ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LITHIUM EXPLORATION GROUP, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
196,221
|
|
$
|
25,208
|
|
Prepaid expenses
|
|
1,100
|
|
|
2,788
|
|
Current assets held for sale (Note 12)
|
|
19,496
|
|
|
20,011
|
|
Total current assets
|
|
216,817
|
|
|
48,007
|
|
Deposit on PetroChase Inc. Investment (Note 6)
|
|
250,000
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
466,817
|
|
$
|
48,007
|
|
|
|
|
|
|
|
|
LIABILITIES AND DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
159,649
|
|
$
|
211,813
|
|
Litigation
Provision (Note 13)
|
|
42,944
|
|
|
-
|
|
Promissory notes payable (Note 7)
|
|
30,000
|
|
|
-
|
|
Derivative
liability convertible promissory notes (Note 8)
|
|
3,376,672
|
|
|
1,162,058
|
|
Derivative liability warrants (Note 8)
|
|
551,242
|
|
|
268,611
|
|
Due to related
party (Note 9)
|
|
115,000
|
|
|
115,000
|
|
Convertible
promissory notes net of unamortized debt discount (Note 8)
|
|
2,245,962
|
|
|
619,769
|
|
Accrued interest
convertible promissory notes (Note 8)
|
|
127,900
|
|
|
137,936
|
|
Current liabilities held for sale
(Note 12)
|
|
6,280
|
|
|
6,420
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
6,655,649
|
|
|
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)
1,334,479,557
common shares (June 30, 2016 119,772,784)
|
|
1,334,480
|
|
|
- 119,773
|
|
Additional paid-in capital
|
|
49,620,663
|
|
|
48,598,773
|
|
Accumulated other comprehensive loss
|
|
(33,984
|
)
|
|
(33,731
|
)
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
(56,757,946
|
)
|
|
(50,806,439
|
)
|
Total Lithium Exploration Group, Inc. Stockholders Deficit
|
|
(5,836,787
|
)
|
|
(2,121,624
|
)
|
Non-controlling interest
|
|
(352,045
|
)
|
|
(351,976
|
)
|
Total Deficit
|
|
(6,188,832
|
)
|
|
(2,473,600
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Deficit
|
$
|
466,817
|
|
$
|
48,007
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
4
LITHIUM EXPLORATION GROUP, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Unaudited)
|
|
Three Months
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended March
|
|
|
Ended March
|
|
|
Ended March
|
|
|
Ended March
|
|
|
|
31, 2017
|
|
|
31,
2016
|
|
|
31, 2017
|
|
|
31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining (Notes 3 & 5)
|
|
50,160
|
|
|
-
|
|
|
87,792
|
|
|
5,000
|
|
Selling, general and
administrative (Notes 3 & 5)
|
|
311,970
|
|
|
63,979
|
|
|
754,436
|
|
|
373,393
|
|
Total operating expenses
|
|
362,130
|
|
|
63,979
|
|
|
842,228
|
|
|
378,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(362,130
|
)
|
|
(63,979
|
)
|
|
(842,228
|
)
|
|
(378,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Note 8)
|
|
(2,067,330
|
)
|
|
(97,758
|
)
|
|
(2,463,008
|
)
|
|
(699,719
|
)
|
(Loss) gain on change in the fair value of derivative
liability (Note 8)
|
|
(90,017
|
)
|
|
112,247
|
|
|
68,275
|
|
|
576,533
|
|
Amortization of debt discount
|
|
(597,871
|
)
|
|
(78,688
|
)
|
|
(1,144,229
|
)
|
|
(399,010
|
)
|
Loss on settlement of warrants
|
|
(42,944
|
)
|
|
-
|
|
|
(42,944
|
)
|
|
-
|
|
Bad-debt write off
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,000
|
)
|
(Loss) gain on disposal of business operations
|
|
-
|
|
|
(96
|
)
|
|
-
|
|
|
7,468
|
|
Gain (loss) on extinguishment of liability
|
|
12,400
|
|
|
-
|
|
|
(1,527,301
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(3,147,892
|
)
|
|
(128,274
|
)
|
|
(5,951,435
|
)
|
|
(913,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes (Note 4)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continued operations
|
|
(3,147,892
|
)
|
|
(128,274
|
)
|
|
(5,951,435
|
)
|
|
(913,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
(61
|
)
|
|
(290
|
)
|
|
(141
|
)
|
|
(78,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(3,147,953
|
)
|
|
(128,564
|
)
|
|
(5,951,576
|
)
|
|
(991,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net loss attributable to the
non-controlling interest
|
|
(30
|
)
|
|
(142
|
)
|
|
(69
|
)
|
|
(38,642
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Lithium
Exploration Group, Inc. Common shareholders
|
|
(3,147,923
|
)
|
$
|
(128,422
|
)
|
$
|
(5,951,507
|
)
|
$
|
(953,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted loss per Common Share
from continuing operations
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.09
|
)
|
Basic and Diluted loss per Common Share from
discontinued operations
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Weighted Average
Number of Common Shares Outstanding
|
|
898,213,521
|
|
|
11,742,168
|
|
|
432,614,598
|
|
|
10,696,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(3,147,953
|
)
|
$
|
(128,564
|
)
|
$
|
(5,951,576
|
)
|
$
|
(991,980
|
)
|
Foreign currency translation adjustment
|
|
196
|
|
|
275
|
|
|
(253
|
)
|
|
(7,947
|
)
|
Comprehensive loss
|
|
(3,147,757
|
)
|
|
(128,289
|
)
|
|
(5,951,829
|
)
|
|
(999,927
|
)
|
Comprehensive loss attributable to
non-controlling interest
|
|
(30
|
)
|
|
(142
|
)
|
|
(69
|
)
|
|
(38,642
|
)
|
Comprehensive loss attributable to Lithium Exploration
Group, Inc.common shareholders
|
$
|
(3,147,727
|
)
|
$
|
(128,147
|
)
|
$
|
(5,951,760
|
)
|
$
|
(961,285
|
)
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
5
LITHIUM EXPLORATION GROUP, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
|
|
Common Shares
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Other
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Comprehensive
|
|
|
Deficit
|
|
|
Non-controlling
|
|
|
(Deficit)
|
|
|
|
Number of
|
|
|
Amount
|
|
|
$
|
|
|
Loss
|
|
|
$
|
|
|
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
|
|
1,214,706,773
|
|
|
1,214,707
|
|
|
(450,077
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
764,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability transferred to
additional paid in capital on conversion of note
|
|
-
|
|
|
-
|
|
|
1,471,967
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,471,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(253
|
)
|
|
-
|
|
|
-
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,951,507
|
)
|
|
(69
|
)
|
|
(5,951,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2017
|
|
1,334,479,557
|
|
$
|
1,334,480
|
|
$
|
49,620,663
|
|
$
|
(33,984
|
)
|
$
|
(56,757,946
|
)
|
$
|
(352,045
|
)
|
$
|
(6,188,832
|
)
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
6
LITHIUM EXPLORATION GROUP, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss from continuing operations
|
$
|
(5,951,435
|
)
|
$
|
(913,121
|
)
|
Loss from
discontinued operations
|
|
(141
|
)
|
|
(78,860
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
used in operating
activities:
|
|
|
|
|
|
|
Non-cash interest expense
|
|
2,229,270
|
|
|
629,248
|
|
Common shares issued for interest
|
|
75,633
|
|
|
-
|
|
Gain (loss) on disposal of business operation
|
|
-
|
|
|
(7,468
|
)
|
Loss on settlement of debt
|
|
42,944
|
|
|
-
|
|
Bad debt written-off
|
|
|
|
|
20,000
|
|
(Gain) on change in the fair value of derivative liability
|
|
(68,275
|
)
|
|
(576,533
|
)
|
Amortization of debt discount
|
|
1,144,229
|
|
|
399,010
|
|
Loss on extinguishment of debt and derivative liabilities
|
|
1,527,301
|
|
|
-
|
|
|
|
|
|
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
Receivable, net
|
|
-
|
|
|
13,421
|
|
Prepaid expenses
|
|
1,688
|
|
|
-
|
|
Accrued interest
|
|
148,741
|
|
|
70,471
|
|
Accounts payable and accrued liabilities
|
|
(52,164
|
)
|
|
105,644
|
|
|
|
|
|
|
|
|
Net cash used in operating activities from
continuing operations
|
|
(902,209
|
)
|
|
(338,188
|
)
|
Net cash provided by operating activities from discontinued
operations
|
|
375
|
|
|
51,338
|
|
Net cash used in operating activities
|
|
(901,834
|
)
|
|
(286,850
|
)
|
|
|
|
|
|
|
|
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
|
|
1,323,100
|
|
|
238,000
|
|
Net cash provided by financing activities
|
|
1,323,100
|
|
|
238,000
|
|
|
|
|
|
|
|
|
Effect of foreign exchange
|
|
(253
|
)
|
|
(7,947
|
)
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents
|
|
171,013
|
|
|
(56,797
|
)
|
Cash and cash equivalents - beginning of period
|
|
25,208
|
|
|
64,098
|
|
Cash and cash equivalents - end of period
|
$
|
196,221
|
|
$
|
7,301
|
|
|
|
|
|
|
|
|
Supplementary disclosure of cash flow
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
Interest
|
$
|
-
|
|
$
|
-
|
|
Income taxes
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Supplementary non- cash Investing and
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt conversion
|
$
|
688,996
|
|
$
|
151,166
|
|
Derivative liability re-classed
to additional paid in capital
|
$
|
1,471,967
|
|
$
|
302,262
|
|
Debt discount on issuance of convertible note
and warrants
|
$
|
2,218,019
|
|
$
|
230,005
|
|
Initial derivative liability on
note issuance
|
$
|
4,447,289
|
|
$
|
836,980
|
|
Interest reclassed to convertible note
|
$
|
158,778
|
|
$
|
5,680
|
|
Re-classification of discontinued
assets and liabilities to additional paid in capital
|
$
|
-
|
|
$
|
60,188
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
7
LITHIUM EXPLORATION GROUP, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
MARCH 31, 2017
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 nine
months ended March 31, 2017 and 2016 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 nine
months ended March 31, 2017 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 March 31, 2017 and 2016 in these footnotes are unaudited.
8
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 Companys 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 nine months ended March 31, 2017.
Use of Estimates
The preparation of consolidated financial statements in
conformity with United States generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Companys periodic filings with the Securities and Exchange
Commission include, where applicable, disclosures of estimates, assumptions,
uncertainties and markets that could affect the financial statements and future
operations of the Company. Significant estimates that may materially change in
the near term include the valuation of derivative liabilities and the underlying
warrants, as well as fair value of investments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market
funds, and certificates of term deposits with original maturities of less than
three months, which are readily convertible to known amounts of cash and which,
in the opinion of management, are subject to an insignificant risk of loss in
value. The Company had $196,221 and $25,208 in cash and cash equivalents at
March 31, 2017 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 March 31, 2017 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,
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.
9
Concentrations of Credit Risk
The Companys financial instruments that are exposed to
concentrations of credit risk primarily consist of its cash and cash equivalents
and related party payables it will likely incur in the near future. The Company
places its cash and cash equivalents with financial institutions of high credit
worthiness. At times, its cash and cash equivalents with a particular financial
institution may exceed any applicable government insurance limits. The Companys
management plans to assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that any associated
credit risk exposures are limited.
Non-controlling Interest
The 49% third party ownership of Alta Disposal Morinville Ltd.
(formerly Blue Tap Resources Ltd.) at March 31, 2017 and 2016 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 March 31, 2017 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 2,938,230,749 at the period ending March 31,
2017.
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.
10
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 March 31, 2017 closing rate at 0.7519 CDN$: US$, average rate at 0.7571
CDN$: 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 March 31, 2016 closing
rate at 0.771 CDN$: US$, average rate at 0.7468 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 March 31, 2017 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.
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.
11
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.
Fair Value of Financial Instruments
ASC 820,
Fair Value Measurements and Disclosures
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. ASC 820 establishes a fair
value hierarchy based on the level of independent, objective evidence
surrounding the inputs used to measure fair value. A financial instruments
categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820 prioritizes the
inputs into three levels that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets
or liabilities;
Level 2 - Inputs other than quoted prices included within Level
1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little or
no market activity, therefore requiring an entity to develop its own assumptions
about the assumptions that market participants would use in pricing.
The carrying amounts of the Companys financial assets and
liabilities, such as cash and cash equivalents, prepaid expenses, deposit,
accounts payable and accrued liabilities, and due to a related party approximate
their fair values because of the short maturity of these instruments.
The Companys Level 3 financial liabilities consist of the
liability of the Companys secured convertible promissory notes and debentures
issued to investors, and the derivative warrants issued in connection with these
convertible promissory notes and debentures. There is no current market for
these securities such that the determination of fair value requires significant
judgment or estimation. The Company used a fair value model which incorporates
transaction details such as Company stock price, contractual terms, maturity,
risk free rates, as well as assumptions about future financings, volatility, and
holder behavior as of the date of issuance and each balance sheet date.
Revenue Recognition
The Company has generated little revenues to date. It is the
Companys policy that revenue from product sales or services will be recognized
in accordance with ASC 605 Revenue Recognition. Four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectability of
those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for
in the same period the related sales are recorded. The Company will defer any
revenue for which the product/services was not delivered or is subject to refund
until such time that the Company and the customer jointly determine that the
product/service has been delivered or no refund will be required.
12
Sales comprise the fair value of the consideration received or
receivable for the sale of goods and rendering of services in the ordinary
course of the Companys activities. Sales are presented, net of tax, rebates and
discounts, and after eliminating intercompany sales. The Company recognizes
revenue when the amount of revenue and related cost can be reliably measured and
it is probable that the collectability of the related receivables is reasonably
assured.
During the year ended June 30, 2016 and period ending March 31,
2017, the Company didnt record any revenue under continuing operation.
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 March 31, 2017, 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 March 2017, the Financial Accounting Standards Board
(FASB) issued ASU 2017-08, ReceivablesNonrefundable Fees and Other Costs.
The Board is issuing this update to amend the amortization period for certain
purchased callable debt securities held at a premium, the Board is shortening
the amortization period for the premium to the earliest call date. For public
business entities, the amendments in this update are effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15,
2018. For all other entities, the amendments are effective for fiscal years
beginning after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020. The Company is currently evaluating the
impact of adopting this guidance.
In January 2017, the FASB issued Accounting Standards Update
No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU
2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of
the goodwill impairment test, which requires a hypothetical purchase price
allocation. ASU 2017-04 is effective for annual or interim goodwill impairment
tests in fiscal years beginning after December 15, 2019, and should be applied
on a prospective basis. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company
does not anticipate the adoption of ASU 2017-04 will have a material impact on
its consolidated financial statements.
13
In January 2017, the FASB issued Accounting Standards Update
No. 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). The
standard clarifies the definition of a business by adding guidance to assist
entities in evaluating whether transactions should be accounted for as
acquisitions of assets or businesses. ASU 2017-01 is effective for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal
years. Under ASU 2017-01, to be considered a business, the assets in the
transaction need to include an input and a substantive process that together
significantly contribute to the ability to create outputs. Prior to the adoption
of the new guidance, an acquisition or disposition would be considered a
business if there were inputs, as well as processes that when applied to those
inputs had the ability to create outputs. Early adoption is permitted for
certain transactions. The Company does not anticipate the adoption of ASU
2017-01 will have a material impact on its consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update
No. 2016-18, Restricted Cash (a consensus of the FASB Emerging Issue Task Force)
("ASU 2016-18"). This new standard addresses the diversity that exists in the
classification and presentation of changes in restricted cash on the statement
of cash flows. The amendments in ASU 2016-18 require that a statement of cash
flows explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or restricted
cash equivalents. Therefore, amounts generally described as restricted cash and
restricted cash equivalents should be included with cash and cash equivalents
when reconciling the beginning-of-period and end-of-period total amounts shown
on the statement of cash flows. This guidance is effective for fiscal years
beginning after December 15, 2017, including interim periods within the year of
adoption, with early adoption permitted. The Company does not expect that the
adoption of ASU 2016-18 will have a material impact on its consolidated
financial statements.
In August, 2016, the FASB issued Accounting Standards Update
No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a
consensus of the Emerging Issues Task Force) ("ASU 2016-15"). The amendments in
ASU 2016-15 address eight specific cash flow issues and apply to all entities
that are required to present a statement of cash flows under ASC Topic 230,
Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public
business entities for fiscal years beginning after December 15, 2017, and
interim periods within those fiscal years. Early adoption is permitted,
including adoption during an interim period. The Company has not yet completed
the analysis of how adopting this guidance will affect its consolidated
financial statements.
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. The Company does not anticipate the
adoption of ASU 2016-16 will have a material impact on its consolidated
financial statements.
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.
14
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.
15
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 Companys issued and outstanding shares
of common stock on a basis of 20 old shares of common stock for one 1 new share
of common stock. The reverse stock split was reviewed and approved for filing by
the FNRA effective February 25, 2015.
On July 13, 2015, the Company's board of directors consented to
effect a reverse stock split of the Companys issued and outstanding shares of
common stock on a basis of 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 Companys authorized capital will not
be affected by the reverse stock split. The split is reflected retrospectively
in the accompanying financial statements.
Authorized Stock
At inception, the Company authorized 100,000,000 common shares
and 100,000,000 preferred shares, both with a par value of $0.001 per share.
Each common share entitles the holder to one vote, in person or proxy, on any
matter on which action of the stockholders of the corporation is sought.
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
Companys common stock with a par value of $0.001. The designated preferred
stock shall be issued on the basis of 1 preferred stock for each $1 of
convertible debt. The series B convertible preferred stock shall be subordinate
to and rank junior to all indebtedness of the Company now or hereafter
outstanding.
On October 17, 2014, the Company amended its Articles of
Incorporation, which amendment was filed with the Nevada Secretary of State on
October 17, 2014, to increase the authorized capital of its common shares from
500,000,000 common shares, par value $0.001 to 2,000,000,000 common shares, par
value $0.001.
The Company's authorized capital consists of 2,000,000,000
common shares and 100,000,000 preferred shares, all with a par value of $0.001.
16
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
Companys 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
Companys 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.
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 March 31, 2017:
During the nine-months ended March 31, 2017, the Company issued
1,214,706,773 common shares at a deemed price ranging from $0.0005 to $0.00075
per share for promissory note and interest conversion valued at $764,630 (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 March 31, 2017 of approximately $16,320,558 will begin to
expire in 2026. Accordingly, deferred tax assets were offset by the valuation
allowance that increased by approximately $1,000,333 and $464,277 during the
periods ended March 31, 2017 and 2016 respectively.
The Company follows the provisions of uncertain tax positions
as addressed in FASC 740-10-65-1. The Company recognized approximately no
increase in the liability for unrecognized tax benefits.
The Company has no tax position at March 31, 2017 for which the
ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility. The Company recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in
operating expenses. No such interest or penalties were recognized during the
periods presented. The Company had no accruals for interest and penalties at
March 31, 2017. 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, 2016, June 30, 2015, June 30, 2014, June
30, 2013 and June 30, 2012 are still open for examination by the Internal
Revenue Service (IRS).
17
|
|
For the nine months ended March 31, 2017
|
|
|
|
Amount
|
|
|
Tax Effect (35%)
|
|
|
|
|
|
|
|
|
Loss before income tax
|
$
|
5,951,435
|
|
$
|
2,083,002
|
|
|
|
|
|
|
|
|
Shares issued for interest
expenses
|
|
(75,633
|
)
|
|
(26,472
|
)
|
Non-cash interest expense
|
|
(2,229,270
|
)
|
|
(780,244
|
)
|
Loss on change in fair value
of derivative liability - convertible notes and warrants and
extinguishment of debt
|
|
(1,459,026
|
)
|
|
(510,659
|
)
|
Amortization of debt discount
|
|
(1,144,229
|
)
|
|
(400,480
|
)
|
Loss on settlement of debt
|
|
(42,944
|
)
|
|
(15,030
|
)
|
|
|
|
|
|
|
|
Total
|
|
1,000,333
|
|
|
350,117
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(1,000,333
|
)
|
|
(350,117
|
)
|
|
|
|
|
|
|
|
Net deferred tax asset
(liability)
|
$
|
-
|
|
$
|
-
|
|
|
|
For
the nine months ended March 31, 2016
|
|
|
|
Amount
|
|
|
Tax
Effect (35%)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
913,121
|
|
|
319,592
|
|
|
|
|
|
|
|
|
Non-cash interest expense
|
|
(699,718
|
)
|
|
(244.901
|
)
|
Gain on change in fair value of derivative
liability
|
|
576,533
|
|
|
201,787
|
|
Amortization of debt discount
|
|
(399,010
|
)
|
|
(139,438
|
)
|
Impairment
|
|
7,468
|
|
|
2,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
398,393
|
|
|
139,438
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(398,393
|
)
|
|
(136,438
|
)
|
|
|
|
|
|
|
|
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;
|
18
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.
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.
19
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 filed a complaint against PetroChase in
the Superior Court of the State of Arizona on March 22, 2017. The management fee
payments have been postponed until this issue has been resolved (See Note 11).
7. Promissory Notes
Summary of promissory notes at June 30, 2016 and March 31, 2017
is as follows:
|
June 30, 2016
|
Reclassification
(Transfer)
|
(Payments)
|
March 31,
2017
|
September 16, 2016
|
$
-
|
$
460,000
|
$
(460,000)
|
$ -
|
October 18, 2016
|
-
|
60,000
|
(30,000)
|
30,000
|
|
|
|
|
|
Total
|
$
-
|
$
520,000
|
$
(490,000)
|
$
30,000
|
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.
20
8. Convertible Promissory Notes
Summary of convertible promissory note at June 30, 2016 and
March 31, 2017 is as follows:
|
|
June
30,
|
|
|
Principal
|
|
|
Accretion
|
|
|
Total
|
|
|
Repaid
|
|
|
Transfer
|
|
|
March
31,
|
|
|
|
2016
|
|
|
Issued
|
|
|
of
|
|
|
converted
|
|
|
|
|
|
(Loan
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
|
Extinguished)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 13, 2013
|
$
|
21,908
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
21,908
|
|
July 22, 2014
|
|
185,314
|
|
|
-
|
|
|
-
|
|
|
(162,789
|
)
|
|
-
|
|
|
(15,304
|
)
|
|
7,222
|
|
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
|
|
|
-
|
|
|
-
|
|
|
(24,750
|
)
|
|
-
|
|
|
(5,000
|
)
|
|
-
|
|
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
|
)
|
|
-
|
|
|
(40,770
|
)
|
|
-
|
|
April 19, 2016
|
|
197,067
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(197,067
|
)
|
|
-
|
|
May 16, 2016
|
|
30,250
|
|
|
-
|
|
|
-
|
|
|
(30,250
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
August 12, 2016
|
|
-
|
|
|
40,000
|
|
|
4,067
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
44,067
|
|
September 7, 2016
|
|
-
|
|
|
100,000
|
|
|
16,000
|
|
|
(169,920
|
)
|
|
-
|
|
|
53,920
|
|
|
-
|
|
September 8, 2016
|
|
-
|
|
|
25,000
|
|
|
1,502
|
|
|
(120,000
|
)
|
|
-
|
|
|
120,000
|
|
|
26,502
|
|
September 9, 2016
|
|
-
|
|
|
125,000
|
|
|
10,143
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
135,143
|
|
September 9, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(87,772
|
)
|
|
-
|
|
|
108,697
|
|
|
20,925
|
|
September 15, 2016
|
|
-
|
|
|
232,000
|
|
|
13,396
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
245,396
|
|
September 16, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(232,500
|
)
|
|
235,500
|
|
|
-
|
|
September 19, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,398,000
|
|
|
1,398,000
|
|
September 27, 2016
|
|
-
|
|
|
110,000
|
|
|
7,739
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
117,739
|
|
October 10, 2016
|
|
-
|
|
|
-
|
|
|
4,345
|
|
|
-
|
|
|
-
|
|
|
93,063
|
|
|
97,408
|
|
October 19, 2016
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
35,000
|
|
October 27, 2016
|
|
-
|
|
|
40,000
|
|
|
3,365
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
43,365
|
|
October 31, 2016
|
|
-
|
|
|
147,000
|
|
|
6,544
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
153,544
|
|
November 14, 2016
|
|
-
|
|
|
25,000
|
|
|
2,135
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
27,135
|
|
November 22, 2016
|
|
-
|
|
|
25,000
|
|
|
1,572
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,572
|
|
November 30, 2016
|
|
-
|
|
|
87,000
|
|
|
4,091
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
91,091
|
|
December 23, 2016
|
|
-
|
|
|
37,500
|
|
|
1,923
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
39,423
|
|
December 29, 2016
|
|
-
|
|
|
82,000
|
|
|
2,211
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
84,211
|
|
January 17, 2017
|
|
-
|
|
|
42,500
|
|
|
1,639
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
44,139
|
|
January 25, 2017
|
|
-
|
|
|
100,000
|
|
|
5,310
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
105,310
|
|
January 26, 2017
|
|
-
|
|
|
68,500
|
|
|
5,043
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
73,543
|
|
January 27, 2017
|
|
-
|
|
|
100,000
|
|
|
2,738
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
102,738
|
|
February 3, 2017
|
|
-
|
|
|
68,500
|
|
|
1,804
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
70,304
|
|
March 1, 2017
|
|
-
|
|
|
316,800
|
|
|
3,735
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
320,535
|
|
March 13, 2017
|
|
-
|
|
|
75,000
|
|
|
513
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
75,513
|
|
March 20, 2017
|
|
-
|
|
|
198,800
|
|
|
453
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
199,253
|
|
|
$
|
842,950
|
|
$
|
2,045,600
|
|
$
|
100,268
|
|
$
|
(688,997
|
)
|
$
|
(232,500
|
)
|
$
|
1,575,882
|
|
$
|
3,643,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized
debt discount
|
$
|
(223,181
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
(1,397,239
|
)
|
Total note payable, net of debt discount
|
$
|
619,769
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
2,245,962
|
|
Current portion
|
$
|
619,769
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
2,245,962
|
|
Long term portion
|
$
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
21
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.
22
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.
23
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.
24
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.
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.
25
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.
On January 17, 2017 Company issued an aggregate of $51,150
Convertible Promissory Notes with issuance cost of $8,650 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% 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 $218,566 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative $42,500
was allocated as a debt discount up to the proceeds of the note with the
remainder $176,066 charged to current period operations as interest expense.
On January 25, 2017 Company issued an aggregate of $132,222
Convertible Promissory Notes with issuance cost of $32,222 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 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 $594,279 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative
$100,000 was allocated as a debt discount up to the proceeds of the note with
the remainder $494,279 charged to current period operations as interest expense.
26
On January 26, 2017 Company issued an aggregate of $99,833
Convertible Promissory Notes with issuance cost of $31,333 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 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 $552,754 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative $68,500
was allocated as a debt discount up to the proceeds of the note with the
remainder $484,254 charged to current period operations as interest expense.
On January 27, 2017 Company issued an aggregate of $116,600
Convertible Promissory Notes with issuance cost of $16,600 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% 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 $269,317 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative
$100,000 was allocated as a debt discount up to the proceeds of the note with
the remainder $169,317 charged to current period operations as interest expense.
On February 3, 2017 Company issued an aggregate of $80,850
Convertible Promissory Notes with issuance cost of $12,350 that matures on
February 3, 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% 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.
27
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 $241,447 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative $68,500
was allocated as a debt discount up to the proceeds of the note with the
remainder $172,947 charged to current period operations as interest expense.
On March 1, 2017 Company issued an aggregate of $181,209
Convertible Promissory Notes with issuance cost of $22,809 that matures on March
1, 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% 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 $130,829 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative
$130,829 was allocated as a debt discount up to the proceeds of the note and no
amounts allocated to interest expense.
On March 1, 2017 Company issued an aggregate of $183,056
Convertible Promissory Notes with issuance cost of $24,656 that matures on March
1, 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 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 $261,920 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative
$158,400 was allocated as a debt discount up to the proceeds of the note with
the remainder $103,520 charged to current period operations as interest expense.
28
On March 13, 2017 Company issued an aggregate of $85,800
Convertible Promissory Notes with issuance cost of $10,800 that matures on March
13, 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 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 $153,245 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative $75,000
was allocated as a debt discount up to the proceeds of the note with the
remainder $78,245 charged to current period operations as interest expense.
On March 20, 2017 Company issued an aggregate of $85,800
Convertible Promissory Notes with issuance cost of $10,800 that matures on March
20, 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% 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 $119,337 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative $75,000
was allocated as a debt discount up to the proceeds of the note with the
remainder $44,337 charged to current period operations as interest expense.
On March 28, 2017 Company issued an aggregate of $141,680
Convertible Promissory Notes with issuance cost of $17,880 that matures on March
28, 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 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.
29
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 $226,203 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
|
284.38%
|
Risk free rate:
|
1.03%
|
The initial fair values of the embedded debt derivative
$123,800 was allocated as a debt discount up to the proceeds of the note with
the remainder $102,403 charged to current period operations as 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 nine months ended March 31,
2017, $1,527,301 was recorded as loss on extinguishment of debt due to
settlement agreement with note holders. The $1,527,301 consists of net increase
in principal of convertible promissory notes of $1,417,101 (net of extinguished
interests of $158,778), 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 nine months period ended March 31, 2017
the Company amortized the debt discount on all the notes of $597,871 and
$1,144,229, respectively to operations as expense including $67,219 and
$100,270, respectively, for accretion expenses. During the three and nine months
period ended March 31, 2016 the Company amortized the debt discount on all the
notes of $78,688 and $399,010 to operations as interest expense, respectively.
During the three and nine months ended March 31, 2017, $232,500
cash was paid to note holders and the derivative liability on such notes were
charged as a gain on change in fair value of derivative liability. No cash
payments were made to note holders for the three and nine months ended March 31,
2016
Derivative Liability - Debt
The fair value of the described embedded derivative on all debt
was valued at $3,376,673 and $1,162,058 at March 31, 2017 and June 30, 2016,
respectively, which was determined using the Black Scholes Model with the
following assumptions:
|
March 31, 2017
|
June 30, 2016
|
Dividend yield:
|
0 %
|
0%
|
Volatility
|
264.4 284.4 %
|
346.6 453.3%
|
Risk free rate:
|
1.03 %
|
0.39%-0.66%
|
The Company recorded change in fair value of the derivative
liability on debt to market resulting in non-cash, non-operating gain (loss) of
$461,979 and $828,693 for the nine months ended March 31, 2017 and 2016,
respectively. For the three months ending March 31, 2017 and 2016, a non-cash,
non-operating gain (loss) of $191,170 and $(241,359) was recorded respectively.
During the period ended March 31, 2017 and year ended June 30,
2016 the Company reclassed the derivative liability of $1,471,967 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 March 31, 2017 and June 30,
2016:
30
|
|
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
|
|
4,447,288
|
|
Fair value of liability at note conversion
|
|
(1,471,967
|
)
|
Extinguishment of derivative liability
|
|
(298,728
|
)
|
Mark-to-market at March 31, 2017
|
|
(461,979
|
)
|
|
|
|
|
Balance, March 31, 2017
|
$
|
3,376,672
|
|
Net gain for the
period included in earnings relating to the liabilities held at March 31,
2017
|
$
|
461,979
|
|
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 March 31, 2017 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 $551,242 at March 31, 2017 and $268,611 at June 30, 2016
which was determined using the Black Scholes Model with the following
assumptions:
|
March 31, 2017
|
June 30, 2016
|
Dividend yield:
|
0 %
|
0%
|
Volatility
|
252.2 %
|
229.1 275.4%
|
Risk free rate:
|
1.03 %
|
0.71 1.01%
|
|
|
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
|
|
(550
|
)
|
|
280.00
|
|
|
-
|
|
Cancelled
|
|
(10,834
|
)
|
|
164.80
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2017
|
|
15,588
|
|
$
|
213.50
|
|
|
2.76 years
|
|
31
The following table provides a summary of changes in fair value
of the Companys Level 3 financial liabilities as of March 31, 2017 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 March 31, 2017 warrant liability
|
|
393,704
|
|
Balance, March 31,
2017
|
$
|
551,242
|
|
|
|
|
|
Net loss for the
year included in earnings relating to the liabilities held at March 31,
2017
|
$
|
393,704
|
|
The Company recorded change in fair value of the derivative
liability on warrants to market resulting in non-cash, non-operating (loss) gain
of $(281,187) and $354,046 for the three months ended March 31, 2017, and 2016,
respectively and non-cash, non-operating loss of $(393,704) and $(252,160) for
the nine months ended March 31, 2017 and 2016, respectively.
During the period ended March 31, 2017 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 nine months ended March 31, 2017, the Company
incurred consulting fees of $65,000 (March 31, 2016 - $1,115) and during the
three months ended March 31, 2017, the Company incurred consulting fees of
$24,000 (March 31, 2016 - $nil) with directors and officers out of which there
were no stock payments.
As of March 31, 2017, 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 consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern, which contemplates, among other things, the realization of assets and
satisfaction of liabilities in the normal course of business. As at March 31,
2017, the Company had a working capital deficiency of $6,438,832 (June 30, 2016
- $2,473,600) and an accumulated deficit of $56,757,946 (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
Companys ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
32
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 Companys
common stock.
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 Companys management and operations. The
compensation for the services to be provided will be $12,000 payable monthly in
cash or if the Company does not have available cash, in shares of the Companys
common stock. The consulting agreement was amended on October 22, 2014 to
include an additional aggregate of $30,000 payable as of October 22, 2014 in
cash or in shares of the Companys common stock, and changed the term of
agreement from 12 months to 10 months. Effective November 1, 2014, the
consultant resigned as member of the Board of Directors.
On April 28, 2014, the Company entered into a consulting
agreement with a consultant to provide services as members of the Board of
Directors in regards to the Companys management and operations. Pursuant to the
terms of the agreement, the consultant will receive compensation of $12,000 in
unregistered restricted common shares of the Company's common stock at a deemed
value of $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 Companys management and operation. The compensation
for the services to be provided will be $10,000 per month payable in common
stock of the Company from 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
On March 22, 2017, our wholly-owned subsidiary, Black Box
Energy, Inc. (BBE), filed a complaint in the Superior Court of the State of
Arizona (Maricopa County) against PetroChase, Inc., Warren County PC#1, LLC,
Stephen R. Moore and Sheree Moore, as well as certain unidentified, predecessor
and success corporations, parent corporations or subsidiaries of the defendants
(collectively the Defendants).
In 2016 the Defendant, Stephen R. Moore, on behalf of
PetroChase, solicited investment from our Company to subscribe to a 50% (of 70%)
working interest in the McKean County Project wells. On September 9, 2016, BBE
entered into a letter agreement with PetroChase to acquire a 50% (of 70%)
working interest in the wells, in addition access to the wells for the purposes
of the developing our mechanical ultrasound technology for use in water
purification. BBE paid $250,000 to PetroChase in consideration of the rights
granted, which funds were to be used for costs associated with development of
the wells. Drilling of the wells was to be commenced within a reasonable time and was to continue until all the wells were completed. To
date, drilling of the wells has not been completed.
33
The complaint seeks a return of the $250,000 for breach of the
letter agreement, treble damages ($750,000 in the aggregate), plus attorneys
fees, costs, and punitive damages. The Company has engaged legal counsel and
intends to respond to the complaint with an answer or motion in due course.
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 Quarterly 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 nine months ended March 31 2017 and
2016 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
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended March 31,
|
|
|
Ended March
|
|
|
Ended March 31,
|
|
|
Ended March 31,
|
|
|
|
2017
|
|
|
31, 2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Selling, general and administrative
|
|
(61
|
)
|
|
(290
|
)
|
|
(141
|
)
|
|
(78,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
$
|
(61
|
)
|
$
|
(290
|
)
|
$
|
(141
|
)
|
$
|
(78,860
|
)
|
Consolidated
Balance Sheets
|
|
|
March
31, 2017
|
|
|
June
30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,195
|
|
$
|
1,301
|
|
Receivable, net
|
|
|
637
|
|
|
651
|
|
Prepaid expenses
|
|
|
1,782
|
|
|
1,822
|
|
GST Receivable
|
|
|
15,882
|
|
|
16,237
|
|
|
|
$
|
19,496
|
|
$
|
20,011
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,280
|
|
$
|
6,420
|
|
34
13. Provisions
On January 5, 2017 Warrant holder exercised warrants to acquire
24,642,857 shares at an adjusted price of $0.0005. The Company did not have
sufficient authorized and allotted shares to meet the obligation. A lawsuit was
filed on January 31, 2017 by the warrant holder against the Company.
The lawsuit was subsequently settled on April 6, 2017 for
90,000,000 shares of the Companys common stock.
Under the terms of ASC 450-20, management must assess the
likelihood of loss and determine whether any liability should be accrued with
connection to the lawsuit. The Company evaluated the terms and determined that
the most representative accrual was the fair value of the settled shares, less
the fair value $42,944, which was recorded on the statement of operations.
14. Subsequent Events
The Company has evaluated subsequent events from April 1, 2017,
through the date of this report, and determined there are no other items to
disclose.
Joint Development and Option Agreement
On April 13, 2017, the Company’s wholly-owned subsidiary, Black Box Energy, Inc. (“BBE”), entered into a Joint Development and Option Agreement with White Top Oil & Gas, LLC (“White Top”), a Louisiana limited liability company (the “White Top Agreement”), under which White Top is the designee to a funding agreement to finance and participate in the completion of certain oil and gas development, exploration and operating activities on certain lands located in Sulphur, Louisiana (the “White Top Field”). Under the terms of the White Top Agreement, BBE has advanced approximately $680,000 to White Top as consideration to White Top for the option to convert and the right to repayment of payouts for the necessary capital, overrating, technical, and related support costs necessary to further develop the White Top Field. White Top’s rights to repayment of the monies received from BBE shall be limited to funding from certain payouts received under terms agreed by the parties under such joint development project, as mutually agreed.
Convertible Secured Redeemable Notes
On April 4, 2017 the Company issued an aggregate of $141,627
Convertible Secured Redeemable Note that matures on April 4, 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 May 2, 2017 the Company issued an aggregate of $28,600
Convertible Secured Redeemable Note that matures on May 2, 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 May 5, 2017 the Company issued an aggregate of $28,600
Convertible Secured Redeemable Note that matures on May 5, 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 May 17, 2017, the Company issued an aggregate of $687,850 Convertible Promissory Notes that mature on May 15, 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 the lesser of $0.005 per share or 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 March 31, 2017, the following conversions
occurred:
On April 3, 2017 the Company issued 32,928,075 common shares at
a deemed price of $0.0008 per share for promissory note and interest conversion.
On April 4, 2017 the Company issued 36,263,400 common shares at
a deemed price of $0.00075 per share for promissory note and interest
conversion.
On April 4, 2017 the Company issued 60,000.000 common shares at
a deemed price of $0.00075 per share for promissory note conversion.
On April 4, 2017 the Company issued 90,000.000 common shares
for warrant settlement agreement as discussed in note 13.
On April 7, 2017 the Company issued 38,715,966 common shares at
a deemed price of $0.0006 per share for promissory note and interest
conversion.
35
On April 13, 2017 the Company issued 60,000.000 common shares
at a deemed price of $0.00055 per share for promissory note conversion.
On April 19, 2017 the Company issued 42,367,109 common shares
at a deemed price of $0.00055 per share for promissory note and interest
conversion.
On April 20, 2017 the Company issued 50,083,181 common shares
at a deemed price of $0.00055 per share for promissory note and interest
conversion.
On April 20, 2017 the Company issued 70,000.000 common shares
at a deemed price of $0.00055 per share for promissory note conversion.
On April 24, 2017 the Company issued 51,849,000 common shares
at a deemed price of $0.00045 per share for promissory note and interest
conversion.
On April 26, 2017 the Company issued 80,000.000 common shares
at a deemed price of $0.0004 per share for promissory note conversion.
On April 28, 2017 the Company issued 42,465,733 common shares
at a deemed price of $0.0003 per share for promissory note and interest
conversion.
On May 12, 2017, the Company issued 100,000,000 common shares
to settle warrants under a warrant termination agreement. No other consideration
was paid as part of the settlement.
36
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This
report contains forward-looking statements. The following discussion should be
read in conjunction with the financial statements and related notes contained in
our Annual Report on Form 10-K, as filed with the Securities & Exchange
Commission on October 18, 2016. Certain statements made in this discussion are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are projections in
respect of future events or 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. Forward-looking statements made in a quarterly report on Form 10-Q
may include statements about our:
|
ability to continue as a going concern;
|
|
ability to obtain sufficient capital or strategic
business arrangements to maintain our operations and realize our business
plan;
|
|
the marketability of natural resources and how that will
be affected by numerous factors beyond our control, which may result in us
not receiving an adequate return on invested capital to be profitable or
viable;
|
|
belief that exploration and production activities are
subject to certain environmental regulations, which may prevent or delay
the commencement or continuation of our operations;
|
|
belief that any change to government
regulation/administrative practices may have a negative impact on our
ability to operate and our profitability;
|
|
expenditures not resulting in commercially successful
products;
|
|
ability to attract and retain key scientific or
management personnel and to expand our management team;
|
|
accuracy of estimates regarding expenses, future revenue,
capital requirements, profitability, and needs for additional financing;
and
|
|
extensive industry regulation, and how that will continue
to have a significant impact on our business.
|
These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
Risk Factors set forth in our Annual Report on Form 10-K for the year ended
June 30, 2016, as filed with the Securities & Exchange Commission on October
18, 2016, any of which may cause our companys or our industrys actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. These risks may cause the Companys
or its industrys actual results, levels of activity or performance to be
materially different from any future results, levels of activity or performance
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 or
performance. Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of these forward-looking statements. The
Company is under no duty to update any forward-looking statements after the date
of this report to conform these statements to actual results.
As
used in this quarterly report and unless otherwise indicated, the terms we,
us, our or the Company refer to Lithium Exploration Group, Inc. a Nevada
corporation, including our wholly-owned subsidiaries, Alta Disposal Ltd., an
Alberta, Canada corporation (Alta Disposal), Black Box Energy, Inc., a Nevada
corporation (Black Box Energy), and our 51% owned subsidiary, Alta Disposal
Morinville Ltd., an Alberta, Canada corporation (ADM), unless otherwise
indicated. Unless otherwise specified, all dollar amounts are expressed in
United States dollars. Our common stock is currently listed on the OTC Market,
OTC Pink tier, under the symbol LEXG.
37
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 Financial Industry Regulatory
Authority (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 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 retroactively in the
descriptions of shares and warrants and their corresponding issuance and
exercise prices, except where otherwise indicated.
Corporate History
We
are a U.S.-based exploration and development company focused on the acquisition
and development potential of lithium brines and other precious metals that
demonstrate high probability for near-term production. Currently the company is
focused testing its SonCav Technology and the acquisition of oil and gas related
assets in Western Canada. 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,
AZ 85282-7127. The telephone number for our Tempe office is (480) 641-4790. We
also have an office at 840 6
th
Ave. SW, Suite 300, Calgary, Alberta
T2P 3E5. The telephone number for our Calgary office is (403) 930-1925.
On
October 18, 2013, we completed, through our then wholly owned subsidiary, Alta
Disposal Ltd. (formerly 1617437 Alberta Ltd.), an Alberta, Canada corporation,
the acquisition of 51% of the shares of Blue Tap Resources Inc. for total
payment of CAD$466,547. As of September 30, 2013, CAD$300,000 (US$294,908) was
paid regarding the acquisition. As a result of the 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, we 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).
On
August 20, 2013, we entered into a letter of intent with Tero Oilfield Services
Ltd. (Tero), 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, our wholly-owned subsidiary, entered into a share
purchase agreement with Tero and Garry Hofmann, the sole shareholder of Tero.
Pursuant to the agreement, Mr. Hofmann agreed to sell and we agreed to purchase
50% of the issued and outstanding common shares of Tero in exchange for an
aggregate of CAD$1,000,000. As part of the share purchase by Alta Disposal, on
February 22, 2014, Tero declared a dividend in the amount of $307,104, payable
to Mr. Hofmann by way of a promissory note. As a result of the share purchase
agreement, Tero is now a partially owned (50%) subsidiary of our company.
Additionally, Alta Disposal, Tero and Mr. Hofmann entered into an option
agreement entitling Alta Disposal to purchase up to an additional 25% of the
issued and outstanding common shares of Tero from Mr. Hofmann, exercisable at a
price of $500,000 for a period of one year. On May 1, 2015, our company entered
into a share purchase agreement with an individual and disposed of our 50%
interest in Tero in consideration for $300,000.
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.
38
On
January 19, 2015, we received written consent from our 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 stock split was reviewed
and approved for filing by FINRA, effective February 25, 2015, and we were
assigned CUSIP number 53680P209, effective that same date. Our authorized
capital was not affected by the reverse stock split.
On
June 22, 2015, in accordance with our Articles of Incorporation, our Board of
Directors designated 250,000 of our 100,000,000 authorized shares of Preferred
Stock as Series A Preferred Stock, par value $0.001, (the Series A
Preferred). The Series A Preferred ranks senior to our common stock, carrying
general voting rights with the common stock at the rate of 62 votes per Series A
Preferred share. The Series A Preferred will be deemed cancelled within one year
of issuance and are not entitled to share in dividends or other distributions.
So long as any shares of Series A Preferred are outstanding, the affirmative
vote of not less than 75% of those outstanding shares of Series A Preferred will
be required for any change to our Articles of Incorporation. As of March 31,
2017, there are zero shares of Series A Preferred outstanding.
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 a
$708,000 loan to our Company. Pursuant to the settlement agreement, JDF Capital
Inc. and its assign, Blue Citi LLC, agreed to release and discharge their
general security interest in consideration of the issuance of 130,000 shares of
Series A Preferred. These shares were subsequently cancelled on December 5,
2015.
On
July 13, 2015, our Board of Directors approved an increase in 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 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 the Securities and Exchange Commission (the SEC) on August 6, 2015. On
September 9, 2015, we filed with the Nevada Secretary of State a Certificate of
Amendment to our Articles of Incorporation 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 stock split
was reviewed and approved for filing by FINRA, effective September 30, 2015, and
we were assigned CUSIP number 53680P308, effective that same date.
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.
Recent Business Developments and Agreements During the Nine
Months Ended March 31, 2017
For
the nine months ended March 31, 2017, our company has received various loans
from unrelated third parties 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 of the loans, convertible promissory notes, and
warrants include terms that make them subject to the share splits.
Loan Agreements
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 InLight Capital Partners, in whole or in part,
into shares of our common stock at a 35% discount to the lowest trading price
occurring during the ten trading days prior to the notice of conversion.
39
Loan with VES Investment Trust
On
April 19, 2016, we entered into a securities purchase agreement with VES
Investment Trust (VES) pursuant to which VES had 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 in unpaid principal on the
note, plus accrued interest. On October 18, 2016, we entered into a debt
settlement agreement with VES pursuant to which we agreed to pay to VES $60,000
in two equal installments on January 2, 2017 and April 19, 2017, respectively.
We paid both of these installments on January 30, 2017 and April 10, 2017,
respectively.
Loans with JDF Capital Inc.
On
August 12, 2016, we entered into an agreement with JDF Capital Inc (JDF).
Pursuant to the agreement, in consideration of $37,000 paid to our company, we
issued to JDF 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 pursuant to which
JDF 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, we
have agreed to amend the conversion discount of an earlier convertible
promissory note held by JDF from July 22, 2015 for $708,000 from 35% to a 50%
discount to market price. In September, 2016 we prepaid $50,082 to JDF in full
settlement of all principal and interest outstanding pursuant to this loan
agreement.
On
September 9, 2016, we entered into a loan agreement with JDF, pursuant which JDF
acquired a 10% convertible note with an aggregate face value of $144,100, with
an issuance discount of $13,100 and legal fees of $6,000. The note matures in
one year. The holder 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 65% of the lowest trading price of the Companys 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 27, 2016, we entered into a loan agreement with JDF, pursuant which
JDF 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 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 a 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, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF 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 is
entitled, at its option, to convert all or a part of the principal outstanding
at the date into shares of our common stock at a 50% discount to the lowest
trading price occurring during the twenty trading days prior to the notice of
conversion.
On
October 27, 2016, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF 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 common stock at a 50% discount to the lowest trading price occurring during the
twenty trading days prior to the notice of conversion.
40
On
November 22, 2016, we issued a $29,700 convertible promissory note to JDF in
consideration for $25,000. The note matures on November 22, 2017 and bears 10%
interest per annum. JDF 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 50% discount to the lowest trading
price occurring during the twenty trading days prior to the notice of
conversion.
On
December 23, 2016, we issued a $45,100 convertible promissory note to JDF with
issuance costs of $7,600 that matures on December 23, 2017. The note bears 10%
interest per annum and the holder 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, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF acquired a convertible note with an
aggregate face value of $46,500 in consideration for $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 common stock at a 50% discount to the lowest trading price
occurring during the twenty trading days prior to the notice of conversion.
On
January 27, 2017, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF 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 common stock at a 50% discount to the lowest
trading price occurring during the twenty trading days prior to the notice of
conversion.
On
February 3, 2017, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF 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 of conversion into shares of our common stock at a 50% discount to
the lowest trading price occurring during the twenty trading days prior to the
notice of conversion.
On
March 1, 2017, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF acquired a 10% original issue
discount convertible note with an aggregate face value of $181,209, including a
10% issuance discount of $16,473, and $6,336 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 of conversion into shares of our common stock at a 50% discount to
the lowest trading price occurring during the twenty trading days prior to the
notice of conversion.
On
March 20, 2017, we entered into a securities purchase agreement with JDF.
Pursuant to the terms of the agreement, JDF acquired a 10% original issue
discount convertible note with an aggregate face value of $85,800, including a
10% issuance discount of $7,800, and $3,000 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 of conversion into shares of our common stock at a 50% discount to
the lowest trading price occurring during the twenty trading days prior to the
notice of conversion.
Loans with Concord Holding Group LLC
On
September 07, 2016, we entered into an agreement with Concord Capital Group LLC
(Concord). 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 a 50%
discount to 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.
41
On
September 08, 2016, we entered into an agreement with Concord. 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 a 50%
discount to 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 is entitled, at its
option, at any time, to convert all or any amount of the principal face amount
of the note then outstanding into shares of the Company's common stock at a
price equal to 50% discount to 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. 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 to 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. 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 to 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, we entered into a securities purchase agreement with Concord.
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 companys common stock at a price equal to lesser
of $0.005 or a 50% discount to the lowest trading price occurring during the
twenty trading days prior to the notice of conversion.
On
November 14, 2016, we issued an aggregate of $31,111 convertible promissory
notes to Concord 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 the note then outstanding into shares of the Company's common stock at
a price equal to lesser of $0.005 or 50% discount to 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, we issued an aggregate of $100,000 convertible promissory
notes to Concord 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 the note then outstanding into shares of the Company's common stock at
a price equal to lesser of $0.005 or 50% discount to 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, we entered into a securities purchase agreement with Concord.
Pursuant to the terms of the agreement, Concord acquired a 10% original issue
discount convertible note with an aggregate face value of $91,111 including a 10% issuance discount of $9,111.
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 of
conversion into shares of our common stock at a 50% discount to the lowest
trading price occurring during the twenty trading days prior to the notice of
conversion.
42
On
January 25, 2017, the Company issued an aggregate of $132,222 convertible
secured redeemable note to Concord in consideration for $119,000. The note
matures on January 25, 2018 and bears 10% interest per annum. The holder of the
note is entitled, at its option, at any time, to convert all or any amount of
the principal face amount of the note then outstanding into shares of the
Company's common stock at a price equal to lesser of $0.005 or 50% discount to
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 in consideration for $89,850. The note matures on
January 26, 2018 and bears 10% interest per annum. The holder of the note is
entitled, at its option, at any time, to convert all or any amount of the
principal face amount of the note then outstanding into shares of the Company's
common stock at a price equal to lesser of $0.005 or 50% discount to 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
March 1, 2017, we entered into a securities purchase agreement with Concord.
Pursuant to the terms of the agreement, Concord acquired a 10% original issue
discount convertible note with an aggregate face value of $183,056, including a
10% issuance discount of $18,306. 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 of conversion into shares of our common stock at a price
equal to lesser of $0.005 or 50% discount to the lowest trading price occurring
during the twenty trading days prior to the notice of conversion.
On
March 13, 2017, we entered into a securities purchase agreement with Concord.
Pursuant to the terms of the agreement, Concord acquired a 10% original issue
discount convertible note with an aggregate face value of $85,800 including a
10% issuance discount of $7,800. 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 of conversion into shares of our common stock at a price
equal to lesser of $0.005 or 50% discount to the lowest trading price occurring
during the twenty trading days prior to the notice of conversion.
On
March 28, 2017, we entered into a securities purchase agreement with Concord.
Pursuant to the terms of the agreement, Concord acquired a 10% original issue
discount convertible note with an aggregate face value of $141,680 including a
10% issuance discount of $12,880. 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 of conversion into shares of our common stock at a price
equal to lesser of $0.005 or 50% discount to the lowest trading price occurring
during the twenty trading days prior to the notice of conversion.
Other Transactions
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 agreements, the investors have agreed to a standstill period until
September 16, 2016. The buyout will take place over six month 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. The 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. The 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 agreement will be subject to a
number of conditions precedent which include, without limitation, our Companys
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.
43
On
September 9, 2016, we incorporated a wholly-owned subsidiary, Black Box Energy,
Inc., in the State of Nevada.
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 9, 2016 and
September 16, 2016. We were required, but did not 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.
Results of Operations
The
following provides selected financial data about our company for the three and
nine months ended March 31, 2017 and 2016.
Comparison of the Three Months Ended March 31, 2017 to the
Three Months Ended March 31, 2016
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
Operating expenses
|
|
362,130
|
|
|
63,979
|
|
Other income
(expenses):
|
|
|
|
|
|
|
Interest expense
|
|
(2,067,330
|
)
|
|
(97,758
|
)
|
Gain (loss) on change in fair
value of derivative liability
|
|
(90,017
|
)
|
|
112,247
|
|
Amortization of debt discount
|
|
(597,871
|
)
|
|
(78,688
|
)
|
Loss on settlement of
warrants
|
|
(42,944
|
)
|
|
-
|
|
Loss on disposal of business operations
|
|
-
|
|
|
(96
|
)
|
Loss on extinguishment of
liability
|
|
12,400
|
|
|
-
|
|
Loss from discontinued operations
|
|
(61
|
)
|
|
(290
|
)
|
Net loss
|
$
|
(3,147,953
|
)
|
$
|
(128,564
|
)
|
We
generated no revenues during the three months ended March 31, 2017. Operating
expenses for the three months ended March 31, 2017 increased by $298,151
compared to the same period in 2016, primarily as a result of an increase in
selling, and general and administrative expenses. We had net losses of
$3,147,953 and $128,564 for the three-month periods ended March 31, 2017 and
2016, respectively, due primarily to interest expense and the amortization of
debt discount related to the convertible promissory notes.
44
Comparison of the Nine Months Ended March 31, 2017 to the
Nine Months Ended March 31, 2016
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
Operating expenses
|
|
842,228
|
|
|
378,393
|
|
Other income (expenses):
|
|
|
|
|
|
|
Interest expense
|
|
(2,463,008
|
)
|
|
(699,719
|
)
|
Gain on change in fair value of derivative
liability
|
|
68,275
|
|
|
576,533
|
|
Amortization of debt discount
|
|
(1,144,229
|
)
|
|
(399,010
|
)
|
Loss on settlement of warrants
|
|
(42,944
|
)
|
|
-
|
|
Bad-debt write off
|
|
-
|
|
|
(20,000
|
)
|
Loss on disposal of business operations
|
|
-
|
|
|
7,468
|
|
Loss on extinguishment of liability
|
|
(1,527,301
|
)
|
|
-
|
|
Loss from discontinued operations
|
|
(141
|
)
|
|
(78,860
|
)
|
Net Income
|
$
|
(5,951,576
|
)
|
$
|
(913,121
|
)
|
We
generated no revenues during the nine months ended March 31, 2017. Operating
expenses for the nine months ended March 31, 2017 increased by $463,835 compared
to the same period in 2016, primarily as a result of an increase in selling, and
general and administrative expenses. We had net losses of $5,951,576 and
$913,121 for the nine month periods ended March 31, 2017 and 2016, respectively,
due primarily to interest expense and the amortization of debt discount related
to the convertible promissory notes, which were partially offset by gains in the
fair value of the derivative liabilities during those periods.
Liquidity and Capital Resources
The
following table provides selected financial data about our company as of March
31, 2017 and June 30, 2016, respectively.
Working Capital
|
|
As of
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Total current assets
|
$
|
216,817
|
|
$
|
48,007
|
|
Total current liabilities
|
$
|
6,655,649
|
|
$
|
2,521,607
|
|
Working capital (deficit)
|
$
|
(6,438,832
|
)
|
$
|
(2,473,600
|
)
|
Cash Flows
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net cash used in operating activities
|
$
|
(901,834
|
)
|
$
|
(286,850
|
)
|
Net cash used in investing activities
|
$
|
(250,000
|
)
|
$
|
-
|
|
Net cash provided by financing activities
|
$
|
1,323,100
|
|
$
|
238,000
|
|
Effect of foreign exchange on cash
|
$
|
(253
|
)
|
$
|
(7,947
|
)
|
Increase (Decrease) in cash
|
$
|
171,013
|
|
$
|
(56,797
|
)
|
We
had cash and cash equivalents of $196,221 as of March 31, 2017 compared to cash
and cash equivalents of $25,208 as of June 30, 2016. We had a working capital
deficit of $6,438,832 as of March 31, 2017 compared to a working capital deficit
of $2,473,600 as of June 30, 2016.
45
Going Concern
The
condensed consolidated financial statements contained in this report have been
prepared assuming that the Company will continue as a going concern. We have
cumulative net losses through March 31, 2017 of $56,757,946, as well as negative
cash flows from operating activities. Management estimates that the cash and
cash equivalents balance as of March 31, 2017 of $196,221 will allow the Company
to continue its operations and activities for a period of one or two quarters
without additional funding. Presently, the Company does not have sufficient cash
resources to meet its plans through this fiscal year. These factors raise
substantial doubt about our ability to continue as a going concern. Management
is in the process of evaluating various financing alternatives for operations,
as we will need to finance future development of our business plan and for
general and administrative expenses.
The
interim condensed consolidated financial statements do not include any
adjustments that may be necessary should the Company be unable to continue as a
going concern. The report of our auditors for 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. Our continuation as a
going concern is dependent on our ability to obtain additional financing as may
be required and ultimately to attain profitability.
We
have been funding operations primarily from the proceeds from private placements
of equity-linked securities, namely convertible notes. During the nine months
ended March 31, 2017, we raised $1,323,100 from the private placement of our
equity-linked securities.
Anticipated Cash Requirements
We
estimate that our operating expenses through the balance of this fiscal year
ended June 30, 2017 will be as follows. These estimates may change significantly
depending on the nature of our future business activities and our ability to
raise capital.
|
|
Estimated
|
|
|
Estimated
|
|
|
|
Completion
|
|
|
Expenses
|
|
Description
|
|
Date
|
|
|
($)
|
|
G&A expenses, including
outside consultants and advisors
|
|
12 months
|
|
$
|
300,000
|
|
Acquisition of components for equipment
|
|
12 months
|
|
|
200,000
|
|
Mining expenses (mainly
technology related)
|
|
12 months
|
|
$
|
150,000
|
|
Legal and accounting
|
|
12 months
|
|
$
|
200,000
|
|
Total
|
|
|
|
$
|
850,000
|
|
Future Financing
We
will require additional funds to implement our growth strategy for our business.
If we raise additional funds through the issuance of equity or equity-linked
securities, the percentage ownership of current shareholders could be reduced,
and such securities might have rights, preferences or privileges senior to our
common stock. Additional financing may not be available upon acceptable terms,
or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to take advantage of prospective business
endeavors or opportunities, which could significantly and materially restrict
our future plans for developing our business and achieving commercial revenues.
If we are unable to obtain the necessary capital when needed, we may have to
cease operations. There can be no assurance that additional financing will be
available when needed or, if available, that can be obtained on commercially
reasonable terms.
We
intend to meet our cash requirements for the next twelve 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.
46
Off-Balance Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
Critical Accounting Policies and Estimates
Our
significant accounting policies are more fully described in the notes to our
financial statements included herein for the quarter ended March 31, 2017 and in
the notes to our consolidated financial statements included in our Annual Report
on Form 10-K for the year ended June 30, 2016.
Recently Adopted Accounting Pronouncements
Our
recently adopted accounting pronouncements are more fully described in Note 1 to
our financial statements included herein for the quarter ended March 31, 2017.