UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 000-54332
LITHIUM CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 98-0530295
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5976 Lingering Breeze St., Las Vegas, Nevada 89148
(Address of principal executive offices) (Zip Code)
(775) 410-5287
(Registrant's telephone number, including area code)
11380 S. Virginia St. #2011, Reno, Nevada 89511
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
74,911,408 common shares issued and outstanding as of October 31, 2013.
LITHIUM CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Mine Safety Disclosures 24
Item 5. Other Information 24
Item 6. Exhibits 24
SIGNATURES 26
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited consolidated interim financial statements for the three and nine
month periods ended September 30, 2013 form part of this quarterly report. They
are stated in United States Dollars (US$) and are prepared in accordance with
United States Generally Accepted Accounting Principles.
3
LITHIUM Corporation
(An Exploration Stage Company)
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
2013 2012
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 873,083 $ 1,186,651
Accounts Receivable -- --
Prepaid Expenses 28,457 62,387
------------ ------------
TOTAL OTHER CURRENT ASSETS 901,540 1,249,038
------------ ------------
OTHER ASSETS
Mineral Properties 187,653 163,139
Property & Equipment 356 162
------------ ------------
TOTAL OTHER ASSETS 188,009 163,301
------------ ------------
TOTAL ASSETS $ 1,089,549 $ 1,412,339
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 2,371 $ 53,201
------------ ------------
TOTAL CURRENT LIABILITIES 2,371 53,201
------------ ------------
TOTAL LIABILITIES 2,371 53,201
------------ ------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common Stock, 3,000,000,000 shares authorized,
par value $0.01; 74,911,408 common shares
outstanding (2012 - 74,661,408) 74,911 74,662
Additional paid in capital 3,300,439 3,292,348
Additional paid in capital - Options 184,130 174,041
Additional paid in capital - Warrants 257,949 257,949
Deficit accumulated during the Exploration stage (2,730,251) (2,439,862)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,087,178 1,359,138
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,089,549 $ 1,412,339
============ ============
4
Lithium Corporation
(An Exploration Stage Company
Consolidated Statements of Operations
(unaudited)
Period from
Three Months Three Months Nine Months Nine Months January 31, 2007
Ended Ended Ended Ended (Inception) to
September 30, September 30, September 30, September 30, September 30,
2013 2012 2013 2012 2013
------------ ------------ ------------ ------------ ------------
REVENUE $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Professional fees 10,977 13,273 41,010 46,612 253,634
Depreciation 73 54 181 162 2,453
Exploration expenses 79,983 16,700 104,572 49,459 720,775
Consulting fees 13,750 18,550 53,200 44,768 351,392
Insurance expense 4,372 3,903 13,116 11,709 48,058
Investor relations 8,240 11,852 33,014 36,600 264,427
Management fees -- -- -- -- 53,800
Transfer agent and filing fees 1,482 2,498 5,383 6,704 51,380
Travel 7,620 5,396 22,156 13,178 85,308
Stock option compensation -- -- 10,089 23,731 289,549
Website development costs -- -- -- -- 3,912
Write-down of website costs -- -- -- -- 12,000
Write-down of mineral properties -- 369,137 -- 369,137 518,746
General and Administration 2,501 2,257 7,954 9,207 84,006
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 128,998 443,620 290,675 611,267 2,739,440
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (128,998) (443,620) (290,675) (611,267) (2,739,440)
OTHER INCOME (EXPENSES)
Other Income -- -- -- 671 17,952
Interest Income 96 318 284 754 3,087
Interest expense -- -- -- -- 11,850
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 96 318 284 1,425 9,189
LOSS BEFORE INCOME TAXES (128,902) (443,302) (290,391) (609,842) (2,730,251)
PROVISION FOR INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS $ (128,902) $ (443,302) $ (290,391) $ (609,842) $ (2,730,251)
============ ============ ============ ============ ============
NET LOSS PER SHARE: BASIC AND DILUTED $ -- $ (0.01) $ -- $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING: BASIC AND DILUTED 74,911,408 63,661,408 74,723,908 63,661,408
============ ============ ============ ============
5
Lithium Corporation
(An Exploration Company)
Consolidated Statements of Cash Flows
(unaudited)
Period from
Nine Months Nine Months January 31, 2007
Ended Ended (Inception) to
September 30, September 30, September 30,
2013 2012 2013
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period $ (290,391) $ (609,842) $ (2,730,251)
Adjustment for non-cash items:
Deposits (700) -- (700)
Write-down of software development -- -- 12,000
Write-down of mineral properties -- 369,137 518,745
Stock option compensation expense 10,089 23,731 289,549
Depreciation 181 162 2,399
Changes in assets and liabilities:
(Increase) decrease in accounts receivable -- -- --
(Increase) decrease in prepaid expenses 34,629 25,173 (27,758)
Increase (decrease) in accounts payable
and accrued liabilities (42,487) (2,937) 10,767
------------ ------------ ------------
Net Cash Used in Operating Activities (288,679) (194,577) (1,925,249)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (375) -- (2,808)
Purchase of software development -- -- (12,000)
Interest in mineral properties (24,514) (25,760) (443,900)
------------ ------------ ------------
Net Cash Used in Investing Activities (24,889) (25,760) (458,708)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment to) director -- -- 6,335
Proceeds from sale of stock -- -- 3,250,705
------------ ------------ ------------
Net Cash Provided by Financing Activities -- -- 3,257,040
------------ ------------ ------------
Increase (decrease) in cash (313,568) (220,337) 873,083
Cash, beginning of period 1,186,651 970,030 --
------------ ------------ ------------
Cash, end of period $ 873,083 $ 749,693 $ 873,083
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ 10,451
============ ============ ============
Cash paid for income taxes $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued for mineral properties $ 8,500 $ -- $ 262,500
============ ============ ============
Shareholder debt converted to contributed capital $ -- $ -- $ 6,335
============ ============ ============
6
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Lithium Corporation (formerly Utalk Communications Inc.) was incorporated on
January 30, 2007 under the laws of Nevada. On September 30, 2009, Utalk
Communications Inc. changed its name to Lithium Corporation.
Nevada Lithium Corporation was incorporated on March 16, 2009 under the laws of
Nevada under the name Lithium Corporation. On September 10, 2009, the Company
amended its articles of incorporation to change its name to Nevada Lithium
Corporation. By agreement dated October 9, 2009 Nevada Lithium Corporation and
Lithium Corporation amalgamated as Lithium Corporation. Lithium Corporation is
engaged in the acquisition and development of certain lithium interests in the
state of Nevada, and is currently in the exploration stage. These consolidated
financial statements have been prepared in accordance with U.S. generally
accepted accounting principles.
EXPLORATION STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to accounting and reporting by
exploration stage companies. An exploration stage company is one in which
planned principal operations have not commenced or if its operations have
commenced, there has been no significant revenues there from.
ACCOUNTING BASIS
The Company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America ("GAAP" accounting). The
Company has adopted a December 31 fiscal year end.
CASH AND CASH EQUIVALENTS
Cash includes cash on account, demand deposits, and short-term instruments with
maturities of three months or less.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, the balances of which
at times may exceed federally insured limits. The Company continually monitors
its banking relationships and consequently has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
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 consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company is in the exploration stage and has yet to realize revenues from
operations. Once the Company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
7
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of our wholly-owned
subsidiary. All material inter-company transactions have been eliminated.
LOSS PER SHARE
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding during
the year. The computation of diluted earnings per share assumes the conversion,
exercise or contingent issuance of securities only when such conversion,
exercise or issuance would have a dilutive effect on earnings per share. The
dilutive effect of convertible securities is reflected in diluted earnings per
share by application of the "if converted" method. In the periods in which a
loss is incurred, the effect of potential issuances of shares under options and
warrants would be anti-dilutive, and therefore basic and diluted losses per
share are the same.
PROPERTY AND EQUIPMENT
Property and equipment is stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets which has been estimated as
2 years. Impairment losses are recorded on computer equipment used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.
INCOME TAXES
The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
prepaid expenses, and accounts payable and accrued liabilities. Unless otherwise
noted, it is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
Because of the short maturity and capacity of prompt liquidation of such assets
and liabilities, the fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Impairment of $Nil and $369,137 were recorded in the years ended 2013 and 2012
respectively, relating to the abandonment of some mineral claims.
OFFICE LEASE
The Company rents office space in Las Vegas, Nevada for $700 per month. The
arrangement is on a month-by-month basis and can be terminated by either party.
8
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 2 - GOING CONCERN
Lithium Corporation's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates that the
Company will continue in operation for the foreseeable future and will realize
its assets and liquidate its liabilities in the normal course of business.
However, Lithium has no current source of revenue, recurring losses and a
deficit accumulated during the exploration stage of $2,730,251 as of September
30, 2013. These factors, among others, raise, substantial doubt about the
Company's ability to continue as a going concern. Lithium's management plans on
raising cash from public or private debt or equity financing, on an as-needed
basis and in the longer term, revenues from the acquisition, exploration and
development of mineral interests, if found. Lithium Corporation's ability to
continue as a going concern is dependent on these additional cash financings
and, ultimately, upon achieving profitable operations through the development of
mineral interests. The successful outcome of future activities cannot be
determined at this time. The accompanying financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
NOTE 3 - PREPAID EXPENSES
Prepaid expenses consisted of the following at September 30, 2013 and December
31, 2012:
September 30, December 31,
2013 2012
-------- --------
Deposits $ 700 $ --
Professional fees 2,888 3,310
Exploration costs 4,847 8,964
Bonds 17,088 28,644
Transfer fees 450 1,800
Insurance 729 13,844
Office Misc 80 800
Investor relations 1,675 5,025
Consulting -- --
-------- --------
Total prepaid expenses $ 28,457 $ 62,387
======== ========
NOTE 4 - PROPERTY AND EQUIPMENT
September 30, December 31,
2013 2012
-------- --------
Computer Equipment $ 2,808 $ 2,433
Less: Accumulated amortization (2,452) (2,271)
-------- --------
Property and equipment, net $ 356 $ 162
======== ========
Amortization expense was $181 and $215 for the years ended September 30, 2013
and December 31, 2012, respectively.
9
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 5 - MINERAL PROPERTIES
FISH LAKE PROPERTY
The Company has purchased a 100% interest in the Fish Lake property by making
staged payments of $350,000 worth of common stock. Title to the pertinent claims
was transferred to the Company through quit claim deed dated June 1, 2011, and
this quitclaim was recorded at the county level on August 3, 2011 and at the BLM
on August 4, 2011. Quarterly stock disbursements were made on the following
schedule:
1st Disbursement: Within 10 days of signing agreement (paid)
2nd Disbursement: within 10 days of June 30, 2009 (paid)
3rd Disbursement: within 10 days of December 30, 2009 (paid)
4th Disbursement: within 10 days of March 31, 2010 (paid)
5th Disbursement: within 10 days of June 30, 2010 (paid)
6th Disbursement: within 10 days of September 30, 2010 (paid)
7th Disbursement: within 10 days of December 31, 2010 (paid)
8th Disbursement: within 10 days of March 31, 2011 (paid)
As at September 30, 2013, the Company has recorded $436,764 in acquisition costs
related to the Fish Lake Property and associated impairment of $276,908 related
to abandonment of claims. The carrying value of the Fish Lake Property was
$159,856 as of September 30, 2013.
The Company has entered into an agreement in April 2013, whereby it may earn a
100% interest in the Mt Heimdal Flake Graphite property in BC, subject to a 1.5%
net overriding royalty. The company must spend $15,000 on exploration, and
submit a government assessment report by Nov 30, 2013 to earn its interest.
STAKED PROPERTIES
The Company has staked claims with various registries as summarized below:
Net Carry
Name Claims Cost Impairment Value
---- ------ ---- ---------- -----
SanEmidio 20 (1,600) $11,438 $(5,719) $ 5,719
Cherryville/BC Sugar 2,036.37 (hectares) $12,027 Nil $12,027
The Company performs an impairment test on an annual basis to determine whether
a write-down is necessary with respect to the properties. The Company believes
no circumstances have occurred and no evidence has been uncovered that warrant a
write-down of the mineral properties other than those abandoned by management
and thus included in write-down of mineral properties. No impairment charges
were recorded in 2013, as of September, 30, 2013. Impairment of $369,137 was
recorded in 2012 relating to the abandonment of some mineral claims relating to
the abandonment of some mineral claims.
NOTE 6 - CAPITAL STOCK
The Company is authorized to issue 300,000,000 shares of it $0.001 par value
common stock. On September 30, 2009, the Company effected a 60-for-1 forward
stock split of its $0.001 par value common stock.
All share and per share amounts have been retroactively restated to reflect the
splits discussed above.
10
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
COMMON STOCK
On January 30, 2007, the Company issued 240,000,000 shares of its common stock
to founders for proceeds of $20,000.
During the year-ended December 31, 2008, the Company issued 28,200,000 shares of
its common stock for total proceeds of 47,000.
On October 9, 2009, the Company cancelled 220,000,000 shares of its common
stock. Also on October 9, 2009, the Company issued 12,350,000 shares of its
common stock for 100 percent of the issued and outstanding stock of Nevada
Lithium Corp. Refer to Note 3.
On January 10, 2010, the Company issued 53,484 shares of its common stock as
part of the Fish Lake Property acquisition.
On March 24, 2010, the Company issued 2,000,000 units in a private placement,
raising gross proceeds of $2,000,000, or $1.00 per unit. Each unit consists of
one common share in the capital of our company and one non-transferable common
share purchase warrant. Each whole common share purchase warrant
non-transferable entitles the holder thereof to purchase one share of common
stock in the capital of our company, for a period of twelve months commencing
the closing, at a purchase price of $1.20 per warrant share and at a purchase
price of $1.35 per warrant share for a period of twenty-four months thereafter.
On April 30, 2010, the Company issued 38,068 shares of its common stock as part
of the Fish Lake Property acquisition.
On July 10, 2010, the Company issued 104,168 shares of its common stock as part
of the Fish Lake Property acquisition.
On October 10, 2010, the Company issued 171,568 of its common stock as part of
the Fish Lake Property acquisition.
On January 10, 2011, the Company issued 163,856 shares of its common stock as
part of the Fish Lake Property acquisition.
On April 10, 2011, the Company issued 230,264 shares of its common stock as part
of the Fish Lake Property acquisition.
On April 28, 2011, the Company issued 150,000 shares of its common stock as part
of a stock option exercise.
On May 5, 2011, the Company issued 200,000 shares of its common stock as part of
a stock option exercise.
On November 19, 2012, the Company issued 11,000,000 shares of its common stock
as part of private placement.
On June 6, 2013, the Company issued 250,000 shares of its common stock as part
of the Cherryville property acquisition located in British Columbia.
There were 74,911,408 shares of common stock issued and outstanding as of
September 30, 2013.
11
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 6 - CAPITAL STOCK (CONTINUED)
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date September 30, 2013
---------- ------ ----- ----------- ------------------
Nov. 19, 2012 11,000,000 $0.10 Nov. 18, 2014 11,000,000
The warrants were valued using the Black-Scholes option pricing model using the
following assumptions: term of 5 years, dividend yield of 0%, risk free interest
rates of 0.67% and volatility of 129%. The fair value of the warrants was
adjusted against additional paid in capital.
Stock Based Compensation
The Company granted 500,000 options at an exercise price of $0.28 and 400,000
options at an exercise price of $0.24 to consultants in exchange for various
professional services. On March 15, 2013, options granted at $0.28 and $0.24 was
modified to exercise prices of $.045. Also, on March 15, 2013 the Company
granted 200,000 options to consultants for management services at exercise price
of $0.045. The issuance of new options, less the expiration of 350,000 options,
and the modification resulted in net stock-based compensation of $10,089 in
2013, as of September 30, 2013. These options were vested on the date of grant.
The Company uses the Black-Scholes option valuation model to value stock options
granted. The Black-Scholes model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. The model requires management to make estimates, which are
subjective and may not be representative of actual results. Assumptions used to
determine the fair value of the stock based compensation is as follows:
Modification New Options
------------ -----------
Risk free interest rate 0.35% 0.67%
Expected dividend yield 0% 0%
Expected stock price volatility 129% 129%
Expected life of options 3 years 5 years
Weighted Total
Total Average Weighted
Exercise Options Remaining Life Average Options
Prices Outstanding (Years) Exercise Price Exercisable
------ ----------- ------- -------------- -----------
$0.045 900,000 2.98 $0.045 900,000
Total stock-based compensation for the quarter-ended September 30, 2013 was
$10,089 (September, 30, 2012: $23,731).
12
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2013
NOTE 6 - CAPITAL STOCK (CONTINUED)
The following table summarizes the stock options outstanding at September 30,
2013:
Outstanding at
Issue Date Number Price Expiry Date December 31, 2012
---------- ------ ----- ----------- -----------------
September 23, 2010 500,000 $0.045 September 23, 2015 500,000
May 31, 2012 100,000 $0.045 July 6, 2013 100,000
May 31, 2012 100,000 $0.045 May 31, 2017 100,000
March 15, 2013 200,000 $0.045 March 15, 2018 200,000
NOTE 7 - INCOME TAXES
As of September 30, 2013, the Company had net operating loss carry forwards of
approximately $2,730,251 that may be available to reduce future years' taxable
income in varying amounts through 2031. Future tax benefits which may arise as a
result of these losses have not been recognized in these financial statements,
as their realization is determined not likely to occur and accordingly, the
Company has recorded a valuation allowance for the deferred tax asset relating
to these tax loss carry-forwards.
The provision for Federal income tax consists of the following:
Nine Months Nine Months
Ended Ended
September 30, September 30,
2013 2012
---------- ----------
Federal income tax benefit attributable to:
Current operations $ 98,733 $ 207,346
Less: valuation allowance (98,733) (207,346)
---------- ----------
Net provision for Federal income taxes $ 0 $ 0
========== ==========
The cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows at September 30, 2013:
September 30, December 31,
2013 2012
---------- ----------
Deferred tax asset attributable to:
Net operating loss carryover $ 913,652 $ 813,201
Less: valuation allowance (913,652) (813,201)
---------- ----------
Net deferred tax asset $ 0 $ 0
========== ==========
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry forwards of approximately $2,730,251 for Federal income tax
reporting purposes are subject to annual limitations. Should a change in
ownership occur net operating loss carry forwards may be limited as to use in
future years.
NOTE 8 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to September 30, 2013 through
the date these financial statements were issued, and has determined that it does
not have any other material subsequent events to disclose.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited consolidated financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles. The following discussion should be read in
conjunction with our financial statements and the related notes that appear
elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this quarterly report.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common shares" refer
to the common shares in our capital stock.
As used in this quarterly report, the terms "we," "us," "our" and "our company"
mean Lithium Corporation, unless otherwise indicated and the term "Nevada
Lithium" means our wholly owned subsidiary, Nevada Lithium Corporation, a Nevada
corporation.
GENERAL OVERVIEW
We were incorporated under the laws of the State of Nevada on January 30, 2007
under the name "Utalk Communications Inc." At inception, we were a development
stage corporation engaged in the business of developing and marketing a
call-back service using a call-back platform. Because we were not successful in
implementing our business plan, we considered various alternatives to ensure the
viability and solvency of our company.
On August 31, 2009, we entered into a letter of intent with Nevada Lithium
regarding a business combination which may be effected in one of several
different ways, including an asset acquisition, merger of our company and Nevada
Lithium, or a share exchange whereby we would purchase the shares of Nevada
Lithium from its shareholders in exchange for restricted shares of our common
stock.
Effective September 30, 2009, we affected a 1 old for 60 new forward stock split
of our issued and outstanding common stock. As a result, our authorized capital
increased from 50,000,000 shares of common stock with a par value of $0.001 to
3,000,000,000 shares of common stock with a par value of $0.001 and our issued
and outstanding shares increased from 4,470,000 shares of common stock to
268,200,000 shares of common stock.
14
Also effective September 30, 2009, we changed our name from "Utalk
Communications, Inc." to "Lithium Corporation", by way of a merger with our
wholly owned subsidiary Lithium Corporation, which was formed solely for the
change of name. The name change and forward stock split became effective with
the Over-the-Counter Bulletin Board at the opening for trading on October 1,
2009 under the stock symbol "LTUM". Our CUSIP number is 536804 107.
On October 9, 2009, we entered into a share exchange agreement with Nevada
Lithium and the shareholders of Nevada Lithium. The closing of the transactions
contemplated in the share exchange agreement and the acquisition of all of the
issued and outstanding common stock in the capital of Nevada Lithium occurred on
October 19, 2009. In accordance with the closing of the share exchange
agreement, we issued 12,350,000 shares of our common stock to the former
shareholders of Nevada Lithium in exchange for the acquisition, by our company,
of all of the 12,350,000 issued and outstanding shares of Nevada Lithium. Also,
pursuant to the terms of the share exchange agreement, a director of our company
cancelled 220,000,000 restricted shares of our common stock.
OUR CURRENT BUSINESS
We are an exploration stage mining company engaged in the identification,
acquisition and exploration of metals and minerals with a focus on lithium
mineralization on properties located in Nevada and British Columbia.
Our current operational focus is to conduct exploration activities on the Fish
Lake Valley property and the San Emidio prospect in Nevada and the Sugar Lake
and Mount Heimdal properties in British Columbia.
FISH LAKE VALLEY PROPERTY
Fish Lake Valley is a lithium enriched playa (also known as a salar, or salt
pan), which is located in northern Esmeralda county in west central Nevada, and
the property is roughly centered at 417050E 4195350N (NAD 27 CONUS). We
currently hold forty, eighty-acre Association Placer claims that cover
approximately 3200 acres (1280 hectares). Lithium-enriched Tertiary-era Fish
Lake formation Rhyolitic tuffs or ash flow tuffs have accumulated in a valley or
basinal environment. Over time interstitial formational waters in contact with
these tuffs, have become enriched in lithium, boron and potassium which could
possibly be amenable to extraction by evaporative methods. Our company allowed
56 claims to lapse on September 1, 2012, which covered the southern playa area.
These claims were allowed to lapse as it was determined through the course of
work over the past three years that they are not overly prospective for hosting
lithium brine resources, nor is it strategically advantageous to continue to
hold them.
The property was originally held under mining lease purchase agreement dated
June 1, 2009, between Nevada Lithium Corporation, and Nevada Alaska Mining Co.
Inc., Robert Craig, Barbara Craig, and Elizabeth Dickman. Nevada Lithium had
agreed to issue the vendors $350,000 worth of common stock of our company in
eight regular disbursements. To date all disbursements have been made of stock
worth a total of $350,000, and claim ownership has been transferred to our
company.
The geological setting at Fish Lake Valley is highly analogous to the salars of
Chile, Bolivia, and Peru, and more importantly Clayton Valley, where Chemetall
has its Silver Peak lithium-brine operation. Access is excellent in Fish Lake
Valley with all-weather gravel roads leading to the property from State Highways
264, and 265, and maintained gravel roads ring the Playa. Power is available
approximately 10 miles from the property, and the village of Dyer is
approximately 12 miles to the south, while the town of Tonopah Nevada is
approximately 50 miles to the east.
15
Our company has completed a number of geochemical and geophysical studies on the
property, and conducted a short drill program on the periphery of the playa in
the fall of 2010. Near-surface brine sampling during the Spring of 2011 outlined
a boron/lithium/potassium anomaly on the northern portions of the northern
playa, that is roughly 1.3 x 2 miles long, which has a smaller higher grade core
where lithium mineralization ranges from 100 to 150 mg/L (Average 122.5 mg/L),
with boron ranging from 1,500 to 2,670 mg/L (Average 2219 mg/L), and potassium
from 5,400 to 8,400 mg/L (Average 7030 mg/L. Wet conditions on the playa
precluded drilling there in 2011, and for a good portion of 2012, however a
window of opportunity presented itself in late fall 2012. In November/December
2012 we conducted a short direct push drill program on the northern end of the
playa, wherein a total of 1,240.58 feet (378.09 meters) was drilled in 20 holes
at 17 discrete sites, and an area of 3,356 feet (1,023 meters) by 2,776 feet
(846 meters) was systematically explored by grid drilling. The deepest hole was
81 feet (24.69 meters), and the shallowest hole that produced brine was 34 feet
(10.36 meters). The average depth of the holes drilled during the program was 62
feet (18.90). The program successfully demonstrated that
lithium-boron-potassium-enriched brines exist to at least 62 feet (18.9 meters)
depth in sandy or silty aquifers that vary from approximately three to ten feet
(one to three meters) in thickness. Average lithium, boron and potassium
contents of all samples are 47.05 mg/L, 992.7 mg/L, and 0.535% respectively,
with Lithium values ranging from 7.6 mg/L to 151.3 mg/L, boron ranging from 146
to 2,160.7 mg/L, and potassium ranging from 0.1 to 1.3%.. The anomaly outlined
by the drill program is 1,476 by 2,461 feet (450 meters by 750 meters), and is
not fully delimited, as the area available for drilling was restricted due to
soft ground conditions to the east and to the south. A 50 mg/L lithium cutoff is
used to define this anomaly and within this zone average lithium, boron and
potassium contents are 90.97 mg/L, 1,532.92 mg/L, and 0.88% respectively.
Our company is very pleased with the results here, and believes that the playa
at Fish Lake Valley may be conducive to the formation of a "Silver Peak" style
lithium brine deposit. Our company is reviewing the results in regards to the
overall geological interpretation of the lithium, boron and potassium bearing
strata. The results confirm the presence of targeted mineralization and further
evaluation programs will focus on determining the extent and depth of
mineralization.
On September 3, 2013, we announced that drilling had commenced at Fish Lake
Valley. Due to recent storms and wet conditions in the area which our company
hoped to concentrate on, the playa was not passable, and so the program
concentrated on larger step-out drilling well off the playa. This 11 hole, 1,025
foot program did prove that mineralization does not extend much if at all past
the margins of the playa. Our company intends to drill again as soon as
conditions on the playa improve sufficiently.
SAN EMIDIO PROPERTY
The San Emidio property was acquired through the staking of claims in September
2011. The twenty, eighty-acre Association Placer claims currently held here
cover an area of approximately 1600 acres (640 hectares). Ten claims in the
southern portions of the original claim block that was staked in 2011 were
allowed to lapse on September 1, 2012, and a further ten claims were then staked
and recorded. These new claims are north of, and contiguous to the surviving
claims from our earlier block. The property is approximately 65 miles
north-northeast of Reno, Nevada, and has excellent infrastructure.
We developed this prospect during 2009, and 2010 through surface sampling, and
the early reconnaissance sampling determined that anomalous values for lithium
occur in the playa sediments over a good portion of the playa. This sampling
appeared to indicate that the most prospective areas on the playa may be on the
newly staked block proximal to the southern margin of the basin, where it is
possible the structures that are responsible for the geothermal system here may
also have influenced lithium deposition in sediments.
Our company conducted near-surface brine sampling in the spring of 2011, and a
high resolution gravity geophysical survey in summer/fall 2011. Our company then
permitted a 7 hole drilling program with the Bureau of Land management in late
fall 2011, and a direct push drill program was commenced in early February 2012.
Drilling here delineated a narrow elongated shallow brine reservoir which is
greater than 2.5 miles length, and which is adjacent to a basinal feature
outlined by the earlier gravity survey. Two values of over 20 milligrams/liter
lithium were obtained from two holes located centrally in this brine anomaly.
16
Most recently we drilled this prospect in late October 2012, further testing the
area of the property in the vicinity where prior exploration by our company
discovered elevated lithium levels in subsurface brines. During the 2012 program
a total of 856 feet (260.89 meters) was drilled at 8 discrete sites. The deepest
hole was 160 feet (48.76 meters), and the shallowest hole that produced brine
was 90 feet (27.43 meters). The average depth of the seven hole program was 107
feet (32.61 meters). The program better defined a lithium-in-brine anomaly that
was discovered in early 2012. This anomaly is approximately 0.6 miles (370
meters) wide at its widest point by more than 3 miles (2 kilometers) long. The
peak value seen within the anomaly is 23.7 mg/l lithium, which is 10 to 20 times
background levels outside the anomaly. Our company believes that much like Fish
Lake Valley the playa at San Emidio may be conducive to the formation of a
"Silver Peak" style lithium brine deposit, and the recent drilling indicates
that the anomaly occurs at or near the intersection of several faults that may
have provided the structural setting necessary for the formation of a
lithium-in-brine deposit at depth.
Our company is compiling all data, and intends to amend its permits with the
Bureau of Land Management, and to commence a deeper drilling program here early
in 2014.
MOUNT HEIMDAL FLAKE GRAPHITE PROPERTY
On April 15, 2013, we entered into a mining option agreement between our company
and our president, Tom Lewis, wherein we had the option to acquire a 100%
interest in the Mount Heimdal Flake Graphite property in the Slocan Mining
Division of British Columbia, Canada.
The Mount Heimdal property is comprised of three mineral claims, which encompass
2,582 acres (1,045 hectares) of highly metamorphosed rock. The property is
roughly six miles (10 kms) south of Eagle Graphite's Black Crystal quarry, and
is located within the same package of gneisses, graphite mineralized marbles,
and calc-silicate gneisses. Data from BC Geological Survey assessment reports
indicate that mineralization grading up to 4.8% graphitic carbon may be located
on the property.
High purity graphite is presently the most widely used anode material for
lithium ion battery technology, and typically greater than ten times more
graphite is used in comparison to lithium in lithium ion battery production. In
addition to increased graphite consumption due to growth in lithium ion
batteries sales, carbon fiber composites are increasingly being utilized in
auto, and aircraft construction. Also, presently there is considerable research
into graphene, a flake graphite product, and it is possible a myriad of new
applications or discoveries will ensue as a direct result of this work.
Pursuant to the terms of the original agreement, we were required to spend
$15,000 in exploration on the property and complete an assessment report by
November 30, 2013, and upon successful completion of the program and the report
our company was to earn a 100% interest in the claims, subject to a 1.5% net
overriding royalty to the vendor from the proceeds of production.
Prospecting work was performed on the Mount Heimdal property in June/July 2013
and several mineralized zones were noted here, the best of which graded 3.72%
flake graphite. Although the work was encouraging it was decided that our
Company would be best served presently by focusing on the BC Sugar property. Our
company negotiated an agreement with Tom Lewis, the vendor of Mount Heimdal
whereby the vendor assigned its 100% interest in the property for a 2% net
smelter royalty on any proceeds from future production from the property. In
addition the vendor holds title to all properties in BC in trust for Lithium
Corporation and will transfer all interest at such time as Lithium Corporation
creates a subsidiary that is eligible to hold title in mineral properties in
British Columbia.
17
BC SUGAR FLAKE GRAPHITE PROPERTY
On June 6, 2013, we entered into a mining claim sale agreement with Herb Hyder
wherein Mr. Hyder agreed to sell a 50.829 acre (20.57 hectare) claim located in
the Cherryville area of British Columbia. As consideration for the purchase of
the property, we issued 250,000 shares of our company's common stock to Mr.
Hyder. In addition to the acquired claim, our company has also staked another
nine claims, to bring the total area to be explored by our company to just
slightly over 18,800 acres (7,608.375 hectares). The flake graphite
mineralization of interest here is hosted predominately in graphitic
calc-silicate and graphitic quartz/biotite/ gneisses. The rocks in the general
area of the BC Sugar prospect are similar to the host rocks in the area of the
Crystal Graphite deposit 55 miles (90 kms) to the southeast, where our company
holds the Mt Heimdal block of claims.
Prospecting and geological work has been ongoing at the property over the
summer, and several graphite prospects have been discovered with the best
mineralization to date grading over 5% flake graphite. A number of mineralized
boulders have also been encountered at various locations on the property, which
appear to indicate that the mineralized horizon or horizons may be found at
other locales within the claim block.
The BC Sugar property is well placed in the Shushwap Metamorphic Complex, in a
geological environment favorable for the formation of flake graphite deposits,
and is in an area of excellent logistics, with a considerable network of logging
roads within the project area. Additionally the town of Lumby is approximately
19 miles (30 kms) to the south of the property, while the City of Vernon is only
30 miles (50 kms) to the southwest of the western portions of the claim block.
OTHER PROPERTIES
Our company allowed all 62 Association Placer Claims held at our Cortez Prospect
in Lander County, Nevada to lapse in September of 2011 as, although drilling
there in the summer of 2011 determined that a considerable volume of brine can
be found locally, lithium contents were below anomalous thresholds, and our
company concluded that it would perhaps be more prudent to focus resources
elsewhere.
Similarly the Salt Wells property was acquired through staking a 12,320 acre
parcel that covers the Eightmile Basin, in Churchill County, Nevada in 2009 and
2010. In September 2011, the property was reduced as we allowed a number of
non-prospective, non-strategic claims to lapse. Exploratory drilling in the fall
of 2011 was disappointing and the remaining 80 claims here were allowed to lapse
in September 2012.
There are no further commitments or contingencies related to any of these
mineral properties.
We are currently exploring other locations which are felt to be prospective for
hosting lithium or graphite mineralization, as well as evaluating opportunities
brought to the company by third parties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2012
We had a net loss of $128,902 for the three month period ended September 30,
2013, which was $314,400 less than the net loss of $443,302 for the three month
period ended September 30, 2012. The change in our results over the two periods
is primarily the result of no write-down of mineral properties.
18
The following table summarizes key items of comparison and their related
increase (decrease) for the three month periods ended September 30, 2013 and
2012:
Change Between
Three Month Period
Ended
Three Months Three Months September 30, 2013
Ended Ended and
September 30, September 30, September 30,
2013 2012 2012
---------- ---------- ----------
Professional fees $ 10,977 $ 13,273 $ (2,296)
Depreciation 73 54 19
Exploration expenses 79,983 16,700 63,283
Consulting fees 13,750 18,550 (4,800)
Insurance expense 4,372 3,903 469
Investor relations 8,240 11,852 (3,612)
Transfer agent and filing fees 1,482 2,498 (1,016)
Travel 7,620 5,396 2,224
Stock option compensation Nil Nil Nil
Write-down of mineral properties Nil 369,137 (369,137)
General and administrative 2,501 2,257 244
Interest/Other income (96) (318) (222)
---------- ---------- ----------
Net loss $ (128,902) $ (443,302) $ (314,400)
========== ========== ==========
NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2012
We had a net loss of $290,391 for the nine month period ended September 30,
2013, which was $319,451 less than the net loss of $609,842 for the nine month
period ended September 30, 2012. The change in our results over the two periods
is primarily the result of no write-off of exploration expenses in 2013.
The following table summarizes key items of comparison and their related
increase (decrease) for the nine month periods ended September 30, 2013 and
2012:
Change Between
Nine Month Period
Ended
Nine Months Nine Months September 30, 2013
Ended Ended and
September 30, September 30, September 30,
2013 2012 2012
---------- ---------- ----------
Professional fees $ 41,010 $ 46,612 $ (5,602)
Depreciation 181 162 19
Exploration expenses 104,572 49,459 55,113
Consulting fees 53,200 44,768 8,432
Insurance expense 13,116 11,709 1,407
Investor relations 33,014 36,600 (3,586)
Transfer agent and filing fees 5,383 6,704 (1,321)
Travel 22,156 13,178 8,978
Stock option compensation 10,089 23,731 (13,642)
Write-down of mineral properties Nil 369,137 (369,137)
General and administrative 7,954 9,207 884
Interest/Other income (284) (1,425) 1,141
---------- ---------- ----------
Net loss $ (290,391) $ (609,842) $ (319,451)
========== ========== ==========
19
REVENUE
We have not earned any revenues since our inception and we do not anticipate
earning revenues in the upcoming quarter.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of September 30, 2013, reflects current assets of $901,540.
We had cash in the amount of $873,083 and a working capital in the amount of
$899,169 as of September 30, 2013. We have sufficient working capital to enable
us to carry out our stated plan of operation for the next twelve months.
WORKING CAPITAL
At At
September 30, December 31,
2013 2012
---------- ----------
Current assets $ 901,540 $1,249,038
Current liabilities 2,371 53,201
---------- ----------
Working capital $ 899,169 $1,195,837
========== ==========
We anticipate generating losses and, therefore, may be unable to continue
operations in the future. If we require additional capital, we would have to
issue debt or equity or enter into a strategic arrangement with a third party.
CASH FLOWS
Nine Months Ended
September 30,
2013 2012
---------- ----------
Net cash provided by (used in) operating activities $ (288,679) $ (194,577)
Net cash provided by (used in) investing activities (24,889) (25,760)
Net cash provided by (used in) financing activities Nil Nil
---------- ----------
Net increase (decrease) in cash during period $ (313,568) $ (220,337)
========== ==========
OPERATING ACTIVITIES
Net cash flow used in operating activities during the nine months ended
September 30, 2013 was $288,679, an increase of $94,102 from the $194,577 net
cash outflow during the nine months ended September 30, 2012.
INVESTING ACTIVITIES
The primary driver of cash provided by investing activities was capital spending
in the acquisition of mineral claims at our BC Sugar property in British
Columbia.
Cash used in investing activities during the nine months ended September 30,
2013 was $24,889, which was a $871 decrease from the $25,760 cash used on
investing activities during the nine months ended September 30, 2012. This
decrease in the cash used in investing activities was primarily due to a
decrease in claim acquisitions in 2013 the acquisition of claims at our BC Sugar
property.
FINANCING ACTIVITIES
Cash used in financing activities during the nine months ended September 30,
2013 was $Nil as compared to $Nil in cash used in financing activities during
the nine months ended September 30, 2012.
20
We estimate that we will spend approximately $200,000 on general and
administrative expenses, $250,000 on exploration and $50,000 on travel over the
next 12 months. Specifically, we estimate our operating expenses and working
capital requirements for the next 12 months to be as follows:
ESTIMATED NET EXPENDITURES DURING THE NEXT TWELVE MONTHS
$
--------
General, Administrative Expenses 200,000
Exploration Expenses 250,000
Travel 50,000
--------
TOTAL 500,000
========
We have suffered recurring losses from operations. The continuation of our
company is dependent upon our company attaining and maintaining profitable
operations and raising additional capital as needed.
The continuation of our business is dependent upon obtaining further financing,
a successful program of exploration and/or development, and, finally, achieving
a profitable level of operations. The issuance of additional equity securities
by us could result in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required
for our continued operations. As noted herein, we are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be unable to conduct our operations as planned, and we will not be able
to meet our other obligations as they become due. In such event, we will be
forced to scale down or perhaps even cease our operations.
Cash on hand as of September 30, 2013 was $873,083.
We are not aware of any known trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in our
liquidity increasing or decreasing in any material way.
FUTURE FINANCINGS
We anticipate continuing to rely on equity sales of our common stock in order to
continue to fund our business operations. Issuances of additional shares will
result in dilution to our existing stockholders. There is no assurance that we
will achieve any additional sales of our equity securities or arrange for debt
or other financing to fund our planned business activities.
We presently do not have any arrangements for additional financing for the
expansion of our exploration operations, and no potential lines of credit or
sources of financing are currently available for the purpose of proceeding with
our plan of operations.
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, and capital
expenditures or capital resources that are material to stockholders.
21
CRITICAL ACCOUNTING POLICIES
EXPLORATION STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to accounting and reporting by
exploration stage companies. An exploration stage company is one in which
planned principal operations have not commenced or if its operations have
commenced, there has been no significant revenues there from.
ACCOUNTING BASIS
Our company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America ("GAAP" accounting). Our
company has adopted a December 31 fiscal year end.
CASH AND CASH EQUIVALENTS
Cash includes cash on account, demand deposits, and short-term instruments with
maturities of three months or less.
CONCENTRATIONS OF CREDIT RISK
Our company maintains its cash in bank deposit accounts, the balances of which
at times may exceed federally insured limits. Our company continually monitors
its banking relationships and consequently has not experienced any losses in
such accounts. Our company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
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 consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Our company is in the exploration stage and has yet to realize revenues from
operations. Once our company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of our wholly-owned
subsidiary. All material inter-company transactions have been eliminated.
LOSS PER SHARE
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding during
the year. The computation of diluted earnings per share assumes the conversion,
exercise or contingent issuance of securities only when such conversion,
exercise or issuance would have a dilutive effect on earnings per share. The
dilutive effect of convertible securities is reflected in diluted earnings per
share by application of the "if converted" method. In the periods in which a
loss is incurred, the effect of potential issuances of shares under options and
warrants would be anti-dilutive, and therefore basic and diluted losses per
share are the same.
22
PROPERTY AND EQUIPMENT
Property and equipment is stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets which has been estimated as
2 years. Impairment losses are recorded on computer equipment used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.
INCOME TAXES
The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities.
FINANCIAL INSTRUMENTS
Our company's financial instruments consist of cash, accounts receivable,
prepaid expenses, and accounts payable and accrued liabilities. Unless otherwise
noted, it is management's opinion that our company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
Because of the short maturity and capacity of prompt liquidation of such assets
and liabilities, the fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although our company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee our company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Impairment of $Nil and $369,137 were recorded in the periods ended September 30,
2013 and 2012 respectively, relating to the abandonment of some mineral claims.
OFFICE LEASE
Our company rents office space in Las Vegas, Nevada for $700 per month. The
arrangement is on a month-by-month basis and can be terminated by either party
with one month's notice.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (our principal executive
officer, principal financial officer and principle accounting officer) to allow
for timely decisions regarding required disclosure.
23
As of the end of the quarter covered by this report, we carried out an
evaluation, under the supervision and with the participation of our president
(our principal executive officer, principal financial officer and principle
accounting officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president (our
principal executive officer, principal financial officer and principle
accounting officer) concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this quarterly report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this report there were no changes in our internal
control over financial reporting that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
executive officers or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
(3) ARTICLES OF INCORPORATION AND BYLAWS
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 filed on December 21, 2007)
3.2 Bylaws (Incorporated by reference to our Registration Statement on
Form SB-2 filed on December 21, 2007)
3.3 Articles of Merger (Incorporated by reference to our Current Report on
Form 8-K filed on October 2, 2009)
24
3.4 Certificate of Change (Incorporated by reference to our Current Report
on Form 8-K filed on October 2, 2009)
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1 2009 Stock Option Plan (Incorporated by reference to our Current
Report on Form 8-K filed on December 30, 2009)
(10) MATERIAL CONTRACTS
10.1 Share Exchange Agreement dated October 9, 2009, between our company,
Nevada Lithium Corporation and the selling shareholders of Nevada
Lithium Corporation (Incorporated by reference to our Current Report
on Form 8-K filed on October 26, 2009)
10.2 Lease Purchase Agreement dated June 1, 2009 between Nevada Lithium
Corporation, Nevada Mining Co., Inc., Robert Craig, Barbara Craig and
Elizabeth Dickman. (Incorporated by reference to our Current Report on
Form 8-K filed on October 26, 2009)
10.3 Lease Agreement dated March 16, 2009 between Nevada Lithium
Corporation and Cerro Rico Ventures LLC (incorporated by reference to
our Current Report on Form 8-K filed on October 26, 2009)
10.4 Mining Option Agreement dated April 15, 2013 between our company and
Thomas Lewis (incorporated by reference to our Current Report on Form
8-K filed on April 22, 2013)
10.5 Mining Claim Sale Agreement dated June 6, 2013 between our company and
Herb Hyder (incorporated by reference to our Current Report on Form
8-K filed on June 12, 2013)
10.6* Trust Agreement dated August 30, 2013 between our company and Tom
Lewis
(14) CODE OF ETHICS
14.1 Code of Business Conduct and Ethics (incorporated by reference to our
Annual Report on Form 10-K filed on April 15, 2013)
(21) SUBSIDIARIES OF THE REGISTRANT
21.1 Nevada Lithium Corporation, a Nevada corporation
(31) RULE 13A-14 (D)/15D-14D) CERTIFICATIONS
31.1* Section 302 Certification by the Principal Executive Officer and
Principal Financial Officer.
(32) SECTION 1350 CERTIFICATIONS
32.1* Section 906 Certification by the Principal Executive Officer and
Principal Financial Officer.
101** INTERACTIVE DATA FILE
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
----------
* Filed herewith.
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the
Interactive Data Files on Exhibit 101 hereto are deemed not filed or part
of any registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, are deemed not filed for purposes of
Section 18 of the Securities and Exchange Act of 1934, and otherwise are
not subject to liability under those sections.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LITHIUM CORPORATION
(Registrant)
Dated: November 7, 2013 /s/ Tom Lewis
---------------------------------------
Tom Lewis
President, Treasurer, Secretary and
Director (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
26