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, 2011
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.)
10597 Double R Blvd. Suite 2, Reno, Nevada 89521
(Address of principal executive offices) (Zip Code)
775.410.5287
(Registrant's telephone number, including area code)
N/A
(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. 63,661,408 common shares issued
and outstanding as of November 14, 2011.
LITHIUM CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II - OTHER INFORMATION 26
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. [Removed and Reserved] 26
Item 5. Other Information 26
Item 6. Exhibits 27
SIGNATURES 28
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, 2011 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
September 30, December 31,
2011 2010
------------ ------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,092,104 $ 1,398,758
Prepaid expenses 54,131 62,900
------------ ------------
TOTAL CURRENT ASSETS 1,146,235 1,461,658
------------ ------------
OTHER ASSETS
Computer equipment, net of amortization -- 498
Mineral properties 618,455 527,445
------------ ------------
TOTAL OTHER ASSETS 618,455 527,943
------------ ------------
TOTAL ASSETS $ 1,764,690 $ 1,989,601
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 20,369 $ 41,887
Due to directors, net 5,350 5,350
------------ ------------
TOTAL CURRENT LIABILITIES 25,719 47,237
------------ ------------
TOTAL LIABILITIES 25,719 47,237
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, 3,000,000,000 shares authorized, par value $0.001;
63,661,408 common shares issued and outstanding (2010 - 62,917,288) 63,662 62,918
Additional paid in capital 1,647,300 1,476,544
Additional paid in capital - options 244,045 244,045
Additional paid in capital - warrants 1,252,243 1,252,243
Deficit accumulated during the exploration stage (1,468,279) (1,093,386)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,738,971 1,942,364
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,764,690 $ 1,989,601
============ ============
See the accompanying notes to the interim consolidated financial statements
4
Lithium Corporation
(An Exploration Stage Company)
Consolidated Statements of Operations (unaudited)
From
Three Months Three Months Nine Months Nine Months January 30, 2007
Ended Ended Ended Ended (Inception) to
September 30, September 30, September 30, September 30, September 30,
2011 2010 2011 2010 2011
------------ ------------ ------------ ------------ ------------
REVENUE $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
EXPENSES
Professional fees 5,359 6,308 15,608 43,732 126,224
Amortization -- 250 498 750 2,002
Exploration expenses 102,851 42,110 191,759 112,853 440,744
Consulting fees 6,258 3,744 34,420 178,744 213,164
Insurance expense 3,913 -- 11,687 -- 14,990
Investor relations 15,302 23,121 49,686 79,356 160,273
Interest expense -- -- -- 4,677 10,451
Management fees -- -- -- 41,800 53,800
Transfer agent and filing fees 4,321 1,636 9,516 4,828 31,875
Travel 4,315 6,647 15,320 18,402 41,843
Stock option compensation -- 244,045 -- 244,045 244,045
Website development costs -- -- -- -- 3,912
Write-down of website costs -- -- -- -- 12,000
Write-down of mineral properties 37,033 15,396 37,033 15,396 52,426
General and administrative 4,700 1,830 10,274 14,618 61,021
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSES 184,052 345,087 375,801 759,201 1,468,733
------------ ------------ ------------ ------------ ------------
LOSS BEFORE FROM OPERATIONS (184,052) (345,087) (375,801) (759,201) (1,468,733)
OTHER ITEM:
Interest income 231 575 908 -- 494
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES (183,821) (344,512) (374,893) (759,201) (1,468,279)
PROVISION FOR INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS $ (183,821) $ (344,512) $ (374,893) $ (759,201) $ (1,468,279)
============ ============ ============ ============ ============
NET LOSS PER SHARE: BASIC AND DILUTED $ nil $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED 63,311,408 62,603,484 63,221,060 61,993,466
============ ============ ============ ============
See the accompanying notes to the interim consolidated financial statements
5
Lithium Corporation
(An Exploration Stage Company)
Consolidated Statement of Stockholders' Equity (unaudited)
Deficit
Additional Additional Accumulated
Common Stock Additional Paid in Paid in during the
-------------------- Paid in Capital - Capital - Exploration
Shares Amount Capital Warrants Options Stage Total
------ ------ ------- -------- ------- ----- -----
Balance, January 30, 2007
(date of inception) -- $ -- $ -- $ -- $ -- $ -- $ --
Shares issued to founder on
January 30, 2007 @ $0.001
per share (par value $0.001
per share) 240,000,000 240,000 (220,000) -- -- -- 20,000
Net loss for the period ended
December 31, 2007 -- -- -- -- -- (23,448) (23,448)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, December 31, 2007 240,000,000 240,000 (220,000) -- -- (23,448) (3,448)
Common stock issued for cash
@ $0.10 per share 28,200,000 28,200 18,800 -- -- -- 47,000
Net loss for the year ended
December 31, 2008 -- -- -- -- -- (26,868) (26,868)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, December 31, 2008 268,200,000 268,200 (201,200) -- -- (50,316) 16,684
Shares issued in conjunction
with merger 12,350,000 12,350 537,355 -- -- -- 549,705
Shares cancelled (220,000,000) (220,000) 220,000 -- -- -- --
Net loss for the year ended
December 31, 2009 -- -- -- -- -- (190,414) (190,414)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, December 31, 2009 60,550,000 60,550 556,155 -- -- (240,730) 375,975
Shares issued with respect to
Fish Lake 367,288 368 174,632 -- -- -- 175,000
Common stock issued for cash
@ $1.00 per share 2,000,000 2,000 745,757 1,252,243 -- -- 2,000,000
Stock options issued -- -- -- -- 244,045 -- 244,045
Net loss for the year ended
December 31, 2010 -- -- -- -- -- (852,656) (852,656)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, December 31, 2010 62,917,288 62,918 1,476,544 1,252,243 244,045 (1,093,386) 1,942,364
Shares issued with respect to
Fish Lake 394,120 394 87,106 -- -- -- 87,500
Options exercised 350,000 350 83,650 -- -- -- 84,000
Net loss for the period ended
September 30, 2011 -- -- -- -- -- (374,893) (374,893)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, September 30, 2011 63,661,408 $ 63,662 $1,647,300 $1,252,243 $244,045 $(1,468,279) $1,738,971
============ ========= ========== ========== ======== =========== ==========
See the accompanying notes to the interim consolidated financial statements
6
Lithium Corporation
(An Exploration Stage Company)
Consolidated Statements of Cash Flows (unaudited)
From
Nine Months Nine Months January 30, 2007
Ended Ended (Inception) to
September 30, September 30, September 30,
2011 2010 2011
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period $ (374,893) $ (759,201) $ (1,468,279)
Adjustment for non-cash items:
Write-down of software development -- -- 12,000
Write-down of mineral properties 37,033 15,396 52,426
Stock option compensation expense -- 244,045 244,045
Amortization 498 750 2,002
Changes in assets and liabilities:
(Increase) Decrease in prepaid expenses 8,769 24,855 (54,131)
Increase (decrease) in accounts payable and accrued liabilities (21,518) (59,895) 20,369
------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES (350,111) (534,050) (1,191,565)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment -- -- (2,002)
Purchase of software development -- -- (12,000)
Interest in mineral properties (40,543) (234,892) (408,384)
------------ ------------ ------------
CASH USED IN INVESTING ACTIVITIES (40,543) (234,892) (422,386)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment) of loan payable -- (169,463) --
Proceeds from (repayment to) director -- (884) 5,350
Proceeds from sale of stock 84,000 2,131,250 2,700,705
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 84,000 1,960,903 2,706,055
------------ ------------ ------------
Increase in cash (306,654) 1,191,961 1,092,104
Cash, beginning of period 1,398,758 360,511 --
------------ ------------ ------------
Cash, end of period $ 1,092,104 $ 1,552,472 $ 1,092,104
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ 10,451
============ ============ ============
Cash paid for income taxes $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Common stock issued for mineral properties $ 87,500 $ 131,250 $ 262,500
============ ============ ============
See the accompanying notes to the interim consolidated financial statements
7
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
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 09, 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.
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.
The accompanying unaudited interim financial statements of Lithium Corp., have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in Lithium Corp.'s Annual Report filed
with the SEC on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements for fiscal 2010 as
reported in the form 10-K have been omitted.
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.
CASH AND CASH EQUIVALENTS
Cash includes cash on account, demand deposits, and short-term instruments with
maturities of three months or less.
COMPUTER EQUIPMENT
Computer 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.
8
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 payable and
accrued liabilities, interest payable, and loans payable. 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.
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's consolidated financial
statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's consolidated financial statements.
9
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value. The guidance is effective for the Company's
acquisitions occurring on or after February 1, 2009.
NON-CONTROLLING INTERESTS
In December 2007, the FASB issued changes to establish accounting and reporting
standards for all entities that prepare consolidated financial statements that
have outstanding non-controlling interests, sometimes called minority interest.
These standards require that ownership interests in subsidiaries held by outside
parties be clearly identified, labelled and presented in equity separate from
the parent's equity; the amount of net income attributable to the parent and the
non-controlling interest be separately presented on the consolidated statement
of income; accounting standards applied to changes in a parent's interest be
consistently applied; fair value measurement upon deconsolidation of a
non-controlling interest be used; and the interests of the non-controlling
owners be already identified and distinguished. The adoption of this guidance
had no impact on the Company's consolidated financial statements.
INTANGIBLE ASSETS
In April 2008, the FASB adopted changes to require companies estimating the
useful life of a recognized intangible asset to consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, to consider assumptions that market participants would
use about renewal or extension as adjusted for entity-specific factors. The
guidance is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively to intangible assets whether acquired before or
after the effective date. The Company adopted the guidance on February 1, 2009.
The adoption had no impact on the Company's consolidated financial statements.
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
In May 2008, the FASB issued changes to identify the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). The guidance is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU section 411, THE MEANING OF PRESENT FAIRLY IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Management is
currently evaluating the guidance and assessing the impact, if any, on the
Company's consolidated financial statements.
SUBSEQUENT EVENTS
On July 31, 2009, the Company adopted changes issued by the FASB that
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, the guidance sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The
Company has evaluated subsequent events through the date the financial
statements were issued.
10
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
In September 2009, the FASB issued new revenue recognition guidance on multiple
deliverable arrangements. It updates the existing multiple-element revenue
arrangements guidance currently included under the Accounting Standards
Codification ("ASC") 605-25. The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) requires the use of the
relative selling price method to allocate the entire arrangement consideration.
In addition, the guidance also expands the disclosure requirements for revenue
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after fiscal 2011, with early adoption permitted provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. Management is currently evaluating the impact of adopting this
guidance on the Company's consolidated financial statements.
NOTE 2 - GOING CONCERN
Lithium'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 $1,468,279 as of September 30, 2011.
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'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:
September 30, December 31,
2011 2010
-------- --------
Professional fees $ 5,190 $ 10,275
Exploration costs 9,000 34,352
Bonds 36,756 12,975
Rent 798 298
Insurance 654 --
Office 1,733 --
Consulting -- 5,000
-------- --------
Total prepaid expenses $ 54,131 $ 62,900
======== ========
NOTE 4 - COMPUTER EQUIPMENT
Accumulated Net Book
Cost Amortization Value
---- ------------ -----
Computer Equipment $2,002 $2,002 $--
====== ====== ===
Depreciation in the nine months ended September 30, 2011 was $498.
11
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
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 01st 2011, and
this quitclaim was recorded at the county level on August 03rd 2011, and at the
BLM on August 4th 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)
STAKED PROPERTIES
The Company has staked claims with various registries as summarized below:
Name Claims (Area in Acres) Amount
---- ---------------------- ------
Salt Wells 156 (12,480) $74,451
Other $20,675
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.
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.
12
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 6 - CAPITAL STOCK (CONTINUED)
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.
There were 63,661,408 shares of common stock issued and outstanding as of
September 30, 2011.
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date September 30, 2011
---------- ------ ----- ----------- ------------------
March 24, 2011 2,000,000 $1.35 March 24, 2013 2,000,000
The warrants were valued using the black scholes option pricing model using the
following assumptions: term of 1 and years, dividend yield of 0%, risk free
interest rates of 0.03% and 1.60%% and volatility of 110%. The fair value of the
warrants was adjusted against additional paid in capital.
13
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 6 - CAPITAL STOCK (CONTINUED)
STOCK BASED COMPENSATION
The Company granted 500,000 options at an exercise price of $0.28 to consultants
in exchange for various professional services. The Company granted another
800,000 options to consultants for management services at exercise price of
$0.24. 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:
Risk free interest rate 2.40%
Expected dividend yield 0%
Expected stock price volatility 93%
Expected life of options 5 years
Weighted
Total Average Total
Exercise Options Remaining Weighted Average Options
Prices Outstanding Life (Years) Exercise Price Exercisable
------ ----------- ------------ -------------- -----------
$0.28 500,000 4.75 $0.28 500,000
$0.24 450,000 4.75 $0.24 450,000
Total stock-based compensation for the year- ended December 31, 2010 was
$244,045.
The following table summarizes the stock options outstanding at September 30,
2011:
Outstanding at
Issue Date Number Price Expiry Date September 30, 2011
---------- ------ ----- ----------- ------------------
September 23, 2010 500,000 $0.28 September 23, 2015 500,000
September 23, 2010 450,000 $0.24 September 23, 2015 450,000
14
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
NOTE 7 - INCOME TAXES
The Company did not provide any current or deferred United States federal, state
or foreign income tax provision or benefit for the period presented because it
has experienced operation losses since inception. The Company has provided a
full valuation allowance on the deferred tax asset, consisting primarily of net
operating loss carry-forwards, because of uncertainty regarding its realization.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred taxes at September 30, 2011 and December 31, 2010 are as
follows:
September 30, December 31,
2011 2010
---------- ----------
Deferred tax asset attributable to:
Net operating losses carried forward $ 323,021 $ 240,545
Valuation allowance (323,021) (240,545)
---------- ----------
Total net deferred tax asset $ -- $ --
---------- ----------
Lithium follows Statement of Financial Accounting Standards Number 109 (SFAS
109) (ASC 740-10), "Accounting for Income Taxes." SFAS No. 109 (ASC 740-10)
requires a valuation allowance, if any, to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized.
Management has determined that a valuation allowance of $323,021 at September
30, 2011 is necessary to reduce the deferred tax assets to the amount that will
more likely not be realized.
At September 30, 2011, the Company had net operating loss carry-forwards
amounting to approximately $1,468,279 that expire in various amounts through
2030 in the U.S.
NOTE 8 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to September 30, 2011 and
through November 6, 2011, the date these financial statements were issued, and
has determined that it does not have any other material subsequent events to
disclose.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited consolidated financial statements are stated in United States
Dollars (US$) 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
Corporation 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 Corporation, or a share exchange whereby we would purchase
the shares of Nevada Lithium Corporation 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.
16
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 Corporation, a Nevada corporation, and the shareholders of Nevada
Lithium Corporation. 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 Corporation 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 Corporation in exchange for the acquisition, by our company, of
all of the 12,350,000 issued and outstanding shares of Nevada Lithium
Corporation. 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.
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.
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.
Our current operational focus is to conduct exploration activities on our
projects in Nevada, known as the Fish Lake Valley, and Salt Wells properties.
FISH LAKE VALLEY PROPERTY
Fish Lake Valley is a lithium enriched salary (also known as a playa, dry lake,
or salt pan), which is located in west central Nevada in northern Esmeralda
county, and the property is roughly centered at 417050E 4195350N (NAD 27 CONUS).
We currently hold 80 acre Association Placer claims that cover approximately
7,360 acres. 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, which could possibly be amenable to the extraction by
evaporative methods. The geological setting at Fish Lake Valley is highly
analogous to the salar at the nearby Clayton Valley where Chemetall has their
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 13 miles to the south, while the town of Tonopah Nevada is
approximately 50 miles to the East. 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. Brine sampling during
the spring of 2011 has outlined a boron/lithium/potassium anomaly 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, with boron ranging from 1,500 to
2,670 mg/L, and potassium from 5,400 to 8,400 mg/L. Our company had planned to
drill this property during the summer/fall of 2011, but it has been
uncharacteristically wet there for the past twelve months, and the opportunity
to safely drill this property has not presented itself this year, with it being
extremely unlikely that conditions will improve during the last couple of months
of 2011. The company plans to drill this property as soon as feasible in 2012.
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, the last of which occurred on March 31, 2011. To
date all disbursements have been made of stock worth a total of $350,000, and
our company has transferred claim ownership.
17
SALT WELLS
The Salt Wells property was acquired through staking in the fall of 2009.
Originally an approximately 12,320 acre parcel was staked, but subsequent to
initial exploration, and due to overlap of existing Fee lands, and federal
rights of way the parcel was reduced to approximately 8500 acres in 2010. The
claims here cover the Eightmile Basin, a playa, which lies approximately 15
miles to the southeast of Fallon, the county seat of Churchill County, Nevada.
U.S. Highway 50 cuts across the northern portions of the claim block and the
Salt Wells all-weather gravel road traverses the western portions of the block.
Power is available locally as a high voltage transmission line runs parallel to
the highway as well as another that originates at the geothermal power plant at
the southern edge of the claim block.
Exploratory sediment sampling of the playa was conducted in the summer and fall
of 2009 and 83% of the samples taken within the claim area have returned
anomalous values in lithium, with the highest value being in the order of 750
ppm Li. In 2010 continued geochemical work, and geophysical studies were
performed on the property, and a brine sampling program is currently underway
there. Brine sampling in the winter and spring of 2011 delineated an anomaly
here which is roughly three quarters of a mile wide by one and a half miles
long, with values up to 36.5 mg/L lithium. This work was followed up by a
gravity geophysical survey during the summer of 2011, which determined that the
brine anomaly in this property is proximal to a basin bounding structure.
The strong lithium values coupled with proximity to a geothermal field and
quaternary faulting indicate that conditions may be favorable for the formation
of a subsurface lithium brine reservoir similar to that currently being
exploited at Silver Peak in Esmeralda County, Nevada.
After two failed attempts to drill the property due to wet conditions in spring
and summer 2011 the company finally succeeded in completing a 31 site - 3,437
foot direct push drill program in September. In all 46 samples were taken, at
varying depths down to 155 feet subsurface. All samples have been submitted to
Inspectorate Laboratory in Reno Nevada, and results are pending.
CORTEZ PROPERTY
Our company staked a block of approximately 4960 acres in the fall of 2009 on
this playa situated in Lander County Nevada. The property is situated about 7
miles to the south of Barrick Gold's Cortez Hills mine, and is approximately 47
miles to the southeast of Battle Mountain, the county seat. The prospect is on
the edge of the Caetano trough, where a thick sequence of tertiary volcanic
rocks with elevated lithium values have accumulated. Past sampling has indicated
that the sediments in the playa are almost ubiquitously enriched in lithium,
with values typically in the 2 - 400 ppm million range.
Our company conducted geochemical, and geophysical surveys on the property in
2009, and 2010 and conducted a brief direct push drill program on it commencing
in early July, 2011. Results from the drill program were not particularly
encouraging, and the decision was made to let the claims here lapse on September
01, 2011 so that our company could concentrate its resources on its other
prospects, and also the generation of newer potentially better prospects.
COMPETITION
The mining industry is intensely competitive. We compete with numerous
individuals and companies, including many major mining companies, which have
substantially greater technical, financial and operational resources and staffs.
Accordingly, there is a high degree of competition for access to funds. There
are other competitors that have operations in the area and the presence of these
competitors could adversely affect our ability to compete for financing and
obtain the service providers, staff or equipment necessary for the exploration
and exploitation of our properties.
18
COMPLIANCE WITH GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations in United States, as well as
other jurisdictions, which govern prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
of the environment, mine safety, hazardous substances and other matters.
We believe that we are and will continue to be in compliance in all material
respects with applicable statutes and the regulations passed in the United
States. There are no current orders or directions relating to our company with
respect to the foregoing laws and regulations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2010
We had a net loss of $183,821 for the three month period ended September 30,
2011, which was $160,691 less than the net loss of $344,512 for the three month
period ended September 30, 2010. The significant change in our results over the
two periods is primarily the result of no stock options being granted during the
period in comparison to 2010.
The following table summarizes key items of comparison and their related
increase (decrease) for the three month periods ended September 30, 2011 and
2010:
Change Between
Three Month Period
Ended
Three Months Three Months September 30, 2011
Ended Ended and
September 30, September 30, September 30,
2011 2010 2010
---------- ---------- ----------
Revenue $ Nil $ Nil $ Nil
Professional fees 5,359 6,308 (949)
Amortization Nil 250 (250)
Exploration expenses 102,851 42,110 60,741
Consulting fees 6,258 3,744 2,514
Insurance expense 3,913 Nil 3,913
Investor relations 15,302 23,121 (7,819)
Interest (income) expense (231) (575) 344
Transfer agent and filing fees 4,321 1,636 2,685
Travel 4,315 6,647 (2,332)
Stock option compensation Nil 244,045 (244,045)
Write-down of mineral properties 37,033 15,396 21,637
General and administrative 4,700 1,830 2,870
Net loss $ (183,821) $ (344,512) $ (160,691)
REVENUE
We have not earned any revenues since our inception and we do not anticipate
earning revenues in the upcoming quarter.
EQUITY COMPENSATION
On December 29, 2009, our board of directors approved the adoption of the 2009
Stock Plan which permits our company to issue up to 6,050,000 shares of our
common stock to directors, officers, employees and consultants. This plan has
not been approved by our security holders.
19
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2010
We had a net loss of $374,893 for the nine month period ended September 30,
2011, which was $384,308 less than the net loss of $759,201 for the nine month
period ended September 30, 2010. The significant change in our results over the
two periods is primarily the result of no stock options being granted during the
period compared to the similar period in 2010 combined with consulting fees and
management fees decreasing compared to 2010.
The following table summarizes key items of comparison and their related
increase (decrease) for the nine month periods ended September 30, 2011 and
2010:
Change Between
Nine Month Period
Ended
Nine Months Nine Months September 30, 2011
Ended Ended and
September 30, September 30, September 30,
2011 2010 2010
---------- ---------- ----------
Revenue $ Nil $ Nil $ Nil
Professional fees 15,608 43,732 (28,124)
Amortization 498 750 (252)
Exploration expenses 191,759 112,853 78,906
Consulting fees 34,420 178,744 (144,324)
Insurance expense 11,687 -- 11,687
Investor relations 49,686 79,356 (29,670)
Interest (income) expense (908) 4,677 (5,585)
Management fees -- 41,800 (41,800)
Transfer agent and filing fees 9,516 4,828 4,688
Travel 15,320 18,402 (3,082)
Stock option compensation -- 244,045 (244,045)
Write-down of mineral properties 37,033 15,396 21,637
General and administrative 10,274 14,861 (4,344)
Net loss $ (374,893) $ (759,201) $ (384,308)
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of September 30, 2011, reflects assets of $1,764,690. We
had cash in the amount of $1,092,104 and a working capital in the amount of
$1,120,516 as of September 30, 2011. 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,
2011 2010
---------- ----------
Current assets $1,146,235 $1,461,658
Current liabilities 25,719 47,237
---------- ----------
Working capital $1,120,516 $1,414,421
========== ==========
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.
20
CASH FLOWS
Nine Months Ended
September 30,
2011 2010
---------- ----------
Net cash provided by (used in) operating activities $ (350,111) $ (534,050)
Net cash provided by (used in) investing activities (40,543) (235,877)
Net cash provided by (used in) financing activities 84,000 1,961,888
---------- ----------
Net increase (decrease) in cash during period $ (306,654) $1,191,961
========== ==========
OPERATING ACTIVITIES
Net cash flow used in operating activities during the nine months ended
September 30, 2011 was $350,111 a decrease of $183,939 from the $534,050 net
cash outflow during the nine months ended September 30, 2010.
INVESTING ACTIVITIES
The primary driver of cash used in investing activities was capital spending in
the acquisition of our company's properties.
Cash used in investing activities during the nine months ended September 30,
2011 was $40,543, which was a decrease of $195,334 from the $235,877 of cash
used investing activities during the nine months ended September 30, 2010. This
decrease in the cash used in investing activities was primarily due to a less
aggressive exploration program during the period.
FINANCING ACTIVITIES
Cash from financing activities during the nine months ended September 30, 2011
was $84,000, which was a decrease of $1,876,903 from the $1,961,888 of cash
provided by financing activities during the nine months ended September 30,
2010. This decrease in the cash from financing activities was primarily due to a
large financing completed during 2010.
We estimate that we will spend approximately $250,000 on general and
administrative expenses, $300,000 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 $250,000
Exploration Expenses 300,000
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.
21
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, 2011 was $1,092,104.
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.
CRITICAL ACCOUNTING POLICIES
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.
The accompanying unaudited interim financial statements of our company, have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
("SEC"), and should be read in conjunction with the audited financial statements
and notes thereto contained in our company's Annual Report filed with the SEC on
Form 10-K. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for fiscal 2010 as reported in the
form 10-K have been omitted.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of our wholly-owned
subsidiary. All material inter-company transactions have been eliminated.
22
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.
CASH AND CASH EQUIVALENTS
Cash includes cash on account, demand deposits, and short-term instruments with
maturities of three months or less.
COMPUTER EQUIPMENT
Computer 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 payable and
accrued liabilities, interest payable, and loans payable. 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.
23
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for our company on February 1, 2010. The adoption of
the guidance did not have an impact on our company's consolidated financial
statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for our company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on our company's consolidated financial statements.
SUBSEQUENT EVENTS
On July 31, 2009, our company adopted changes issued by the FASB that
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, the guidance sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. Our
company has evaluated subsequent events through the date the financial
statements were issued.
BUSINESS COMBINATIONS
Our company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
Our company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value. The guidance is effective for our company's
acquisitions occurring on or after February 1, 2009.
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NON-CONTROLLING INTERESTS
In December 2007, the FASB issued changes to establish accounting and reporting
standards for all entities that prepare consolidated financial statements that
have outstanding non-controlling interests, sometimes called minority interest.
These standards require that ownership interests in subsidiaries held by outside
parties be clearly identified, labeled and presented in equity separate from the
parent's equity; the amount of net income attributable to the parent and the
non-controlling interest be separately presented on the consolidated statement
of income; accounting standards applied to changes in a parent's interest be
consistently applied; fair value measurement upon deconsolidation of a
non-controlling interest be used; and the interests of the non-controlling
owners be already identified and distinguished. The adoption of this guidance
had no impact on our company's consolidated financial statements.
INTANGIBLE ASSETS
In April 2008, the FASB adopted changes to require companies estimating the
useful life of a recognized intangible asset to consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, to consider assumptions that market participants would
use about renewal or extension as adjusted for entity-specific factors. The
guidance is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively to intangible assets whether acquired before or
after the effective date. Our company adopted the guidance on February 1, 2009.
The adoption had no impact on our company's consolidated financial statements.
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
In May 2008, the FASB issued changes to identify the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). The guidance is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU section 411, The Meaning if Present Fairly in
Conformity with Generally Accepted Accounting Principles. Management is
currently evaluating the guidance and assessing the impact, if any, on our
company's consolidated financial statements.
REVENUE RECOGNITION
In September 2009, the FASB issued new revenue recognition guidance on multiple
deliverable arrangements. It updates the existing multiple-element revenue
arrangements guidance currently included under the Accounting Standards
Codification ("ASC") 605-25. The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) requires the use of the
relative selling price method to allocate the entire arrangement consideration.
In addition, the guidance also expands the disclosure requirements for revenue
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after fiscal 2011, with early adoption permitted provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. Management is currently evaluating the impact of adopting this
guidance on our company's consolidated financial statements.
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.
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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.
As of September 30, 2011, the end of our 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
There have been no changes in our internal controls over financial reporting
that occurred during our quarter ended September 30, 2011 that have materially
or are reasonably likely to materially affect, our internal controls 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. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION
None.
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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).
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).
(21) SUBSIDIARIES OF THE REGISTRANT
21.1 Nevada Lithium 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 (FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2011 FURNISHED IN XBRL).
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.
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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 14, 2011 /s/ Tom Lewis
----------------------------------------
Tom Lewis
President, Treasurer, Secretary and
Director (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
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