Item 1. Financial Statements
The condensed consolidated unaudited financial statements of
our company have been prepared in accordance with accounting principles
generally accepted in the United States (US GAAP) and are expressed in U.S.
dollars.
LITHIUM EXPLORATION GROUP, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 (unaudited)
Lithium Exploration Group, Inc.
Condensed
Consolidated Balance Sheets
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2016 (unaudited)
|
|
|
2016
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
68,570
|
|
$
|
25,208
|
|
Prepaid expenses
|
|
1,100
|
|
|
2,788
|
|
Current assets held for sale (Note 13)
|
|
|
|
|
|
|
|
|
19,312
|
|
|
20,011
|
|
Total current
assets
|
|
88,982
|
|
|
48,007
|
|
Deposit on PetroChase Inc. Investment (Note 6)
|
|
250,000
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
338,982
|
|
$
|
48,007
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc.
|
Condensed Consolidated Balance Sheets
|
|
LIABILITIES AND DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities (Note 9)
|
$
|
286,196
|
|
$
|
211,813
|
|
Promissory notes
payable (Note 7)
|
|
142,000
|
|
|
-
|
|
Derivative
liability convertible promissory notes (Note 8)
|
|
1,812,193
|
|
|
1,162,058
|
|
Derivative
liability warrants (Note 8)
|
|
270,055
|
|
|
268,611
|
|
Due to related party (Note 9)
|
|
115,000
|
|
|
115,000
|
|
Convertible promissory notes net of unamortized debt discount (Note 8)
|
|
2,335,094
|
|
|
619,769
|
|
Accrued interest
convertible promissory notes (Note 8)
|
|
134,107
|
|
|
137,936
|
|
Current liabilities held for
sale (Note 13)
|
|
6,221
|
|
|
6,420
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
5,100,8668
|
|
|
2,521,607
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT
|
|
|
|
|
|
|
Lithium Explorations Group, Inc. Stockholders
Deficit
|
|
|
|
|
|
|
Capital stock (Note
3)
Authorized:
100,000,000
preferred shares, $0.001 par
value
10,000,000,000
(June 30, 2016 2,000,000,000) common shares, $0.001 par value
Issued and
outstanding:
Nil
preferred shares (June 30, 2016
Nil)
501,338,334 common
shares (June 30, 2016 119,772,784)
|
|
501,339
|
|
|
- 119,773
|
|
Additional paid-in capital
|
|
48,732,995
|
|
|
48,598,773
|
|
Accumulated other comprehensive loss
|
|
(34,180
|
)
|
|
(33,731
|
)
|
Accumulated
deficit
|
|
(53,610,023
|
)
|
|
(50,806,439
|
)
|
Total Lithium Exploration Group, Inc. Stockholders
Deficit
|
|
(4,409,869
|
)
|
|
(2,121,624
|
)
|
Non-controlling
interest
|
|
(352,015
|
)
|
|
(351,976
|
)
|
Total Deficit
|
|
(4,761,884
|
)
|
|
(2,473,600
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Deficit
|
$
|
338,982
|
|
$
|
48,007
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc.
Condensed
Consolidated Statements of Operations And Comprehensive Income (Loss)
(unaudited)
|
|
Three
|
|
|
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December
|
|
|
December 31,
|
|
|
December
|
|
|
December 31,
|
|
|
|
31, 2016
|
|
|
2015
|
|
|
31, 2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining (Notes 3 & 5)
|
|
2,549
|
|
|
-
|
|
|
37,632
|
|
|
5,000
|
|
Selling, general and
administrative (Notes 3 & 5)
|
|
263,809
|
|
|
167,606
|
|
|
442,466
|
|
|
309,415
|
|
Total operating expenses
|
|
266,358
|
|
|
167,606
|
|
|
480,098
|
|
|
314,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(266,358
|
)
|
|
(167,606
|
)
|
|
(480,098
|
)
|
|
(314,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Note 8)
|
|
(172,462
|
)
|
|
(255,178
|
)
|
|
(395,678
|
)
|
|
(601,960
|
)
|
Gain on change in the fair value of derivative liability
(Note 8)
|
|
1,308,622
|
|
|
8,906,059
|
|
|
158,292
|
|
|
464,286
|
|
Amortization of debt discount
|
|
(404,026
|
)
|
|
(149,379
|
)
|
|
(546,358
|
)
|
|
(320,322
|
)
|
Bad-debt write off
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,000
|
)
|
(Loss) gain on disposal of business
operations
|
|
-
|
|
|
(72
|
)
|
|
-
|
|
|
7,565
|
|
Loss on extinguishment of liability
|
|
(48,619
|
)
|
|
-
|
|
|
(1,539,701
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before income taxes
|
|
417,157
|
|
|
8,333,824
|
|
|
(2,803,543
|
)
|
|
(784,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes (Note 4)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) from continued operations
|
|
417,157
|
|
|
8,333,824
|
|
|
(2,803,543
|
)
|
|
(784,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
(49
|
)
|
|
(24,496
|
)
|
|
(80
|
)
|
|
(78,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
417,108
|
|
|
8,309,328
|
|
|
(2,803,623
|
)
|
|
(863,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to the non-controlling
interest
|
|
(24
|
)
|
|
(12,003
|
)
|
|
(39
|
)
|
|
(38,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Lithium Exploration
Group, Inc.
Common shareholders
|
$
|
417,132
|
|
$
|
8,321,331
|
|
$
|
(2,803,584
|
)
|
$
|
(824,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted income (loss) per Common Share from
continuing
operations
|
$
|
0.00
|
|
$
|
0.72
|
|
$
|
(0.01
|
)
|
$
|
(0.08
|
)
|
Basic and Diluted income (loss) per
Common Share from discontinued
operations
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Weighted Average
Number of Common Shares
Outstanding
|
|
282,395,703
|
|
|
11,500,561
|
|
|
203,944,692
|
|
|
10,158,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
417,108
|
|
$
|
8,309,328
|
|
$
|
(2,803,623
|
)
|
$
|
(863,416
|
)
|
Foreign currency translation adjustment
|
|
(328
|
)
|
|
1,336
|
|
|
(449
|
)
|
|
(8,222
|
)
|
Comprehensive Income (loss)
|
|
416,780
|
|
|
8,310,694
|
|
|
(2,804,072
|
)
|
|
(871,638
|
)
|
Comprehensive loss attributable to
non-controlling interest
|
|
(24
|
)
|
|
(12,003
|
)
|
|
(39
|
)
|
|
(38,499
|
)
|
Comprehensive Income (loss) attributable to Lithium
Exploration Group, Inc common shareholders
|
$
|
416,804
|
|
$
|
8,322,697
|
|
$
|
(2,804,033
|
)
|
$
|
(833,139
|
)
|
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 Deficit
|
(unaudited)
|
|
|
Common Shares
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
controlling
|
|
|
(Deficit)
|
|
|
|
Number of
|
|
|
Amount
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest
|
|
|
$
|
|
|
|
Shares
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2016
|
|
119,772,784
|
|
$
|
119,773
|
|
$
|
48,598,773
|
|
$
|
(33,731
|
)
|
$
|
(50,806,439
|
)
|
$
|
(351,976
|
)
|
$
|
(2,473,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for debt conversion
and interest
|
|
381,565,550
|
|
|
381,566
|
|
|
(171,541
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
210,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability transferred to
additional paid in capital on conversion of note
|
|
-
|
|
|
-
|
|
|
305,763
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
305,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(449
|
)
|
|
-
|
|
|
-
|
|
|
(449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,803,584
|
)
|
|
(39
|
)
|
|
(2,803,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
|
501,338,334
|
|
$
|
501,339
|
|
$
|
48,732,995
|
|
$
|
(34,180
|
)
|
$
|
(53,610,023
|
)
|
$
|
(352,015
|
)
|
$
|
(4,761,884
|
)
|
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)
|
|
Six
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Cash Flows from Operating
Activities
|
|
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(2,803,543
|
)
|
$
|
(784,846
|
|
Loss from discontinued operations
|
|
(80
|
)
|
|
(78,570
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Non-cash Interest expense
|
|
258,994
|
|
|
545,852
|
|
Common shares issued for interest
|
|
2,402
|
|
|
60,178
|
|
Investment Impairment
|
|
-
|
|
|
20,000
|
|
(Gain) loss on change in the fair value of derivative
liability
|
|
(158,292
|
)
|
|
(464,286
|
)
|
Amortization of debt discount
|
|
546,358
|
|
|
320,322
|
|
Loss on extinguishment of debt and derivative liabilities
|
|
1,539,701
|
|
|
-
|
|
|
|
|
|
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
Receivable, net
|
|
-
|
|
|
13,421
|
|
Prepaid expenses
|
|
1,688
|
|
|
-
|
|
Accrued interest
|
|
134,200
|
|
|
46,121
|
|
Accounts payable and accrued liabilities
|
|
74,383
|
|
|
130,812
|
|
Net cash used in operating
activities from continuing operations
|
|
(404,189
|
)
|
|
(190,996
|
)
|
Net
cash provided by operating activities from discontinued operations
|
|
500
|
|
|
(9,084
|
)
|
Net cash used in operating activities
|
|
(403,689
|
)
|
|
(200,080
|
)
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities
|
|
|
|
|
-
|
|
Investment in PetroChase Inc.
|
|
(250,000
|
)
|
|
-
|
|
Net cash used in investing activities
|
|
(250,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities
|
|
|
|
|
|
|
Proceed from issuance of
convertible promissory notes, net
|
|
697,500
|
|
|
158,000
|
|
Net cash provided by financing activities
|
|
697,500
|
|
|
158,000
|
|
|
|
|
|
|
|
|
Effect of foreign exchange
|
|
(449
|
)
|
|
(8,222
|
)
|
|
|
|
|
|
|
|
Increase (Decrease) in
cash and cash equivalents
|
|
43,362
|
|
|
(50,302
|
)
|
Cash and cash equivalents - beginning of period
|
|
25,208
|
|
|
64,098
|
|
Cash and cash equivalents - end of period
|
$
|
68,570
|
|
$
|
13,796
|
|
|
|
|
|
|
|
|
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
|
$
|
207,623
|
|
$
|
116,043
|
|
Derivative liability re-classed to additional
paid in capital
|
$
|
305,763
|
|
$
|
261,331
|
|
Debt discount on issuance of
convertible note and warrants
|
$
|
1,266,294
|
|
$
|
155,231
|
|
Initial derivative liability on note issuance
|
$
|
1,525,435
|
|
$
|
701,073
|
|
Interest reclassed to convertible
note
|
$
|
137,883
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Lithium Exploration Group, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
December 31, 2016 (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 Phoenix, Arizona, USA. The accounting and reporting
policies of the Company conform to accounting principles generally accepted in
the United States of America, and the Companys fiscal year end is June 30.
Effective November 30, 2010, the Company changed its name to
Lithium Exploration Group, Inc., by way of a merger with its wholly-owned
subsidiary Lithium Exploration Group, Inc., which was formed solely for the
change of name.
A wholly owned subsidiary, 1617437 Alberta Ltd. was
incorporated in the province of Alberta, Canada on July 8, 2011. Effective
October 2, 2013, the subsidiary changed its name to Alta Disposal Ltd.
On October 18, 2013, the Company acquired 51% interest in Alta
Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.). Effective September
4, 2015, the Company entered into an Asset Purchase Agreement with Cancen Oil
Canada whereby the Company agrees to sell all right, title and interest of Alta
Disposal Morinville Ltd. assets for total purchase price of CAD$10,000
approximately USD$7,466.
On March 1, 2014, the Company through its 100% subsidiary Alta
Disposal Ltd. acquired 50% interest in Tero Oilfield Services Ltd. (the Tero)
On May 1, 2015, the Company entered into a Share Purchase Agreement with an
individual and disposed its 50% interest in Tero.
On September 9, 2016, the Company acquired 100% interest in
Black Box Energy, Inc. (Black Box Energy) a company incorporated in the state
of Nevada.
On September 9, 2016, the Company through its 100% subsidiary
Black Box Energy entered into an agreement with PetroChase to acquire a 50% of a
70% of the working interest in the McKean County Project.
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.
2. Significant Accounting Policies
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
These interim financial statements as of and for the three months ended December 31, 2016 and 2015 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three and six months ended December 31, 2016 are not necessarily indicative of the results to be expected for
the year ending June 30, 2017 or for any future period. All references to December 31, 2016 and 2015 in these footnotes are unaudited.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended June 30, 2016, included in the Company’s annual report on Form 10-K filed
with the SEC on October 18, 2016.
Principal of Consolidation
The unaudited condensed financial statements include the accounts of the Company, its wholly-owned subsidiary Alta Disposal Ltd., its 51% owned subsidiary Alta Disposal Morinville Ltd. (formerly Bluetap Resources Ltd.), and its 100% interest in
Black Box Energy. Intercompany accounts and transactions have been eliminated in consolidation in conformity with the applicable accounting framework. Note that no transactions occurred within Black Box Energy for the six months ended December 31,
2016.
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 $68,570 and $25,208 in cash and cash equivalents at December 31, 2016 and June 30, 2016, respectively.
Concentration of Risk
The Company maintains cash balances at a financial institution which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for banks located in the US. As of December 31, 2016 and June 30, 2016, the Company had no
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.
2. Significant Accounting Policies -
Continued
Prepaid expenses
Prepaid expenses consist of security deposit for office lease which will be expensed or refunded at the end of the lease period.
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.
Non-controlling Interest
The 49% third party ownership of Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.) at December 31, 2016 and 2015 are recorded as non-controlling interests in the consolidated financial statements. Details of changes in the
non-controlling interests during the year ended June 30, 2016 and period ending December 31, 2016 are reflected in the condensed statement of deficit.
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners
of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or
operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair
value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related
party.
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. The total number of potential no. of dilutive shares is 1,549,537,677 at the period ending December 31, 2016.
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.
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;
- equity is translated at
historical exchange rates; 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
ending December, 2016 closing rate at 0.7448 CDN$: US$, average rate at 0.7580
CDN$: US$ and for the year ended June 30, 2016 closing rate at 0.769 CDN$: US$,
average rate at 0.7761 CDN$: US$. For the period ending December 31, 2015
closing rate at 0.7225 CDN$: US$, average rate at 0.7565 CDN$: US$
Comprehensive Income (Loss)
FASC Topic No. 220,
Comprehensive Income,
establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. As at December 31, 2016
and June 30, 2016, 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.
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 accounts for currently outstanding detachable warrants to purchase common stock as derivative liabilities as they are freestanding derivative financial instruments. The warrants are recorded as derivative liabilities at fair value,
estimated using a Black-Scholes option pricing model, and marked to market at each balance sheet date, with changes in the fair value of the derivative liabilities recorded in the consolidated statements of operations and comprehensive loss. Upon
exercise of a derivative financial instrument, the instrument is marked to fair value at the conversion date and is reclassified to equity.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815 “Derivatives and Hedging”. It provide three criteria that, if met, require companies to bifurcate conversion
options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not
clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise
applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the
fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative financial instrument, the instrument is marked to fair value at
the conversion date and is reclassified to equity.The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the
underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of notes
redemption
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.
During the year ended June 30, 2016 and period ending December 31, 2016, the Company didn’t record any revenue under continuing operation.
2. Significant Accounting Policies -
Continued
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset
any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company also follows the provisions of ASC 740-10 related to accounting for uncertain income tax positions. When tax returns are filed, some positions taken may be sustained upon examination by the taxing authorities, while others may be subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. As of December 31, 2016, the Company has had no uncertain tax positions. The Company recognizes interest and penalties, if any, related to uncertain tax positions as general and administrative expenses.
The Company currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception.
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. The Company recorded $Nil (June 30, 2016 - $Nil) in allowance for doubtful accounts.
Recent Accounting Pronouncements
In January 2017, FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The
Company does not expect the adoption of this amendment to have a material effect on its financial condition and results of operations.
In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-16 - Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 will require the tax
effects of intercompany transactions, other than sales of inventory, to be recognized currently, eliminating an exception under current GAAP in which the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to
a third party or otherwise recovered through use. The guidance will be effective for the first interim period of our 2019 fiscal year, with early adoption permitted.
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” (“ASU
2016-15”). ASU 2016-15 provides guidance regarding the classification of certain items within the statements of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 with early adoption permitted.
In connection with its financial instruments project, the FASB
issued ASU 2016-13 - Financial Instruments
- Credit Losses: Measurement of
Credit Losses on Financial Instruments in June 2016 and ASU 2016-01
-
Financial Instruments
- Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities in January 2016.
|
ASU 2016-13 introduces a new impairment model for most
financial assets and certain other instruments. For trade and other
receivables, held-to-maturity debt securities, loans and other
instruments, entities will be required to use a forward-looking expected
loss model that will replace the current incurred loss model and
generally will result in earlier recognition of allowances for losses. The
guidance will be effective for the first interim period of our 2021 fiscal
year, with early adoption in fiscal year 2020 permitted.
|
|
ASU 2016-01 addresses certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments. Among
other provisions, the new guidance requires the fair value measurement of
investments in certain equity securities. For investments without readily
determinable fair values, entities have the option to either measure these
investments at fair value or at cost adjusted for changes in observable
prices minus impairment. All changes in measurement will be recognized in
net income. The guidance will be effective for the first interim period of
our 2019 fiscal year. Early adoption is not permitted, except for certain
provisions relating to financial liabilities.
|
In January 2016, the FASB issued an accounting standard update
which requires, among other things, that entities measure equity investments
(except those accounted for under the equity method of accounting or those that
result in consolidation of the investee) at fair value, with changes in fair
value recognized in earnings. Under the standard, entities will no longer be
able to recognize unrealized holding gains and losses on equity securities
classified today as available for sale as a component of other comprehensive
income. For equity investments without readily determinable fair values the cost
method of accounting is also eliminated, however subject to certain exceptions,
entities will be able to elect to record equity investments without readily
determinable fair values at cost, less impairment and plus or minus adjustments
for observable price changes, with all such changes recognized in earnings. This
new standard does not change the guidance for classifying and measuring
investments in debt securities and loans. The standard is effective for us on
July 1, 2018 (the first quarter of our 2019 fiscal year). The Company is
currently evaluating the anticipated impact of this standard on its consolidated
financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases
(Topic 842) to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet and
disclosing key information about leasing arrangements. Topic 842 affects any
entity that enters into a lease, with some specified scope exemptions. The
guidance in this Update supersedes Topic 840, Leases. The core principle of
Topic 842 is that a lessee should recognize the assets and liabilities that
arise from leases. A lessee should recognize in the statement of financial
position a liability to make lease payments (the lease liability) and a
right-of-use asset representing its right to use the underlying asset for the
lease term. For public companies, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. We are currently evaluating the impact of adopting
ASU No. 2016-02 on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08, Revenue from
Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net) that clarifies how to apply revenue
recognition guidance related to whether an entity is a principal or an agent.
ASU 2016-08 clarifies that the analysis must focus on whether the entity has
control of the goods or services before they are transferred to the customer and
provides additional guidance about how to apply the control principle when
services are provided and when goods or services are combined with other goods
or services. The effective date for ASU 2016-08 is the same as the effective
date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15,
2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal
year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding
requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments
related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess
tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the
statement of cash flows using either a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on its consolidated financial statements.
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and
understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim
periods within those years. The Company has not yet determined the impact of ASU 2016-10 on its consolidated financial statements.
FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in June 2016 and clarifies the objective of the collectability criterion, presentation of taxes
collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in Topic 606 is retrospectively applied. The amendments do not change the core principle of the guidance in
Topic 606. The effective dates are the same as those for Topic 606.
3. Capital Stock
On January 19, 2015, the Company's board of directors consented to effect a reverse stock split of the Company’s 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.
On July 13, 2015, the Company's board of directors consented to effect a reverse stock split of the Company’s issued and outstanding shares of common stock on a basis of 200 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 September 30, 2015. The Company’s authorized capital will not be affected by the reverse stock split. The split is reflected retrospectively in the accompanying
financial statements.
3.
Capital Stock –
Continued
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.
On April 8, 2009, the Company increased the number of authorized shares to 600,000,000 shares, of which 500,000,000 shares are designated as common stock par value $0.001 per share, and 100,000,000 shares are designated as preferred stock, par
value $0.001 per share.
On October 25, 2012, the Company designated 20,000,000 series A convertible preferred stock with a par value of $0.001 per share and stated value of $100 per share. The designated preferred stock is convertible at the option of the holder,
at any time beginning one year from the date such shares are issued, into common stock of the Company with a par value of $0.001. All shares of common stock of the Company, shall be of junior rank to all series A preferred stock in respect to
the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. All other shares of preferred stock shall be of junior rank to all series A preferred shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of the Company.
On January 3, 2014, the Company designated 2,000,000 series B convertible preferred stock with a par value $0.001 per share, issuable only in consideration of the extinguishment of existing debt convertible in to the Company’s common stock
with a par value of $0.001. The designated preferred stock shall be issued on the basis of 1 preferred stock for each $1 of convertible debt. The series B convertible preferred stock shall be subordinate to and rank junior to all
indebtedness of the Company now or hereafter outstanding.
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.
Effective June 22, 2015, the Company designated 50,000,000 of its 100,000,000 authorized shares of preferred stock as series A preferred stock. The series A preferred stock, par value $0.001, will rank senior to the Company’s common stock,
carrying general voting rights with the common stock at the rate of 62 votes per share. The series A preferred stock will be deemed cancelled within 1 year of issuance and are not entitled to share in dividends or other distributions. So long as any
shares of series A preferred stock are outstanding, the affirmative vote of not less than 75% of those outstanding shares of series A preferred stock will be required for any change to the Company’s Articles of Incorporation.
Effective September 9, 2015, the Company increase the authorized capital of its common shares from 2,000,000,000 common shares, par value $0.001 to 10,000,000,000 common shares, par value $0.001.
Share Issuances
Common Stock Issuance
For the year ended June 30, 2016:
During the year ended June 30, 2016, the Company issued 109,612,491 shares upon conversion of the convertible promissory notes and accrued interest, valued at $476,901.
4.
Capital Stock –
Continued
The Company also issued 2,577,896 shares, valued at $22,476 on cashless exercise of warrants during the year ended June 30, 2016.
For the period ended December 31, 2016:
During the six-months ended December 31, 2016, the Company issued 381,565,550 common shares at a deemed price ranging from $0.0005 to $0.00075 per share for promissory note and interest conversion valued at $210,025 (Note 6).
4. Provision for Income Taxes
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under
FASC 740-20-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future
years.
Exploration stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated
during the period from May 31, 2006 (date of inception) through December 31, 2016 of approximately $15,934,605 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately
$614,380 and $390,542 during the periods ended December 31, 2016 and 2015 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.
4. Provision for Income Taxes -
Continued
The Company has no tax position at December 31, 2016 for which
the ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility. The Company recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in
operating expenses. No such interest or penalties were recognized during the
periods presented. The Company had no accruals for interest and penalties at
December 31, 2016. The Companys utilization of any net operating loss carry
forward may be unlikely as a result of its intended exploration stage
activities. The tax years for June 30, 2015, June 30, 2014, June 30, 2013 and
June 30, 2012 are still open for examination by the Internal Revenue Service
(IRS).
|
|
For
the six months ended December 31, 2016
|
|
|
|
Amount
|
|
|
Tax
Effect (35%)
|
|
Loss before income tax
|
$
|
2,803,543
|
|
$
|
981,240
|
|
|
|
|
|
|
|
|
Shares issued for interest expenses
|
|
(2,402
|
)
|
|
(841
|
)
|
Non-cash interest expense
|
|
(258,994
|
)
|
|
(90,648
|
)
|
Loss on derivative liability - convertible
notes and warrants
|
|
(1,381,409
|
)
|
|
(483,493
|
)
|
Amortization of discount
|
|
(546,358
|
)
|
|
(191,225
|
)
|
|
|
|
|
|
|
|
Total
|
|
614,380
|
|
|
215,033
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(614,380
|
)
|
|
(215,033
|
)
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
$
|
-
|
|
$
|
-
|
|
|
|
For
the six months ended December 31, 2015
|
|
|
|
Amount
|
|
|
Tax
Effect (35%)
|
|
Net loss
|
$
|
784,846
|
|
|
274,696
|
|
|
|
|
|
|
|
|
Non-cash interest expense
|
|
(545,832
|
)
|
|
(191,041
|
)
|
Gain on change in fair value of derivative liability
|
|
464,286
|
|
|
162,500
|
|
Amortization of debt discount
|
|
(320,322
|
)
|
|
(112,113
|
)
|
Gain on disposal of business operation
|
|
(7,565
|
)
|
|
(2,648
|
)
|
|
|
|
|
|
|
|
Total
|
|
390,542
|
|
|
136,690
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(390,542
|
)
|
|
(136,690
|
)
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
5. Mineral Property Costs
Mineral Permit (Assignment Agreement with Lithium
Exploration VIII Ltd.)
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 and
paid);
|
|
iv. )
|
CDN $300,000 on or before January 1, 2014 (not paid);
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 June 30, 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 239 common shares of the Company at a price of US$330 per share. The
January 1, 2014 payment was not paid by the Company, and subsequent to the
schedule payment date, the agreement was terminated.
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 500 shares
for $1.00 to Glottech USA upon receipt of the operational ultrasonic
generator that they are building for Lithium Exploration Group. The 500
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 500 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, 10,000 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.
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. Deposits in PetroChase, Inc.
On September 9, 2016, the Company acquired 100% interest in
Black Box Energy, Inc. a company incorporated in the State of Nevada. Black Box
Energy will purchase 50% of the working interest in the McKean County Project
from PetroChase, Inc. The consideration paid for the 50% interest in McKean
County Project, is in the following amounts:
-
First Payment made on 09/09/2016 for an amount of $125,000;
-
Second Payment made on 09/16/2016 for an amount of $125,000; and
-
Management Fees Payment for an amount of $30,000 within 90 days after the
Second Payment.
The first two payments have been made to PetroChase, Inc. as at
December 31, 2016 and appear as Deposit on Balance sheet. The Company is
currently in dispute with Petrochase regarding the well that was not drilled in
accordance with the agreement, and has given Petrochase notice of breach of
contract. The management fee payments have been postponed until this issue has
been resolved.
7. Promissory Notes
Summary of promissory notes at June 30, 2016 and December 31,
2016 is as follows:
|
June 30,
2016
|
Reclassification
(Transfer)
|
(Payments)
|
December
31, 2016
|
September 16, 2016
|
$
-
|
$ 460,000
|
$ (378,000)
|
$ 82,000
|
October 18, 2016
|
-
|
60,000
|
-
|
60,000
|
|
|
|
|
|
Total
|
$
-
|
$ 520,000
|
$ (378,000)
|
$ 142,000
|
The above promissory notes are short-term notes that carry no
interest. They are expected to be settled by cash with varying payment terms.
All of the promissory notes are expected to be settled by the end of fiscal year
2017.
8. Convertible Promissory Notes
Summary of convertible promissory note at June 30, 2016 and
December 31, 2016 is as follows:
|
|
June
30,
|
|
|
Principal
|
|
|
Accretion
|
|
|
Total
|
|
|
Transfer (Loan
|
|
|
Dec.
31,
|
|
|
|
2016
|
|
|
Issued
|
|
|
of Issuance
|
|
|
converted
|
|
|
Extinguished)
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 13, 2013
|
$
|
21,908
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
21,908
|
|
July 22, 2014
|
|
185,314
|
|
|
-
|
|
|
-
|
|
|
(90,917
|
)
|
|
(15,304
|
)
|
|
79,093
|
|
August 22, 2014
|
|
15,768
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(15,768
|
)
|
|
-
|
|
February 6, 2015
|
|
7,150
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,150
|
|
March 9, 2015
|
|
10,220
|
|
|
|
|
|
|
|
|
|
|
|
(10,220
|
)
|
|
-
|
|
February 24, 2015
|
|
76,239
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(76,239
|
)
|
|
-
|
|
August 3, 2015
|
|
36,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
36,000
|
|
September 9, 2015
|
|
30,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
September 30, 2015
|
|
20,800
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,800
|
)
|
|
-
|
|
November 06,2015
|
|
12,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
December 01, 2015
|
|
36,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(18,000
|
)
|
|
18,000
|
|
December 03, 2015
|
|
17,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,000
|
)
|
|
-
|
|
January 27, 2016
|
|
29,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,000
|
)
|
|
24,750
|
|
February, 1, 2016
|
|
49,197
|
|
|
|
|
|
|
|
|
|
|
|
(49,197
|
)
|
|
-
|
|
March 01, 2016
|
|
13,200
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13,200
|
|
March 24, 2016
|
|
12,100
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,100
|
|
March 28, 2016
|
|
42,986
|
|
|
-
|
|
|
-
|
|
|
(2,216
|
)
|
|
(70
|
)
|
|
40,700
|
|
April 19, 2016
|
|
197,067
|
|
|
|
|
|
|
|
|
|
|
|
(137,500
|
)
|
|
59,5657
|
|
May 16, 2016
|
|
30,250
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30,250
|
|
August 12, 2016
|
|
-
|
|
|
40,000
|
|
|
2,453
|
|
|
-
|
|
|
-
|
|
|
42,453
|
|
September 7, 2016
|
|
-
|
|
|
100,000
|
|
|
4,700
|
|
|
(53,920
|
)
|
|
161,420
|
|
|
212,200
|
|
September 8, 2016
|
|
-
|
|
|
25,000
|
|
|
819
|
|
|
(60,570
|
)
|
|
120,000
|
|
|
85,249
|
|
September 9,2016
|
|
-
|
|
|
125,000
|
|
|
5,567
|
|
|
|
|
|
-
|
|
|
130,567
|
|
September 15, 2016
|
|
-
|
|
|
232,000
|
|
|
7,116
|
|
|
|
|
|
-
|
|
|
239,116
|
|
September 16, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
125,000
|
|
|
125,000
|
|
September 19, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
1,398,000
|
|
|
1,398,000
|
|
September 27, 2016
|
|
-
|
|
|
110,000
|
|
|
3,907
|
|
|
|
|
|
|
|
|
113,907
|
|
October 10, 2016
|
|
-
|
|
|
-
|
|
|
2,050
|
|
|
-
|
|
|
93,063
|
|
|
95,113
|
|
October 19, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
35,000
|
|
|
35,000
|
|
October 27, 2016
|
|
-
|
|
|
40,000
|
|
|
1,400
|
|
|
-
|
|
|
-
|
|
|
41,400
|
|
October 31, 2016
|
|
-
|
|
|
147,000
|
|
|
2,599
|
|
|
-
|
|
|
-
|
|
|
149,599
|
|
November 14, 2016
|
|
-
|
|
|
25,000
|
|
|
727
|
|
|
-
|
|
|
-
|
|
|
25,727
|
|
November 22, 2016
|
|
-
|
|
|
25,000
|
|
|
471
|
|
|
-
|
|
|
-
|
|
|
25,471
|
|
November 30, 2016
|
|
-
|
|
|
87,000
|
|
|
1,036
|
|
|
-
|
|
|
-
|
|
|
88,036
|
|
December 23, 2016
|
|
-
|
|
|
37,500
|
|
|
156
|
|
|
-
|
|
|
-
|
|
|
37,656
|
|
December 29, 2016
|
|
-
|
|
|
82,000
|
|
|
48
|
|
|
-
|
|
|
-
|
|
|
82,048
|
|
|
$
|
842,950
|
|
$
|
1,075,500
|
|
$
|
33,049
|
|
$
|
(207,623
|
)
|
$
|
1,567,384
|
|
$
|
3,311,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized debt discount
|
$
|
(223,181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(976,166
|
)
|
Total note
payable, net of debt discount
|
$
|
619,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,335,094
|
|
Current portion
|
$
|
619,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,335,094
|
|
Long term portion
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
8. Convertible Promissory Notes
Continued
On September 8, 2016 Company had transferred an aggregate of
$15,304 plus accrued interest of $104,696 in Convertible Promissory Notes from
one debt holder to another. The transfer was treated as a modification of the
Convertible Promissory Notes. The Convertible Promissory Notes matures on
September 8, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to 50% discount of the lowest trading
price of the Common Stock as reported on the OTC Markets for the twenty prior
trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $90,498 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $78,957
was allocated as a debt discount of the note with the remainder $11,542 was
charged to current period operations as interest expense.
On October 10, 2016 Company issued an aggregate of $102,369
Convertible Promissory Notes with no issuance costs that matures on October 10,
2017. These notes bear 10% interest per annum and the Holder of this Note is
entitled, at its option, at any time, to convert all or any amount of the
principal face amount of this Note then outstanding into shares of the Company's
common stock at a price equal to 50% discount of the lowest trading price of the
Common Stock as reported on the OTC Markets for the twenty prior trading days
including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $74,334 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $74,334
was allocated as a debt discount and no amounts allocated to interest expense.
On October 19, 2016 Company issued an aggregate of $35,000
Convertible Promissory Notes with no issuance costs that matures on October 19,
2017. These notes bear 8% interest per annum and the Holder of this Note is
entitled, at its option, at any time, to convert all or any amount of the
principal face amount of this Note then outstanding into shares of the Company's
common stock at a price equal to 65% discount of the lowest trading price of the
Common Stock as reported on the OTC Markets for the twenty prior trading days
including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $44,093 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $18,846
was allocated as a debt discount of the note with the remainder $25,247 was
charged to current period operations as interest expense.
On October 27, 2016 Company issued an aggregate of $48,400
Convertible Promissory Notes with issuance cost of $8,400 that matures on
October 27, 2017. These notes bear 10% interest per annum and the Holder of this
Note is entitled, at its option, at any time, to convert all or any amount of
the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to 50% discount of the lowest trading
price of the Common Stock as reported on the OTC Markets for the twenty prior
trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $27,583 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241,19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $27,583
was allocated as a debt discount up to the proceeds of the note and no amounts
allocated to interest expense.
On October 31, 2016 Company issued an aggregate of $163,334
Convertible Promissory Notes with issuance cost of $16,334 that matures on
October 31, 2017. These notes bear 10% interest per annum and the Holder of this
Note is entitled, at its option, at any time, to convert all or any amount of
the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to lesser of $0.005 or 50% discount of
the lowest trading price of the Common Stock as reported on the OTC Markets for
the twenty prior trading days including the day upon which a Notice of
Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $63,303 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $63,303
was allocated as a debt discount and no amounts allocated to interest expense.
On November 14, 2016 Company issued an aggregate of $31,111
Convertible Promissory Notes with issuance cost of $6,111 that matures on
November 14, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to lesser of $0.005 or 50% discount of
the lowest trading price of the Common Stock as reported on the OTC Markets for
the twenty prior trading days including the day upon which a Notice of
Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $47,670 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $25,000
was allocated as a debt discount of the note with the remainder $22,670 was
charged to current period operations as interest expense.
On November 22, 2016 Company issued an aggregate of $29,700
Convertible Promissory Notes with issuance cost of $4,700 that matures on
November 22, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to 50% discount of the lowest trading
price of the Common Stock as reported on the OTC Markets for the twenty prior
trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $19,950 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.59%
|
The initial fair values of the embedded debt derivative $19,950
was allocated as a debt discount.
On November 30, 2016 Company issued an aggregate of $100,000
Convertible Promissory Notes with issuance cost of $13,000 that matures on
November 30, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares
of the Company's common stock at a price equal to lesser of $0.005 or 50%
discount of the lowest trading price of the Common Stock as reported on the OTC
Markets for the twenty prior trading days including the day upon which a Notice
of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $63,665 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.59%
|
The initial fair values of the embedded debt derivative $63,665
was allocated as a debt discount and no amounts allocated to interest expense.
On December 23, 2016 Company issued an aggregate of $45,100
Convertible Promissory Notes with issuance cost of $7,600 that matures on
December 23, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to 50% discount of the lowest trading
price of the Common Stock as reported on the OTC Markets for the twenty prior
trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $22,112 of
the embedded derivative. The fair value of the embedded derivative was
determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $22,112
was allocated as a debt discount and no amounts allocated to interest expense.
On December 29, 2016 Company issued an aggregate of $91,111
Convertible Promissory Notes with issuance cost of $9,111 that matures on
December 29, 2017. These notes bear 10% interest per annum and the Holder of
this Note is entitled, at its option, at any time, to convert all or any amount
of the principal face amount of this Note then outstanding into shares of the
Company's common stock at a price equal to lesser of $0.005 or 50% discount of
the lowest trading price of the Common Stock as reported on the OTC Markets for
the twenty prior trading days including the day upon which a Notice of
Conversion is received.
The Company identified embedded derivatives related to the
Convertible Promissory Notes. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the
fair value as of each subsequent balance sheet date. At the inception of the
Convertible Promissory Note, the Company determined a fair value of $68,524 of the embedded derivative. The fair value of the
embedded derivative was determined using the Black Scholes Model based on the
following assumptions:
Dividend yield:
|
0.00%
|
Volatility
|
241.19%
|
Risk free rate:
|
.85%
|
The initial fair values of the embedded debt derivative $68,524
was allocated as a debt discount up to the proceeds of the note and no amounts
allocated to interest expense.
The modification of the Notes was evaluated under FASB
Accounting Standards Codification (ASC) Topic No. 470-50-40, Debt
Modification and Extinguishments. Therefore, according to the guidance, the
instruments were determined to be substantially different, and the transaction
qualified for extinguishment accounting. During the six months ended December
31, 2016, $1,539,701 was recorded as loss on extinguishment of debt due to
settlement agreement with note holders. The $1,539,701 consists of net increase
in principal of convertible promissory notes of $1,429,501 (net of extinguished
interests of $137,883), increase in principal of non-convertible promissory
notes of $520,000, extinguished derivative liabilities for debt and warrants
with fair values on date of conversion was $298,728 and $111,072 respectively.
During the three and six months period ended December 31, 2016
the Company amortized the debt discount on all the notes of $404,026 and
$546,358, respectively to operations as expense including $28,957 and $33,052,
respectively, for accretion expenses. During the three and six months period
ended December 31, 2015 the Company amortized the debt discount on all the notes
of $149,379 and $320,322, respectively, to operations as expense.
Derivative Liability - Debt
The fair value of the described embedded derivative on all debt
was valued at $1,812,194 and $1,162,058 at December 31, 2016 and June 30, 2016,
respectively, which was determined using the Black Scholes Model with the
following assumptions:
|
December 31, 2016
|
June 30, 2016
|
Dividend yield:
|
0%
|
0%
|
Volatility
|
241.2 267.9%
|
346.6 453.3%
|
Risk free rate:
|
0.62%-0.85%
|
0.39%-0.66%
|
The Company recorded fair value of the derivative liability on
debt to market resulting in non-cash, non-operating gain of $270,809 and
$1,070,492 for the six months ended December 31, 2016 and 2015, respectively.
For the three months ending December 31, 2016 and 2015, a non-cash,
non-operating gain of $1,239,892 and $8,660,230 was recorded respectively.
During the period ended December 31, 2016 and June 30, 2016 the
Company reclassed the derivative liability of $305,763 and $768,175,
respectively, to additional paid in capital on conversion of convertible note.
8. Convertible Promissory Notes
Continued
The following table provides a summary of changes in fair value
of the Companys Level 3 financial liabilities as of December 31, 2016 and June
30, 2016:
|
|
Derivative
|
|
|
|
Liability (convertible
|
|
|
|
promissory notes)
|
|
Balance, June 30, 2015
|
$
|
1,646,448
|
|
Initial fair value at note issuances
|
|
1,027,009
|
|
Fair value of liability at note conversion
|
|
(768,175
|
)
|
Mark-to-market at
June 30, 2016
|
|
(743,224
|
)
|
Balance, June 30, 2016
|
$
|
1,162,058
|
|
Initial fair value at note issuances
|
|
1,525,435
|
|
Fair value of liability at note conversion
|
|
(305,763
|
)
|
Extinguishment of derivative liability
|
|
(298,728
|
)
|
Mark-to-market at December 31, 2016
|
|
(270,809
|
)
|
|
|
|
|
Balance, December 31, 2016
|
$
|
1,812,193
|
|
Net gain for the period included in earnings relating to
the liabilities held at December 31, 2016
|
$
|
270,809
|
|
|
|
|
|
Derivative Liability- Warrants
Along with the promissory notes, the Company issued warrants
that 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 480. The warrants are recorded at fair
value using the Black-Scholes option pricing model and marked-to-market at each
reporting period, with the changes in the fair value recorded in the
consolidated statement of operations and comprehensive income (loss).
During the period ended December 31, 2016 and the year ended
June 30, 2016 no warrants were issued along with convertible note.
The fair value of the described embedded derivative on all
warrants was valued at $270,055 at December 30, 2016 and $268,611 at June 30,
2016 which was determined using the Black Scholes Model with the following
assumptions:
|
December 31,
|
June 30, 2016
|
|
2016
|
|
Dividend yield:
|
0
%
|
0%
|
Volatility
|
240.7 291.9 %
|
229.1 275.4%
|
Risk free rate:
|
0.88 -
1.47 %
|
0.71 1.01%
|
8. Convertible Promissory Notes
Continued
|
|
Warrants
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
|
|
|
|
Price
|
|
|
life
|
|
Balance, June 30, 2015
|
|
27,092
|
|
$
|
100.98
|
|
|
3.79 years
|
|
Exercised
|
|
(120
|
)
|
|
280.00
|
|
|
-
|
|
Issued
|
|
-
|
|
|
-
|
|
|
-
|
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
Cancelled
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance, June 30, 2016
|
|
26,972
|
|
$
|
100.20
|
|
|
2.79 years
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
Issued
|
|
-
|
|
|
-
|
|
|
-
|
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
Cancelled
|
|
(10,834
|
)
|
|
164.80
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
16,138
|
|
$
|
211.60
|
|
|
2.91 years
|
|
The following table provides a summary of changes in fair value
of the Companys Level 3 financial liabilities as of December 31, 2016 and June
30, 2016:
|
|
Derivative
|
|
|
|
Liability (warrants)
|
|
Balance, June 30, 2015
|
$
|
143,375
|
|
Initial fair value of warrant derivatives at note issuances
|
|
-
|
|
Fair value of warrant exercised
|
|
(22,476
|
)
|
Mark-to-market at
June 30, 2016 warrant liability
|
|
147,712
|
|
Balance, June 30, 2016
|
$
|
268,611
|
|
Fair value of warrant cancelled
|
|
(111,073
|
)
|
Mark-to-market at December 31, 2016 warrant liability
|
|
112,517
|
|
Balance, December
31, 2016
|
$
|
270,055
|
|
|
|
|
|
Net loss for the
year included in earnings relating to the liabilities held at December 31,
2016
|
$
|
112,517
|
|
The Company recorded fair value of the derivative liability on
warrants to market resulting in non-cash, non-operating gain of $68,730 and
$245,829 for the three months ended December 31, 2016, and 2015, respectively
and non-cash, non-operating loss of $112,517 and $606,206 for the six months
ended December 31, 2016, and 2015, respectively.
During the period ended December 31, 2016 and June 30, 2016 the
Company reclassed the derivative liability on warrants of $Nil and $22,476,
respectively, to additional paid in capital on exercise of warrants.
9. Related Party Transactions
During the six months ended December 31, 2016, the Company incurred consulting fees of $41,000 (December 31, 2015 - $1,115) and during the three months ended December 31, 2016, the Company incurred consulting fees of $17,000 (December
31, 2015 - $300) with directors and officers out of which there were no stock payments.
As of December 31, 2016, the Company repaid to a director for a non-interest bearing demand loan of $nil (Note 10) (June 30, 2016 – payable $nil). The balance outstanding for this loan is $115,000.
These transactions are in the normal course of operations and are measured at the exchange amount of consideration established and agreed to by the related parties.
10. Going Concern and Liquidity Considerations
The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal
course of business. As at December 31, 2016, the Company had a working capital deficiency of $5,011,884 (June 30, 2016 - $2,473,600) and an accumulated deficit of $53,610,023 (June 30, 2016 - $50,806,439). The Company intends to fund
operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.
The ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtaining additional financing to continue operations, explore and develop the mineral properties and the discovery, development and sale of ore
reserves.
In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
11. Commitments and Contingencies
Employment Agreements
On January 12, 2014, the Company entered into an employment agreement with a director and officer. Commencing on January 12, 2014, the director and officer will be employed for 24 months ending on January 12, 2016. Pursuant to the agreement, annual
salary of US$120,000 is payable monthly in cash or if the Company does not have available cash, in shares of the Company’s common stock.
11. Commitments and Contingencies -
Continued
Consulting Agreements
On January 1, 2014, the Company entered in a consulting agreement with a consultants to provide services as members of the Board of Directors in regards to the Company’s management and operations. The compensation for the services to be
provided will be $12,000 payable monthly in cash or if the Company does not have available cash, in shares of the Company’s common stock. The consulting agreement was amended on October 22, 2014 to include an additional aggregate of
$30,000 payable as of October 22, 2014 in cash or in shares of the Company’s common stock, and changed the term of agreement from 12 months to 10 months. Effective November 1, 2014, the consultant resigned as member of the Board of
Directors.
On April 28, 2014, the Company entered into a consulting agreement with a consultant to provide services as members of the Board of Directors in regards to the Company’s 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 $200.0 per share, issuable on May 15, 2014, effective April 28, 2014 to April 27, 2015. The
consultant resigned as member of the Board of Directors and these shares were not issued.
On May 30, 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 Company’s 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 a period of six months from the effective date of May 30, 2014.
On August 1, 2014, the Company entered into a consulting agreement with a 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 500 common shares of the Company valued at $68,000. These shares were issued in full effective October 22, 2014.
Lease Commitment
On May 25, 2016, the Company entered into a sublease agreement for a term of twelve months and expiring on May 30, 2017. Future minimum rental payments required under operating lease (exclusive of other additional rent payments) are $5,993.
Litigation
From time to time we may be a defendant and plaintiff in various other legal proceedings arising in the normal course of our business. Except as disclosed above, we are currently not a party to any material legal proceedings or government actions,
including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this
Annual Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material
interest adverse to us.
12. Discontinued Operations
On September 4, 2015, the Company entered into an Asset Purchase agreement whereby the Company sells the net assets of Alta Disposal Morinville Ltd. (of which the Company had acquired 51% interest on October 18, 2013) for total purchase price of
CDN$10,000.
Operating results for the six months ended December 31, 2016 and 2015 for Alta Disposal Morinville Ltd. are presented as discontinued operations and the assets and liabilities classified as held for sale are presented separately in the unaudited
condensed balance sheet.
A breakdown of the discontinued operations is presented as follow:
Consolidated Statements of Operations and Comprehensive
Loss
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Selling, general and administrative
|
|
(49
|
)
|
|
(24,496
|
)
|
|
(80
|
)
|
|
(78,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
$
|
(49
|
)
|
$
|
(24,496
|
)
|
$
|
(80
|
)
|
$
|
(78,570
|
)
|
Consolidated Balance Sheets
|
|
December 31,
|
|
|
June 30, 2016
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,183
|
|
$
|
1,301
|
|
Receivable, net
|
|
631
|
|
|
651
|
|
Prepaid expenses
|
|
1,765
|
|
|
1,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. Discontinued
Operations -
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GST Receivable
|
|
15,732
|
|
|
16,237
|
|
|
$
|
19,312
|
|
$
|
20,011
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
$
|
6,221
|
|
$
|
6,420
|
|
13. Subsequent Events
The Company has evaluated subsequent events from January 1,
2017, through the date of this report, and determined there are no other items
to disclose.
Convertible Secured Redeemable Note
On January 17, 2017 the Company issued an aggregate of $46,500
Convertible Secured Redeemable Note that matures on January 17, 2018. These
notes bear 10% interest per annum and the Holder of this Note is entitled, at
its option, at any time, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company's common stock
at a price equal to 50% of the lowest trading price of the Common Stock as
reported on the OTC Markets for the twenty prior trading days including the day
upon which a Notice of Conversion is received.
On January 25, 2017 the Company issued an aggregate of $132,222
Convertible Secured Redeemable Note that matures on January 25, 2018. These
notes bear 10% interest per annum and the Holder of this Note is entitled, at
its option, at any time, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company's common stock
at a price equal to 50% of the lowest trading price of the Common Stock as
reported on the OTC Markets for the twenty prior trading days including the day
upon which a Notice of Conversion is received.
On January 26, 2017 the Company issued an aggregate of $99,833 Convertible Secured Redeemable Note that matures on January 26, 2018. These notes bear 10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to
convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty
prior trading days including the day upon which a Notice of Conversion is received.
On January 27, 2017 the Company issued an aggregate of $116,600 Convertible Secured Redeemable Note that matures on January 27, 2018. These notes bear 10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to
convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty
prior trading days including the day upon which a Notice of Conversion is received.
On January 31, 2017, Union Capital LLC filed a complaint against our company in
the United States District Court, Southern District of New York. The nature and
circumstances of the complaint are further described in Item 1Legal Proceedings
of this Quarterly Report on Form 10-Q, the contents of which are hereby
incorporated into this Item 5 by reference. As at the date of this report, we
have engaged legal counsel and intend to respond to the complaint with an answer
or motion in due course.
On February 3, 2017 the Company issued an aggregate of $80,850 Convertible Secured Redeemable Note that matures on January 26, 2018. These notes bear 10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to
convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty
prior trading days including the day upon which a Notice of Conversion is received.
Conversions
Subsequent to December 31, 2016, the following conversions occurred:
On January 2, 2017 the Company issued 24,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 4, 2017 the Company issued 23,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 5, 2017 the Company issued 25,014,107 common shares at a deemed price of $0.00065 per share for promissory note conversion.
On January 13, 2017 the Company issued 28,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 17, 2017 the Company issued 28,598,938 common shares at a deemed price of $0.00065 per share for promissory note conversion.
On January 19, 2017 the Company issued 26,063,507 common shares at a deemed price of $0.00065 per share for promissory note conversion.
On January 19, 2017 the Company issued 31,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 20, 2017 the Company issued 14,956,600 common shares at a deemed price of $0.00065 per share for promissory note conversion.
On January 23, 2017 the Company issued 32,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 24, 2017 the Company issued 23,441,660 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 25, 2017 the Company issued 34,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 30, 2017 the Company issued 30,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On January 31, 2017 the Company issued 34,031,250 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On February 6, 2017 the Company issued 38,625,200 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On February 8, 2017 the Company issued 35,000,000 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On February 13, 2017 the Company issued 44,588,820 common shares at a deemed price of $0.0005 per share for promissory note conversion.
On February 16, 2017 the Company issued 10,864,000 common shares at a deemed price of $0.00125 per share for promissory note conversion.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”,
“should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or
other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our
industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this annual report, the terms “we”, “us”, “our company”, mean Lithium Exploration Group, Inc. a Nevada corporation, our wholly owned subsidiaries, Alta Disposal Ltd., an Alberta, Canada corporation,
Black Box Energy, Inc., a Nevada corporation, and our 51% owned subsidiary, Alta Disposal Morinville Ltd., an Alberta, Canada corporation, unless otherwise indicated.
Disclosure Adjustments for Reverse Stock Split
On January 19, 2015, our board of directors consented to effect a reverse stock split of our issued and outstanding shares of common stock on a basis of 20 old shares of common stock for one 1 new share of common stock. The reverse stock split was
reviewed and approved for filing by the FINRA effective February 25, 2015. Our authorized capital was not affected by the reverse stock split.
On July 13, 2015, our board of directors consented to effect a reverse stock split of our issued and outstanding shares of common stock on a basis of 200 old shares of common stock for 1 new share of common stock. The reverse stock split was
reviewed and approved for filing by the FINRA effective September 30, 2015. Our authorized capital was not affected by the reverse stock split.
In this Quarterly Report and in the accompanying audited financial statements and notes, the above described reverse splits are reflected retrospectively in the descriptions of shares and warrants, and their corresponding issuance and exercise
prices, except where 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 4635 South Lakeshore Drive, Suite 200, Tempe Arizona, 85282-7127, 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. became 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. Effective September 4, 2015, our company entered into an Asset Purchase Agreement with Cancen Oil Canada
whereby we sold all right, title and interest of Alta Disposal Morinville Ltd. assets for total purchase price of CAD$10,000 (approximately USD$7,531.25) .
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. The reverse split became effective with the Over-the-Counter Bulletin Board at the opening of trading on February 25, 2015. We
were assigned CUSIP number 53680P209 effective February 25, 2015. Our authorized capital was not affected by the reverse stock split.
On May 1, 2015, our company entered into a share purchase agreement with an individual and disposed of our 50% interest in Tero in consideration of $300,000.
On June 22, 2015, in accordance with our articles of incorporation, our board of Directors has designated 250,000 of our 100,000,000 authorized shares of Preferred Stock as Series “A” Preferred Stock. The Series “A’ Preferred
Stock, par value $0.001, will rank senior to our common stock, carrying general voting rights with the common stock at the rate of 62 votes per share. The Series “A” Preferred Stock will be deemed cancelled within 1 year of issuance
and are not entitled to share in dividends or other distributions. So long as any shares of Series “A” Preferred Stock are outstanding, the affirmative vote of not less than 75% of those outstanding shares of Series “A”
Preferred Stock will be required for any change to our Articles of Incorporation.
On July 9, 2015 our board of directors approved a settlement agreement dated June 25, 2015 among our company, JDF Capital Inc., and our wholly owned subsidiary, Alta Disposal Ltd. Previously, pursuant to a General Security Agreement dated July 22,
2014, JDF Capital Inc. was granted a first ranking security interest over all current and future assets of Alta Disposal Ltd. in full guarantee of $708,000 loan to our Company. Pursuant to the Settlement Agreement, JDF Capital Inc. and its
assign, Blue Citi LLC, have agreed to release and discharge their general security interest in consideration of the issuance of 130,000 shares of Series “A” Preferred Stock.
On July 13, 2015 our company's directors approved an increase to our authorized capital from 2,000,000,000 shares of common stock, par value $0.001 to 10,000,000,000 shares of common stock, par value of $0.001 per share and a reverse stock
split on a basis of up to 200 old shares of common stock for one (1) share of common stock. The increase of authorized capital and stock split was approved by shareholders on July 13, 2015. A Definitive Schedule 14C was filed with United States
Securities and Exchange Commission ("SEC") on August 6, 2015. On September 9, 2015, we filed with the Nevada Secretary of State a Certificate of Amendment increasing our authorized capital from 2,000,000,000 shares of common stock, par value
$0.001 to 10,000,000,000 shares of common stock, par value of $0.001 per share. The reverse split became effective with the OTC Markets at the opening of trading on September 30, 2015. Effective September 30, 2015, our new CUSIP number is
53680P308.
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.
Business Developments and Agreements During the Six Months Ended December 31, 2016
On September 1, 2016, our company entered into letter agreements with five separate investors with the intent to buyout their notes and warrants. Pursuant to the terms of the agreement, the investors have agreed to a standstill period until
September 16, 2016. The buyout will take place over a six month period of time and will result in an aggregate of $252,856 in debt being retired, an aggregate of $195,500 in warrants being retired and an aggregate buyout amount of
$460,000 will be paid over the period Additionally the Company will also issue an aggregate of $232,500 in new convertible debt. Conversion Price for note will be 65% of the lowest trading price of the Common Stock as reported on the OTC
Markets electronic quotation service or such marketplace. Note will have no prepayment penalties and can be purchased from the holder at face value.
The various letters of agreement impose standstill periods on the holders of the convertible notes during which time they will refrain from converting their convertible notes into common shares. Each standstill period will expire upon termination of
the applicable letter of intent or until the execution of a definitive agreement, whichever is earlier. Each letter of intent contemplates the completion of good faith negotiation and due diligence by the parties by September 12, 2016 which, if
successful, will be followed by the execution and closing of a definitive agreement by September 14, 2016 and September 16, 2016, respectively. The closing of the definitive definitive agreement will be subject to a number of conditions precedent
which include, without limitation, our Company’s ability to secure sufficient and timely financing to complete the transaction, customary director approvals, and the participation of each of the convertible noteholders in question.
On September 9, 2016, we incorporated a wholly-owned subsidiary, Black Box Energy, Inc., in the State of Nevada.
Also on September 9, 2016, through Black Box Energy, Inc., we entered into a letter agreement with PetroChase, Inc. pursuant to which we agreed to purchase 50% of a 70% working interest held by PetroChase in a certain oil & gas lease known as
the McKean County Project, located in McKean County, Pennsylvania. Each 10% working interest entitles the holder to earn a $0.70% net revenue interest derived from the lease. In consideration for the working interest we paid $250,000 to
PetroChase, Inc. in equal installments on September 9th and September 16th, 2016. We are required to pay an additional $30,000 to PetroChase for management fees by December 16, 2016.
Pursuant to the letter agreement we will be entitled to recoup 100% of net revenue derived from the lease until we have recouped 100% of the $280,000 paid in consideration of the working interest. The agreement provides that PetroChase will
serve as the operator and drill contractor for the project. The drilling of an initial well on the property was scheduled for fall of 2016. As at the date of this report, we are in dispute with Petrochase regarding its failure to drill a well in
accordance with the agreement, and have given Petrochase notice of breach of contract. We have therefore indefinitely postponed delivery of the $30,000 management fee until this issue has been resolved.
Loans of Our Company
For the six months period ended December 31, 2016 and for the subsequent period, 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 descriptions below of the loans, the issuance of common shares pursuant to the conversion of debt pursuant to convertible promissory notes, and the issuance of common shares pursuant to the exercise of warrants,
transactions are a on a post reverse stock split basis. All the loans, convertible promissory notes, and warrants include terms that make them subject to the share splits.
Loan with Inlight Capital Partners
As additional consideration for the settlement, our company issued a convertible promissory to InLight Capital Partners with an aggregate face value of $35,000 that matures on October 19, 2017. The Note bears 8% interest per annum and is
convertible, at the option of the Holder, in whole or in part, into shares of our company’s common stock at a 35% discount to the lowest trading price occurring during the ten trading days prior to the notice of conversion.
Loan with VES Investment Trust
On April 19, 2016 we entered into a Securities Purchase Agreement with VES Investment Trust pursuant to which VES has purchased a Convertible Promissory Note dated April 19, 2016 in the aggregate principal amount of up to $30,000. As at October
18, 2016, there was $30,000.00 in unpaid principal on the note, plus accrued interest. On October 18, 2016, we entered into a Debt Settlement Agreement with VES Investment Trust pursuant to which we agreed to pay to VES Investment Trust
$60,000 in two equal installments on January 2, 2017 and April 19, 2017, respectively.
Loan with JDF Capital Inc.
On August 12, 2016, our company entered into an agreement with JDF Capital Inc. Pursuant to the agreement, in consideration of $37,000 paid to our company, we issued to JDF Capital a convertible promissory note in the aggregate principal amount
of $42,500, which amount is inclusive of prepaid interest at the rate of 10% per annum and $2,500 for legal expenses. The promissory note is due and payable on August 12, 2017 and will bear additional interest after maturity at the rate of
10% per annum The Note is convertible at the option of the holder into common shares of our company at a price per share equal to 65% of the lowest trading price of our common stock as reported on the OTC Markets electronic quotation system during
the twenty trading days ending on the date the applicable conversion notice is received by our company.
On September 2, 2016 we entered into a loan agreement with JDF Capital Inc. pursuant to which JDF Capital has provided our company with a bridge loan in the amount of $50,000. The loan bears interest at the rate of 10% per annum and is due
November 2, 2016. In the event the loan is not repaid on maturity, as additional consideration to JDF Capital, we have agreed to amend the July 22, 2015, $708,000 convertible promissory note held by JDF Capital so that the note shall be
convertible into our common shares at a 50% discount to market price rather than a 35% discount to market price. In September, 2016 we prepaid $50,082.19 to JDF Capital in full settlement of all principal and interest outstanding pursuant to the
loan agreement.
On September 27, 2016, we entered into an agreement with JDF Capital Inc.. Pursuant to the terms of the agreement, the investor acquired a 10% convertible note with an aggregate face value of $64,900, with an issuance discount of $5,900 and legal fees of $4,000. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of common stock in the Company at a
price equal to the lesser of $0.005 or 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On October 10, 2016, our company entered into a securities purchase agreement with JDF Capital Inc. Pursuant to the terms of the agreement, JDF Capital acquired a 10% original issue discount convertible note with an aggregate face value of
$102,369 in consideration for $93,062.50. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of our company’s common stock at
a 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
On October 27, 2016, our company entered into a securities purchase agreement with JDF Capital Inc. Pursuant to the terms of the agreement, JDF Capital acquired a 10% original issue discount convertible note with an aggregate face value of
$48,400, with an issuance discount of $4,000 of legal fees. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of our
company’s common stock at a 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
On November 22, 2016 Company issued an aggregate of $29,700 Convertible Promissory Notes to JDF Capital Inc. in consideration for $25,000. The note matures on November 22, 2017 and bears 10% interest per annum. The Holder of this Note is
entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% discount of the lowest trading price of the Common Stock
as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On December 23, 2016 Company issued a $45,100 Convertible Promissory Notes to JDF Capital Inc. with issuance cost of $7,600 that matures on December 23, 2017. These notes bear 10% interest per annum and the Holder of this Note is entitled,
at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% discount of the lowest trading price of the Common Stock as
reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On January 17, 2017, our company entered into a securities purchase agreement with JDF Capital Inc. Pursuant to the terms of the agreement, JDF Capital acquired a convertible note with an aggregate face value of $46,500 in consideration of
$42,500 ($4,000 was deducted from the amount funded in respect of legal fees incurred by the purchaser). The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding
at the date into shares of our company’s common stock at a 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
On January 27, 2017, our company entered into a securities purchase agreement with JDF Capital Inc. Pursuant to the terms of the agreement, JDF Capital acquired a 10% original issue discount convertible note with an aggregate face value of
$116,600, including a 10% issuance discount of $10,600, and $6,000 in legal fees deducted from the amount funded. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal
outstanding at the date into shares of our company’s common stock at a 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
On February 3, 2017, our company entered into a securities purchase agreement with JDF Capital Inc. Pursuant to the terms of the agreement, JDF Capital acquired a 10% original issue discount convertible note with an aggregate face value of
$80,850, including a 10% issuance discount of $7,350, and $5,000 in legal fees deducted from the amount funded. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal
outstanding at the date into shares of our company’s common stock at a 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
Loan with Concord Holding Group LLC
On September 07, 2016, we entered into an agreement with Concord Capital Group LLC. Pursuant to the terms of the agreement, the investor acquired a 10% convertible note with an aggregate face value of $116,000, with an issuance discount of
$11,600. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of the of common stock in the Company at a price equal to the lesser of
$0.005 or 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On September 08, 2016, we entered into an agreement with Concord Capital Group LLC. Pursuant to the terms of the agreement, the investor acquired a 10% convertible note with an aggregate face value of $27,778, with an issuance discount of
$2,778. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of common stock in the Company at a price equal to the lesser of $0.005
or 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On September 8, 2016, the Company had transferred an aggregate of $15,304 plus accrued interest of $104,696 in Convertible Promissory Notes from one debt holder to another. The transfer was treated as a modification of the Convertible
Promissory Notes. The Convertible Promissory Notes matures on September 8, 2017. These notes bear 10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount
of this Note then outstanding into shares of the Company's common stock at a price equal to 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a
Notice of Conversion is received.
On September 15, 2016, we entered into an agreement with Concord Capital Group LLC. Pursuant to the terms of the agreement, the investor acquired a 10% convertible note with an aggregate face value of $257,778, with an issuance discount of
$25,778. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of common stock in the Company at a price equal to the lesser of $0.005
or 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On September 29, 2016, we entered into an agreement with Concord Capital Group LLC. Pursuant to the terms of the agreement, the investor acquired a 10% convertible note with an aggregate face value of $61,112, with an issuance discount of
$6,112. The note matures in one year. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of common stock in the Company at a price equal to the lesser of $0.005
or 50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On October 31, 2016, our company entered into a securities purchase agreement with Concord Holding Group LLC. Pursuant to the terms of the agreement, Concord acquired a convertible note bearing 10% interest with an aggregate face value of
$163,334 with an issuance discount of $16,334 that matures on October 31, 2017. The holder of this note is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of our company’s common
stock at a price equal to lesser of $0.005 or 50% discount to the lowest trading price occurring during the 20 trading days prior to the notice of conversion.
On November 14, 2016 Company issued an aggregate of $31,111 Convertible Promissory Notes to Concord Holding Group LLC in consideration for $28,000. The note matures on November 14, 2017 and bears 10% interest per annum. The Holder of this
Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005 or 50% discount of the lowest
trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On November 30, 2016 Company issued an aggregate of $100,000 Convertible Promissory Notes to Concord Holding Group LLC in consideration for $90,000. The Note matures on November 30, 2017 and bears 10% interest per annum. The Holder of this
Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005 or 50% discount of the lowest
trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On December 29, 2016 Company issued $91,111 Convertible Promissory Notes to Concord Holding Group LLC in consideration for $82,000. The Note matures on December 29, 2017 and bears 10% interest per annum. The Holder of this Note is entitled,
at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005 or 50% discount of the lowest trading price of the
Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On January 25, 2017 we issued a Secured Redeemable Note to Concord Holding Group, LLC with an aggregate value of $132,000 Convertible that matures on January 25, 2018. These notes bear 10% interest per annum and the Holder of this Note is
entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common Stock as
reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On January 26, 2017 we issued a Secured Redeemable Note to Concord Holding Group, LLC with an aggregate value of $99,833 Convertible Secured Redeemable Note that matures on January 26, 2018. These notes bear 10% interest per annum and the Holder
of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common
Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On January 25, 2017 the Company issued an aggregate of $132,222 Convertible Secured Redeemable Note to Concord Holding Group, LLC in consideration for $119,000. The note matures on January 25, 2018and bears 10% interest per annum. The Holder
of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common
Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
On January 26, 2017 the Company issued an aggregate of $99,833 Convertible Secured Redeemable Note to Concord Holding Group, LLC in consideration for $89,850. The note matures on January 26, 2018 and bears 10% interest per annum. The Holder
of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to 50% of the lowest trading price of the Common
Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
Results of Operations
We have generated nominal revenues since inception and incurred $266,358 and $480,098 in operating expenses for the three and six month periods ended December 31, 2016.
The following provides selected financial data about our company for the three and six month periods ended December 31, 2016 and 2015.
Three months ended December 31, 2016 and 2015.
|
|
Three months
|
|
|
Three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating expenses
|
$
|
266,358
|
|
$
|
167,606
|
|
Other Income
(expenses):
|
|
|
|
|
|
|
Interest expense
|
$
|
(172,462
|
)
|
$
|
(255,178
|
)
|
Gain on change in fair value
of derivative liability
|
$
|
1,308,622
|
|
$
|
8,906,059
|
|
Amortization of debt discount
|
$
|
(404,026
|
)
|
$
|
(149,379
|
)
|
Bad-debt write off
|
$
|
-
|
|
$
|
-
|
|
Loss on disposal of business operations
|
$
|
-
|
|
$
|
(72
|
)
|
Loss on extinguishment of
liability
|
$
|
(48,619
|
)
|
$
|
-
|
|
Loss from discontinued operations
|
$
|
(49
|
)
|
$
|
(24,496
|
)
|
Net Income
|
$
|
417,108
|
|
$
|
8,309,328
|
|
Operating expenses for the three months ended December 31, 2016
increase by $98,752 compared to the same period in 2015, primarily as a result
of an increase in selling, and general and administrative expenses. Our
financial statements indicate net income of $417,757 and $8,309,328 for the
three month periods ended December 31, 2016 and 2015, respectively, due
primarily to gains in the fair value of the derivative liabilities during those
periods, offset by amortization of debt discount and interest expense.
Six months ended December 31, 2016 and 2015.
|
|
Six months
|
|
|
Six months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
Operating expenses
|
$
|
480,098
|
|
$
|
314,415
|
|
Other income
(expenses):
|
|
|
|
|
|
|
Interest expense
|
$
|
(395,678
|
)
|
$
|
(601,960
|
)
|
Gain on change in fair value
of derivative liability
|
$
|
158,292
|
|
$
|
464,286
|
|
Amortization of debt discount
|
$
|
(546,358
|
)
|
$
|
(320,332
|
)
|
Bad-debt write off
|
$
|
-
|
|
$
|
(20,000
|
)
|
Gain on disposal of business operations
|
$
|
|
|
$
|
7,565
|
|
Loss on extinguishment of
liability
|
$
|
1,539,701
|
|
$
|
-
|
|
Loss from discontinued operations
|
$
|
(80
|
)
|
$
|
(78,570
|
)
|
Net loss
|
$
|
(2,803,623
|
)
|
$
|
(863,416
|
)
|
Operating expenses for the six months ended December 31, 2016
increase by $165,683 as compared to the same period in 2015 as a result of
increased selling, general and administrative expenses, and increase mining
expenses.
Liquidity and Capital Resources
The following table provides selected financial data about our
company as of December 31, 2016, and June 30, 2016, respectively.
Working Capital
|
|
As at
|
|
|
As at
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2016
|
|
Total current assets
|
$
|
88,982
|
|
$
|
48,007
|
|
Total current liabilities
|
$
|
5,100,866
|
|
$
|
2,521,607
|
|
Working capital (deficit)
|
$
|
(5,011,884
|
)
|
$
|
(2,473,600
|
)
|
Cash Flows
|
|
Six Months
|
|
|
Six Months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net cash used in operating
activities
|
$
|
(403,689
|
)
|
$
|
(200,080
|
)
|
Net cash used in investing activities
|
$
|
(250,000
|
)
|
$
|
Nil
|
|
Net cash provided by
financing activities
|
$
|
697,500
|
|
$
|
158,000
|
|
Effect of foreign exchange on cash
|
$
|
(449
|
)
|
$
|
(8,222
|
)
|
Increase (Decrease) in cash
|
$
|
43,362
|
|
$
|
(50,302
|
)
|
We had cash and cash equivalents of $68,570 as of December 31,
2016 compared to cash and cash equivalents of $25,208 as of June 30, 2016. We
had a working capital deficit of $5,011,884 as of December 31, 2016 compared to
a working capital deficit of $2,473,600 as of June 30, 2016.
The report of our auditors on our audited consolidated
financial statements for the fiscal year ended June 30, 2016, 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 $650,000 as described in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from shareholders or other sources.
Description
|
|
Estimated
|
|
|
Estimated
|
|
|
|
Completion
|
|
|
Expenses
|
|
|
|
Date
|
|
|
($)
|
|
General and administrative
|
|
12 months
|
|
$
|
300,000
|
|
Mining expenses (mainly technology related)
|
|
12 months
|
|
$
|
150,000
|
|
Legal and accounting
|
|
12 months
|
|
$
|
200,000
|
|
Total
|
|
|
|
$
|
650,000
|
|
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
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
These interim financial statements as of and for the three months ended December 31, 2016 and 2015 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three and six months ended December 31, 2016 are not necessarily indicative of the results to be expected for
the year ending June 30, 2017 or for any future period. All references to December 31, 2016 and 2015 in these footnotes are unaudited. These unaudited condensed consolidated financial statements should be read in conjunction with the audited
financial statements and the notes thereto for the year ended June 30, 2016 included in the Company’s annual report on Form 10-K filed with the SEC on October 18, 2016.
Principal of Consolidation
The unaudited condensed financial statements include the accounts of our company, its wholly-owned subsidiary Alta Disposal Ltd., its 51% owned subsidiary Alta Disposal Morinville Ltd. (formerly Bluetap Resources Ltd.), and its 100% interest in
Black Box Energy. Intercompany accounts and transactions have been eliminated in consolidation in conformity with the applicable accounting framework. Note that no transactions occurred within Black Box Energy for the six months ended December 31,
2016.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our company’s periodic
filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of our company. Significant estimates
that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.
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 $68,570 and $25,208 in cash and cash equivalents at December 31, 2016 and June 30, 2016, respectively.
Concentration of Risk
The Company maintains cash balances at a financial institution which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for banks located in the US. As of December 31, 2016 and June 30, 2016, the Company had no
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 consist of security deposit for office lease which will be expensed or refunded at the end of the lease period.
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. 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.
Non-controlling Interest
The 49% third party ownership of Alta Disposal Morinville Ltd. (formerly Blue Tap Resources Ltd.) at December 31, 2016 and 2015 are recorded as non-controlling interests in the consolidated financial statements. Details of changes in the
non-controlling interests during the year ended June 30, 2016 and period ending December 31, 2016 are reflected in the condensed statement of deficit.
Related Parties
Parties are considered to be related to our company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with our company. Related parties also include principal owners
of our company, its management, members of the immediate families of principal owners of our company and its management and other parties with which our company may deal if one party controls or can significantly influence the management or
operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Our company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of
the cost is reflected as a distribution to related party.
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. The total number of potential no. of dilutive shares is 1,549,537,677 at the period ending December 31, 2016.
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.
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; - equity is translated at historical exchange rates; 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 ending December, 2016 closing rate at 0.7448 CDN$: US$, average rate at 0.7580 CDN$: US$ and for the year ended June 30, 2016 closing rate at 0.769 CDN$: US$,
average rate at 0.7761 CDN$: US$. For the period ending December 31, 2015 closing rate at 0.7225 CDN$: US$, average rate at 0.7565 CDN$: US$
Comprehensive Income (Loss)
FASC Topic No. 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. As at December 31, 2016 and June 30, 2016, our
company had no material items of other comprehensive income except for the 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
Our company accounts for currently outstanding detachable warrants to purchase common stock as derivative liabilities as they are freestanding derivative financial instruments. The warrants are recorded as derivative liabilities at fair value,
estimated using a Black-Scholes option pricing model, and marked to market at each balance sheet date, with changes in the fair value of the derivative liabilities recorded in the consolidated statements of operations and comprehensive loss. Upon
exercise of a derivative financial instrument, the instrument is marked to fair value at the conversion date and is reclassified to equity.
Convertible Instruments
Our company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815 “Derivatives and Hedging”. It provide three criteria that, if met, require companies to bifurcate conversion
options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not
clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise
applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the
fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative financial instrument, the instrument is marked to fair value at
the conversion date and is reclassified to equity. Our company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of
the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of
notes redemption.
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The carrying amounts of our company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of
the short maturity of these instruments.
Our company’s Level 3 financial liabilities consist of the liability of our company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible
promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Our company used a 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.
During the year ended June 30, 2016 and period ending December 31, 2016, our company didn’t record any revenue under continuing operation.
Income Taxes
Our company accounts for income taxes pursuant to the provisions of ASC 740-10, “Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for
which management believes it is more likely than not that the net deferred asset
will not be realized.
Our company also follows the provisions of ASC 740-10 related
to accounting for uncertain income tax positions. When tax returns are filed,
some positions taken may be sustained upon examination by the taxing
authorities, while others may be subject to uncertainty about the merits of the
position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is
recognized in the financial statements in the period during which, based on all
available evidence, management believes it is more likely than not that the
position will be sustained upon examination, including the resolution of appeals
or litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions. As of December 31, 2016, our company has had no
uncertain tax positions. Our company recognizes interest and penalties, if any,
related to uncertain tax positions as general and administrative expenses. Our
company currently has no federal or state tax examinations nor has it had any
federal or state examinations since its inception.
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. Our company recorded $Nil (June 30, 2016 - $Nil) in allowance for
doubtful accounts.
Recent Accounting Pronouncements
In January 2017, FASB issued ASU No. 2017-01, Business
Combinations (Topic 805): Clarifying the Definition of a Business, in an effort
to clarify the definition of a business with the objective of adding guidance to
assist entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. The amendments of this ASU
are effective for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years. The Company does not expect the adoption of
this amendment to have a material effect on its financial condition and results
of operations
In October 2016, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2016-16 - Income Taxes:
Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 will require
the tax effects of intercompany transactions, other than sales of inventory, to
be recognized currently, eliminating an exception under current GAAP in which
the tax effects of intra-entity asset transfers are deferred until the
transferred asset is sold to a third party or otherwise recovered through use.
The guidance will be effective for the first interim period of our 2019 fiscal
year, with early adoption permitted.
In August 2016, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU
2016-15 provides guidance regarding the classification of certain items within
the statements of cash flows. ASU 2016-15 is effective for annual periods
beginning after December 15, 2017 with early adoption permitted.
In connection with its financial instruments project, the FASB
issued ASU 2016-13 - Financial Instruments - Credit Losses: Measurement of
Credit Losses on Financial Instruments in June 2016 and ASU 2016-01 - Financial
Instruments - Overall: Recognition and Measurement of Financial Assets and
Financial Liabilities in January 2016.
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ASU 2016-13 introduces a new impairment model for most financial assets
and certain other instruments. For trade and other receivables,
held-to-maturity debt securities, loans and other instruments, entities will
be required to use a forward-looking expected loss model that will replace
the current incurred loss model and generally will result in earlier
recognition of allowances for losses. The guidance will be effective for the
first interim period of our 2021 fiscal year, with early adoption in fiscal
year 2020 permitted.
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ASU 2016-01 addresses certain aspects of recognition, measurement,
presentation, and disclosure of financial instruments. Among other provisions,
the new guidance requires the fair value measurement of investments in certain equity
securities. For investments without readily determinable fair values, entities
have the option to either measure these investments at fair value or at cost
adjusted for changes in observable prices minus impairment. All changes in
measurement will be recognized in net income. The guidance will be effective for
the first interim period of our 2019 fiscal year. Early adoption is not
permitted, except for certain provisions relating to financial liabilities.
In January 2016, the FASB issued an accounting standard update
which requires, among other things, that entities measure equity investments
(except those accounted for under the equity method of accounting or those that
result in consolidation of the investee) at fair value, with changes in fair
value recognized in earnings. Under the standard, entities will no longer be
able to recognize unrealized holding gains and losses on equity securities
classified today as available for sale as a component of other comprehensive
income. For equity investments without readily determinable fair values the cost
method of accounting is also eliminated, however subject to certain exceptions,
entities will be able to elect to record equity investments without readily
determinable fair values at cost, less impairment and plus or minus adjustments
for observable price changes, with all such changes recognized in earnings. This
new standard does not change the guidance for classifying and measuring
investments in debt securities and loans. The standard is effective for us on
July 1, 2018 (the first quarter of our 2019 fiscal year). Our company is
currently evaluating the anticipated impact of this standard on its consolidated
financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases
(Topic 842) to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet and
disclosing key information about leasing arrangements. Topic 842 affects any
entity that enters into a lease, with some specified scope exemptions. The
guidance in this Update supersedes Topic 840, Leases. The core principle of
Topic 842 is that a lessee should recognize the assets and liabilities that
arise from leases. A lessee should recognize in the statement of financial
position a liability to make lease payments (the lease liability) and a
right-of-use asset representing its right to use the underlying asset for the
lease term. For public companies, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. We are currently evaluating the impact of adopting
ASU No. 2016-02 on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08, Revenue from
Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net) that clarifies how to apply revenue
recognition guidance related to whether an entity is a principal or an agent.
ASU 2016-08 clarifies that the analysis must focus on whether the entity has
control of the goods or services before they are transferred to the customer and
provides additional guidance about how to apply the control principle when
services are provided and when goods or services are combined with other goods
or services. The effective date for ASU 2016-08 is the same as the effective
date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods
beginning after December 15, 2017, including interim periods within those years.
Our company has not yet determined the impact of ASU 2016-08 on its consolidated
financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation
Stock Compensation, or ASU No. 2016-09. The areas for simplification in this
Update involve several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification of awards as
either equity or liabilities, and classification on the statement of cash flows.
For public entities, the amendments in this Update are effective for annual
periods beginning after December 15, 2016, and interim periods within those
annual periods. Early adoption is permitted in any interim or annual period. If
an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that
interim period. An entity that elects early adoption must adopt all of the
amendments in the same period. Amendments related to the timing of when excess
tax benefits are recognized, minimum statutory withholding requirements,
forfeitures, and intrinsic value should be applied using a modified
retrospective transition method by means of a cumulative-effect adjustment to
equity as of the beginning of the period in which the guidance is adopted.
Amendments related to the presentation of employee taxes paid on the statement
of cash flows when an employer withholds shares to meet the minimum statutory
withholding requirement should be applied retrospectively. Amendments requiring
recognition of excess tax benefits and tax deficiencies in the income statement
and the practical expedient for estimating expected term should be applied
prospectively. An entity may elect to apply the amendments related to the
presentation of excess tax benefits on the statement of cash flows using either
a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on its consolidated financial statements.
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and
understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim
periods within those years. Our company has not yet determined the impact of ASU 2016-10 on its consolidated financial statements.
FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in June 2016 and clarifies the objective of the collectability criterion, presentation of taxes
collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in Topic 606 is retrospectively applied. The amendments do not change the core principle of the guidance in
Topic 606. The effective dates are the same as those for Topic 606.