(The accompanying notes are an integral part of these unaudited consolidated financial statements)
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
Notes to the Consolidated Financial Statements
For the period ended December 31, 2017
(unaudited)
1.
Organization and Nature of Operations
The accompanying unaudited consolidated financial statements of Oroplata Resources, Inc. and its subsidiary (“Oroplata” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended September 30, 2017, included in our Annual Report on Form 10-K for the year ended September 30, 2017.
The Company was incorporated under the laws of the state of Nevada on October 6, 2011 for the purpose of acquiring and developing mineral properties. The Company has a wholly-owned subsdiary called Oroplata Exploraciones E Ingenieria SRL, which was incorporated in the Dominican Republic on January 10, 2012. On July 26, 2016, the Company incorporated Lithortech Resources Inc., a Nevada company, as a wholly-owned subsidiary. The Company currently holds mineral rights in the Dominican Republic and in the Western Nevada Basin of Nye County in the state of Nevada.
Going Concern
These unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at December 31, 2017, the Company has not earned revenue, has a working capital deficit of $1,644,470, and an accumulated deficit of $33,735,219. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. If the Company is able to obtain financing, there is no certainty that terms will be favorable to the Company. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is September 30.
(b)
Principles of Consolidation
These condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL and Lithortech Resources Inc. All inter-company accounts and transactions have been eliminated on consolidation.
3.
Mineral Property
On June 15, 2016, the Company acquired the mineral rights to 500 lithium claims, with an option to purchase an additional 600 lithium claims, situated in the Railroad Valley in the Western Nevada Basin of Nye County, Nevada in exchange for $277,500.
Of the $277,500 payable, $100,000 was due upon signing of the agreement and could be paid within 10 days, $100,000 was due after confirmation of the claims being free from all liens, encumbrances, and mortgages (within 30 days of signing the agreement), and $77,500 upon registration with the BLM for the claims that are due (to be completed on or before July 31, 2016).
7
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the period ended December 31, 2017
(unaudited)
3.
Mineral Property
(continued)
The entire amount of $277,500 was advanced by various individuals and is recorded in accounts payable and accrued liabilities. Due to late payment of the purchase price, the Company agreed to issue 636,943 restricted shares of common stock. In November 2016, a settlement agreement related to the purchase of the Nye County properties was reached, in which, the parties settled on payment of $252,500, the return of the previously issued 636,943 restricted shares of common stock and the issuance of 2,000,000 unrestricted shares of common stock. The $25,000 reduction in the required payment was recorded as a gain on extinguishment of debt on the statement of operations.
The total consideration given for the mineral rights was $1,231,848 which includes the $200,000 payment ($77,500 was recorded as exploration expense) and the 636,943 shares of common stock valued at $1,031,848. The total amount of $1,231,848 was impaired and recorded as an impairment loss during the year ended September 30, 2016.
4.
Convertible Notes Payable
(a)
On July 18, 2016, the Company entered into a convertible note agreement, as amended, with a non-related party for proceeds of $75,000. The terms of the convertible note became effective on February 15, 2017. The amount owing is secured, bears interest at 10%, is convertible into common shares of the Company at $0.24 per share, and is due on February 18, 2017. In September 2017, the conversion price was amended to $0.115 per share and the due date extended to December 31, 2017. On December 11, 2017, the due date was extended to December 11, 2018. The initial amortized discount was $9,375 and as at December 31, 2017, the carrying value of the note payable is $75,000 (September 30, 2017 - $75,000), and accrued interest of $6,575 (September 30, 2017 - $4,685) has been recorded in accounts payable and accrued liabilities.
(b)
On July 18, 2016, the Company entered into a loan agreement with a non-related party for proceeds of $121,000. The amount owing is unsecured, bears interest at 10% per annum, and is due on April 18, 2017, and is convertible into common shares of the Company at $0.50 per share. On January 31, 2017, the due date was extended to December 31, 2017. In September 2017, the conversion feature on the note payable was adjusted $0.115 per share. On December 11, 2017, the due date was extended to December 11, 2018. During the period ended December 31, 2017, the Company issued 578,696 common shares for the conversion of $63,657 of note payable. As at December 31, 2017, the carrying value of the note payable is $57,343 (September 30, 2017 - $121,000), and accrued interest of $17,961 (September 30, 2017 - $15,382) has been recorded in accounts payable and accrued liabilities.
As an incentive for the loan, the Company issued 121,000 cashless warrants to the note holder as a bonus incentive, which has an exercise price of $0.50 per warrant until July 18, 2021. The fair value of the cashless warrants was $229,069, and was calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 239%, and risk-free rate of 1%.
(c)
On September 28, 2016, the Company entered into a loan agreement with a non-related party for proceeds up to $550,000. On September 30, 2016, the Company received proceeds of $110,000, net of issuance fees of $10,000. The amount owing is unsecured, bears interest at 10% per annum, and is due on September 30, 2017, and is convertible into common shares of the Company at $0.10 per share. In September 2017, the conversion price was amended to $0.115 per share and the due date extended to December 31, 2017. On December 11, 2017, the due date was extended to December 11, 2018. As at December 31, 2017, the carrying value of the note payable is $110,000 (September 30, 2017 - $110,000), and accrued interest of $13,773 (September 30, 2017 - $11,000) has been recorded in accounts payable and accrued liabilities.
As an incentive for the loan, the Company issued 121,000 cashless warrants to the note holder as a bonus incentive, which has an exercise price of $0.50 per warrant until September 30, 2021. The fair value of the cashless warrants was $65,990, and was calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 233%, and risk-free rate of 1%.
8
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the period ended December 31, 2017
(unaudited)
4.
Convertible Notes Payable
(continued)
(d)
On February 16, 2017, the Company entered into a loan agreement with a non-related party for proceeds up to $250,000. On February 16, 2017, the Company received proceeds of $32,428, net of issuance fees of $2,948. On February 24, 2017, the Company received proceeds of $77,000, net of issuance fees of $7,000. On April 17, 2017, the Company received proceeds of $13,750, net of issuance fees of $1,250. On April 26, 2017, the Company received proceeds of $88,000, net of issuance fees of $8,000. On June 13, 2017, the Company received proceeds of $38,822 net of issuance fees of $3,882. The aggregate principal amount owed of $250,000 is secured, bears interest at 10%, is due one year after the date of funding for each tranche, and is convertible into common shares of the Company at $0.10 per share. In September 2017, the conversion price was amended to $0.115 per share. On December 11, 2017, the due date for all tranches was extended to December 11, 2018. As at December 31, 2017, the carrying value of the note payable is $250,000 (September 30, 2017 - $250,000), and accrued interest of $18,537 (September 30, 2017 - $12,236) has been recorded in accounts payable and accrued liabilities.
(e)
On July 25, 2017, the Company entered into a loan agreement with a non-related party for proceeds up to $550,000. On July 25, 2017 the Company received proceeds of $44,000, net of issuance fees of $4,000. On August 17, 2017, the Company received proceeds of $110,000, net of issuance fees of $10,000. The aggregate principal amount owed of $154,000 is secured, bears interest at 10%, is due one year after the date of funding for each tranche, and is convertible into common shares of the Company at $0.115 per share. On October 23, 2017, the Company received proceeds of $82,500, net of issuance costs of $7,500. On December 1, 2017, the Company received proceeds of $55,000, net of issuance costs of $5,000. On December 11, 2017, the due date was extended to December 11, 2018. On December 15, 2017, the Company received proceeds of $55,000, net of issuance costs of $5,000. As at December 31, 2017, the carrying value of the note payable is $315,811 (September 30, 2017 - $140,937), the unamortized discount on the note is $30,689 (September 30, 2017 - $13,063), and accrued interest of $8,694 (September 30, 2017 - $2,507) has been recorded in accounts payable and accrued liabilities.
5.
Related Party Transactions
(a)
As at December 31, 2017, the Company owes $120,146 (September 30, 2017 - $120,146) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations. The amounts owing are unsecured, non-interest bearing, and due on demand.
(b)
As at December 31, 2017, the Company owes $85,500 (September 30, 2017 - $85,500) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations and accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand. During the period ended December 31, 2017, the Company accrued $nil (2016 - $30,000) of management fees and paid $nil (2016 - $7,500) to the former Chief Executive Officer of the Company.
(c)
As at December 31, 2017, the Company owes $85,000 (September 30, 2017 - $12,500) to directors of the Company for accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand. During the period ended December 31, 2017, the Company recorded management fees of $75,000 (2016 - $nil) and repaid $2,500 (2016 - $7,500) to the directors of the Company.
(d)
As at December 31, 2017, the Company owes $174,267 (September 30, 2017 - $100) to the Chief Executive Officer of the Company for management and consulting fees. The amounts owing are unsecured, non-interest bearing, and due on demand.
6.
Common Shares
The Company’s authorized common stock consists of 500,000,000 shares of common stock, with par value of $0.001.
(a)
On December 29, 2017, the Company issued 19,700,000 common shares with a fair value of $1,970,000 for services, including 5,000,000 common shares to the Chief Executive Officer of the Company, and 4,000,000 common shares to directors of the Company. In addition, the Company also issued 1,000,000 common shares to the Chief Executive Officer of the Company to replace the common shares that were previously issued in error and cancelled on December 18, 2017.
(b)
On December 18, 2017, the Company cancelled 1,000,000 common shares issued to the Chief Executive Officer of the Company which was previously issued in error.
9
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the period ended December 31, 2017
(unaudited)
6.
Common Shares
(continued)
(c)
On December 5, 2017, the Company issued 578,696 common shares with a fair value of $63,657 as part of a conversion of convertible notes payable at $0.11 per share.
(d)
On July 31, 2017, the Company issued 500,000 common shares with a fair value of $65,000 for professional services.
(e)
On February 24, 2017, the Company received 636,943 common shares which were cancelled and returned to treasury.
(f)
On February 23, 2017, the Company issued 300,000 common shares with a fair value of $75,000 for legal services.
(g)
On February 16, 2017, the Company issued 500,000 common shares with a fair value of $130,000 for services.
(h)
On February 16, 2017, the Company received 2,000,000 common shares which were cancelled and returned to treasury.
(i)
On February 8, 2017, the Company issued 400,000 shares of common stock with a fair value of $96,000 to settle outstanding accounts payable of $60,000 resulting in a $36,000 loss on settlement of debt.
(j)
On January 31, 2017, the Company issued 300,000 shares of common stock with a fair value of $87,000 for consulting services.
(k)
On November 8, 2016, the Company issued 2,000,000 shares of common stock with a fair value of $600,000. The shares were issued as part of a settlement agreement related to the purchase of the Nye County properties, in which, the parties settled on payment of $252,000 and the return of the previously issued 636,943 shares of common stock. Refer to Note 3.
7.
Share Purchase Warrants
In December 2017, the Company granted 1,000,000 share purchase warrants to a consultant of the Company for professional services. The warrants are exercisable into common shares at $0.10 per share for a period of five years. The fair value of the share purchase warrants was $101,310 calculated using the Black-Scholes Option Pricing Model assuming volatility of 154%, risk-free rate of 1.0%, expected life of 5 years, and no expected dividends.
|
Number of
warrants
|
|
Weighted average exercise price
$
|
|
|
|
|
Balance, September 30, 2017
|
2,742,000
|
|
0.07
|
Issued
|
1,000,000
|
|
0.10
|
|
|
|
|
Balance, December 31, 2017
|
3,742,000
|
|
0.08
|
10
OROPLATA RESOURCES, INC.
Notes to the Consolidated Financial Statements
For the period ended December 31, 2017
(unaudited)
7.
Share Purchase Warrants
(continued)
Additional information regarding cashless warrants as of December 31, 2017, is as follows:
|
|
Outstanding and exercisable
|
Range of
Exercise Prices
$
|
|
Number of Warrants
|
|
Weighted Average Remaining Contractual Life (years)
|
|
|
|
|
|
0.001
|
|
2,000,000
|
|
4.3
|
0.10
|
|
1,000,000
|
|
4.9
|
0.15
|
|
500,000
|
|
4.3
|
0.50
|
|
242,000
|
|
3.7
|
|
|
3,742,000
|
|
|
8.
Commitments
On December 28, 2017, the Company entered into management and consulting agreements as follows:
Chief Executive Officer and Director of the Company for a three year term with monthly management fees of $20,833 retroactive to August 7, 2017 in addition to 1,000,000 common shares issuable on August 7, 2018 and 2019;
Director of the Company for a three year term with monthly management fees of $5,000 retroactive to January 1, 2017 in addition to 1,000,000 common shares issuable on January 1, 2018 and 2019; and
Director of the Company for a three year term with monthly management fees of $5,000 retroactive to October 1, 2017 in addition to 1,000,000 common shares issuable on October 1, 2018 and 2019.
9.
Subsequent Events
(a)
On February 9, 2018, the Company received proceeds of $51,000, net of issuance costs of $5,100 from a convertible note payable as part of the July 25, 2017 convertible note agreement.
11