ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheet of Oroplata Resources, Inc. at June 30, 2017 (with comparative figures as at September 30, 2016) and the consolidated statements of operations for the three and nine months ended June 30, 2017 and 2016 and the statements of cash flows for the nine months ended June 30, 2017 and 2016 have been prepared by the Company's management in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Operating results for the nine months ended June 30, 2017 are not necessarily indicative of the results that can be expected for the year ended September 30, 2017.
OROPLATA RESOURCES, INC.
Condensed Consolidated Financial Statements (Unaudited)
|
|
Consolidated Balance Sheets as of June 30, 2017 and September 30, 2016 (unaudited)
|
5
|
|
|
Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2017 and 2016 (unaudited)
|
6
|
|
|
Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2017 and 2016 (unaudited)
|
7
|
|
|
Notes to the Consolidated Financial Statements (unaudited)
|
8
|
4
OROPLATA RESOURCES, INC.
Consolidated Balance Sheets
(unaudited)
|
June 30,
2017
$
|
|
September 30,
2016
$
|
|
(Restated – Note 10)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
33,755
|
|
90,040
|
|
|
|
|
Total assets
|
33,755
|
|
90,040
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
422,626
|
|
423,208
|
Due to related parties
|
223,246
|
|
178,146
|
Convertible notes payable, net of unamortized discount of $241,977 and $198,321,
respectively
|
314,023
|
|
32,679
|
|
|
|
|
Total liabilities
|
959,895
|
|
634,033
|
|
|
|
|
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Common Stock
Authorized: 500,000,000 common shares with a par value of $0.001 per share
Issued and outstanding: 58,000,000 and 57,136,943 common shares, respectively
|
|
|
|
58,000
|
|
57,137
|
|
|
|
|
Additional paid-in capital
|
29,812,237
|
|
27,925,770
|
|
|
|
|
Deficit
|
(30,796,377)
|
|
(28,526,900)
|
|
|
|
|
Total stockholders’ equity (deficit)
|
(926,140)
|
|
(543,993)
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
33,755
|
|
90,040
|
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
5
OROPLATA RESOURCES, INC.
Consolidated Statements of Operations
(unaudited)
|
For the three
months ended
June 30,
2017
$
|
|
For the three
months ended
June 30,
2016
$
|
|
For the nine
months ended
June 30,
2017
$
|
|
For the nine
months ended
June 30,
2016
$
|
|
|
|
|
|
(Restated – Note 10)
|
|
|
Revenues
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration costs
|
–
|
|
–
|
|
600,000
|
|
–
|
General and administrative
|
89,654
|
|
30,369
|
|
1,370,776
|
|
56,740
|
Impairment of mineral property
|
|
|
1,131,848
|
|
|
|
1,131,848
|
Payroll
|
53,600
|
|
–
|
|
53,600
|
|
–
|
|
|
|
|
|
|
|
|
Net loss before other expenses
|
(143,254)
|
|
(1,162,217)
|
|
(2,024,376)
|
|
(1,188,588)
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(92,673)
|
|
–
|
|
(234,101)
|
|
–
|
Gain on forgiveness of debt
|
–
|
|
–
|
|
25,000
|
|
–
|
Loss on settlement of debt
|
–
|
|
–
|
|
(36,000)
|
|
–
|
Other expense
|
–
|
|
(25,920,000)
|
|
–
|
|
(25,920,000)
|
|
|
|
|
|
|
|
|
Total other expense
|
(92,673)
|
|
(25,920,000)
|
|
(245,101)
|
|
(25,920,000)
|
|
|
|
|
|
|
|
|
Net loss
|
(235,927)
|
|
(27,082,217)
|
|
(2,269,477)
|
|
(27,108,588)
|
Net loss per share, basic and diluted
|
(0.00)
|
|
(0.68)
|
|
(0.04)
|
|
(0.68)
|
Weighted average shares outstanding
|
58,000,000
|
|
40,000,000
|
|
58,333,445
|
|
40,000,000
|
|
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
6
OROPLATA RESOURCES, INC.
Consolidated Statements of Cash Flows
(unaudited)
|
For the
nine months
ended
June 30,
2017
$
|
|
For the
nine months
ended
June 30,
2016
$
|
|
(Restated – Note 10)
|
|
|
Operating Activities
|
|
|
|
Net loss
|
(2,269,477)
|
|
(27,108,588)
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
Accretion expense
|
202,697
|
|
–
|
Fair value of share purchase warrants issued
|
652,977
|
|
–
|
Issuance costs of convertible debt
|
23,020
|
|
–
|
Convertible note issued for commitment fee
|
75,000
|
|
–
|
Gain on forgiveness of debt
|
(25,000)
|
|
–
|
Loss on settlement of debt
|
36,000
|
|
–
|
Shares issued for mineral property exploration costs
|
600,000
|
|
–
|
Shares issued for services
|
292,000
|
|
–
|
Impairment loss and other expenses on mineral property
|
–
|
|
1,131,848
|
Shares issuable for other expenses
|
–
|
|
25,920,000
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
Prepaid expenses
|
|
|
1,000
|
Accounts payable and accrued liabilities
|
84,418
|
|
(2,702)
|
Due to related parties
|
45,100
|
|
–
|
|
|
|
|
Net Cash Used In Operating Activities
|
(283,265)
|
|
(58,442)
|
Financing Activities
|
|
|
|
|
|
|
|
Advances from related parties
|
–
|
|
48,496
|
Proceeds from issuance of convertible debentures
|
226,980
|
|
–
|
|
|
|
|
Net Cash Provided By Financing Activities
|
226,980
|
|
48,496
|
|
|
|
|
Change in Cash
|
(56,285)
|
|
(9,946)
|
Cash – Beginning of Period
|
90,040
|
|
9,946
|
Cash – End of Period
|
33,755
|
|
–
|
|
|
|
|
Supplemental Disclosures
|
|
|
|
Interest paid
|
–
|
|
–
|
Income tax paid
|
–
|
|
–
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
Discount on convertible debenture
|
246,353
|
|
–
|
Convertible note issued to settle commitment fee
|
75,000
|
|
–
|
Shares issued to settle accounts payable
|
60,000
|
|
–
|
Original issue discount on convertible debentures
|
23,080
|
|
–
|
Shares issuable for acquisition of mineral properties
|
–
|
|
1,031,848
|
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
7
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
1.
Organization and Nature of Operations
The accompanying unaudited consolidated financial statements of Oroplata Resources, Inc. and its subsidiary (“Oroplata” or “the Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended September 30, 2016, included in our Annual Report on Form 10-K/A for the year ended September 30, 2016.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine month period has been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Company", "we", "us" or "our" mean Oroplata Resources, Inc. and all entities included in our consolidated financial statements.
Oroplata was incorporated under the laws of the State of Nevada on October 6, 2011 for the purpose of acquiring and developing mineral properties. The Company has a wholly-owned subsidiary called Oroplata Exploraciones E Ingenieria SRL, which was incorporated in the Dominican Republic on January 10, 2012.
Going Concern
These unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at June 30, 2017, the Company has not earned revenue, has a working capital deficit of $926,140, and an accumulated deficit of $30,796,377. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. If the Company is able to obtain financing, there is no certainty that terms will be favorable to the Company. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is September 30.
(b)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2017 and September 30, 2016, there were no cash equivalents.
(c)
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
8
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
2.
Summary of Significant Accounting Policies (continued)
(d)
Long-Lived Assets
Long-lived assets, such as property and equipment, mineral properties, and purchased intangibles with finite lives (subject to amortization), are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with Accounting Standards Codification topic 360 “Property, Plant, and Equipment”. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.
Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis. Any impairment in value is recognized as an expense in the period when the impairment occurs. Asset Retirement Obligations
The Company follows the provisions of ASC 410,
Asset Retirement and Environmental Obligations
, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
(e)
Loss per Share
The Company computes net income (loss) per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at June 30, 2017, the Company has 6,896,500 (September 30, 2016 – 1,584,000) potentially dilutive shares outstanding related to share purchase warrants and convertible debentures.
(f)
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign currency transactions are translated to United States dollars in accordance with ASC 830,
Foreign Currency Translation Matters
, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
(g)
Financial Instruments
Pursuant to ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
9
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
2.
Summary of Significant Accounting Policies (continued)
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
(h)
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740,
Accounting for Income Taxes
. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Due to the Company’s net loss position from inception on October 6, 2011 to June 30, 2017, there was no provision for income taxes recorded. As a result of the Company’s losses to date, there exists doubt as to the ultimate realization of the deferred tax assets. Accordingly, a valuation allowance equal to the total deferred tax assets has been recorded at June 30, 2017.
(i)
Mineral Property Costs
Mineral property acquisition costs are capitalized as incurred. Exploration and evaluation costs are expensed as incurred until proven and probable reserves are established. The Company assesses the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then 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 reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
(j)
Comprehensive Loss
ASC 220,
Comprehensive Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2017 and September 30, 2016, the Company has no items representing comprehensive income or loss.
(k)
Advertising and Marketing Costs
The Company expenses advertising and marketing development costs as incurred.
(l)
Revenue Recognition
Revenue from the sale of minerals will be recognized when a contract is in place and minerals are delivered to the customer.
10
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
2.
Summary of Significant Accounting Policies (continued)
(m)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.
Mineral Property
(a)
The Company has acquired the mineral rights to the Mogollon claim located in the Province of San Juan near the villages of Solorin and El Toro in the Dominican Republic for a price of $10,000 which included the cost of a geological report.
(b)
On June 15, 2016, the Company acquired the mineral rights to 500 lithium claims, with an option to purchase an additional 600 lithium claims, situated in the Railroad Valley in the Western Nevada Basin of Nye County, Nevada in exchange for $277,500.
The entire amount of $277,500 was advanced by various individuals and is recorded in accounts payable and accrued liabilities on the balance sheet. Due to payments being late and not paid on-time per the agreement, the Company agreed to issue 636,943 restricted shares of common stock. In November 2016, a settlement agreement related to the purchase of the Nye County properties was reached, in which, the parties settled on a payment of $252,500, the return of previously issued 636,943 restricted shares of common stock and the issuance of 2,000,000 unrestricted shares of common stock. The $25,000 reduction in the required payment was recorded as a gain on extinguishment of debt on the statement of operations.
The total consideration given for the mineral rights was $1,231,848 which includes the $200,000 payment and the 636,943 shares of common stock valued at $1,031,848. The total amount of $1,231,848 was impaired and recorded as an impairment loss during the year ended September 30, 2016.
4.
Convertible Notes Payable
(a)
On July 18, 2016, the Company entered into a convertible note agreement, as amended, with a non-related party for proceeds of $75,000. The terms of the convertible note became effective on February 15, 2017. The amount owing is secured, bears interest at 10%, is convertible into common shares of the Company at $0.24 per share, and is due on December 31, 2017. As at June 30, 2017, the carrying value of the note payable is $69,592 (September 30, 2016 - $nil), the unamortized discount on the note is $5,408 (September 30, 2016 - $nil), and accrued interest of $1,870 (September 30, 2016 - $nil) has been recorded in accounts payable and accrued liabilities.
(b) On July 18, 2016, the Company entered into a loan agreement, as amended, with a non-related party for proceeds of $121,000. The amount owing is secured, bears interest at 10%, is convertible into common shares of the Company at $0.50 per share, and is due on December 31, 2017. During the year ended September 30, 2016, the Company recorded a beneficial conversion feature of $121,000. As at June 30, 2017, the carrying value of the note payable is $102,267 (September 30, 2016 - $32,679), the unamortized discount on the note is $18,733 (September 30, 2016 - $88,321), and accrued interest of $12,332 (September 30, 2016 - $3,282) has been recorded in accounts payable and accrued liabilities.
As an incentive for the loan, the Company issued 121,000 cashless warrants to the note holder as a bonus incentive, which has an exercise price of $0.50 per warrant until July 18, 2021. The fair value of the cashless warrants was $229,069, and was calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 239%, and risk-free rate of 1%.
11
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
4.
Convertible Notes Payable
(continued)
(c)
On September 28, 2016, the Company entered into a loan agreement, as amended with a non-related party for proceeds up to $550,000. On September 30, 2016, the Company received proceeds of $110,000, net of issuance fees of $10,000. The amount owing is secured, bears interest at 10%, and is due on December 31, 2017, and is convertible into common shares of the Company at $0.10 per share. During the year ended September 30, 2016, the Company recorded a beneficial conversion feature of $110,000. As at June 30, 2017, the carrying value of the note payable is $69,822 (September 30, 2016 - $nil), the unamortized discount on the note is $40,178 (September 30, 2016 - $110,000), and accrued interest of $8,227 (September 30, 2016 - $nil) has been recorded in accounts payable and accrued liabilities.
As an incentive for the loan, the Company issued 121,000 cashless warrants to the note holder as a bonus incentive, which has an exercise price of $0.50 per warrant until September 30, 2021. The fair value of the cashless warrants was $65,990, and was calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 233%, and risk-free rate of 1%.
(d)
On February 16, 2017, the Company entered into a loan agreement with a non-related party for proceeds up to $250,000. On February 16, 2017, the Company received proceeds of $32,428, net of issuance fees of $2,948. On February 24, 2017, the Company received proceeds of $77,000, net of issuance fees of $7,000. On April 17, 2017, the Company received proceeds of $13,750, net of issuance fees of $1,250. On April 26, 2017, the Company received proceeds of $88,000, net of issuance fees of $8,000. On June 13, 2017, the Company received proceeds of $38,822 net of issuance fees of $3,882. The aggregate principal amount owed of $250,000 is secured, bears interest at 10%, is due one year after the date of funding for each tranche, and is convertible into common shares of the Company at $0.10 per share. During the period ended June 30, 2017, the Company recorded a beneficial conversion feature of $236,978. As at June 30, 2017, the carrying value of the note payable is $72,342 (September 30, 2016 - $nil), the unamortized discount on the note is $177,658 (September 30, 2016 - $nil), and accrued interest of $5,935 (September 30, 2016 - $nil) has been recorded in accounts payable and accrued liabilities.
5.
Other Expenses
During the period ended June 30, 2017, the Company incurred $nil (2016 - $25,920,000) of costs relating to the issuance of 16,000,000 common shares of stock to individuals for which no consideration was received by the Company.
6.
Related Party Transactions
(a)
As of June 30, 2017, the Company owes $120,146 (September 30, 2016 - $81,650) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations. The amounts owing are unsecured, non-interest bearing, and due on demand.
(b)
As of June 30, 2017, the Company owes $85,500 (September 30, 2016 - $33,000) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations and accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand. During the period ended June 30, 2017, the Company accrued $60,000 of management fees and paid $7,500 to the Chief Executive Officer of the Company.
(c)
As of June 30, 2017, the Company owes $17,500 (September 30, 2016 - $25,000) to directors of the Company for accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand. During the period ended June 30, 2017, the Company recorded management fees of $nil and repaid $7,500 to the directors of the Company.
(d) As of June 30, 2017, the Company owes $100 (September 30, 2016 - $nil) to the Secretary and director of the Company for cash advance for the Company’s new bank account. The amounts owing are unsecured, non-interest bearing, and due on demand.
(c)
On September 28, 2016, the Company entered into a loan agreement, as amended with a non-related party for proceeds up to $550,000. On September 30, 2016, the Company received proceeds of $110,000, net of issuance fees of $10,000. The amount owing is secured, bears interest at 10%, and is due on December 31, 2017, and is convertible into common shares of the Company at $0.10 per share. During the year ended September 30, 2016, the Company recorded a beneficial conversion feature of $110,000. As at June 30, 2017, the carrying value of the note payable is $69,822 (September 30, 2016 - $nil), the unamortized discount on the note is $40,178 (September 30, 2016 - $110,000), and accrued interest of $8,227 (September 30, 2016 - $nil) has been recorded in accounts payable and accrued liabilities.
12
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
7.
Common Shares
The Company’s authorized common stock consists of 500,000,000 shares of common stock, with par value of $0.001.
(a)
On November 8, 2016, the Company issued 2,000,000 shares of common stock with a fair value of $600,000. The shares were issued as part of a settlement agreement related to the purchase of the Nye County properties, in which, the parties settled on payment of $252,500 and the return of the previously issued 636,943 shares of common stock. Refer to Note 3.
(b)
On January 31, 2017, the Company issued 300,000 shares of common stock with a fair value of $87,000 for consulting services.
(c)
On February 8, 2017, the Company issued 400,000 shares of common stock with a fair value of $96,000 to settle outstanding accounts payable of $60,000 resulting in a $36,000 loss on settlement of debt.
(d)
On February 16, 2017, the Company received 2,000,000 common shares which were cancelled and returned to treasury. Refer to Note 7.
(e)
On February 16, 2017, the Company issued 500,000 common shares with a fair value of $130,000 for services.
(f)
On February 23, 2017, the Company issued 300,000 common shares with a fair value of $75,000 for legal services.
(g)
On February 24, 2017, the Company received 636,943 common shares which were cancelled and returned to treasury. Refer to Note 3.
8.
Share Purchase Warrants
On February 15, 2017, the Company issued 500,000 share purchase warrants with an exercise price of $0.15 per share of common stock for a period of five years. The fair value of the share purchase warrants was $133,295, calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 212%, expected life of 5 years, and a risk-free rate of 1%.
On February 16, 2017, the Company issued 2,000,000 share purchase warrants with an exercise price of $0.001 per share of common stock for a period of five years to replace 2,000,000 shares of common stock which were cancelled and returned to treasury (refer to Note 6). The fair value of the share purchase warrants was $519,682, calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 212%, expected life of 5 years, and a risk-free rate of 1%.
|
Number of
cashless warrants
|
|
Weighted
average exercise price
$
|
|
|
|
|
Balance, September 30, 2016
|
242,000
|
|
0.50
|
Issued
|
2,500,000
|
|
0.03
|
|
|
|
|
Balance, June 30, 2017
|
2,742,000
|
|
0.07
|
13
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
8.
Share Purchase Warrants (continued)
Additional information regarding share purchase warrants as of June 30, 2017, is as follows:
|
|
Outstanding and exercisable
|
Range of
Exercise Prices
$
|
|
Number of
Warrants
|
|
Weighted
Average
Remaining
Contractual Life
(years)
|
|
|
|
|
|
0.001
|
|
2,000,000
|
|
4.6
|
0.15
|
|
500,000
|
|
4.6
|
0.50
|
|
242,000
|
|
4.0
|
|
|
|
|
|
|
|
2,742,000
|
|
4.5
|
9.
Commitments
On July 1, 2016, the Company entered into a management agreement with the former Chief Executive Officer and Director of the Company for a twelve month term with monthly management fees of $10,000 in addition to reasonable out-of-pocket expenses and any pre-approved travel expenses.
10.
Restatement
The Company has restated its consolidated financial statements as at June 30, 2017 and for the nine months then ended to reflect adjustments related to notes payable that were not valid promissory note obligations of the Company and were reclassified to accrued expenses, and an amendment in the amounts owing for acquisition of mineral properties. This restatement resulted in a decrease in net loss of $25,000 for the nine months ended June 30, 2017, but had no impact on loss per share.
The impact of the restatement as at June 30, 2017 and for the nine months ended June 30, 2017 is summarized below:
Consolidated Balance Sheet
|
As at June 30, 2017
|
|
As reported
|
|
Adjustment
|
|
As restated
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
147,694
|
|
274,932
|
|
422,626
|
|
|
|
|
|
|
Total Current Liabilities
|
684,963
|
|
274,932
|
|
959,895
|
|
|
|
|
|
|
Notes payable
|
274,932
|
|
(274,932)
|
|
–
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
(30,796,377)
|
|
–
|
|
(30,796,377)
|
|
|
|
|
|
|
Total Stockholders’ Equity (Deficit)
|
(926,140)
|
|
–
|
|
(926,140)
|
14
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended June 30, 2017 and 2016
(unaudited)
10.
Restatement (continued)
Consolidated Statement of Operations
|
Nine months ended June 30, 2017
|
|
As reported
|
|
Adjustment
|
|
As restated
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
Gain on forgiveness of debt
|
–
|
|
25,000
|
|
25,000
|
|
|
|
|
|
|
Total other income (expense)
|
(270,101)
|
|
25,000
|
|
(245,101)
|
|
|
|
|
|
|
Net loss
|
(2,294,477)
|
|
25,000
|
|
(2,269,477)
|
Consolidated Statement of Cash Flows
|
Nine months ended June 30, 2017
|
|
As reported
|
|
Adjustment
|
|
As restated
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(2,294,477)
|
|
25,000
|
|
(2,269,477)
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Gain on forgiveness of debt
|
–
|
|
(25,000)
|
|
(25,000)
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
112,486
|
|
(28,068)
|
|
84,418
|
|
|
|
|
|
|
Net Cash Used In Operating Activities
|
(255,197)
|
|
(28,068)
|
|
(283,265)
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of note payable
|
6,000
|
|
(6,000)
|
|
|
Repayment on note payable
|
(34,068)
|
|
34,068
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
198,912
|
|
28,068
|
|
226,980
|
11.
Subsequent Events
(a) On July 25, 2017, the Company entered into a loan agreement with a non-related party for proceeds up to $550,000. The Company received initial proceeds of $44,000 net of issuance fees of $4,000. The amount owing is secured, bears interest at 10%, and is due on July 25, 2018, and is convertible into common shares of the Company at $0.10 per share.
(b) On July 31, 2017, the Company issued 500,000 common shares to a non-related party for professional services.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in the Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.
Background
We are a start-up, exploration mining company whose purpose is to explore mineral properties which, hopefully, will contain lithium and other economic minerals. We were incorporated under the laws of the State of Nevada on October 6, 2011 for the purpose of acquiring rights to mineral properties with the eventual objective of being a producing mineral company, if and when it ever occurs.
We have limited operating history and have not yet generated or realized any revenues from our activities. We performed limited exploration work on our former property, the Leomary Gold Claim located in the Dominican Republic. To date we have not performed any exploration work on our new mineral claim called the Mogollon located in the Dominican Republic.
On January 10, 2012 we incorporated a wholly-owned subsidiary under the laws of the Dominican Republic named "Oroplata Exploraciones E Ingenieria, Orexi, SRL" (“Oroplata Exploraciones”) in order to hold the mineral rights to a claim named "Leomary Gold Claim" consisting of 4,500 mining hectors (approximately 11,100 acres) located in the province of Monseñor Nouelan, municipality of Bonao. After performing limited exploration work, in September 2014, we lost the rights to the Leomary Gold Claim.
We subsequently acquired rights to a new mineral claim in the Dominican Republic called Mogollon (the “Mogollon Claim”) whereby the Company paid $10,000 for the rights to the minerals on the Mogollon Claim and for the completion of a geological report thereon. To date we have not performed, and do not expect to perform in the future, any exploration on the Mogollon Claim. Furthermore, management is currently investigating whether we have any remaining rights in any mineral claims located in the Dominican Republic.
On June 15, 2016, we entered into a Mineral Claim Purchase Agreement with Plateau Ventures LLC., a Utah corporation (“PVL”) to acquire five hundred (500) lithium mineral claims, totaling 10,000 acres, called the Western Nevada Basin, situated in Railroad Valley in Nye County, Nevada (the “WNB Clto veaim”). In the second half of 2016, we engaged experts to evaluate the region and the WNB Claim to target on-site exploration efforts, which we expect to begin in 2017.
We have two wholly-owned subsidiaries: Oroplata Exploraciones, which was incorporated under the laws of the Dominican Republic on January 10, 2012; and Lithortech Resources Inc., which we incorporated under the laws of Nevada on August 8, 2016.
We own no real estate, other than the mineral rights to the Mogollon concession located in the Dominican Republic (which Oroplata is investigating) and the Nye County properties located in Nevada, United States.
Oroplata has not earned any revenues to date and we do not anticipate earning revenues until such time as we have undertaken sufficient exploration work to identify an ore body. Exploration work will take a number of years and there is no certainty we will ever reach a production stage. Our Company is considered to be in the exploration stage due to not having done exploration work which would result in a development decision.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we intend to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
allowance to provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
reduced disclosure about our executive compensation arrangements;
no non-binding advisory votes on executive compensation or golden parachute arrangements; and
16
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering (our “IPO”); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you have beneficial ownership. In addition, we have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Exchange Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
Our auditors have issued a going concern opinion on the September 30, 2016 financial statements. This means that our auditors believe there is substantial doubt that it can continue as an on-going business for the next twelve months unless it obtains additional capital to pay for its operations. This is because it has not generated any revenues and no revenues are anticipated until it begins removing and selling minerals, if ever. Accordingly, it must raise cash from sources other than the sale of minerals found on the Mogollon concession. That cash must be raised from other sources. Our only other source for cash at this time is investment by others in our Company, advances from its sole director or institutional financing. We must raise cash to implement its planned exploration program
We review and evaluate long-lived assets, such as its former and present mineral claims, for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Our assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When we determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Recent Developments
Recent Appointments
On August 7, 2017, the Board of Directors appointed Mr. Douglas D Cole, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors.
On July 30, 2017 Mr. Michael Mason resigned from all officer and director positions with the company and its subsidiary Lithortech Resources.
On May 25, 2017 The Board of Directors removed Mr. Craig Alford from any positions with the company.
On the same date, the Board of Directors appointed Mr. Douglas Cole to serve as Controller, interim Treasurer and interim Secretary, effective March 14, 2017, until such time as the Company appoints a qualified, permanent replacement to such positions. Mr. Cole will also continue to serve the Company as a member of the Board of Directors.
Also effective March 14, 2017, the Board of Directors appointed Mr. Michael Mason, the Company’s Chief Executive Officer and director, to act as interim Chief Financial Officer and to assume such related duties of Principal Financial Officer until such time as the Company appoints a qualified, permanent replacement Chief Financial Officer.
Appointment of Mr. Douglas Cole
On February 20, 2017, the Board of Directors of the Company appointed Douglas Cole to serve as a member of the Board of Directors, effective February 28, 2017.
Appointment of Mr. Michael Mason and Resignation of Mr. Craig Alford
On February 15, 2017, Craig Alford resigned from his officer positions with the Company and was simultaneously appointed Chief Operating Officer of the Company. Mr. Alford will continue to serve on the Board of Directors of the Company.
On February 15, 2017, Michael Mason was appointed Chief Executive Officer of the Company. Mr. Mason will continue to serve on the Board of Directors of the Company.
17
Appointment of Mr. William Hunter
On June 10, 2016, the Board of Directors of the Company appointed William Hunter to the Board of Directors.
Appointment of Mr. Gregory Kuzma
On June 10, 2016 the Board of Directors of the Company appointed Gregory Kuzma to the Board of Directors.
Appointment of Mr. Michael Mason
On July 22, 2016 the Board of Directors of the Company appointed Michael Mason to the Board of Directors.
Preceding the above appointments, the following developments occurred:
Appointment of Mr. Craig Alford and Resignation of Mr. Ruben Ricardo Vasquez
On May 31, 2016, Craig Alford acquired control of twenty-five million (25,000,000) shares (the “Purchased Shares”) of the Company’s issued and outstanding common stock, representing approximately 62.5% of the Company’s total then issued and outstanding common stock, from Ruben Ricardo Vasquez in accordance with a stock purchase agreement between Mr. Alford and Mr. Vasquez (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Mr. Alford paid an aggregate purchase price of twenty-five thousand dollars ($25,000.00) to Mr. Vasquez in exchange for the Purchased Shares.
As a result of the Stock Purchase Agreement, the following changes to the Company's directors and officers have occurred:
As of May 31, 2016, Ruben Ricardo Vasquez resigned from all officer positions with the Company, including but not limited to those of President, Chief Executive Officer, Chief Financial Officer and Secretary.
On May 31, 2016, Craig Alford was appointed as the Company’s President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary.
On June 13, 2016, Mr. Vasquez resigned from his position as the sole director of the Company and Mr. Alford was appointed as the sole director of the Company.
As a result of these transactions, control of the Company passed to Mr. Alford. The Purchased Shares acquired by Mr. Alford constituted 62.5% of the then issued and outstanding common stock of the Company.
Entrance into Mineral Claim Purchase Agreement with Plateau Ventures LLC
On June 15, 2016, the Company entered into Mineral Claim Purchase Agreement (the “Agreement”) with Plateau Ventures LLC., a Utah corporation (“PVL”). Pursuant to the Agreement, upon the satisfaction of various closing conditions, PVL will sell to the Company the title to five hundred (500) lithium mineral claims situated in Railroad Valley in the Western Nevada Basin of Nye County, Nevada (the “Claims”) for a total of $277,500. The parties settled on payment of $252,500 and the return of the previously issued 636,943 shares of common stock.
Full entitlement to the Company of the Claims will occur when all filing requirements are processed and accepted by the Bureau of Land Management (BLM) in Nevada. All BLM requirements must be completed on or before September 1st of each year. Although no assurances can be made, the Company believes it is compliant with all BLM procedures and anticipates that it will receive confirmation from the BLM of its entitlement to the Claims.
18
Dominican Republic Claims
On January 10, 2012 Oroplata incorporated a wholly-owned subsidiary under the laws of the Dominican Republic named "Oroplata Exploraciones E Ingenieria, Orexi, SRL" in order to hold the mineral rights to a claim named "Leomary Gold Claim". In order to determine what mineralization was present on the Leomary the Company hired Ismael Martinez, Professional Geologist, to undertake an exploration program on the Leomary at a cost of $25,800. The exploration program centered mainly on obtaining soil, sediment and rock samples from various areas within the Leomary Gold Claim to determine what minerals were present. Based on the results on these initial findings, Oroplata undertook a further exploration program during the summer of 2013, at a cost of $18,800, to identify mineralization in other parts of the Leomary and to resample the previous high grade samples. This additional exploration work was completed at the end of August 2013. Unfortunately the Company lost the rights to any minerals on the Leomary in September 2014.
The Company acquired rights to a new mineral claim in the Dominican Republic called Mogollon (the “Mogollon Claim”) whereby the Company paid $10,000 for the rights to the minerals on the Mogollon Claim and for the completion of a geological report thereon. To date we have not performed, and do not expect to perform in the future, any exploration on the Mogollon Claim. Furthermore, management is currently investigating whether we have any remaining rights in any mineral claims located in the Dominican Republic.
Western Nevada Basin Property
On June 15, 2016, the Company entered into an agreement to acquire the mineral rights to 500 Placer claims situated in the Railroad Valley, Nye County, Nevada in exchange for $277,500. The parties settled on payment of $252,500 and the return of the previously issued 636,943 shares of common stock.
The Western Nevada Basin (WNB) Property is located in east central Nye County approximately 93 miles northeast of the county seat of Tonopah, NV, the major commercial center for the region; 56 miles southwest of the town of Ely, NV and 120 miles northeast of the village of Silver Peak the only currently operating Lithium producer in the State. The Western Nevada Basin Property covers a total of 10,000 acres. Each of the 500 Placer claims covers approximately 20 acres and was laid out by aliquot parts as required by the Bureau of Land Management.
Lithium is a locatable mineral according to the Code of Federal Regulations. Lithium should be located by lode claims where it occurs in bedrock and by placer claims where it occurs in sediments. A body of legal precedence set during the original development of lithium brines in the area provides that lithium in valley sediments by nature of the unconsolidated host rock are staked by and produced from placer claims.
The WNB project is held by 500, 20 acre placer claims, which are located on public Federal lands managed by the Bureau of Land Management. The placer claims are located on U.S. Surveyed lands and fit to aliquot parts.
In Nevada, the claim staking procedure requires recording documents with both the county Recorder’s Office and then with the state Bureau of Land Management office. Claims must be held by posts at the claims four corners and Notice of Location which describe the claims legal description of location and owner. The claims are required to be recorded at the county courthouse within the proper jurisdiction within 90 days from the staking date.
Placer claims on Federal lands are held to a September 1 to August 31 assessment year when Intent to Hold or Proof of Labor documents need to be filed with the county for the annual assessment work. The pertinent documents are filed with the Nye County Recorder’s Office.
The current annual maintenance fee is $155 per 20 acre (or a portion thereof) placer claim (http://www.blm.gov/ca/st/en/info/iac/miningfacts.html). Payment of those fees allows the claim to stay on the BLM active data base. Non-payment results in the claims moving to ‘closed’ status. Before August 31st each year, a payment of $155 per claims is made to the BLM to hold the claims in good standing for the following assessment year. The total cost for the 500 WNB claims is $77,500.
The claims were transferred to the Company by a transfer method of a ‘Quit Claim Deed’ which transfers official title to the Company. Before Oct 31st each year, it is necessary to make a payment to the county of $10 per claim to file an affidavit of assessment fees paid and notice of intent to hold the claims into the next assessment year. The total cost for the 500 WNB claims will be $5,000.
As public lands, there is right of free access and both surface and mineral rights are held by the Federal government. Public records (Management, Bureau of Land) show no military withdrawals or Areas of Critical Environmental Concern. The Railroad Valley Wildlife Management Area is located to the west of the WNB claim boundary and has no effect on any planned work on the WNB claim area.
19
There is free access to the Federal land in Railroad Valley and there are no restrictions on casual prospecting. New exploration drilling will trigger a permitting process. There are two major levels of permitting: Notice of Intent (NOI) and Plan of Operations (POO). Historically, if the proposed disturbance was less than 5 acres or 1,000 tons, then the work can proceed under a NOI if there are no complications such as ancient ruins or endangered species. Application for a NOI is relatively simple with requirements like bonding the access route and re-seeding afterwards. A NOI is valid for two years and may be renewed on a two year basis. Maintaining it requires maintaining bonds and seeding disturbed areas when the work is complete. A POO is more complicated with requirements like an archeological survey, environmental assessment, etc. The BLM may respond within 15 days to a NOI application whereas a POO may require several months to years for final acceptance.
Any drilling planned will require a NOI filed with the Tonopah office of the BLM. To the best of the Company’s knowledge, there are no known environmental liabilities to which the property is subject or other significant factors and risks that may affect access, title, or the right or ability to perform work on the property.
Geologic Setting
The claims are located in the Basin and Range physiographic province which stretches from southern Oregon and Idaho to Mexico. It is characterized by extreme elevation changes between mountains and flat intermountain valleys or basins.
Plate tectonics powered by crustal spreading broadly generates two types of forces: compression as plates are moved together and extension as those forces relax. Compression was the dominant geologic force affecting the western United States beginning about 200 million years ago as the Pacific Ocean plate moved eastward under the North American continent. Those forces compressed the overlying pile of sedimentary rocks accumulated over hundreds of millions of years into a thick stack reaching up to elevations of 10 – 14,000 feet, similar to the altiplano of Mexico and South America which formed at the same time from similar forces. That highland plateau stretched west – east from the Sierra Nevada Mountains in California to the Wasatch Range in Utah.
Extension became the dominant force beginning in the Eocene - Oligocene epochs approximately 55 to 25 million years ago. Also, the relative movement of the tectonic plates changed about 30 million years ago with the movement becoming more oblique to the continent. That relaxed the compressional forces and also tended to ‘tear’ the crust apart, creating diagonal extensions.
The resulting compressional and extensional tectonics have created throughout Nevada a classical Basin and Range province consisting of narrow, N- to NE-trending, fault block mountain chains separated by flat, linear valleys. This geological pattern is repeated across the State and has created a number of currently arid, ‘trapped’ or closed basins with respect to drainage that have the potential of containing Lithium Brine deposits.
Geology of Lithium Brines
Lithium brine deposits are accumulations of saline groundwater that are enriched in dissolved lithium. All producing lithium brine deposits share a number of first-order characteristics: (1) arid climate; (2) closed basin containing a salt flat (Playa or Salar); (3) tectonically driven subsidence; (4) associated igneous or geothermal activity; (5) suitable lithium source-rocks; (6) one or more adequate aquifers; and (7) sufficient time to concentrate a brine.
The single most important factor determining if a non-marine basin can accumulate lithium brine is whether or not the basin is closed.
Lithium enriched brines are formed by complex and multiple processes of evaporation, re-mobilization, and salt and lithium clay dissolution and precipitation. In essence, lithium is liberated by weathering or derived from hydrothermal fluids from a variety of rock sources within a closed basin where Lithium, a lightweight element, cannot escape.
Lithium is highly soluble and, unlike sodium (Na), potassium (K), or calcium (Ca), does not readily produce evaporite minerals when concentrated by evaporation. Instead it ends up in residual brines in the shallow subsurface. Economic brines have Li concentrations in the range of 200 to 4,000 milligrams per liter (mg/l). 1 mg/l = 1 ppm.
Clayton Valley contains the only currently producing Lithium Brine project in Nevada. Production has been on-going since 1967. The production at Clayton Valley is located approximately 120 miles west of the Railroad Valley. Evidence from Clayton Valley suggests that felsic vitric tuffs are a particularly favorable primary source of Lithium, as well, uplifted Neogene lake beds from earlier in the basin’s history, which have been altered to hectorite, may provide a source of Lithium.
20
Oroplata's Main Product
Oroplata's main product will be the sale of Lithium Carbonate or Lithium Hydroxide that can be extracted from its Western Nevada Basin Project once the claim has been explored. Since the Western Nevada Basin has yet to be explored by us, we have yet to find an ore body and therefore cannot sell any ore.
Exploration and Office Facilities
The Company has no plans to construct a mine or smelter on the Mogollon until an ore body of reasonable worth is found; which might never happen. While in the exploration stage, the crew of workers will be housed in a nearby town or tent facilities will be established on the property itself. This will initially avoid building any structures either permanent or removable on the Mogollon concession.
Oroplata's office is at 1802 N Carson Street Suite 206, Carson City Nevada 89701-1238. At the present time Oroplata does not require its own office space due to having no employees, other than our one officer, Mr. Cole, but will consider renting office space shortly.
Other Mineral Properties
The Company has no other properties other than the Mogollon property located in the Dominican Republic (which Oroplata is investigating), and the Nye County mineral claims located in Nevada, United States.
Employees
Other than our Board of Directors and our one officer, Mr. Cole who are engaged by the Company as a consultant, we do not have any employees. Our officer devotes approximately 20-30 hours a week, collectively, to our operations but will increase the number of hours when an exploration program is undertaken on our mineral properties.
Investigation of Prior Agreements.
At the request of the Board of Directors, the Company is reviewing all prior agreements and stock issuances of the Company entered into by the previous management of the Company to ensure their validity.
Significant Accounting Policies
Research and Development Expenditures
Oroplata has not expended any money on research and development since its inception.
Patents and Trademarks
Oroplata does not have any patents or trademarks.
RESULTS OF OPERATIONS FOR THE THREE and NINE MONTHS ENDED JUNE 30, 2017 AND 2016
Results of Operations
Revenues
During the three and nine months ended June 30, 2017 and 2016, the Company has not realized any revenues.
Expenses
Three months ended June 30, 2017 and 2016
During the three months ended June 30, 2017, the Company incurred of $143,254 of operating expenses compared to $1,162,217 during the three months ended June 30, 2016. The decrease is due to an impairment loss of $1,131,848 during fiscal 2016 for the impairment of the acquisition cost of the Nye County property offset by an increase in operating expenses due to the increase in operating activity during the current fiscal year which included $53,600 of payroll expenses to employees at Lithortech, a wholly-owned subsidiary of the Company, and an increase in day-to-day operating costs.
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In addition to operating expenses, the Company incurred interest and accretion expense of $92,673 during the three months ended June 30, 2017 compared to $nil during the three months ended June 30, 2016. The increase is due to the issuance of convertible notes to fund the Company’s operations which resulted in the recognition of interest expense for the notes outstanding as well as accretion expense for the beneficial conversion feature of the convertible notes.
Net Loss
During the three months ended June 30, 2017, the Company incurred a net loss of $235,927 or $nil loss per share compared to a net loss of $27,082,217 or $0.68 loss per share during the three months ended June 30, 2016.
Nine months ended June 30, 2017 and 2016
During the nine months ended June 30, 2017, the Company incurred operating expenses of $2,024,376 compared to $1,188,588 for the nine months ended June 30, 2016. Outside of a one-time impairment charge of $1,131,848 in fiscal 2016 relating to the impairment of the Nye County claims, the increase in operating expenses includes $600,000 of exploration costs for the issuance of 2,000,000 common shares for settlement of the purchase price of the Nye County claims. The remaining amount was related to general and administrative expense which was a result of increased operating activity including the issuance of a convertible note for $75,000 for a commitment fee, stock-based compensation for share purchase warrants of 500,000 warrants with an exercise price of $0.15 and 2,000,000 warrants with an exercise price of $0.001 (issued in conjunction with the cancellation of 2,000,000 common shares) with a fair value of $652,977. Furthermore, during the period, the Company issued 300,000 common shares for investor relation services with a fair value of $87,000, 500,000 common shares for consulting services with a fair value of $130,000, and 300,000 common shares for legal services with a fair value of $75,000. In addition to share-based compensation, the Company also incurred management fees of $60,000 to the former Chief Executive Officer and Director of the Company, $24,000 to the current Chief Executive Officer and Director of the Company, $115,495 of consulting fees to consultants for services, $10,500 of investor relation services, $36,000 of professional fees for accounting, audit, and legal services, and $64,000 of payroll costs relating to operating activity of its wholly-owned subsidiary, Lithortech Resources. During the comparative nine month period ended June 30, 2016, the Company incurred no exploration costs and $56,740 of operating expenses which consisted primarily of professional services for the Company’s SEC filing requirements and day-to-day operating costs which were minimal given that the Company had limited operations and cash flows.
In addition to operating expenses, the Company incurred interest and accretion expense of $234,101 with respect to outstanding loans and convertible notes payable issued and outstanding, a gain of $25,000 on the forgiveness of amounts owing on the Nye Claims, and settled $60,000 of outstanding accounts payable with the issuance of 400,000 common shares with a fair value of $96,000 which resulted in a loss on settlement of debt of $36,000. Comparatively, the Company recorded other expense of $25,920,000 during the three and nine months ended June 30, 2016 relating to the fair value of 16,000,000 common shares that were issued to individuals for which the Company did not receive any consideration.
Net Loss
During the nine months ended June 30, 2017, the Company incurred a net loss of $2,269,477 or $0.04 loss per share compared to a net loss of $27,108,588 or $0.68 loss per share during the nine months ended June 30, 2016.
Liquidity and Capital Resources
At June 30, 2017, the Company had cash and total assets of $33,755 compared to $90,040 as at September 30, 2016. The decrease in cash and total assets were due to the use of cash at a higher rate than funding, as the Company currently earns no cash from operations and is reliant on cash received from financing activities until such time that the Company earns revenue from its operating activities.
The Company had total current liabilities of $959,895 at June 30, 2017 compared to $634,033 at September 30, 2016. The increase in current liabilities is due to a $45,100 increase in amounts due to related parties for unpaid management fees, and $281,344 increase in the carrying value of convertible notes payable which is due to an increase in the overall issuance of convertible notes payable from $231,000 of notes issued as at September 30, 2016 to $556,000 of notes issued as at June 30, 2017.
As at June 30, 2017, the Company had a working capital deficit of $926,140 compared to a working capital deficit of $543,993 at September 30, 2016. The increase in the working capital deficit was due to the fact that the Company financed its operating costs, including acquisition of mineral properties, through the issuance of shares of its common stock, loans and notes payable and did not earn any cash flow from operating activities.
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During the period ended June 30, 2017, the Company issued 2,000,000 common shares as settlement for the purchase of the Nye County claims, issued 800,000 common shares for services, issued 300,000 common shares for legal fees, issued 400,000 shares to settle outstanding accounts payable, and cancelled 636,943 common shares that were returned due to the settlement of the purchase price of the Nye County properties, and 2,000,000 common shares which were returned to treasury and replaced with the issuance of 2,000,000 share purchase warrants. As at June 30, 2017, the Company had 58,000,000 common shares outstanding compared to 57,136,943 common shares outstanding as at September 30, 2016.
During the nine months ended June 30, 2017, the Company issued 500,000 share purchase warrants which are exercisable at $0.15 per share until February 15, 2022 as compensation to waive certain events of default relating to an agreement between the Company and the convertible note holder which included the extension of the July 18, 2016 and the September 30, 2016 notes to December 31, 2017. Furthermore, the Company issued 2,000,000 share purchase warrants which are exercisable at $0.001 per share until February 16, 2022 in exchange for the cancellation of 2,000,000 common shares. As at June 30, 2017, the Company had 2,742,000 outstanding share purchase warrants compared to 242,000 outstanding share purchase warrants at September 30, 2016.
As at June 30, 2017 and September 30, 2016, the Company does not have any issued or outstanding stock options.
Cash Flows
Cash from Operating Activities.
During the nine months ended June 30, 2017, the Company used $283,265 of cash for operating activities compared to $58,442 of cash during the nine months ended June 30, 2016. The increase in the use of cash for operating activities is due to the fact that the Company received more cash funding from financing activities during the period which was used to settle outstanding day-to-day operating costs incurred by the Company.
Cash from Investing Activities
During the nine months ended June 30, 2017 and 2016, the Company did not have any investing activities.
Cash from Financing Activities
During the nine months ended June 30, 2017, the Company received $226,980 of cash from financing activities compared to $48,496 received during the nine months ended June 30, 2016. The increase in the cash received from financing activities is due to $226,480 received from the issuance of convertible notes payable during the current period compared to $nil funds received from loans and notes during the prior year as the Company relied solely on $48,496 of funding from related parties to support the limited operations from prior year.
Off-Balance Sheet Arrangements
None.
Trends
From Oroplata's date of inception it has produced no revenue and maybe will not be able to produce revenue. To the knowledge of its management Oroplata is unaware of any trends or past and future events which will have a material effect upon it, its income and business, both in the long and short term. Please refer to Oroplata's assessment of Risk Factors as noted below.
Critical Accounting Policies and Estimates
In presenting Oroplata's financial statements in conformity with U.S. generally accepting accounting principles, or GAAP, Oroplata is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures.
Some of the estimates and assumptions Oroplata is required to make relate to matters that are inherently uncertain as they pertain to future events. Oroplata bases these estimates and assumptions on historical experience or on various other factors that it believes to be reasonable and appropriate under the circumstances. On an ongoing basis, Oroplata reconsiders and evaluates its estimates and assumptions. Actual results may differ significantly from these estimates.
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Oroplata believes that the critical accounting policies listed below involve its more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on its financial statements. In addition, Oroplata believes that a discussion of these policies is necessary to understand and evaluate the financial statements contained in this filing.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Mineral claim acquisition and exploration costs
The cost of acquiring mineral properties or claims is initially capitalized and then tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Mineral exploration costs are expensed as incurred.
Income Taxes
Oroplata utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Recent Accounting Pronouncements
Oroplata does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.
Foreign Currency
The Company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign currency transactions are translated to United States dollars in accordance with ASC 830,
Foreign Currency Translation Matters
, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.