issue for the province and presents a considerable economic issue for producers. We intend to use the technology on our Valleyview Property in Alberta, in cooperation with oil and gas producers, to treat and dispose of their produced
water while monetizing the minerals that are contained within that produced water stream that is being brought to the surface during the oil and gas production process. As we own the MAIM (Metals and Industrial Minerals) claims to the minerals on
the Valleyview Property, the minerals contained in their produced water stream fall under our rights. While we have had discussions with oil and gas consultants and oil operators regarding their difficulties in treating the brine at some of their
fields, we have no formal agreements in place.
The technical process is based on the use of mechanical ultrasound generated through the production of a series of cavitations. Mechanical ultrasound is a machine-produced sound of a frequency above the upper limit of the normal range of human
hearing. Cavitations are the rapid formation and collapse of bubbles in liquids, caused by the movement of something such as a propeller or by waves of high-frequency sound. The production of mechanical ultrasound allows GD Glottech
International’s technology to distill the fluid stock. Using mechanical ultrasound for distillation has been attempted before, but the external energy requirement needed to produce the mechanical ultrasound was far too expensive to make it
commercially viable. GD Glottech International’s technology uses the energy released during the cavitations in order to make it commercially viable from an economic perspective. During these cavitations, a millisecond of energy is released.
During this release, temperatures can reach 5,000 degrees centigrade.
On August 27, 2012, we filed a motion to amend our complaint to include claims of breach of trust and fiduciary duty, breach of good faith and fair dealing, breach of contract, conversion of funds, fraud, and the imposition of a constructive trust.
We believe that this action was necessary to protect our interests against possible misuse of funds by Glottech-USA, LLC and its principals. We will also seek damages as appropriate.
On October 19, 2012, GD Glottech International moved to intervene as an interested party in the litigation pending against Glottech-USA. GD Glottech International cited its role as owner of the patents as a basis for intervening in the litigation
against Glottech-USA. We believe GD Glottech International’s entry into the litigation against Glottech-USA is favorable to our cause in the litigation.
On October 22, 2012, the Court of Common Pleas in Chester County, Pennsylvania, granted our motion to amend our complaint against Glottech-USA to add claims for fraud and damages reflective of the malfeasance which we allege against Glottech-USA and
its officers.
On December 12, 2012, GD Glottech International removed the management of Glottech-USA and appointed itself as the manager of Glottech-USA. On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to dissolve Glottech-USA in
Mississippi on the basis that Glottech-USA was unable to meet its financial obligations and could not finish or deliver the unit to us.
On December 19, 2012, an attorney purportedly acting on behalf of Glottech-USA filed a motion in the lawsuit pending in Chester County, Pennsylvania, seeking possession of the unit. In addition, Glottech-USA filed a counterclaim seeking possession
of the unit.
GD Glottech International immediately filed a motion to quash Glottech-USA’s motion and for sanctions against the law firm that filed the motion. We also filed a motion, seeking disqualification of the law firm that purported to represent
Glottech-USA on the basis that the new management for Glottech-USA had fired the law firm and, as such, the law firm no longer had authority to represent Glottech-USA.
On April 25, 2013, we attended a hearing on the motions pending in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on any of the motions and, instead, stayed the case as to Glottech-USA until December of 2013 pending the
outcome of the lawsuit seeking dissolution of Glottech-USA. The matter in Pennsylvania is no longer stayed. An attorney purporting to represent Glottech-USA and the receiver appointed in Mississippi has filed motions and other documents that may
move the matter forward. We have pending preliminary objections to the counterclaim, including a request for a determination of which group is in control of Glottech-USA.
Certain members of Glottech-USA continue to pursue dissolution of the company in Mississippi. The members of Glottech-USA who seek dissolution have stated in court filings that it is not practicable for Glottech-USA to continue as an ongoing
business. In addition, Sulzer filed suit against Glottech-USA Texas for unfulfilled obligations.
We do not believe that Glottech-USA has sufficient capital to continue as an ongoing business. We have provided full consideration to Glottech-USA and complied with all other agreed upon terms. We believe any assertions against us to lack merit.
Given pending litigation against Glottech-USA, and the uncertainties naturally inherent of any litigation (particularly as to outcome and timing thereof), we have moved to assure continuity of our licensing rights through entering into, and
exercising, the option to contract directly with the technology inventor and patents owner, GD Glottech International. Thus, regardless of the outcome of the litigation, or indeed any action or inaction of Glottech-USA, our interest in the
technology is assured.
Alta Disposal Morinville Ltd. Acquisition
On June 11, 2013, we entered into a letter of intent with Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Inc.) pursuant to which we agreed to acquire not less than 51% of the outstanding securities of Alta Disposal Morinville in
consideration of an aggregate investment of $450,000 in Alta Disposal Morinville’s waste water disposal facility located in Morinville, Alberta. The closing of the transaction was subject to a number of conditions precedent, including but
not limited to completion of due diligence and the negotiation of a definitive long form agreement.
On July 29, 2013, in anticipation of the completion of a formal agreement with Alta Disposal Morinville embodying the terms of the letter of intent, we entered into a convertible debenture agreement with Alta Disposal Morinville pursuant to which we
agreed to deliver to Alta Disposal Morinville up to CAD$300,000 (approximately USD$291,000) payable in two installments of CAD$150,000 deliverable respectively upon execution of the convertible debenture, and within 5 business days
following receipt of regulatory approval for the re-activation of Alta Disposal Morinville’s waste water disposal facility. Delivery of the first and second installments totaling CAD$300,000 have been satisfied and the acquisition was
finalized as of October 18, 2013. The funds advanced are secured against all present and future assets and undertakings of Alta Disposal Morinville and are convertible at our option into a number of common shares of Alta Disposal Morinville equal to 51% of its issued and outstanding voting stock.
Effective August 1, 2013, we entered into a joint venture agreement with Alta Disposal Morinville pursuant to which our company and Alta Disposal Morinville will operate certain lands and facilities including a disposal well in the Morinville area
of Alberta.
On October 18, 2013, we completed the acquisition of 51% of the outstanding securities of Alta Disposal Morinville, pursuant to a letter of intent with Alta Disposal Morinville dated June 11, 2013. As a result of the share acquisition, Alta Disposal
Morinville is now a partially owned subsidiary of our company through our wholly owned subsidiary, Alta Disposal Ltd.
In accordance with the letter of intent, we acquired, through our wholly owned subsidiary, Alta Disposal Ltd., 51% of the outstanding securities of Alta Disposal Morinville (being 510,000 common shares (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock)) 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) (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) for each $105,000 funded until Alta Disposal holds an aggregate of 70% of Alta Disposal Morinvilles outstanding common shares. If Alta Disposal elects to fund the on-going capital requirements of Alta Disposal Morinville beyond the aggregate of $870,000, any such funds advanced by Alta Disposal will be deemed to be funds loaned by Alta Disposal to Alta Disposal Morinville on a non-interest bearing, unsecured bridge loan basis.
Any such funds provided to Alta Disposal Morinville will be repayable from cash flow generated by Alta Disposal Morinville. Funds loaned prior to June 30, 2014 will not be due and payable until June 30, 2014 and thereafter will not be due and
payable until at least 6 months following the date of any such loan.
Other terms of the Shareholders Agreement include:
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the board of directors of Alta Disposal Morinville will consist of 3 directors including 2 nominees of Alta Disposal and 1 nominee of Excel.
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Alexander Walsh will serve as chairman of the board of directors, president and chief executive officer of Alta Disposal Morinville.
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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.
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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.
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Alta Disposal will otherwise have sole discretion and authority in respect of any and all management and operational decisions relating to the corporation.
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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.
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Customary restrictions on the encumbrance and disposition of shares.
The Shareholders Agreement additionally provides for the engagement of Valeura Energy Inc. as the operator of Alta Disposal Morinville’s lands, wells, the facilities, pipelines and disposal wells pursuant to an operating agreement between Alta
Disposal Morinville and Valeura dated July 9, 2013. Valeura was to retain a 10% working interest in Alta Disposal Morinville’s lands until completion of the initial work on the disposal well project and will re-convey that interest to Alta
Disposal Morinville provided that Alta Disposal Morinville has paid Valeura a cash payment of $2,500 per month for acting as operator of the disposal well and the lands and upon payment of an amount of $10,000 to Valeura upon completion of
the project. The disposal well work program must be mutually approved by Alta Disposal Morinville and Valeura. Alta Disposal Morinville will be responsible for all costs and expenses relating to the work program.
Tero Oilfield Services Ltd. Acquisition (and Disposition)
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 (the “Tero Shares”) 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 Tero’s operations. This agreement provides that the shareholders of
Tero, Alta Disposal and Mr. Hofmann, may by unanimous resolution advance to Tero, upon demand by Tero, such funds as may be determined specified by unanimous resolution, subject to the agreement.
Tero was a family owned waste disposal company. The waste disposal facility had been under the same ownership since it began operations in 1997. In 2002, Tero successfully reclassified the original Class II well to a Class IB disposal well and expanded the capabilities of the facility to handle solid waste disposal. The facility is located near Wardlow, Alberta and is right in the heart of the area's oil and gas producers. The nearest competing
commercial disposal companies are 75 kilometers away which presents Tero’s facility with a large geographical advantage.
On September 15, 2014, Northern Hunter Energy Inc. entered into a conveyance agreement with Tero dated June 1, 2014. Pursuant to this agreement, Northern Hunter Energy will transfer a 10% working interest in certain assets of the Morinville, Alberta
property, which was previously acquired from Valeura, to Tero effective June 1, 2014 for the sum of $10,000. As of the date of this report, the transfer has not been completed and the sum of $10,000 has not been paid.
On May 1, 2015, Alta Disposal entered into a share purchase agreement with Natel Hofmann and Tero Oilfield Services Ltd. for the sale of the Tero Shares by Alta Disposal to Ms. Hofmann in exchange for an aggregate of $300,000 (the Purchase Price). The Purchase Price was payable in an aggregate of $100,000 on May 15, 2015 and $200,000 on June 1, 2015.
Loans of Our Company
Since March 2014, our company has received various loans from unrelated third party that are listed below. These loans are convertible into shares of our company pursuant to the terms of the loan agreements. In the description below of the loans and the conversions of debt into shares, the warrant issuance and debt to share conversions prior to January 19, 2015 are on a share pre-split basis as our board of directors approved a reverse stock split of our issued and outstanding shares of common stock on January 19, 2015 on a basis of 20 old shares of common stock for one (1) new share of common stock (the “Share Split”). All the loans have terms that make them subject to the Share Split.
Loan Agreements with JDF Capital Inc.
$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 company’s common stock, par value $0.001 per share at the option of the holder. The fair value of the note at issuance was $846,154. During the year ended
June 30, 2014, an interest expense of $24,063 was accrued in respect of the note.
In addition on March 15, 2014, we issued an aggregate of 18,333,333 warrants to JDF in consideration for purchasing the note. Subject to adjustments, these warrants are convertible into common shares at a price of $0.06 and expire after a term
of three years. In the case that after six months there is no registration statement available for the resale of our common shares from exercising of these warrants, the warrants may be exercised on a cashless basis at a price as set out in the
warrant.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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On April 1, 2015, we issued 3,822,000 common shares for promissory note and interest conversion of $22,932.
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On April 7, 2015, we issued 3,921,568 common shares for promissory note and interest conversion of $20,000.
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On April 14, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $15,250.
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On April 15, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $12,000.
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On April 20, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $10,000.
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On April 21, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $6,500.
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On April 27, 2015, we issued 6,000,000 common shares for promissory note and interest conversion of $7,200.
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On April 30, 2015, we issued 6,000,000 common shares for promissory note and interest conversion of $6,000.
-
On May 4, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $5,850.
- On May 7, 2015, we issued 10,000,000 common shares for promissory note and interest conversion of $6,500.
- On May 11, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $6,375.
- On May 12, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $5,250.
As at the date of this report $8,393 of the note and the full amount of the warrants remain unconverted and outstanding.
On March 3, 2015, JDF Capital, LG Capital Funding, LLC and our company agreed to assign an aggregate of $50,000 from the note of JDF Capital to LG Capital and amend the conversion price to equal to 65% of the lowest closing price of the our
common stock for the last 20 trading days prior to conversion, as well as 10% per annum interest. As at the date of this report, we have made the following issuances of common stock in conversion of this convertible note:
-
On April 21, 2015, we issued 5,184,405 common shares for promissory note and interest conversion of $10,109.59.
-
On May 4, 2015, we issued 3,810,301 common shares at a deemed price of $0.01 per share for promissory note and interest conversion of $8,061.08.
As at the date of this report, there remains a balance $32,050 in principal payable pursuant to the note.
$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.
On March 9, 2015, JDF Capital and Blue Citi PR, LLC agreed to assign an aggregate of $100,000 from the note of JDF Capital (that was issued from our company) to LG Capital. As at the date of this report, the note which amount remains unconverted
and outstanding.
- On April 29, 2015, we issued 2,958,580 common shares for promissory note and interest conversion of $5,000.
- On May 4, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $7,605.
- On May 11, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $6,825.
- On May 13, 2015, we issued 17,802,198 common shares for promissory note and interest conversion of $8,100.
- On May 15, 2015, we issued 25,000,000 common shares for promissory note and interest conversion of $9,750.
As at the date of this report, there remains a balance of $62,720 unconverted and payable pursuant to the note.
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.
-
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.
-
On April 22, 2015, we issued 6,200,000 common shares for promissory note and interest conversion of $8,060.
-
On April 30, 2015, we issued 8,300,000 common shares for promissory note and interest conversion of $8,715.
- On May 12, 2015, we issued 18,500,000 common shares for promissory note and interest conversion of $6,475.
- On May 15, 2015, we issued 26,400,000 common shares for promissory note and interest conversion of $8,715.
As at the date of this report, there remains a balance of $93,285 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.
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.
-
On April 14, 2015, we issued 4,367,609 common shares for promissory note and interest conversion of $18,474.99.
As at the date of this report, there remains no balance payable pursuant to the note.
Loan Agreement with LG Capital Funding, LLC
On March 3, 2015, 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 $29,000 in consideration of our issuance of convertible promissory
notes. We issued LG Capital a convertible promissory note with 10% interest due March 3, 2016 and convertible into common shares on a cashless basis at a price of 65% of the lowest closing bid price of our common shares during the prior 20 trading
days including the delivery of any related conversion notice.
As at the date of this report, there remains a balance of $29,000 unconverted and payable pursuant to the note.
Loan Agreement with St. George Investments LLC
On February 28, 2014, we entered into a securities purchase agreement with St. George Investments LLC, pursuant to which St. George Investments provided our company with an aggregate investment of $100,000 in consideration of our issuance of
convertible promissory notes and common share purchase warrants. We issued St. George Investments a convertible promissory note of $125,500 including 15% prepaid interest due August 28, 2015 and convertible into common shares on a cashless basis
at a price of 50% of the lower of lowest closing bid price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion. The fair value of the note at issuance was
$200,000. As at the date of this report we have made the following issuances of common stock in conversion of the February 28, 2014 note:
-
On September 10, 2014, we issued 1,538,462 common shares 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. As at the date of this report we have made the following issuances of common stock in exercise of the February 28, 2014 warrant:
-
On April 2, 2015, we issued 8,483,394 common shares by cashless exercise.
-
On April 24, 2015, we issued 7,235,023 common shares by cashless exercise.
Due to the above warrant exercises, there remains no balance of the February 28, 2014 warrant.
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:
-
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.
-
On April 2, 2015, we issued 3,000,000 common shares for promissory note and interest conversion of $18,000.
-
On April 8, 2015, we issued 4,500,000 common shares for promissory note and interest conversion of $22,950.
-
On April 15, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $12,250.
-
On April 21, 2015, we issued 6,000,000 common shares for promissory note and interest conversion of $7,800.
-
On April 27, 2015, we issued 7,500,000 common shares for promissory note and interest conversion of $7,875.
-
On May 1, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $6,300.
As at the date of this report, there remains a balance of $21,315 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.
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.
As at the date of this report, we have made the following issuances of common stock in cashless exercise of the March 3, 2014 warrant:
-
On April 14, 2015, we issued 1,076,923 common shares.
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.
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.
-
On April 2, 2015, we issued 4,166,712 common shares the promissory note and interest conversion of $21,524.
-
On May 5, 2015, we issued 21,063,048 common shares the promissory note and interest conversion of $14,350.
As at the date of this report, there remains a principal balance of $29,126 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.
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. As at the date of this report, we have made the following issuances of common stock in conversion of
the October 31, 2014 note:
-
On May 1, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $9,800.
-
On May 4, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $9,800.
- On May 7, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $4,459.
- On May 11, 2015, we issued 22,000,000 common shares for promissory note and interest conversion of $10,010.
As at the date of this report, there remains a balance of $15,931 unconverted and payable pursuant to the note.
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.
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 April 22, 2015, we issued 5,250,000 common shares the promissory note and interest conversion of $16,721.25.
-
On April 30, 2015, we issued 5,250,000 common shares the promissory note and interest conversion of $5,801.25.
-
On May 4, 2015, we issued 10,839,994 common shares the promissory note and interest conversion of $9,159.79.
- On May 11, 2015, we issued 15,778,495 common shares the promissory note and interest conversion of $9,230.42.
- On May 12, 2015, we issued 18,548,242 common shares the promissory note and interest conversion of $8,439.45.
There remains a principal balance of $71,147.84 unconverted and payable pursuant to the note.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.
Loan Agreement with Louis Feld
On February 6, 2015, Louis Feld provided our company with an aggregate investment of $88,500 in consideration of our issuance of a $88,500 convertible promissory note and warrants with an aggregate exercise price of $88,500. We issued
Mr. Feld a convertible promissory note with 12% interest due August 6, 2016 and convertible into common shares on a cashless basis at a price of 65% of the lowest closing bid price of our common shares during the prior 20 trading days. As at the
date of this report, there remains the entire balance unconverted and payable pursuant to the note.
Loan Agreement with River North Equity LLC
On February 24, 2015, River North provided our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes. We issued River North a convertible promissory note with 12% interest due August
24, 2016 and convertible into common shares on a cashless basis at a price of 65% of the lowest closing bid price of our common shares during the prior 25 trading days including the delivery of any related conversion notice. As at the date of this
report, we have made the following issuances of common stock in conversion of the February 24, 2015 note:
-
On April 27, 2015, we issued 6,471,951 common shares for promissory note and interest conversion of $7,766.34.
-
On April 29, 2015, we issued 7,860,681 common shares for promissory note and interest conversion of $7,860.68.
-
On May 4, 2015, we issued 9,716,815 common shares for promissory note and interest conversion of $7,287.61.
- On May 5, 2015, we issued 14,727,449 common shares for promissory note and interest conversion of $9,572.84.
- On May 11, 2015, we issued 15,778,495 common shares for promissory note and interest conversion of $6,311.40.
- On May 14, 2015, we issued 22,227,542 common shares for promissory note and interest conversion of $8,891.02.
As at the date of this report, there remains a balance of $55,931.46 unconverted and payable pursuant to the note.
Loan Agreement with JDF Capital Inc.
On April 15, 2015, JDF Capital provided our company with a $50,000 loan with 10% interest per annum due April 15, 2015.
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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) held by Mr. Walsh. The Series A Convertible Preferred Shares have a par value of $0.001 per share and are convertible on a one for one basis into shares of our common stock after a one year hold period. There are no other preferential rights attached to the Series A Convertible Preferred Shares. Mr. Walsh established a series of a 10b5-1 Sales Plans in connection with an overall asset diversification strategy. Sales transactions occurring under Mr. Walshs 10b5-1 Plans were disclosed publicly through Form 4 filings with the SEC and are subject to the restrictions and filing requirements of Rule 144.
On July 25, 2013, we entered into a consulting agreement with Advanced Capital Trading, LLC, pursuant to which Advanced Capital performed financial consulting services for our company for a period of three months with an extension of an additional
three months based on performance, such services commenced effective August 1, 2013. Compensation payable to Advanced Capital of $10,000 was paid upon execution of the consulting agreement.
Effective January 1, 2014, we entered into a consulting agreement for a term of 12 months with International Compass, LLC for the services of Bryan Kleinlein as chief financial officer of our company. As compensation, we agreed to pay to International Compass $12,000 per month during the term of the agreement payable in cash and/or common shares of our company that were previously registered on Form S-8 at our sole discretion. The value of the shares of our company issued as compensation, if any, shall be based on the volume weighted average trading closing price of the shares of our company in the five (5) trading days immediately preceding the date(s) which the shares are due. Mr. Kleinlein was first appointed as our chief financial officer on May 15, 2012. Effective 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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock). 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 company’s common stock. The employment agreement also provides for
liability insurance and any travel and out-of-pocket expenses incurred and approved by our company.
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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) 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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) 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 (based on pre-split basis where on January 19, 2015 our board of directors approved 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 (1) new share of common stock) 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.
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 nine month periods ended March 31, 2015.
The following provides selected financial data about our
company for the three and nine month periods ended March 31, 2015 and 2014.
Three months ended March 31, 2015 and 2014.
|
|
Three months |
|
|
Three months |
|
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March31, |
|
|
|
2015 |
|
|
2014 |
|
Revenue |
$ |
16,176 |
|
$ |
17,882 |
|
Operating expenses |
$ |
(1,040,130 |
) |
$ |
(536,842 |
) |
Other income (expenses): |
|
|
|
|
|
|
Other recovery |
$ |
80,524 |
|
$ |
Nil |
|
Interest expense |
$ |
(146,468 |
) |
$ |
(1,984,721 |
) |
Gain (loss) on change in fair
value of derivative liability |
$ |
(819,513 |
) |
$ |
42,768 |
|
Fair value of warrants issued |
$ |
(865,239 |
) |
$ |
(2,309,345 |
) |
Equity in income (loss) of
unconsolidated affiliate |
$ |
(6,469 |
) |
$ |
5,473 |
|
Net loss |
$ |
(1,142,093 |
) |
$ |
(4,764,785 |
) |
Operating expenses for the three months ended March 31, 2015 increased as a result of increases in selling, general and administrative and impairment loss expenses.
Nine months ended March 31, 2015 and 2014.
|
|
Nine months |
|
|
Nine months |
|
|
|
ended |
|
|
ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Revenue |
$ |
57,476 |
|
$ |
17,882 |
|
Operating expenses |
$ |
(1,964,046 |
) |
$ |
(1,640,913 |
) |
Other income (expenses): |
|
|
|
|
|
|
Interest expense |
$ |
(2,818,008 |
) |
$ |
(2,835,206 |
) |
Other recovery |
$ |
80,524 |
|
$ |
Nil |
|
Gain (loss) on change in fair
value of derivative liability |
$ |
3,638,090 |
|
$ |
(2,103,614 |
) |
Fair value of warrants issued |
$ |
(962,309 |
) |
$ |
Nil |
|
Equity in income (loss) of
unconsolidated affiliate |
$ |
(324 |
) |
$ |
5,473 |
|
Net loss |
$ |
(1,968,597 |
) |
$ |
(6,556,378 |
) |
Operating expenses for the nine months ended March 31, 2015 increased as a result of increases in selling, general and administrative and impairment loss expenses.
Liquidity and Capital Resources
The following table provides selected financial data about our
company as of March 31, 2015, and June 30, 2014, respectively.
Working Capital
|
|
As at |
|
|
As at |
|
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Total current assets |
$ |
115,191 |
|
$ |
138,013 |
|
Total current liabilities |
$ |
1,230,301 |
|
$ |
3,417,902 |
|
Working capital (deficit) |
$ |
(1,115,110 |
) |
$ |
(3,279,889 |
) |
Cash Flows
|
|
Nine Months |
|
|
Nine Months |
|
|
|
ended |
|
|
ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Net cash used in operating
activities |
$ |
(897,997 |
) |
$ |
(1,028,195 |
) |
Net cash used in investing activities |
$ |
Nil |
|
$ |
(1,055,195 |
) |
Net cash provided by
financing activities |
$ |
908,668 |
|
$ |
2,577,077 |
|
Effect of foreign exchange on cash |
$ |
(21,831 |
) |
$ |
(10,780 |
) |
Increase (Decrease) in cash |
$ |
(11,610 |
) |
$ |
482,907 |
|
We had cash and cash equivalents of $58,572 as of March 31, 2015 compared to cash and cash equivalents of $69,732 as of June 30, 2014. We had a working capital deficit of $1,115,110 as of March 31, 2015 compared to a working capital deficit of $3,279,889 as of June 30, 2014.
The report of our auditors on our audited consolidated
financial statements for the fiscal year ended June 30, 2014, contains a going
concern qualification as we have suffered losses since our inception. We have
minimal assets and have achieved no operating revenues since our inception. We
have depended on loans and sales of equity securities to conduct operations.
Unless and until we commence material operations and achieve material revenues,
we will remain dependent on financings to continue our operations.
Anticipated Cash Requirements
We estimate that our expenses over the next 12 months will be
approximately $1,550,000 as described in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from shareholders or other sources.
Description |
|
Estimated |
|
|
Estimated |
|
|
|
Completion |
|
|
Expenses |
|
|
|
Date |
|
|
($) |
|
General and administrative
|
|
12 months |
|
$ |
300,000 |
|
Mining expenses (mainly technology related)
|
|
12 months |
|
$ |
150,000 |
|
Tero acquisition expenses |
|
12 months |
|
$ |
500,000 |
|
Morinville expansion |
|
12 months |
|
$ |
400,000 |
|
Legal and accounting |
|
12 months |
|
$ |
200,000 |
|
Total |
|
|
|
$ |
1,550,000 |
|
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 company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of our company. Significant estimates that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.
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 $58,572 and $69,732 in cash and cash equivalents at March 31, 2015 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 company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. 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 company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Net Income or (Loss) per Share of Common Stock
Our company has adopted FASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding during the period.
Potentially dilutive securities are not presented in the computation of EPS since their effects are anti-dilutive.
Foreign Currency Translations
Our company’s functional and reporting currency is the US dollar. All transactions initiated in other currencies are translated into US dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the US dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.
No significant realized exchange gain or losses were recorded as of March 31, 2015 to June 30, 2014.
Translation of Foreign Operations
The financial results and position of foreign operations whose functional currency is different from our company’s presentation currency are translated as follows:
- assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; and
- income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to our company’s accumulated other comprehensive loss in the consolidated balance sheets. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.
The relevant translation rates are as follows: For the period ended March 31, 2015 closing rate at 0.07885 CND$: US$, average rate at 0.8655 CND$: 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 March 31, 2015 and June 30, 2014, our company had no material items of other comprehensive income except for foreign currency translation adjustment.
Risks and Uncertainties
Our company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.
Environmental Expenditures
The operations of our company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon our company vary greatly and are not predictable. Our company's policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.
Warrants
We value our warrants with provisions resulting in derivative liabilities at fair value using the lattice model according to ASC-815-10-55. We revalue our warrants at the end of every period at fair value and record the difference in other income (expense) in the condensed consolidated statement of operations.
Convertible Debentures
We value our convertible debentures with provisions resulting in beneficial conversion features from the embedded derivative at fair value according to ASC-840-10-25-14, rather than have its conversion feature bifurcated and reported separately due to ASC-815-15-25-1b. Because the value of the derivative related to the warrant exceeds the proceeds of the loan, our company allocated 100% of the proceeds to the warrant derivative and took a day one loss for the difference between the proceeds and the fair value of the warrants, resulting in a debt discount on the full fair value of the debenture because no proceeds were available to be allocated to the debt or its beneficial conversion feature. That debt discount is accreted to interest expense over the stated life of the note using the interest method in accordance with ASC 470-20-35-7a and 835-30-35-2. Unaccreted debt discount on the date of conversion is accreted to interest expense on that date.
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The carrying amounts of our company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of the short maturity of these instruments.
Our company’s Level 3 financial liabilities consist of the derivative liability of our company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Our company used a fair value model which incorporates transaction details such as company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.
Revenue Recognition
Our company has generated little revenues to date. It is our company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. Our company will defer any revenue for which the product/services was not delivered or is subject to refund until such time that our company and the customer jointly determine that the product/service has been delivered or no refund will be required.
Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of our company’s activities. Sales are presented, net of tax, rebates and discounts, and after eliminating intercompany sales. Our company recognizes revenue when the amount of revenue and related cost can be reliably measured and it is probable that the collectability of the related receivables is reasonably assured.
Receivables
Trade and other receivables are customer obligations due under normal trade terms and are recorded at face value less any provisions for uncollectible amounts considered necessary. Our company includes any balances that are determined to be uncollectible in its overall allowance for doubtful accounts.
Investment in Unconsolidated Affiliate
Investments in affiliates that are not controlled by our company, but over which we have significant influence, are accounted for using the equity method. Our company’s share of net income from its unconsolidated affiliate is reflected in the Consolidated Statements of Operations and Comprehensive Loss and Equity investment in Unconsolidated Affiliate.
Recent Accounting Pronouncements
Our company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards Codification.
A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities.
For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted.
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.
PART II OTHER INFORMATION
Item 1. Legal
Proceedings
Lithium Exploration Group v. Glottech-USA, et al.
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-USA’s license to the technology expired and also on September 1, 2012, we exercised this option agreement and released the funds to GD Glottech International.
On October 1, 2012, we entered into a license agreement and a sales agency agreement with GD Glottech, regarding GD Glottech International’s proprietary and patented mechanical ultrasound technology for use in water purification in the process
of separation of salt and other minerals from lithium bearing brine produced from oil and gas operations. The license agreement and sales agency agreement expands and replaces all prior agreements among our company, GD Glottech International and
Glottech-USA, LLC regarding our rights to use and sell the mechanical ultrasound technology, included in our letter of intent dated November 18, 2011, and our option agreement dated August 14, 2012.
Pursuant to the sales agency agreement we were appointed as sales agent for the patented mechanical ultrasound technology within Canada. Our appointment is exclusive within the field of non petrochemical mining and non-exclusive in all other fields
of use. In consideration of the sales agency rights, we agreed to issue to GD Glottech International 2,000,000 common shares of our capital stock, which obligation has been satisfied through the transfer to GD Glottech International of 2,000,000
shares held by our officer and director, Alexander Walsh. It was the explicit intention of the parties that this share transfer fulfills the prior obligations of Alexander Walsh and our company with respect to the option contemplated in the March
and November 2011 agreements with Glottech-USA. We will receive a royalty in respect of sales of the technology secured by us. The term of the initial agreement will be for 5 years with the possibility of extension if sales targets are achieved.
Pursuant to the license agreement, we obtained the exclusive right to use the mechanical ultrasound technology within the field of non-petro-chemical mining within the territory of Canada. We may also sublicense our rights under the license in
respect of one or more units of the technology to any entity operating within the field of use in which we own or beneficially own at least a 20% equity interest. GD Glottech International agreed to supply us with up to 5 technology units per
12-month period from the effective date of the license term, which will start from the month of delivery of the unit of the technology. The first unit of the technology provided under the license to be provided at no additional cost to us and
subsequent units shall be subject to a fee based on the then current retail price of the units. If we sublicense any of our rights, the term of the applicable license will be for 5 years from the date the applicable unit is delivered. Pursuant to the license agreement, GD Glottech International shall provide ongoing technical assistance and training in respect of our use of the technology at our cost.
In consideration of the license, we will pay to GD Glottech International a royalty based on the tonnage of water produced by our use of the technology in accordance with the agreement. A minimum annual royalty will be applicable. The term of the
license agreement shall be for an initial period of 5 years and shall be renewable for additional terms of 5 years provided that we satisfy the minimum royalty requirements during each period.
GD Glottech International’s technology is designed to separate suspended solids from water (brine), which is one step in the process that we are taking to produce commercially viable minerals. The technology produces extremely high
temperatures, which destroy organic substances such as bacteria and other toxic agents. We believe that GD Glottech International's technology can provide lower costs of operation as well as reduced time for site clean-up than traditional methods of
water treatment. We anticipate using this application to extract dissolved solids like lithium, potassium, and magnesium from oil field brine. The disposal of produced water (brine) from oil and gas production in Alberta is a significant
environmental issue for the province and presents a considerable economic issue for producers. We intend to use the technology on our Valleyview Property in Alberta, in cooperation with oil and gas producers, to treat and dispose of their produced
water while monetizing the minerals that are contained within that produced water stream that is being brought to the surface during the oil and gas production process. As we own the MAIM (Metals and Industrial Minerals) claims to the minerals on
the Valleyview Property, the minerals contained in their produced water stream fall under our rights. While we have had discussions with oil and gas consultants and oil operators regarding their difficulties in treating the brine at some of their
fields, we have no formal agreements in place.
The technical process is based on the use of mechanical ultrasound generated through the production of a series of cavitations. Mechanical ultrasound is a machine-produced sound of a frequency above the upper limit of the normal range of human
hearing. Cavitations are the rapid formation and collapse of bubbles in liquids, caused by the movement of something such as a propeller or by waves of high-frequency sound. The production of mechanical ultrasound allows GD Glottech
International’s technology to distill the fluid stock. Using mechanical ultrasound for distillation has been attempted before, but the external energy requirement needed to produce the mechanical ultrasound was far too expensive to make it
commercially viable. GD Glottech International’s technology uses the energy released during the cavitations in order to make it commercially viable from an economic perspective. During these cavitations, a millisecond of energy is released.
During this release, temperatures can reach 5,000 degrees centigrade.
On August 27, 2012, we filed a motion to amend our complaint to include claims of breach of trust and fiduciary duty, breach of good faith and fair dealing, breach of contract, conversion of funds, fraud, and the imposition of a constructive trust.
We believe that this action was necessary to protect our interests against possible misuse of funds by Glottech-USA, LLC and its principals. We will also seek damages as appropriate.
On October 19, 2012, GD Glottech International moved to intervene as an interested party in the litigation pending against Glottech-USA. GD Glottech International cited its role as owner of the patents as a basis for intervening in the litigation
against Glottech-USA. We believe GD Glottech International’s entry into the litigation against Glottech-USA is favorable to our cause in the litigation.
On October 22, 2012, the Court of Common Pleas in Chester County, Pennsylvania, granted our motion to amend our complaint against Glottech-USA to add claims for fraud and damages reflective of the malfeasance which we allege against Glottech-USA and
its officers.
On December 12, 2012, GD Glottech International removed the management of Glottech-USA and appointed itself as the manager of Glottech-USA. On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to dissolve Glottech-USA in
Mississippi on the basis that Glottech-USA was unable to meet its financial obligations and could not finish or deliver the unit to us.
On December 19, 2012, an attorney purportedly acting on behalf of Glottech-USA filed a motion in the lawsuit pending in Chester County, Pennsylvania, seeking possession of the unit. In addition, Glottech-USA filed a counterclaim seeking possession
of the unit.
GD Glottech International immediately filed a motion to quash Glottech-USA’s motion and for sanctions against the law firm that filed the motion. We also filed a motion, seeking disqualification of the law firm that purported to represent
Glottech-USA on the basis that the new management for Glottech-USA had fired the law firm and, as such, the law firm no longer had authority to represent Glottech-USA.
On April 25, 2013, we attended a hearing on the motions pending in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on any of the motions and, instead, stayed the case as to Glottech-USA until December of 2013 pending the
outcome of the lawsuit seeking dissolution of Glottech-USA. The matter in Pennsylvania is no longer stayed. An attorney purporting to represent Glottech-USA and the receiver appointed in Mississippi has filed motions and other documents that may
move the matter forward. We have pending preliminary objections to the counterclaim, including a request for a determination of which group is in control of Glottech-USA.
Certain members of Glottech-USA continue to pursue dissolution of the company in Mississippi. The members of Glottech-USA who seek dissolution have stated in court filings that it is not practicable for Glottech-USA to continue as an ongoing
business. In addition, Sulzer filed suit against Glottech-USA Texas for unfulfilled obligations.
We do not believe that Glottech-USA has sufficient capital to continue as an ongoing business. We have provided full consideration to Glottech-USA and complied with all other agreed upon terms. We believe any assertions against us to lack merit.
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.
The case remained largely inactive and on December 10, 2014, the parties attended an administrative conference. At the conclusion of the administrative conference, the parties advised that they had reached a settlement whereby the adverse parties agreed to general releases against each other, with each party to bear its own attorneys fees and costs. However, due in large part to the Mississippi dissolution proceedings, the parties have not yet finalized the settlement. We are reasonably hopeful that the matter will soon be resolved, either through written agreement or through court enforcement of the terms stated upon the record on December 10, 2014.
We continue to believe that Glottech-USA has insufficient capital to continue as an ongoing business. We have provided full consideration to Glottech-USA and complied with all other agreed upon terms of the original agreement(s).
Donoghue v. Lithium Exploration Group, Inc. and Richard A. Walsh.
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 company’s 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, attorneys representing shareholders of our
company (the Plaintiff) served us with a notice to recover their
respective fees related to notifying us of the Short-Swing Profit (the
Fees). On March 26, 2015, we settled the Fees with the Plaintiff for an
aggregate of $15,400.
Item 1A. Risk Factors
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. The following issuances of shares of our company in the description below prior to January 19, 2015 are on a share pre-split basis as our board of directors approved the Share Split:
Loan Agreement with JDF Capital Inc.
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 April 1, 2015, we issued 3,822,000 common shares for promissory note
and interest conversion of $22,932.
- On April 7, 2015, we issued 3,921,568 common shares for promissory note
and interest conversion of $20,000.
- On April 14, 2015, we issued 5,000,000 common shares for promissory note
and interest conversion of $15,250.
- On April 15, 2015, we issued 5,000,000 common shares for promissory note
and interest conversion of $12,000.
- On April 20, 2015, we issued 5,000,000 common shares for promissory note
and interest conversion of $10,000.
- On April 21, 2015, we issued 5,000,000 common shares for promissory note
and interest conversion of $6,500.
- On April 27, 2015, we issued 6,000,000 common shares for promissory note
and interest conversion of $7,200.
-
On April 30, 2015, we issued 6,000,000 common shares for promissory note and interest conversion of $6,000.
-
On May 4, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $5,850.
- On May 7, 2015, we issued 10,000,000 common shares for promissory note and interest conversion of $6,500.
- On May 11, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $6,375.
- On May 12, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $5,250.
As at the date of this report $8,393 of the note and the full amount of the warrants remain unconverted and outstanding.
On March 9, 2015, JDF Capital and Blue Citi PR, LLC agreed to assign an aggregate of $100,000 from the note of JDF Capital (that was issued from our company) to LG Capital. As at the date of this report, the note which amount remains unconverted and outstanding.
- On April 29, 2015, we issued 2,958,580 common shares for promissory note and interest conversion of $5,000.
- On May 4, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $7,605.
- On May 11, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $6,825.
- On May 13, 2015, we issued 17,802,198 common shares for promissory note and interest conversion of $8,100.
- On May 15, 2015, we issued 25,000,000 common shares for promissory note and interest conversion of $9,750.
As at the date of this report, there remains a balance of $62,720 unconverted and payable pursuant to the note.
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 April 22, 2015, we issued 6,200,000 common shares for promissory note and interest conversion of $8,060.
-
On April 30, 2015, we issued 8,300,000 common shares for promissory note and interest conversion of $8,715.
- On May 12, 2015, we issued 18,500,000 common shares for promissory note and interest conversion of $6,475.
- On May 15, 2015, we issued 26,400,000 common shares for promissory note and interest conversion of $8,715.
As at the date of this report, there remains a balance of $93,285 unconverted and payable pursuant to the note.
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 April 14, 2015, we issued 4,367,609 common shares for promissory note and interest conversion of $18,474.99.
As at the date of this report, there remains no balance payable pursuant to the note.
Loan Agreement with St. George Investments LLC
On February 28, 2014, we entered into a securities purchase agreement with St. George Investments LLC, pursuant to which St. George Investments provided our company with an aggregate investment of $100,000 in consideration of our issuance of
convertible promissory notes and common share purchase warrants. We issued St. George Investments a convertible promissory note of $125,500 including 15% prepaid interest due August 28, 2015 and convertible into common shares on a cashless basis
at a price of 50% of the lower of lowest closing bid price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion. The fair value of the note at issuance was
$200,000.
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. As at the date of this report we have made the following issuances of common stock in exercise of the February 28, 2014 warrant:
-
On April 2, 2015, we issued 8,483,394 common shares by cashless exercise.
-
On April 24, 2015, we issued 7,235,023 common shares by cashless exercise.
Due to the above warrant exercises, there remains no balance of the February 28, 2014 warrant.
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:
-
On April 2, 2015, we issued 3,000,000 common shares for promissory note and interest conversion of $18,000.
-
On April 8, 2015, we issued 4,500,000 common shares for promissory note and interest conversion of $22,950.
-
On April 15, 2015, we issued 5,000,000 common shares for promissory note and interest conversion of $12,250.
-
On April 21, 2015, we issued 6,000,000 common shares for promissory note and interest conversion of $7,800.
-
On April 27, 2015, we issued 7,500,000 common shares for promissory note and interest conversion of $7,875.
-
On May 1, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $6,300.
- On May 7, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $7,500.
- On May 12, 2015, we issued 15,000,000 common shares for promissory note and interest conversion of $5,250.
- On May 14, 2015, we issued 9,000,000 common shares for promissory note and interest conversion of $8,565.
As at the date of this report, there remains a balance of Nil unconverted and payable pursuant to the note.
Loan Agreement with Iconic Holdings, LLC
On March 3, 2014, we entered into a securities purchase agreement with Iconic Holdings, LLC, pursuant to which Iconic provides our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes
and common share purchase warrants. We issued Iconic a convertible promissory note of $100,000 with 12% interest due September 3, 2014 and convertible into common shares on a cashless basis at a price of 50% of the lower of lowest closing bid
price of our common shares during the prior 20 trading days prior to 1) the date of the purchase agreement or 2) the day of the notice for conversion. The fair value of the note at issuance was $100,000.
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.
As at the date of this report, we have made the following issuances of common stock in cashless exercise of the March 3, 2014 warrant:
-
On April 14, 2015, we issued 1,076,923 common shares.
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 April 2, 2015, we issued 4,166,712 common shares the promissory note and interest conversion of $21,524.
-
On May 5, 2015, we issued 21,063,048 common shares the promissory note and interest conversion of $14,350.
- On May 11, 2015, we issued 18,154,990 common shares the promissory note and interest conversion of $5,400.
- On May 12, 2015, we issued 18,154,990 common shares the promissory note and interest conversion of $5,400.
As at the date of this report, there remains a balance of $23,726 unconverted and payable pursuant to the note.
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. As at the date of this report, we have made the following issuances of common stock in conversion of the October 31, 2014 note:
-
On May 1, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $9,800.
-
On May 4, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $9,800.
- On May 7, 2015, we issued 9,800,000 common shares for promissory note and interest conversion of $4,459.
- On May 11, 2015, we issued 22,000,000 common shares for promissory note and interest conversion of $10,010.
As at the date of this report, there remains a balance of $15,931 unconverted and payable pursuant to the note.
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.
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 April 22, 2015, we issued 5,250,000 common shares the promissory note and interest conversion of $16,721.25.
-
On April 30, 2015, we issued 5,250,000 common shares the promissory note and interest conversion of $5,801.25.
-
On May 4, 2015, we issued 10,839,994 common shares the promissory note and interest conversion of $9,159.79.
- On May 11, 2015, we issued 15,778,495 common shares the promissory note and interest conversion of $9,230.42.
- On May 12, 2015, we issued 18,548,242 common shares the promissory note and interest conversion of $8,439.45.
There remains a balance of $71,147.84 unconverted and payable pursuant to the note.
Loan Agreement with River North Equity LLC
On February 24, 2015, River North provided our company with an aggregate investment of $100,000 in consideration of our issuance of convertible promissory notes. We issued River North a convertible promissory note with 12% interest due August
24, 2016 and convertible into common shares on a cashless basis at a price of 65% of the lowest closing bid price of our common shares during the prior 25 trading days including the delivery of any related conversion notice. As at the date of this
report, we have made the following issuances of common stock in conversion of the February 24, 2015 note:
-
On April 27, 2015, we issued 6,471,951 common shares for promissory note and interest conversion of $7,766.34.
-
On April 29, 2015, we issued 7,860,681 common shares for promissory note and interest conversion of $7,860.68.
-
On May 4, 2015, we issued 9,716,815 common shares for promissory note and interest conversion of $7,287.61.
- On May 5, 2015, we issued 14,727,449 common shares for promissory note and interest conversion of $9,572.84.
- On May 11, 2015, we issued 15,778,495 common shares for promissory note and interest conversion of $6,311.40.
- On May 14, 2015, we issued 22,227,542 common shares for promissory note and interest conversion of $8,891.02.
As at the date of this report, there remains a balance of $55,931.46 unconverted and payable pursuant to the note.
Item 3. Defaults Upon
Senior Securities
None.
Item 4. Mine Safety
Disclosures
Not applicable.
Item 5. Other
Information
On January 19, 2015, our board of directors approved 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 (1) new share of common stock.
Stockholders of our company originally approved the reverse stock split on
October 14, 2014 at a special meeting. Upon effect of the reverse stock split
our issued and outstanding shares will decrease from 1,571,669,638 to 78,583,482
shares of common stock, with a par value of $0.001. Our authorized share capital
will remain unchanged.
The reverse stock split has been reviewed by the Financial
Industry Regulatory Authority (FINRA) and has been approved for filing
with an effective date of February 25, 2015.
The reverse split was effective with the Over-the-Counter
Bulletin Board at the opening of trading on February 25, 2015 under the symbol
LEXGD. Our new CUSIP number is 53680P209.
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.
Item 6. Exhibits
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) |
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) |
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) |
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, |
10.63 |
2014) 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) |
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 (incorporated by reference to our Quarterly Report on Form 10-Q filed on February 23, 2015) |
10.79 |
Securities Purchase Agreement dated as of February 24, 2015 between our company and River North Equity LLC Debt Settlement Agreement with Alexander R. Walsh dated December 23, 2014 (incorporated by reference to our Quarterly Report on Form 10-Q filed on February 23, 2015) |
10.80 |
Form of Convertible Promissory Note between our company and River North Equity LLC |
10.81 |
Loan Agreement dated April 15, 2015 between JDF Capital Inc. and our company. |
10.82 |
Share Purchase Agreement dated May 1, 2015 among our company, Natel Hofmann and Tero Oilfield Services Ltd. |
(14) |
Code of Ethics |
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: May 22, 2015 |
/s/
Alexander Walsh |
|
Alexander Walsh |
|
President, Secretary, Treasurer and Director
|
|
(Principal Executive Officer, Principal
Financial Officer |
|
and Principal Accounting Officer)
|
CONVERTIBLE PROMISSORY NOTE
$100,000
THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
Issue Date: February 24, 2015
FOR VALUE RECEIVED, Lithium Exploration Group, Inc. as
Obligor ("Borrower, or Obligor), hereby promises to pay to River North Equity
LLC, (the Lender or Holder) on the Maturity Date the Principal Sum, as
defined below, along with the Interest Rate, as defined below, according to the
terms herein.
The "Lender" shall be: |
River North Equity LLC |
The "Principal Sum" shall be: |
$118,000 (one hundred eighteen thousand US Dollars) which
amount includes $100,000 paid by the Lender and $18,000 in respect of
interest at 12% per annum for 18 months. |
The Consideration shall be: |
$100,000 (one hundred thousand US dollars) in the form of
cash payment by wire or check. |
The "Interest Rate" shall be: |
12% per annum, calculated monthly, in arrears. The
Principal Sum is inclusive of interest at the Interest Rate for 18 months.
Interest shall continue to accrue at a rate of 12% per annum on any
portion of the Principal Sum outstanding following the Maturity Date.
|
The "Conversion Price" shall be the following
price: |
the lower of (i) 65% of the lowest reported sale price of
the Borrower's common stock (the Common Stock) for the 25 trading days
immediately prior to the closing date on February 24, 2015 (the Closing
Date), or (ii) 65% of the lowest reported sale price for the 25 trading
days prior to the conversion date of the Note. |
The "Maturity Date" is the date upon which the Principal
Sum of this Note, as well as any unpaid interest shall be due and payable
in cash, and that date shall be: |
August 24, 2016. |
|
ARTICLE 1 PAYMENT-RELATED PROVISIONS
1.1 Principal Sum. The
Principal Sum is $118,000 (one hundred eighteen thousand USD) which includes
$100,000 (one hundred thousand USD) payable to be advanced by the Lender and
$18,000 (eighteen thousand USD) in interest at the Interest Rate for 18
months.
1.2 Events of
Default. The occurrence of any of the following events shall be an Event of
Default or Default under this Note:
(a) the Borrower shall fail to
make the payment of any amount of principal outstanding on the date such payment
is due hereunder;
(b) the Borrower shall fail
to fully comply with the reporting requirements of the Exchange Act; and/or
Borrower shall cease to be subject to the reporting requirements of the Exchange
Act.;
(c) the Borrower shall fail
to maintain the listing on any one of the OTC Pink, OTC QB, OTC QX, Nasdaq
SmallCap Market, Nasdaq National Market, American Stock Exchange or The New York
Stock Exchange for more than five (5) trading days or fail to remove a "Stop"
sign from its ticker symbol within five (5) days after such sign is posted;
(d) the Borrowers notice to
the Lender, including by way of public announcement, at any time, of its
inability to comply or its intention not to comply with proper requests for
conversion of this Note into shares of Common Stock;
(e) the Borrower shall fail
to (i) timely deliver the shares of Common Stock upon conversion of the Note or
any accrued and unpaid interest, or (ii) make the payment of any fees and/or
liquidated damages under this Note, which failure in the case of items (i) and
(ii) of this Section 1.2 (e) is not remedied within three (3) business days
after the incurrence thereof;
(f) default shall be made in
the performance or observance of (i) any material covenant, condition or
agreement contained in this Note (other than as set forth in clause (e) of this
Section 1.2) and such default is not fully cured within five (5) business days
after the occurrence thereof; or (ii) any material covenant, condition or
agreement contained in any Transaction Document which is not covered by any
other provisions of this Section 1.2 and such default is not fully cured within
five (5) business days after the occurrence thereof; ;
(g) any material
representation or warranty made by the Borrower herein or in any Transaction
Document, shall prove to have been false or incorrect or breached in a material
respect on the date as of which made;
(h) the Borrower shall (A)
default in any payment of any amount or amounts of principal of or interest on
any indebtedness (other than the indebtedness hereunder) the aggregate principal
amount of which indebtedness is in excess of $100,000 or (B) default in
the observance or performance of any other agreement or condition relating to
any indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders or beneficiary or beneficiaries of such
indebtedness to cause with the giving of notice if required, such indebtedness
to become due prior to its stated maturity;
(i) the Borrower shall (i)
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or assets, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the United States
Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of
any jurisdiction (foreign or domestic), (iv) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium, reorganization or other
similar law affecting the enforcement of creditors rights generally, (v)
acquiesce in writing to any petition filed against it in an involuntary case
under United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice
of bankruptcy or winding down of its operations or issue a press release
regarding same, or (vii) take any action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing;
(j) a proceeding or case shall be
commenced in respect of the Borrower, without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets in connection with
the liquidation or dissolution of the Borrower or (iii) similar relief in
respect of it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of sixty (60) days or any
order for relief shall be entered in an involuntary case under United States
Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of
any jurisdiction (foreign or domestic) against the Borrower or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing
shall be taken with respect to the Borrower and shall continue undismissed, or
unstayed and in effect for a period of sixty (60) days; or
(k) the failure of the Borrower
to instruct its transfer agent to remove any legends from shares of Common Stock
eligible to be sold under Rule 144 of the Securities Act (or any available
exemption under said Act) and have the transfer agent DWAC the shares of Common
Stock to the Lender's broker within two (2) business days of the Holder's
request or issue unlegended certificates to the Holder within three (3) business
days of the Holders request if DWAC transfer is not available at such time, so
long as the Holder has provided reasonable assurances and opinions of counsel to
the Borrower that such shares of Common Stock can be resold pursuant to Rule 144
or any available exemption under the Securities Act; or
(l) the failure of the Borrower
to pay any amounts due to the Holder herein within three (3) business days of
receipt of notice to the Company.
(m) So long as Borrower shall
have any obligation under this Note, Borrower covenants that at any time when
the Holder shall deliver a conversion notice, the par value of Borrower's Common
Stock shall not be higher than the Conversion Price applicable to such
conversion notice.
(n) So long as Borrower shall
have any obligation under this Note, should there be no bid for 5 consecutive
trading days on the trading market where Borrower's Common Stock is listed or
traded, then Borrower shall immediately have its Common Stock undergo a reverse
stock split at a ratio of 100-to-1.
1.3 Consequences of
Default/Remedies. In the event of any Event of Default, as defined in above
section 1.2, the outstanding principal amount of this Note, plus accrued but
unpaid interest, liquidated damages, fees and other amounts owing in respect
thereof through the date of acceleration, shall become, at the Holders
election, immediately due and payable in cash at the Mandatory Default Amount.
Commencing five (5) days after the occurrence of any Event of Default that
results in the eventual acceleration of this Note, the interest rate on this
Note shall accrue at an interest rate equal to the lesser of 18% per annum or
the maximum rate permitted under applicable law. In connection with such
acceleration described herein, the Holder need not provide, and the Borrower
hereby waives, any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such acceleration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 1.2. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon. The Mandatory Default Amount means the greater of (i) the
outstanding principal amount of this Note, plus all accrued and unpaid interest,
liquidated damages, fees and other amounts hereon, divided by the Conversion
Price on the date the Mandatory Default Amount is either demanded or paid in
full, whichever has a lower Conversion Price, multiplied by the VWAP on the date
the Mandatory Default Amount is either demanded or paid in full, whichever has a
higher VWAP, or (ii) 130% of the outstanding principal amount of this Note, plus
100% of accrued and unpaid interest, liquidated damages, fees and other amounts
hereon.
1.4 Redemption. During the first
18 months this Note is in effect, the Borrower may redeem this Note by paying to
the Holder an amount as follows: (i) if the redemption is within the first 60
days after the Issue Date of this Note, then for an amount equal to 110% of the
unpaid Principal Sum of this Note, (ii) if the redemption is on or after the
61st day after the Issue Date of this Note, but prior to the 121st day after the
Issue Date of this Note, then for an amount equal to 120% of the unpaid
Principal Sum of this Note, and (iii) if the redemption is after the 121st day
after the Issue Date of this Note, but prior to the Maturity Date of this Note,
then for an amount equal to 130% of the unpaid Principal Sum. This Note may not
be redeemed on or after the Maturity Date. The redemption must be closed and
paid for within 10 business days of the Company sending the redemption demand or
the redemption will be invalid.
ARTICLE 2 CONVERSION RIGHTS
The Holder will have the right to convert the Principal Sum
(including interest, and other fees) under this Note into Shares of the
Borrower's Common Stock as set forth below.
2.1 Conversion Rights and
Cashless Exercise. The Holder will have the right at its election from and after
the Issue Date, and then at any time, to convert all or part of the outstanding
and unpaid Principal Sum, accrued interest and other fees into shares of fully
paid and non-assessable shares of common stock of Lithium Exploration Group,
Inc. (as such stock exists on the date of issuance of this Note, or any shares
of capital stock of Lithium Exploration Group, Inc. into which such stock is
hereafter changed or reclassified, the "Common Stock") as per the Conversion
Formula set forth in Section 2.2. Any such conversion shall be cashless, and
shall not require further payment from Holder. Unless otherwise
agreed in writing by both the Borrower and the Holder, at no time will the
Holder convert any amount of the Note into common stock that would result in the
Holder owning more than 9.99% of the common stock outstanding of Lithium
Exploration Group, Inc., as calculated in accordance with sections 13(d) and
13(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act).
Shares from any such conversion will be delivered to Holder (in any name
directed by Holder) by 2:30pm EST within 2 (two) business days of conversion
notice delivery (see 3.1) by DWAC/FAST electronic transfer and within 3
(three) business days if DWAC transfer is not available at such time.
2.2. Conversion Formula. The
number of shares issued through conversion is the conversion amount divided by
the Conversion Price, as illustrated below. The Holder and the Borrower shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s). If no objection is delivered from Borrower to Holder regarding
any variable or calculation of the conversion notice within 24 (twenty-four)
hours of delivery of the conversion notice, the Borrower shall have been
thereafter deemed to have irrevocably confirmed and irrevocably ratified such
notice of conversion and waive any objection thereto. The Company acknowledges
and agrees that, absent a duly delivered objection notice as required above, the
Holder shall materially rely on the confirmation and ratification of the
conversion price and, notwithstanding subsequent information to the contrary
that such computation was made in error, such deemed conversion price shall
thereafter be the conversion price for purposes of such conversion.
# Shares = Conversion
Amount
Conversion
Price
2.3. Reservation of Shares.
Reference is made to the 20 for 1 reverse stock split (the Reverse Stock
Split) approved by the Board of Directors of the Borrower on January 19,
2015. Borrower represents that it will reserve for the Holder no less than
100,000,000 of the post Reverse Stock Split shares with VStock Transfer as soon
as the Reverse Stock Split is made effective and the new cusip has been issued.
Within 7 business days after the Reverse Stock Split becomes effective, but in
no event later than April 1, 2015, Borrower shall deliver to the Holder a letter
from Borrower to Vstock Transfer, executed by Borrower and acknowledged and
agreed to by VStock Transfer. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. The
Borrower agrees that its issuance of this Note constitutes full authority to its
officers, agents and transfer agents who are charged with the duty of executing
and issuing shares to execute and issue the necessary shares of Common Stock
upon the conversion of this Note.
2.4. Delivery of Conversion
Shares. Shares from any such conversion will be delivered to Holder by 2:30pm
EST within 2 (two) business days of conversion notice delivery (see 3.1) by
DWAC/FAST electronic transfer (such date, the Share Delivery Date). For
example, if Holder delivers a conversion notice to Borrower at 5:15 pm eastern
time on Monday, January 1st, Borrowers transfer agent must deliver
shares to Holders broker via DWAC/FAST electronic transfer by no later than
2:30 pm eastern time on Wednesday January 3rd . If those shares are
not delivered in accordance with this timeframe stated in this Section 2.6,
Holder, at any time prior to selling those shares (in whole or in part), may
rescind that particular conversion (in whole or in part) and have the conversion
amount (in whole or in part) returned to the note balance with the conversion shares (in whole or in part) returned to the
Borrower (under Holder and Borrowers expectation that any returned conversion
amounts will tack back to the original date of the note). The Company will
make its best efforts to deliver shares to Holder same day / next day. If DWAC transfer is not available at the time of conversion, a certificate shall
be issued and shipped (same day delivery) to the Holder within 3 (three) days of
conversion notice.
2.4.1 Nothing herein shall
limit a Holders right to pursue any other remedies available to it hereunder
(including election to pursue its rights under this Section 2.4 and
subsections), at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Borrowers
failure to timely deliver shares of Common Stock upon conversion of the Note as
required pursuant to the terms hereof.
2.4.2 Conversion Delay
Penalties. Holder may assess, at its election, penalties or liquidated damages
(both referred to herein as penalties) as follows.
2.4.2.
A. For each conversion, Borrower agrees to
deliver share issuance instructions to its transfer agent same day. In the event
that the share issuance instructions and all applicable paperwork are not
delivered to the Borrowers transfer agent, broker, or clearing firm the same
day the conversion notice is delivered, a penalty of $2,000 per day will be
assessed for each day until share issuance instructions are delivered to the
transfer agent ($2,000 per day inclusive of the day of conversion); and such
penalty will be added to the principal balance of the Note (under Holder and
Borrowers expectation that any penalty amounts will tack back to the original
date of the note).
2.4.2.
B. For each conversion, in the event that shares
are not delivered by the third business day (inclusive of the day of
conversion), a penalty of $2,000 per day will be assessed for each day after
such third business day until share delivery is made; and such penalty will be
added to the principal balance of the Note (under Holder and Borrowers
expectation that any penalty amounts will tack back to the original date of the
note). Borrower will not be subjected to any penalties once its transfer
agent processes the shares to the DWAC system.
2.4.3 If failure to deliver
Conversion Shares occurs as follows, Holder may elect to enforce one or more of
these remedies at its sole election.
2.4.3.
A. In addition to any other rights available
to the Holder, if the Borrower fails to cause its transfer agent to transmit to
the Holder the shares on or before the Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) or if the Holders brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
shares which the Holder anticipated receiving upon such conversion (a
Buy-In), then the Borrower shall (A) pay in cash to the Holder the
amount, if any, by which (x) the Holders total purchase price (including
brokerage commissions and other fees, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the number of
Shares that the Borrower was required to deliver to the Holder in connection with the conversion at
issue times (2) the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder, either (x)
reinstate the portion of the Note and equivalent number of shares for which such
conversion was not honored (in which case such conversion shall be deemed
rescinded), (y) deliver to the Holder the number of shares of Common Stock that
would have been issued had the Borrower timely complied with its conversion and
delivery obligations hereunder, or (z) pay in cash to the Holder the amount
obtained by multiplying (1) the number of Shares that the Borrower was required
to deliver to the Holder in connection with the conversion at issue times (2)
the price at which the sell order giving rise to such purchase obligation was
executed. The Holder shall provide the Borrower written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the
Borrower, evidence of the amount of such loss.
2.4.3. B. If the Borrower fails for
any reason to deliver to the Holder the Shares by DWAC/FAST electronic transfer
(such as by delivering a physical stock certificate) and if the Holder incurs a
Market Price Loss, then at any time subsequent to incurring the loss the Holder
may provide the Borrower written notice indicating the amounts payable to the
Holder in respect of the Market Price Loss and the Borrower must make the Holder
whole by either of the following options at Holders election:
Market Price Loss = [(VWAP of the
Common Stock on the day of conversion) x (Number of shares receivable from the
conversion)] [(Sales price realized by Holder) x (Number of shares receivable
from the conversion)].
Option A Pay Market Price Loss in
Cash. The Borrower must pay the Market Price Loss by cash payment, and any such
cash payment must be made by the third business day from the time of the
Holders written notice to the Borrower.
Option B Add Market Price Loss to
Principal Sum. The Borrower must pay the Market Price Loss by adding the Market
Price Loss to the balance of the Principal Sum (under Holders and the
Borrowers expectation that any Market Price Loss amounts will tack back to the
original date of issue of this Note).
2.4.3. C. If the Borrower fails for
any reason to deliver to the Holder the Shares by the Share Delivery Date and if
the Holder incurs a Failure to Deliver Loss, then at any time subsequent to
incurring the loss the Holder may provide the Borrower written notice indicating
the amounts payable to the Holder in respect of the Failure to Deliver Loss and
the Borrower must make the Holder whole as follows:
Failure to Deliver Loss = [(Highest
trading price of the Common Stock at any time on or after the day of conversion)
x (Number of shares receivable from the conversion)] - [(Sales price realized by
Holder) x (Number of shares receivable from the conversion)].
The Borrower must pay the Failure to
Deliver Loss by cash payment, and any such cash payment must be made by the
third business day from the time of the Holders written notice to the Borrower.
ARTICLE 3 MISCELLANEOUS
3.1. Notices. Any notice required
or permitted hereunder must be in writing and either personally served, sent by
facsimile or email transmission, or sent by overnight courier. Notices will be
deemed effectively delivered at the time of transmission if by facsimile or
email, and if by overnight courier the business day after such notice is
deposited with the courier service for delivery.
3.2 Prohibition on Certain
Financings. As an inducement to the Holder for the purchase of this Note the
Borrower hereby agrees not to accept, for as long as any portion of this Note
remains payable to Lender, any future equity financing from Vista Capital
Investments, LLC or Black Mountain Equities, Inc.
3.3. Amendment Provision.
The term "Note" and all reference thereto, as used throughout this instrument,
means this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
3.4. Assignability. The
Borrower may not assign this Note. This Note will be binding upon the Borrower
and its successors, and will inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder to anyone of its
choosing without Borrowers approval.
3.5. Governing Law. This Note
will be governed by, and construed and enforced in accordance with, the laws of
the State of Nevada, without regard to the conflict of laws principles thereof.
Each of the Borrower and the Holder (i) hereby submits to the exclusive
jurisdiction of the state and federal courts of Nevada for the purposes of any
suit, action or proceeding arising out of or relating to this Note and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Borrower
and the Holder consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 3.5 shall affect or limit any right to serve process in any other manner
permitted by law.
3.6. Delivery of Process by
Holder To Borrower. In the event of any action or proceeding by Holder against
Borrower, and only by Holder against Borrower, service of copies of summons
and/or complaint and/or any other process which may be served in any such action
or proceeding may be made by Holder via overnight delivery service such as FedEx
or UPS, process server, or by personal delivery of a copy of such process to the
Borrower at its last known address or to its last known attorney set forth in
its most recent SEC filing.
3.7. No Rights as Stockholder Until Conversion. This Note does
not entitle the Holder to any voting rights, dividends or other rights as a
stockholder of the Company prior to the conversion hereof as set forth in
Section 2.1. So long as this Note is unconverted, this Note carries no voting
rights and does not convey to the Holder any control over the Company, as such
term may be interpreted by the SEC under the Securities Act or the Exchange Act,
regardless of whether this Note is currently convertible.
3.8. Maximum Payments. Nothing contained herein may be deemed
to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum will be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
3.9. Attorney Fees. In the event any attorney is employed by
either party to this Note with regard to any legal or equitable action,
arbitration or other proceeding brought by such party for the enforcement of
this Note or because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Note, the prevailing party in
such proceeding will be entitled to recover from the other party reasonable
attorneys' fees and other costs and expenses incurred, in addition to any other
relief to which the prevailing party may be entitled.
3.10. Nonwaiver. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice the Holders rights, powers or remedies.
3.11. No Public Announcement. Except as required by securities
law, no public announcement may be made regarding this Note, payments, or
conversions without written permission by both Borrower and Holder.
3.12. Opinion of Counsel. In the event that an opinion of
counsel is needed for any matter related to this Note, Holder has the right to
have any such opinion provided by its counsel. Holder also has the right to have
any such opinion provided by Borrowers counsel.
3.13. Directors Resolution. Once effective, Borrower will
execute and deliver to Holder a copy of a Board of Directors resolution
resolving that this note is validly issued, paid, and effective.
3.14. No Shorting. Holder agrees that so long as any Note from
Borrower to Holder remains outstanding, Holder will not enter into or effect any
short sales of the common stock or hedging transaction which establishes a net
short position with respect to the common stock of Lithium Exploration Group,
Inc. Borrower acknowledges and agrees that upon submission of conversion notice
as set forth in Section 3.1 (up to the amount of cash paid in under the Note),
Holder immediately owns the common shares described in the conversion notice and
any sale of those shares issuable under such conversion notice would not be
considered short sales.
3.15 Solvency. The Borrower represents that (after giving
effect to the transaction contemplated by this Note) it is solvent (i.e.,
its assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured) and currently Borrower has no information that would
lead it to reasonably conclude that it would not, after giving effect to the
transaction contemplated by this Note, have the ability to, nor does it intend
to take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debt mature.
3.16 Integrated Offering. Neither
the Borrower, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Note to be integrated with prior offerings by the Borrower
for purposes of the Securities Act
BORROWER: |
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LITHIUM EXPLORATION GROUP,
INC. |
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By: |
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Alexander Walsh |
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President |
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LENDER/HOLDER: |
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RIVER NORTH EQUITY LLC
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By: |
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Edward Liceaga |
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President |
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[Convertible Promissory Note
Signature Page] |
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement is made effective as of the
1st day of May, 2015.
BETWEEN:
ALTA DISPOSAL LTD., a corporation, incorporated
pursuant to the laws of the Province of Alberta (hereinafter called the
Vendor) |
OF THE FIRST PART
AND
NATEL HOFMANN, an individual, residing in the
Hamlet of Wardlow, in the Province of Alberta, or her nominees
(hereinafter called the Purchaser) |
OF THE SECOND PART
AND
TERO OILFIELD SERVICES LTD., a corporation,
incorporated pursuant to the laws of the Province of Alberta
(hereinafter called the Corporation) |
OF THE THIRD PART
RECITALS
A. |
WHEREAS the Corporation operates a water well
drilling and water disposal business located in central Alberta; |
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B. |
AND WHEREAS the Vendor owns 500,000 Class A
Voting Common Shares of the Corporation (the Shares) which represents
50% of the issued and outstanding shares of the Corporation; |
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C. |
AND WHEREAS the Vendor wishes to sell and convey
the Shares to the Purchaser and the Purchaser wishes to purchase the
Shares upon the terms and conditions hereinafter set forth; |
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D. |
AND WHEREAS the Vendor is willing to provide a
restrictive covenant not to compete with the Corporation after the sale of
the Shares; |
NOW THEREFORE THIS AGREEMENT
WITNESSES THAT in consideration of the mutual covenants contained herein and other good and
valuable consideration (the receipt and sufficiency of which is acknowledged),
the Parties agree as follows:
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SECTION ONE
INTERPRETATION
Whenever used in this Agreement, including the recitals and any
schedules hereto, the following words and phrases shall have the following
meanings unless the context otherwise requires:
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(a) |
Agreement means this Share Purchase Agreement
and includes any agreement amending this agreement or any agreement or
instrument which is supplemental or ancillary thereof, and the expressions
above, below, herein, hereto, hereof and similar expressions
refer to this Agreement; |
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(b) |
Books and Records means all books, records,
files and papers of the Corporation, including computer programs
(including source codes and software programs), computer manuals, computer
data, financial and tax working papers, financial and tax books and
records, business reports, business plans and projections, sales and
advertising materials, sales and purchases records and correspondence,
trade association files, research and development records, lists of
present and former customers and suppliers, personnel and employment
records, minute and share certificate books, and all copies and recordings
of the foregoing; |
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(c) |
Business means the business currently carried on
by the Corporation as a water well drilling, water disposal and service
company as a going concern and the intangible goodwill associated
therewith and any and all interests of whatsoever kind and nature related
thereto; |
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(d) |
Closing Date means May 15, 2015 or such other
date as the Parties agree to in writing; |
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(e) |
Counsel means any barrister, solicitor or
attorney or a firm thereof retained by the Vendor or Purchaser as the case
may be; |
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(f) |
Documents means all contracts, agreements,
documents, permits, licenses, certificates, plans, drawings,
specifications, reports, compilations, analysis, studies, financial
statements, budgets, market surveys, minute books, corporate records,
corporate seals and any other documents or information of whatsoever
nature relating to the Corporation or its Business and any all rights in
relation thereto; |
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(g) |
Effective Date means 8:00 a.m. (Calgary, Alberta
time), on May 1, 2015; |
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(h) |
Party or Parties means a party or
parties to this Agreement; |
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(i) |
Purchaser means Natel Hofmann or her
nominees; |
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(j) |
Purchase Price means the sum of $300,000
US; |
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(k) |
Shares means 500,000 Class A Voting Common
Shares of the Corporation; |
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(l) |
Transaction means the transaction contemplated
by this Agreement; |
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(m) |
Time of Closing means 11:00 am, Calgary time, on
the Closing Date when the Closing of the purchase and sale herein provided
for shall be completed; and |
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(n) |
Vendor means Alta Disposal
Ltd. |
Appended hereto are the following schedules, which are
incorporated into this Agreement by reference and are deemed to be a part
hereof:
Schedule A Resignation of Alex Walsh as a Director and
Officer of the Corporation
Wherever any provision of any schedule to this Agreement
conflicts with any provision in the body of this Agreement, the provisions of
the body of this Agreement shall prevail. References herein to a schedule shall
mean a reference to a schedule to this Agreement. References in any schedule to
this Agreement shall mean a reference to this Agreement. References in any
schedule to another schedule shall mean a reference to a schedule to this
Agreement.
All dollar amounts referred to in this Agreement are in US
funds, unless otherwise indicated herein. All payments contemplated herein shall
be by certified cheque or bank draft issued by a Canadian chartered bank or such
other transfer of immediately available funds as may be acceptable to the
Vendor.
The Vendor hereby directs the Purchase to pay the Purchase
Price to Lithium Exploration Group, Inc.
In this Agreement, words importing the singular number include
the plural and vice versa; words importing the masculine gender include the
feminine and neuter genders; and references to any statute shall extend to and
include orders-in-council or regulations passed under and pursuant thereto, of
any amendment or re-enactment of such statute, orders-in-council or regulations,
or any statute, order-in-council or regulations substantially in replacement
thereof.
4
This Agreement constitutes the entire agreement between the
Parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties, and there are no warranties,
representations or other agreements between the Parties in connection with the
subject matter hereof. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby.
Section headings are not to be considered part of this
Agreement and are included solely for convenience of reference and are not
intended to be full or accurate descriptions of the contents thereof.
1.9. |
SUCCESSORS AND ASSIGNS |
All of the terms and provisions in this Agreement shall be
binding upon and shall enure to the benefit of the Parties and their respective
successors and assigns.
SECTION TWO
PURCHASE OF SHARES
2.1. |
PURCHASE OF SECURITIES |
Subject to the terms and conditions of this Agreement, the
Vendor hereby sells to the Purchaser and the Purchaser hereby purchases from the
Vendor on the Closing Date, with effect on the Effective Date, the Shares for
the Purchase Price of $300,000 US (the Purchase Price). The Shares shall
constitute 50% of the issued and outstanding voting common shares in the capital
of the Corporation, free and clear of all liens and encumbrances.
2.2. |
PAYMENT OF PURCHASE PRICE |
Subject to the terms and conditions of this Agreement, the
Purchase Price shall be paid by the Purchaser to the Vendor for the Shares in
two installments, with one installment of $100,000 US paid on the Closing Date
of May 15, 2015 and the balance of $200,000 US to be paid on or before June 1,
2015. Both payments shall be payable to the Vendor by certified cheque or bank
draft.
Subject to the fulfilment of all of the terms and conditions
hereof (unless waived as herein provided), on the Closing Date, the Vendor shall
deliver (or make arrangements to deliver) to the Purchaser a share certificate
representing the Shares duly endorsed for transfer to the Purchaser, together
with such other documentation as contemplated in Section 5.1 hereof.
2.4. |
EFFECTIVE DATE OF TRANSFER |
For accounting, title and tax purposes, the transfer and
assignment of the Shares from the Vendor to the Purchaser shall be effective as of the Effective
Date.
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2.5. |
ASSUMPTION OF ALL LIABILITIES BY
PURCHASER |
The Parties agree that there will be no distribution of revenue
by the Corporation for the period from the purchase date of the Shares by the
Vendor until the Closing date of the Transaction. The Parties also agree that
the Vendor shall not be liable for any expenses or financial obligations of the
Corporation in that same time period.
2.6. |
TERMINATION OF AGREEMENTS |
The Parties acknowledge that the Option Agreement entered into
between the Vendor and the Purchaser as of March 1, 2014 has been terminated.
The Parties also agree that the Unanimous Shareholder Agreement between the
Vendor, the Purchaser and the Corporation and dated effective as of March 1,
2014, shall be terminated on the Closing Date.
SECTION THREE
REPRESENTATIONS AND WARRANTIES OF
THE VENDOR
To induce the Purchaser to enter into this Agreement and
complete the Transaction the Vendor represents and warrants to and in favour of
the Purchaser as provided in this Section Three as follows:
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(a) |
The Vendor has or will have on the Closing Date good,
marketable, beneficial and/or recorded title to the Shares, and such
Shares are free of all mortgages, charges, liens, pledges, claims,
security interests and agreements and other encumbrances of whatsoever
nature and no person, firm or corporation has any agreement or option or
right capable of becoming an agreement or option for the purchase from the
Vendor of any of the Shares except as provided herein, and the Vendor has
good right, full power and absolute authority to sell and assign the
Shares to the Purchaser for the purpose and in the manner as provided in
this Agreement. The Shares are not subject to any shareholder, pooling,
escrow or similar agreements. |
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(b) |
No consents of, filings with or approval of any
governmental or regulatory body or authority is required by the Vendor for
the Vendor's sale and transfer of the Shares to the Purchaser, other than
those presently held or obtained by the Vendor which are in full force and
effect. |
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(c) |
The Vendor is not obligated to obtain the written consent
of any person to the Transaction. |
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(a) |
The Vendor is a resident of Canada within the meaning of
the Income Tax Act; |
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(b) |
There are no remittances due to the Canada Revenue Agency
on the Closing Date. |
3.3. |
EXECUTION AND DELIVERY OF
AGREEMENT |
This Agreement has been duly executed and delivered by the
Vendor or its duly appointed power of attorney and representative and all
documents required hereunder to be executed and delivered by the Vendor shall
have been duly executed and delivered by the Vendor and this Agreement does and
such documents and instruments shall, constitute legal, valid and binding
obligations of the Vendor enforceable in accordance with their respective terms.
3.4. |
REPRESENTATIONS AND WARRANTIES SURVIVING CLOSING
DATE |
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(a) |
The covenants, representations and warranties of the
Vendor contained in Section Three hereof and elsewhere in this Agreement
and in any certificate or other material delivered under this Agreement
are accurate and complete, do not contain any untrue statement of a
material fact or, considered in the context in which presented, omit to
state a material fact necessary in order to make the statements and
information contained herein or therein not misleading. |
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(b) |
Any claims against the Vendor by the Purchaser pursuant
to the terms hereof shall not be enforceable against the Vendor unless
notice thereof shall have been given in writing to the Vendor within one
(1) year of the Closing Date. |
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(c) |
Each and every right, remedy and power granted to the
Purchaser hereunder pursuant to Section Three or under any documents or
instruments delivered pursuant to the terms and conditions hereof, shall
be cumulative and shall be in addition to any other right, remedy or power
herein or therein specifically granted or hereinafter existing in equity
at law, by virtue or statue or otherwise and every such right, remedy and
power may be exercised by the Purchaser from time to time concurrently or
independently and as often and in such order as the Vendor may deem
expedient. |
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(d) |
Notwithstanding any other provision of this Agreement, a
claim for any breach of any of the representations and warranties
contained in this Agreement or in any contract, agreement, instrument,
certificate or other document executed or delivered pursuant hereto
involving fraud or fraudulent misrepresentations may be made at any time
following the Closing Date, subject only to applicable limitation periods
imposed by applicable law. |
SECTION FOUR
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
To induce the Vendor to enter into this Agreement and complete
the transactions contemplated thereby, the Purchaser represents and warrants to
and in favour of the Vendor as provided in this Section Four:
7
4.1. |
EXECUTION AND DELIVERY OF
AGREEMENT |
|
(a) |
The execution and delivery of this Agreement by the
Purchaser and the consummation of the Transaction has been authorized by
the Purchaser and does not breach any agreement to which the Purchaser is
a party or by which he is bound. |
|
|
|
|
(b) |
This Agreement has been duly executed and delivered by
the Purchaser or his duly appointed power of attorney and representative,
and all documents required hereunder to be executed and delivered by the
Purchaser shall have been duly executed and delivered by the Purchaser,
and this Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of the Purchaser and are
enforceable in accordance with their respective
terms. |
The Purchaser has good right, full power and absolute authority
to purchase the Shares on the terms described herein and in the manner
contemplated by this Agreement.
|
(a) |
The Purchaser is a resident of Canada within the meaning
of the Income Tax Act; |
|
|
|
|
(b) |
All remittance to the Canada Revenue Agency due by the
Corporation at the Closing Date, have been
remitted. |
|
(a) |
No consents of, filings with or approval of any
governmental or regulatory body or authority is required by the Purchaser
to purchase the Shares from the Vendor. |
|
|
|
|
(b) |
The Purchaser is not obligated to obtain the written
consent of any person to the transaction contemplated by this Agreement,
other than those persons from whom consent has, or prior to the Closing
Date, will be obtained. |
4.5. |
REPRESENTATIONS AND WARRANTIES SURVIVING CLOSING
DATE |
|
(a) |
The covenants, representations and warranties of the
Purchaser contained in Section Four hereof and elsewhere in this
Agreement, and in certificate or other material delivered under this
Agreement are accurate and complete, do not contain any untrue statement
of any material facts or, considered in the context in which presented,
omit to state a material fact necessary in order to make the statements
and information contained herein and therein misleading. |
|
|
|
|
(b) |
Any claims against the Purchaser by the Vendor pursuant
to the terms hereof shall not be enforceable against the Purchaser unless
notice thereof shall have been given in writing to the Purchaser within
one (1) year of the Closing Date. |
|
|
|
|
(c) |
Each and every right, remedy and power granted to the
Vendor hereunder pursuant to Section Four or under any documents or
instruments delivered pursuant to the terms and conditions hereof, shall be cumulative and shall be
in addition to any other right, remedy or power herein or therein specifically
granted or hereinafter existing in equity at law, by virtue or statue or
otherwise and every such right, remedy and power may be exercised by the Vendor
from time to time concurrently or independently and as often and in such order
as the Purchaser may deem expedient. |
8
|
(d) |
Notwithstanding Section 4.6(c) a claim for any breach of
any of the representations and warranties contained in this Agreement or
in any contract, agreement, instrument, certificate or other document
executed or delivered pursuant hereto involving fraud or fraudulent
misrepresentations may be made at any time following the Closing Date,
subject only to applicable limitation periods imposed by applicable
law. |
SECTION FIVE
COMPLETION OF PURCHASE
5.1. |
PURCHASERS CONDITIONS |
The obligation of the Purchaser to complete the purchase of the
Shares contemplated herein, is subject to the fulfilment of each of the
following conditions precedent, unless waived in writing by the Purchaser.
|
(a) |
The Vendors Representations, Warranties
and Covenants: At the Time of Closing, the Vendor shall have executed,
delivered and performed all agreements and documents on its part to be
performed hereunder; all representations and warranties contained in
Section Three shall be true at the Time of Closing, except where a
different date is otherwise specified therein, and in such case, at the
date specified, with the same effect as if made on and as of such date,
the Vendor shall deliver a Certificate executed as of the Time of Closing
certifying that all representations and warranties of the Corporation and
the Vendor as contained herein are true and correct as of such date,
except where a different date is otherwise specified therein, and in such
case, at the date specified. |
|
|
|
|
(b) |
Approvals: At the Closing Date, there shall have
been obtained the written consents or approvals, in form and substance
satisfactory to the Purchaser, acting reasonably, of any governmental or
regulatory agency or person whose consent to the transactions contemplated
hereby is required, including, but without limitation the approval by the
board of directors of the Corporation. |
|
|
|
|
(c) |
Closing Documents: The Corporation shall have
executed and delivered to the Purchaser all documents as the Purchaser or
the Purchasers Counsel may reasonably request for the purposes of
effecting the transfer and delivery of the Shares in accordance with the
terms of this Agreement, including the
following: |
|
i. |
Certificate representing the Shares, accompanied by stock
transfer powers duly executed in blank or duly executed instruments of
transfer, and all such other assurances, consents and other documents as
the Purchaser may reasonably request to effectively transfer to the Purchaser
title to the Shares free and clear of all encumbrances; |
9
|
ii. |
Original share registers, share transfer ledgers, minute
books and corporate seals (if any) of the Corporation; |
|
|
|
|
iii. |
All other Books and Records of the Corporation in the
possession of the Vendor; and |
|
|
|
|
iv. |
A certified copy of a resolution of the board of
directors of the Corporation consenting to the transfer of the Shares from
the Vendor to the Purchaser as contemplated by this
Agreement. |
|
(d) |
Delivery of Documents: The Vendor shall deliver to
the Purchaser, or make arrangements satisfactory to the Purchaser, to
deliver, in organized form all Documents relating to the Corporation as
are in the possession of the Vendor at the Closing
Date. |
If any such conditions shall not be fulfilled or waived in
writing by the Purchaser at or prior to the Time of Closing, the Purchaser may
rescind this Agreement by written notice to the Vendor and, in such event, the
Purchaser and the Vendor shall be released from all obligations hereunder.
Notwithstanding the foregoing, the Purchaser acknowledges that the $100,000
deposit is non-refundable to the Purchaser.
The obligation of the Vendor to complete the sale of the Shares
contemplated herein, is subject to the fulfilment of the condition precedent,
unless waived in writing by the Vendor, that at the Closing Date the
representations and warranties contained in Section Four shall be true at the
Closing Date with the same effect as if made on and as of such date.
5.3. |
RESCISSION AND TERMINATION |
In the event this Agreement is rescinded and terminated
pursuant to the provisions of Section 5.1 and Section 5.2 hereof, each Party
shall be released from all obligations hereunder and each Party shall take all
reasonable actions to return the other Parties to the position relative to the
Shares which such Party occupied prior to the execution hereof.
SECTION SIX
INDEMNIFICATION
6.1. |
MUTUAL INDEMNIFICATIONS FOR BREACHES OF WARRANTIES,
ETC. |
The Vendor hereby covenants and agrees with the Purchaser and
the Purchaser hereby covenants and agrees with the Vendor (the party or parties
so covenanting and agreeing to indemnify another party or parties hereinafter in
this Section referred to as the Indemnifying Party and the party or parties so
to be indemnified being hereinafter called the Indemnified Party) to indemnify
and save harmless the Indemnified Party, effective as and from the Closing Date,
from and against any claims, demands, actions, causes of action, damages, loss,
costs, liability or expense (hereinafter in this Section called Claims) which
may be made or brought against the Indemnified Party and/or which it may suffer
or incur as a result of, in respect of, or arising out of any non-fulfilment of
any covenant or agreement on the part of the Indemnifying Party under this
Agreement or any incorrectness in or breach of any representation or warranty or
covenant of the Indemnifying Party contained herein or in any certificate or
other document furnished by the Indemnifying Party pursuant hereto.
10
SECTION SEVEN
CLOSING
7.1. |
CLOSING AND CLOSING DATE |
The Closing of the sale and purchase herein contemplated shall
take place at the offices of VAN DER WISSEL Law Firm in Calgary, Alberta, on the
Closing Date or upon such earlier or later time and date as may be agreed upon
between the Parties.
SECTION EIGHT
RESTRICTIVE COVENANT
For the period of three (3) years from the Closing the Vendor
and its shareholders, officers and directors, shall not anywhere within 200
kilometres from the Town of Brooks, without the prior consent in writing of the
Corporation, either individually or in partnership or in conjunction with any
other person or persons, firm or corporation as employee, principal, officer,
agent stockholder or in any other manner whatsoever directly or indirectly carry
on or be engaged or concerned with or interested in or advise or act as
consultant for, lend money to, guarantee the debts or obligations of, or
otherwise provide financial assistance for, a business that is in competition
with the business of the Corporation as conducted by the Corporation at the
Closing Date.
SECTION EIGHT
GENERAL
All Parties shall be responsible for their own legal and audit
fees and other charges and expenses incurred in connection with the purchase and
sale of the Shares, the preparation of this Agreement and all negotiations
between the Parties.
Time shall be of the essence of this Agreement.
This Agreement shall be construed in accordance with the laws
of the Province of Alberta, and the parties hereto attorn to the courts of such
jurisdiction.
11
This Agreement may be executed in several counterparts, each of
which so executed shall be deemed to be an original, and such counterparts
together shall constitute one and the same instrument and, notwithstanding their
date of execution, shall be deemed to bear the date as of the date above
written.
Any notice required or permitted to be given by a Party to the
other shall be given in writing and addressed:
|
ALTA DISPOSAL LTD. |
|
Suite 300, 840 6 Avenue SW |
|
Calgary, Alberta T2P 3E5 |
|
Attention: Alex Walsh, President |
|
Telephone: (403) 930-1925 |
|
Email: aw@lithiumexplorationgroup.com
|
|
(b) |
if to the Purchaser or the Corporation
at: |
|
VAN DER WISSEL Law Firm |
|
200, 638 11th Ave. S.W. |
|
Calgary, AlbertaT2S 0J7 |
|
Telephone: (403) 537-9935 |
|
Email: svanderwissel@vdwlaw.ca |
Any such notice shall be delivered, or mailed by prepaid
registered post. Any notice delivered as aforesaid shall be deemed to have been
received by the Party to which it is so delivered at the time on the date of its
being so delivered. Any notice mailed as aforesaid shall be deemed to have been
received by the Party to which it is so mailed on the third business day next
following the time on the date of it being so mailed. Any Party may change its
address for notice by giving notice to that effect.
This Agreement shall enure to the benefit of the Parties, their
respective heirs, successors and permitted assigns.
The Vendor will from time to time, on and after the Closing
Date, at the request and expense of the Purchaser, execute and deliver all such
other additional instruments, notices, releases and other documents and shall do
all such other acts and things as may be reasonably necessary to more fully
convey the Shares to the Purchaser.
12
8.8. |
PUBLIC ANNOUNCEMENTS |
|
(a) |
The Parties acknowledge that the Vendor is a wholly owned
subsidiary of a reporting issuer, that the Vendor and its parent company
are required to give public disclosure with respect to the Transaction and
any ongoing matters with respect to the Corporation and the Corporation
and the Purchaser hereby consent to any such disclosure required to
satisfy the Vendors reporting requirements. |
|
|
|
|
(b) |
Notwithstanding the foregoing, the Parties may disclose
any information required to be disclosed to any federal, provincial, state
or local government or governmental agency or regulatory body, branch,
board, agency or necessary to comply with relevant timely disclosure laws
or the requirements of regulatory authorities, including stock exchange,
having jurisdiction in respect of the securities of the
Parties. |
Remainder of page left blank intentionally
13
If, in any jurisdiction, any provision of this Agreement or its
application to any Party or circumstance is restricted, prohibited or
unenforceable, that provision shall, as to that jurisdiction, be ineffective
only to the extent of that restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, without affecting the
validity or enforceability of that provision in any other jurisdiction and, if
applicable, without affecting its application to the other parties or
circumstances. The Parties shall engage in good faith negotiations to replace
any provision which is so restricted, prohibited or unenforceable with an
unrestricted and enforceable provision, the economic effect of which comes as
close as possible to that of the restricted, prohibited or unenforceable
provision which it replaces.
IN WITNESS WHEREOF the Parties have executed this
Agreement as of the date and year first above written.
|
|
ALTA DISPOSAL LTD. |
|
|
|
|
|
|
|
Per: |
Alexander Walsh, President |
|
|
|
|
|
|
Witness |
|
NATEL HOFMANN |
|
|
|
|
|
|
|
|
TERO OILFIELD SERVICES LTD. |
|
|
|
|
|
|
|
Per: |
Gary Hofmann |
14
SCHEDULE A
Tero Oilfield Services Ltd.
Financial Statements
March 31, 2015 and June 30, 2014
Tero Oilfield Services Ltd.
Condensed Balance Sheets
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash |
$ |
-- |
|
$ |
21,208 |
|
Accounts receivable, net |
|
155,827 |
|
|
202,359 |
|
Other current
assets |
|
25,440 |
|
|
20,376 |
|
Total current assets |
|
181,267 |
|
|
243,943 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
358,652 |
|
|
427,712 |
|
TOTAL ASSETS |
$ |
539,919 |
|
$ |
671,655 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities |
$ |
74,176 |
|
$ |
71,174 |
|
Current maturities of long-term
debt |
|
156,577 |
|
|
91,925 |
|
Due to
shareholders |
|
-- |
|
|
47,494 |
|
Total current liabilities |
|
230,753 |
|
|
210,593 |
|
|
|
|
|
|
|
|
Notes payable, less current maturities |
|
162,930 |
|
|
286,952 |
|
Asset retirement obligations |
|
228,672 |
|
|
271,164 |
|
TOTAL LIABILITIES |
|
622,355 |
|
|
768,709 |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (DEFICIT) |
|
(82,436 |
) |
|
(97,054 |
)
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT) |
$ |
539,919 |
|
$ |
671,655 |
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
Tero Oilfield Services Ltd.
Condensed Statements of Income
and Shareholders Equity (Deficit)
(unaudited)
|
|
Nine Months Ended |
|
|
Quarter Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
REVENUE |
$ |
871,763 |
|
$ |
1,043,901 |
|
$ |
189,882 |
|
$ |
349,062 |
|
COST OF GOODS SOLD |
|
518,004 |
|
|
460,382 |
|
|
101,682 |
|
|
47,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
353,759 |
|
|
583,519 |
|
|
88,200 |
|
|
301,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
marketing |
|
16,731 |
|
|
13,312 |
|
|
7,632 |
|
|
2,004 |
|
Depreciation |
|
61,808 |
|
|
67,446 |
|
|
19,062 |
|
|
39,067 |
|
General and
administrative |
|
267,575 |
|
|
344,122 |
|
|
74,886 |
|
|
105,904 |
|
TOTAL OPERATING EXPENSES |
|
346,114 |
|
|
424,880 |
|
|
101,580 |
|
|
146,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
7,645 |
|
|
158,639 |
|
|
(13,380 |
) |
|
154,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
(11,513 |
) |
|
(11,299 |
) |
|
(2,778 |
) |
|
(6,801 |
) |
Gain on Disposal of Assets |
|
--
|
|
|
100,468 |
|
|
--
|
|
|
100,468 |
|
TOTAL OTHER EXPENSES |
|
(11,513 |
) |
|
89,169 |
|
|
(2,778 |
) |
|
93,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
(3,868 |
) |
|
247,808 |
|
|
(16,158 |
) |
|
248,236 |
|
Provision (Benefit) for (from) income taxes |
|
3,220
|
|
|
(33,083 |
) |
|
3,220
|
|
|
(33,083 |
)
|
NET INCOME (LOSS) |
|
(648 |
) |
|
214,725 |
|
|
(12,938 |
) |
|
215,153 |
|
Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment |
|
15,264 |
|
|
6,021 |
|
|
7,739 |
|
|
6,241 |
|
COMPREHENSIVE INCOME (LOSS) |
$ |
14,616 |
|
$ |
220,746 |
|
$ |
(5,199 |
) |
$ |
221,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (DEFICIT): |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity (deficit) Beginning
of period |
$ |
(97,054 |
) |
$ |
13,716 |
|
$ |
(77,237 |
) |
$ |
13,068 |
|
Net income (loss) |
|
(648 |
) |
|
214,725 |
|
|
(12,938 |
) |
|
215,153 |
|
Cumulative Translation Adjustment |
|
15,264 |
|
|
6,021 |
|
|
7,739 |
|
|
6,241 |
|
Dividends |
|
--
|
|
|
(352,885 |
) |
|
--
|
|
|
(352,885 |
)
|
Shareholders equity (deficit) End of
period |
$ |
(82,436 |
) |
$ |
(118,423 |
) |
$ |
(82,436 |
) |
$ |
(118,423 |
) |
The accompanying notes are an integral part of these unaudited
condensed financial statements.
Tero Oilfield Services Ltd.
Condensed Statements of Cash
Flows
(unaudited)
|
|
Nine months ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income (loss) |
$ |
(648 |
) |
$ |
214,725 |
|
Adjustments to reconcile net income
(loss) to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation |
|
61,808 |
|
|
67,446 |
|
Gain on Disposal of Assets |
|
-- |
|
|
(100,468 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Short-term investments |
|
-- |
|
|
66,468 |
|
Accounts receivable, net |
|
46,532 |
|
|
(37,838 |
) |
Other current assets |
|
(5,064 |
) |
|
17,535 |
|
Accounts payable and accrued liabilities |
|
16,300 |
|
|
25,015 |
|
NET CASH PROVIDED BY OPERATING ACTIVITES
|
|
118,928 |
|
|
252,883 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchase of property and equipment |
|
(60,288 |
) |
|
(148,659 |
) |
Proceeds from sale of property and
equipment |
|
-- |
|
|
277,714 |
|
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
|
(60,288 |
) |
|
129,055 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Long-term debt retired |
|
(45,221 |
) |
|
(86,496 |
) |
Dividends paid |
|
--
|
|
|
(352,885 |
) |
NET CASH USED IN FINANCING ACTIVITIES |
|
(45,221 |
) |
|
(439,381 |
) |
|
|
|
|
|
|
|
Effects of currency translation on cash and
cash equivalents |
|
(34,627 |
) |
|
24,010 |
|
NET DECREASE IN CASH |
|
(21,208 |
) |
|
(33,433 |
) |
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
21,208 |
|
|
56,138 |
|
CASH (BANK OVERDRAFT) AT END OF PERIOD |
$ |
-- |
|
$ |
22,705 |
|
|
|
|
|
|
|
|
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.
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Tero Oilfield Services Ltd, Inc. (the Company, Tero) was
incorporated in the State of Alberta on January 31, 1997.
Tero Oilfield Services Ltd., an energy services company,
provides specialized services to upstream oil and natural gas companies
operating in the Western Canadian Sedimentary Basin. Through the exploration and
production of oil and gas a significant regular stream of waste is generated by
the oil and gas producers. The oil and gas producers are required to dispose of
this waste in an environmentally approved manner as stipulated by Alberta
Energy, 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.
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
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 nine
months ended March 31, 2015 and 2014 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 nine months ended March 31, 2015 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 March 31, 2015 and 2014 in these footnotes are
unaudited.
The condensed balance sheet as of June 30, 2015 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.
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
Accounts Receivable
Accounts receivable arise in the normal course of business and
are reported net of an allowance for doubtful accounts. The allowance is based
on 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 March 31, 2015 and June 30, 2015 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 March 31, 2015 and 2014.
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.
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
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 nine months ended March 31, 2015 and
2014 consists of the following:
|
|
2015
|
|
|
2014
|
|
Fuel & oil
disposal |
$ |
52,441 |
|
$ |
54,066 |
|
Insurance |
|
22,772 |
|
|
15,514 |
|
Repairs and
maintenance |
|
194,263 |
|
|
149,267 |
|
Skim oil processing fees |
|
57,306 |
|
|
55,051 |
|
Solids
processing |
|
114,706 |
|
|
84,789 |
|
Subcontract trucking |
|
14,003 |
|
|
20,332 |
|
Utilities |
|
31,483 |
|
|
38,367 |
|
Other |
|
31,030 |
|
|
42,996 |
|
TOTAL COST OF GOODS SOLD |
$ |
518,004 |
|
$ |
460,382 |
|
Advertising
The Company expenses the costs associated with advertising when
incurred. Advertising expense totaled $16,732 and $13,312 for the nine months
ended March 31, 2015 and 2014, respectively and $7,633 and $2,004 for the three
months ended March 31, 2015 and 2014, 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.
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
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 March
31, 2015, 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
are no excess of the deposit liabilities over the amounts covered by federal
insurance at March 31, 2015 and 2014.
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 March 31, 2015 and June 30, 2014
consists of the following:
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Accounts receivable |
$ |
155,827 |
|
$ |
202,359 |
|
Less allowance for doubtful accounts |
|
--
|
|
|
--
|
|
|
$ |
155,827 |
|
$ |
202,359 |
|
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2015 and June 30, 2014
consists of the following:
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Vehicles |
$ |
322,341 |
|
$ |
382,238 |
|
Disposal wells |
|
438,627 |
|
|
520,132 |
|
Machinery and equipment |
|
891,738 |
|
|
992,991 |
|
|
|
1,652,706 |
|
|
1,895,361 |
|
Less accumulated depreciation |
|
(1,294,054 |
) |
|
(1,467,649 |
) |
Net book value |
$ |
358,652 |
|
$ |
427,712 |
|
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
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 is $61,808 and
$67,446 for the nine months ended March 31, 2015 and 2014, respectively and
$20,995 and $39,067 for the three months ended March 31, 2015 and 2014,
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 $(3,868) and $247,808 for the nine months ending March 31, 2015 and
2014.
Tax Rate Reconciliation |
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Federal statutory rate |
|
38.0 |
% |
|
38.0 % |
|
Statutory deductions |
|
(43.1 |
) |
|
26.5 |
|
Provincial statutory rate, net of federal
tax benefit |
|
(5.1 |
) |
|
3.9 |
|
Effective tax rate |
|
(8.2 |
) %
|
|
15.4
% |
|
Provision (Benefit) for Income Taxes |
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Federal |
$ |
(1,124 |
) |
$ |
24,648 |
|
Provincial |
|
(1,876 |
) |
|
8,435
|
|
Total |
$ |
(3,000 |
) |
$ |
33,083 |
|
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
NOTE 6 LONG-TERM DEBT
Long-Term Debt at March 31, 2015 and June 30, 2014 consists of
the following:
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
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%. |
$ |
319,507 |
|
$ |
378,877 |
|
Current maturities |
|
(156,577 |
) |
|
(91,925 |
) |
|
$ |
162,930 |
|
$ |
286,952 |
|
Future principal payments on the note payable are scheduled as
follows:
Year Ending March 31,
2016 |
$ |
156,577 |
|
2017 |
|
80,652 |
|
2018 |
|
82,278 |
|
|
$ |
319,507 |
|
NOTE 7 ASSET RETIREMENT OBLIGATION
The Company owns and operates a full Class 1B liquid and solid
oilfield waste handling facility in Wardlow, Alberta, Canada. Annual inspections
are performed by the Waste Management and Liability Management Departments of
the Alberta Energy Regulator (AER). AER requires the Company to secure Letters
of Credit or make deposits equal to the estimated costs of well and surface
facility abandonment and reclamation.
|
|
March 31, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Asset retirement obligation at beginning of
year |
$ |
271,164 |
|
$ |
259,667 |
|
Accretion expense |
|
-- |
|
|
-- |
|
Change due to foreign currency translation
|
|
(42,492 |
) |
|
11,497 |
|
Asset retirement obligation |
$ |
228,672 |
|
$ |
271,164 |
|
Tero Oilfield Services Ltd.
Notes to Unaudited Condensed
Financial Statements
March 31, 2015 and June 30, 2014
NOTE 8 COMMITMENTS AND CONTINGENCIES
Litigation
The Company is not involved in any litigation and Management is
not aware of any outstanding contingencies.
Leases and Obligations
The Company entered into a surface easement lease for road
usage through an agreement dated September 27, 1997 and amended on April 28,
2005 which permits use of 5.432 acres for $2,420 per year. The lease is renewed
annually.
The Company has obtained Letters of Credit from its bank to
satisfy its legal obligations to remediate well and surface abandonment as
explained in Note 7. The outstanding balances of the Letters of Credit were
$228,672 and $271,164 at March 31, 2015 and June 2014, respectively.
NOTE 9 MAJOR CUSTOMERS AND VENDORS
The Company has seven customers that represent approximately
77% of its revenue for the nine months ended March 31, 2015. The Company has
four customers that represent approximately 67% of its accounts receivable at
March 31, 2015. The Company is not reliant on any specific vendor for its
purchases or goods or equipment and can establish additional relationships with
minimal disruption.
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: May 22, 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 March 31, 2015 (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: May 22, 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.