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LITHIUM EXPLORATION GROUP, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this quarterly report.
Unless otherwise specified in this quarterly report, all dollar amounts are
expressed in United States dollars and all references to "common stock" refer to
shares of our common stock.
As used in this quarterly report, the terms "we", "us", "our", and "our company"
mean Lithium Exploration Group, Inc., unless otherwise indicated.
Corporate History
We were incorporated on May 31, 2006 in the State of Nevada under the name
"Mariposa Resources, Ltd." Prior to June 25, 2009, we had the right to conduct
exploration work on 20 mineral mining claims in Esmeralda County, Nevada. On
July 31, 2009, we 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
we entered into an agreement with Beeston Enterprises Ltd., under which our
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 March 17, 2011 we terminated the option agreement with Beeston.
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 3200 N. Hayden Road, Suite 235, Scottsdale,
Arizona 85251, and our telephone number is (480) 641-4790.
Other than as set out herein, we have not been involved in any bankruptcy,
receivership or similar proceedings, nor have we been a party to any material
reclassification, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of our business.
Our Current Business
We are an exploration stage company that engages principally in the acquisition,
exploration, and development of resource properties.
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On December 16, 2010, we 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. To date, our activities have been
limited to our formation, the raising of equity capital and our mining
exploration work program.
On January 18, 2011, we entered into a purchase option agreement with Salta
Water Co. and we have acquired a 60% interest on the Salta Aqua claims in Salta
Province, Argentina. We have a further option to acquire the remaining 40%
interest from Salta Water. On January 18, 2011, we issued 250,000 shares of
common stock at a deemed price of $0.10 per share for mining expenses relating
to the Salta Aqua Claims. The price of the issued shares was based on the market
price of the shares on January 18, 2011.
On March 17, 2011, we entered into a letter agreement with Glottech-USA, LLC for
an acquisition of one initial unit of certain proprietary and patented
mechanical ultrasound technology for use in the water treatment in regards to
our lithium operations in Alberta, Canada. Alexander Walsh, an office and
director of our company, met the principals of Glottech-USA in 2009 in the
course of operating his consulting company AW Enterprises LLC. Pursuant to the
terms of the agreement, Glottech-USA will assemble and ship to our company one
unit of the technology specifically designed for our water treatment purposes
and will license the use of the technology. Furthermore, we have agreed that in
the event that we have purchased a minimum of five technology units within
twelve months from the date of execution, Glottech-USA has agreed that it will
neither license nor lease the technology to any third party for the purposes of
mineral extraction in the country of Canada.
On April 29, 2011, we entered into a settlement agreement with Beeston
Enterprises Ltd., in regard to all of Beeston's claims against our company
arising under an option agreement for the option of various mining claims from
Beeston by our company dated September 25, 2009 and terminated by our company on
March 17, 2011. Under the terms of the settlement Beeston received the sum of
CDN$54,623.65 and 200,000 restricted shares of common stock of our company in
full and complete settlement of all claims against our company including, but
without limitation, all claims for the payment of various amounts due and owing
to Beeston by our company under the terms of the option agreement for past and
future mining claim maintenance fees, the costs for re-claiming four of the
eight mining claims optioned under the option agreement and damages for the loss
of four mining claims.
At our Valleyview Project in the Swan Hills and Valleyview Region of
west-central Alberta, we completed a 12 week sample testing program on May 31,
2011. We are initiating the process to complete the resource estimates for the
Valleyview Project, and hope to have it completed by January 31, 2012. Immediate
plans include conducting bulk sampling to be utilized in the design of a
separation process to produce battery-grade lithium carbonate, potash (KCl), and
magnesium hydroxide. Once the bulk sampling and separation process have been
completed we will raise capital to build a pilot scale plant in Valleyview to
begin the production of the outlined minerals. On July 28, 2011, we staked
additional lands at our Valleyview Project bringing our contiguous claim
holdings at the property to 517,960 acres. Additionally, on December 15, 2011,
we staked an additional 135,000 acres approximately 50 miles south of the
Valleyview Property. Our total MAIM (Metallic and Industrial Mineral) claim
holdings in the Swan Hills region are now over 650,000 acres.
On June 29, 2011 we entered into a securities purchase agreement with one
investor. Pursuant to the terms of the agreement, the investor acquired
convertible debentures with an aggregate total of $1,500,000. $1,000,000 was
paid on June 29, 2011 and $500,000 was paid on July 12, 2011.
The initial debenture for $1,000,000 is due on December 28, 2012. The release of
the full $1,500,000 to us is governed by the terms of an escrow agreement
entered into on the same day.
The debenture initially carries an interest rate of 12% per annum and is
convertible at $0.83 per share subject to various prescribed conditions. Along
with the debentures, we have issued warrants to acquire a total of 1,204,819
shares of our common stock for a period of five years at a price of $0.913. The
warrants also include cashless exercise provisions in the event that the
registration statement is not effective.
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Pursuant to a registration rights agreement entered into with the investor on
the same day, we were required to file a registration statement for the shares
underlying the convertible debentures, as well as the warrants, within 30 days
of the closing of the initial $1,000,000 and ensure that the registration
statement is declared effective by the Securities and Exchange Commission within
120 days of the closing. That process is still underway and has gone beyond the
120 day initial period activating a $0.10 penalty on the share conversion price
for any conversions of stock. The price of the conversion is now $0.73.
Also on June 29, 2011, Alexander Walsh, an officer and director of our company,
entered into a guaranty and pledge agreement whereby he pledged 25,000,000
shares of our common stock currently held by him, as collateral and guaranty for
our obligations under the securities purchase agreement and the debentures.
On July 12, 2011 we received the remaining $500,000 from the investor and
entered into a $500,000 convertible debenture. The debenture is due on December
28, 2012 and carries an interest rate of 12% per annum. The debenture is also
convertible at $0.83 per share, subject to various prescribed conditions. Along
with the debentures, we have issued warrants to acquire a total of 602,410
shares of our common stock for a period of five years at a price of $0.913. The
warrants also include cashless exercise provisions in the event that a
registration statement covering it is not effective. The debenture and warrants
were entered into on July 12, 2011.
On November 22, 2011, we issued 2,000,000 shares of our common stock, at $0.2925
per share, upon receiving a notice of conversion from an investor converting
$585,000 of a total $1,000,000 debt owed, pursuant to the securities purchase
agreement entered into on June 29, 2011. The balance of debt remaining to the
investor is $915,000.
APEX Geoscience Ltd., with whom we entered into a consulting agreement in August
2011, will assist us in furthering the Valleyview Project by completing a
NI43-101 compliant technical report and resource estimate. The substantive steps
and timeline of this project are as follows:
º July 20 to September 1, 2011: Download and prepare downhole GeoScout
geological, geophysical, water chemistry and water production data required
and forward to hydrogeological consultant. This part of the project has
been completed.
º September 1 to October 30th, 2011: The water data from the testing program
has been sent to the hydrogeological consultant and they have commenced
downhole geological modeling of the pertinent reservoir geology in
Micromine. Their report gave hydrogeological characteristics for the entire
aquifer covering the 517,960 contiguous acres that we hold MAIM rights to
at our Valleyview Project. A meeting between the hydrogeological consultant
and Apex Geoscience took place on November 10, 2011 where they discussed
the initial findings of the hydrogeological characteristics and how best to
incorporate the findings into the technical report.
º October 30 to January 15, 2012: Receive and integrate aquifer data into
Micromine. Start wire-framing aquifer data into a 3D model that will
include porosity, effective porosity, permeability and potential flow
dynamics. Once aquifer model is created and checked, integrate into some
sort of basic formation water flow simulation model. Commence block
modeling and in-situ resource estimate. The draft of the hydrogeological
report arrived on January 15, 2012 and is being incorporated into the
Resource Technical Report.
º January 16 to February 15, 2012: Complete resource estimation and create
preliminary draft of Resource Technical Report, and upon review complete
resource Technical Report. The report will only measure a resource estimate
for the area from which we have received test sampling in the past and will
be prepared to meet the NI43-101 technical report guidelines.
Our total budget for this project is $139,825. $60,500 is budgeted for reservoir
characterization; $28,500 is budgeted for oilfield geological modeling; $18,075
is budgeted for formation water and reservoir geological modeling; $15,500 is
budgeted for Li and other metal resource modeling; and $17,250 is budgeted for
the 43-101 report preparation. Exploration work will be led by Mike Dufresne,
President of APEX Geoscience Ltd.
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On August 8, 2011 we retained a team of researchers from the University of
Alberta to provide analysis of a separation process to target lithium,
potassium, magnesium, and other mineral compounds in the Valleyview Project
brine. The goal of working with the University of Alberta team is to develop
novel and economical approaches/processes to separate the valuable minerals from
the brine and develop a strategy to further refine the waste product to be
utilized in various compounds of industrial salts. The first phase of the
project has been completed and we have been provided with a "white paper" of
three potential process flow candidates for further review in a pilot scale upon
completion of the ultrasonic generator.
We have also initiated our exploration efforts at the Salta Project. On July 11,
2011 we contracted a firm to produce high resolution imaging of both sets of
cateos to show road access to the properties and provide our exploration team
the information they need to target the areas of the property that could produce
the best early exploration results. On September 12, 2011 we engaged Montgomery
& Associates to send a team to both properties associated with our Salta Project
to get on site photographs and hand auger testing of the ground water. On
December 27-29, 2011 they traveled to the properties taking photos of the
surrounding area and collected 15 samples. The samples taken from our property
have been sent to a local laboratory for testing. From these samples we have
determined that a commercially viable economic mineral deposit was not found on
the property and accordingly, on January 18, 2012, our company abandoned the
Salta Project.
On September 30, 2011 we invested CAD$100,000 in an exploration well at our
Valleyview Project. The well is to be drilled to a total depth of 3500 meters
taking core samples from multiple zones that have been targeted for hydrocarbon
production. We made this investment because of our interest in the potential
mineral production from these targeted zones and will have access to all data
associated with the project. In return for our investment we also received
400,000 shares of working interest in the well valued at CAD$0.25 and will
financially benefit from any value derived from the project if they find
economically viable levels of oil and gas production. Drilling began on October
9, 2011 and was completed in November 2011. The operator identified 4
potentially producible zones for oil and gas. Subsequent to identifying
producible zones for oil and gas, on November 28, 2011 we invested an additional
CAD$100,000 to fund the completion of the well and maintain our 3.5% working
interest in the well. The operator has perforated the well and should begin
producing oil and gas from it in the first quarter of 2012. Our geological team
at Apex Geoscience is reviewing the core samples to analyze the aquifers of
interest to our lithium production and from the initial tests of the well we
were able to recover 3 water samples to test for mineral content. We will begin
doing additional testing of the content of the water after the well has been
completed and is producing.
On November 18, 2011, we entered into another letter agreement with
Glottech-USA, LLC, which will govern distribution rights, exclusivity and
royalty provisions as they relate to Glottech's proprietary and patented
mechanical ultrasound technology for use in water purification in the process of
separation of salt and other minerals from lithium bearing brine produced from
oil and gas operations. This letter replaces all agreements previously entered
into between our company and Glottech.
Pursuant to the terms of the agreement, we are granted an exclusive license to
use and distribute the technology within the Swan Hills region of Alberta as
well as the non-exclusive right to distribute the technology within Canada.
Glottech has agreed not to distribute, or license, this product within Canada
for the term of the agreement to any entities involved in the business of
mineral exploration or production. Our distribution rights will be subject to a
distribution agreement to be entered into by the two parties.
We will be subject to royalty payments on any revenue created by the use or
distribution of the acquired technology. We have applied to the Securities and
Exchange Commission for confidential treatment pursuant to Rule 26b-2 of the
Securities Exchange Act of 1934 regarding the particulars of the royalty
payments and distribution contract. We believe that public disclosure of these
terms could potentially damage the ability of Glottech and our company to
distribute the technology to other users.
Pursuant to the terms of the agreement we will acquire one initial unit of
Glottech's technology for operations in the Swan Hills region of Alberta. The
use of this unit will be subject to a license and lease agreement to be entered
into by both parties.
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We have previously made the following payments in association with the
production of a working unit of Glottech's technology:
A. $25,000 on March 21, 2011 in consideration for entering into the letter
agreement dated March 17, 2011;
B. $75,000 on May 27, 2011; and
C. $700,000 on May 27, 2011.
The term of the letter agreement and consequently our ability to distribute the
unit of Glottech's technology shall be for an initial period of five years,
automatically renewable thereafter for successive five year periods of time so
long as we, directly or indirectly through third party purchasers, have licensed
five technology units from Glottech per year.
Additionally, as part of the letter agreement, Alexander Walsh, an officer and
director of our company, upon the delivery of an operational unit to us will
also provide Glottech with the option, for a period of 12 months to acquire
2,000,000 shares of our common stock currently held by him, for a total price of
$1 per share. If, for any reason, Mr. Walsh fails to deliver the 2,000,000
shares of our common stock to Glottech, it will be our responsibility to issue
the shares from treasury.
Glottech-USA's technology is designed to separate suspended solids from water
(brine), which is one step in the process that we are taking to produce
commercially viable minerals. The technology produces extremely high
temperatures which destroy organic substances such as bacteria and other toxic
agents. We believe that Glottech-USA's technology can provide lower costs of
operation as well as reduced time for site clean-up than traditional methods of
water treatment. We anticipate using this application to extract dissolved
solids like lithium, potassium, and magnesium from oil field brine. The disposal
of produced water (brine) from oil and gas production in Alberta is a
significant environmental issue for the province and presents a considerable
economic issue for producers. We intend to partner with the use of the
technology on our Valleyview Property in Alberta, in cooperation with oil and
gas producers, to treat and dispose of their produced water while monetizing the
minerals that are contained within that produced water stream that is being
brought to the surface during the oil and gas production process. As we own the
MAIM (Metallic and Industrial Mineral) claims to the minerals on the Valleyview
Property, the minerals contained in their produced water stream fall under our
rights. While we have had discussions with oil and gas consultants and oil
operators regarding their difficulties in treating the brine at some of their
fields, we have no formal agreements in place.
The technical process is based on the use of mechanical ultrasound generated
through the production of a series of cavitations. Mechanical ultrasound is a
machine-produced sound of a frequency above the upper limit of the normal range
of human hearing. Cavitations are the rapid formation and collapse of bubbles in
liquids, caused by the movement of something such as a propeller or by waves of
high-frequency sound. The production of mechanical ultrasound allows
Glottech-USA's technology to distil the fluid stock. Using mechanical ultrasound
for distillation has been attempted before, but the external energy requirement
needed to produce the mechanical ultrasound was far too expensive to make it
commercially viable. Glottech-USA's technology uses the energy released during
the cavitations in order to make it commercially viable from an economic
perspective. During these cavitations, a millisecond of energy is released.
During this release temperatures can reach 5000 degrees centigrade. As this is a
pilot unit, no other units are currently in production.
This initial unit was projected to be completed September 30, 2011 but has
experienced delays due to modifications in the design of the generator and a
hurricane in September impacting the production times for various part
manufacturers. The generator is the critical component to the technology because
the internal workings are where the cavitations are produced causing excitation
of the molecules and heat which are the critical initial step to the separation
of the suspended solids in the fluid stock. The final generator manufacturer was
selected in the summer and after many design meetings with their team a decision
was made in August to modify the design of the generator to make the components
40% larger, and configuring it vertically instead of horizontally. These
adjustments were made to provide greater efficiency of the generator and the
overall unit. They were collaboratively made and agreed upon by the scientist
and engineers at Glottech and the engineers at the generator manufacturer. This
modification to the generator design caused a material delay in the production
but it also delayed the ordering of the other parts to the unit because each of
the other components could not be designed and ordered until the generator
design was finalized due to different size valves, different weight limits, and
flow rates. The hurricane that caused flooding and power outages across the east
coast in September also caused the generator manufacturer to be closed for
nearly 2 weeks, delaying the ordered components for our generator.
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We have been in communication with the chief operating officer of Glottech USA
updating the progress of the unit weekly since the beginning of September 2011.
The initial generator parts arrived from the foundry and assembly began on
November 1, 2011. Due to delays at the foundry, the other parts of the generator
arrived at the manufacturer's facility sporadically between December 1 and
December 27, 2011. As of January 11, 2012, all of the parts had arrived at the
manufacturer and the assembly, balancing, and quality control testing of the
unit is underway. The only other major customized component that goes into the
assembly of the unit is the phase separator. That phase separator arrived on
December 28, 2011 and has been mounted on the base of the unit. The assembly of
other componentry has begun but certain parts of the final technology unit
cannot be installed until arrival of the generator. Based on our most recent
update from the manufacturer on December 28, 2011 was expected on January 28,
2012. The generator was delivered to Glottech USA's facility in West Chester, PA
on Friday February 3, 2012. It is being mounted and prepared for intial testing
which we expect to take place before the end of February 2012.
On January 12, 2012 we entered into an employment agreement with Alexander
Walsh, for services provided by Mr. Walsh as an officer and director of our
company. The employment agreement is effective for a period of twenty four
months from January 12, 2012 at an annual salary of $120,000 payable in monthly
cash installments or, in the event cash is unavailable, in shares of our
company's common stock. The employment agreement also provides for liability
insurance and reimbursement of any travel and out-of-pocket expenses incurred
and approved by our company.
Also on January 12, 2012, we entered into consulting agreements with Brandon
Colker and Jonathan Jazwinski for services provided by them as members of our
board of directors in regards to its management and operations for a period of
twenty four months from April 27, 2011. Pursuant to the terms of the consulting
agreements, Mr. Colker and Mr. Jazwinski will each receive compensation payable
in 150,000 shares of our company's common stock issuable at the beginning of
every year served during the term of their agreements, with 150,000 for the
first year having previously been issued.
Results of Operations
We have generated no revenues since inception and have incurred $382,403 and
$1,135,103, respectively, in operating expenses for the three and six month
periods ended December 31, 2011.
The following provides selected financial data about our company for the three
and six month periods ended December 31, 2011 and 2010.
Three months ended December 31, 2011 and 2010.
Three months Three months
ended ended
December 31, December 31,
2011 2010
Revenue $ Nil $ Nil
Operating Expenses $ 382,403 $ 94,671
Net Loss $ (1,620,441 ) $ (94,671 )
Operating expenses for the three months ended December 31, 2011 increased as a
result of an increase in our operations and commencement of exploration and
raising capital, including $14,484 in advertising expenses, $48,000 in
consulting fees, $9,018 in general and administrative expenses, $130,400 in
investor relations; $94,558 in mining expenses, $36,976 in professional fees,
$7,598 in travel expenses and $41,369 in wages.
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Six months ended December 31, 2011 and 2010.
Six months Six months
ended ended
December 31, December 31,
2011 2010
Revenue $ Nil $ Nil
Operating Expenses $ 1,135,103 $ 101,527
Net Loss $ (1,818,746 ) $ (101,527 )
Operating expenses for the six months ended December 31, 2011 increased as a
result of an increase in our operations and commencement of exploration and
raising capital, including $25,272 in advertising expenses, $141,675 in
consulting fees, $25,695 in general and administrative expenses, $581,600 in
investor relations; $171,604 in mining expenses, $68,548 in professional fees,
$22,390 in travel expenses and $98,319 in wages.
Liquidity and Capital Resources
The following table provides selected financial data about our company as of
December 31, 2011, and June 30, 2011, respectively.
Working Capital
As at As at
December 31, June 30,
2011 2011
Total assets 971,419 1,657,161
Total liabilities 1,563,975 2,290,971
Working capital (deficit) (789,949 ) (633,810 )
Cash Flows
Six Months Six Months
ended ended
December 31, December 31,
2011 2010
Net cash provided by (used in) operating (744,142 ) (11,179 )
activities
Net cash provided by (used in)investing (197,393 ) Nil
activities
Net cash provided by (used in)financing 500,000 10,738
activities
Increase (Decrease) in cash (441,535 ) (441 )
We had cash of $568,458 as of December 31, 2011 as compared to cash of
$1,009,993 as of June 30, 2011. We had a working capital deficit of $789,949 as
of December 31, 2011 compared to a working capital deficit of $633,810 as June
30, 2011.
The report of our auditors on our audited financial statements for the fiscal
year ended June 30, 2011, 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.
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Anticipated Cash Requirements
You should read the following discussion of our financial condition and results
of operations together with our unaudited financial statements and the notes
thereto included elsewhere in this filing. Our unaudited financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States. This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.
On June 29, 2011 we entered into a debenture agreement which provided $1,500,000
to the company fulfilling our planned exploration expenditures as well as
providing working capital to our company's future planning. Our present plan of
operations calls for $650,000 in planned exploration, operation, and
administrative expenses for the year end June 30, 2012.
We received the initial $1,000,000 on June 29, 2011 and the remaining $500,000
on July 12, 2011. The debentures mature on December 28, 2012 and carry an
interest rate of 12% per annum. The interest is payable on the maturity date in
cash or, at our option, in duly authorized, validly issued, fully paid and
non-assessable shares of our common stock, subject to certain prescribed
conditions. The debentures are also convertible, in whole or in part, into
shares of common stock at a price equal to (i) the lesser of 65% of the lowest
reported sale price of the common stock for the twenty trading days immediately
prior to the date of conversion, or (ii) $0.83 per share, subject to various
prescribed conditions. The investor may not convert the debentures at any time
if upon such conversion the investor would become the beneficial owner of more
than 4.99% of the outstanding shares of our common stock. The debentures include
anti-dilution protection with respect to lower priced issuances of common stock
or securities convertible or exchangeable into common stock.
Along with the debentures, we also issued warrants to acquire a total of
1,807,229 shares of common stock for a period of five years at a price of $0.913
per share, subject to certain adjustments. The warrants also include cashless
exercise provisions in the event that the Registration Statement is not
effective. The investor may not exercise the warrants at any time if upon such
exercise the investor would become the beneficial owner of more than 4.99% of
the outstanding shares of our common stock. The warrants include anti-dilution
protection with respect to lower priced issuances of common stock or securities
convertible or exchangeable into common stock.
We estimate that our expenses over the next 12 months will be approximately
$350,000 as described in the table below. These estimates may change
significantly depending on the nature of our future business activities and our
ability to raise capital from shareholders or other sources.
Description Estimated Estimated
Completion Expenses
Date ($)
General and administrative 12 months 200,000
Mining expenses 12 months 100,000
Professional fees 12 months 50,000
Total $ 350,000
We intend to meet our cash requirements for the next 12 months with the cash
that we have on hand. On June 29, 2011 we entered into a securities purchase
agreement with one investor. Pursuant to the terms of the agreement, the
investor acquired convertible debentures with an aggregate total principal of
$1,500,000. We received the initial $1,000,000 on June 29, 2011 and the
remaining $500,000 on July 12, 2011. The investor has a right to invest an
additional $1,500,000 on the same terms. 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.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
Inflation
The amounts presented in the financial statements do not provide for the effect
of inflation on our operations or financial position. The net operating losses
shown would be greater than reported if the effects of inflation were reflected
either by charging operations with amounts that represent replacement costs or
by using other inflation adjustments.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Our company's periodic
filings with the Securities and Exchange Commission include, where applicable,
disclosures of estimates, assumptions, uncertainties and markets that could
affect the financial statements and future operations of our company.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and
certificates of term deposits with original maturities of less than three
months, which are readily convertible to known amounts of cash and which, in the
opinion of management, are subject to an insignificant risk of loss in value.
Our company had $568,458 and $1,009,993 in cash and cash equivalents at December
31, 2011 and June 30, 2011, respectively.
Start-Up Costs
In accordance with FASC 720-15-20 "Start-Up Costs," our company expenses all
costs incurred in connection with the start-up and organization of our company.
Mineral Acquisition and Exploration Costs
Our company has been in the exploration stage since its formation on May 31,
2006 and has not yet realized any revenue from its planned operations. It is
primarily engaged in the acquisition, exploration, and development of mining
properties. Mineral property acquisition and exploration costs are expensed as
incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property are capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserves.
Concentrations of Credit Risk
Our company's financial instruments that are exposed to concentrations of credit
risk primarily consist of its cash and cash equivalents and related party
payables it will likely incur in the near future. Our company places its cash
and cash equivalents with financial institutions of high credit worthiness. At
times, its cash and cash equivalents with a particular financial institution may
exceed any applicable government insurance limits. Our company's management
plans to assess the financial strength and credit worthiness of any parties to
which it extends funds, and as such, it believes that any associated credit risk
exposures are limited.
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Net Income or (Loss) per Share of Common Stock
Our company has adopted FASC Topic No. 260, "Earnings Per Share," ("EPS") which
requires presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. In the
accompanying financial statements, basic earnings (loss) per share is computed
by dividing net income/loss by the weighted average number of shares of common
stock outstanding during the period.
Our company has no potentially dilutive securities, such as options or warrants,
currently issued and outstanding.
Foreign Currency Translations
Our company's functional and reporting currency is the US dollar. All
transactions initiated in other currencies are translated into US dollars using
the exchange rate prevailing on the date of transaction. Monetary assets and
liabilities denominated in foreign currencies are translated into the US dollar
at the rate of exchange in effect at the balance sheet date. Unrealized exchange
gains and losses arising from such transactions are deferred until realization
and are included as a separate component of stockholders' equity (deficit) as a
component of comprehensive income or loss. Upon realization, the amount deferred
is recognized in income in the period when it is realized.
No significant realized exchange gain or losses were recorded from inception
(May 31, 2006) to December 31, 2011.
Comprehensive Income (Loss)
FASC Topic No. 220, "Comprehensive Income," establishes standards for reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. From inception (May 31, 2006) to December
31, 2011, our company had no items of other comprehensive income. Therefore, net
loss equals comprehensive loss from inception (May 31, 2006) to December 31,
2011.
Risks and Uncertainties
Our company operates in the resource exploration industry that is subject to
significant risks and uncertainties, including financial, operational,
technological, and other risks associated with operating a resource exploration
business, including the potential risk of business failure.
Environmental Expenditures
The operations of our company have been, and may in the future be, affected from
time to time in varying degree by changes in environmental regulations,
including those for future reclamation and site restoration costs. Both the
likelihood of new regulations and their overall effect upon our company vary
greatly and are not predictable. Our company's policy is to meet or, if
possible, surpass standards set by relevant legislation by application of
technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation
programs are charged against earnings as incurred or capitalized and amortized
depending on their future economic benefits. All of these types of expenditures
incurred since inception have been charged against earnings due to the
uncertainty of their future recoverability. Estimated future reclamation and
site restoration costs, when the ultimate liability is reasonably determinable,
are charged against earnings over the estimated remaining life of the related
business operation, net of expected recoveries.
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