(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 Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(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 subsidiary 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 June 30, 2018, the Company has not earned revenue, has a working capital deficit of $1,618,441, and an accumulated deficit of $35,048,034. 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.
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. During the period ended June 30, 2018, the Company issued 717,391 common shares for the conversion of $75,000 of note payable and $7,500 of interest payable. As at June 30, 2018, the carrying value of the note payable is $nil (September 30, 2017 - $75,000), and accrued interest of $1,315 (September 30, 2017 - $4,685) has been recorded in accounts payable and accrued liabilities.
7
OROPLATA RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(unaudited)
3.
Convertible Notes Payable
(continued)
(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 June 30, 2018, the Company issued 1,157,382 common shares for the conversion of $121,000 of note payable and $12,100 of interest payable. As at June 30, 2018, the carrying value of the note payable is $nil (September 30, 2017 - $121,000), and accrued interest of $5,584 (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. During the period ended June 30, 2018, the Company issued 1,052,174 common shares for the conversion of $110,000 of note payable and $11,000 of interest payable. As at June 30, 2018, the carrying value of the note payable is $nil (September 30, 2017 - $110,000), and accrued interest of $6,721 (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%.
(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 by assets of the Company, 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. During the period ended June 30, 2018, the Company issued 817,391 common shares for the conversion of $94,000 of note payable and $nil of interest payable. As at June 30, 2018, the carrying value of the note payable is $156,000 (September 30, 2017 - $250,000), and accrued interest of $29,999 (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. On February 9, 2018, the Company received proceeds of $56,100, net of issuance costs of $5,100. As at June 30, 2018, the carrying value of the note payable is $389,730 (September 30, 2017 - $140,937), the unamortized discount on the note is $12,870 (September 30, 2017 - $13,063), and accrued interest of $28,060 (September 30, 2017 - $2,507) has been recorded in accounts payable and accrued liabilities.
8
OROPLATA RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(unaudited)
3.
Convertible Notes Payable
(continued)
(f)
On April 3, 2018, the Company entered into a loan agreement with a non-related party for $85,800, net of an original issue discount of $7,800. The amount owing is unsecured, bears interest at 12% per annum, is due on January 15, 2019, and is convertible into common shares at $0.15 per share until October 3, 2018 (180 days following the issuance date of the loan) when the conversion price is equal to 75% of the lowest closing bid price during the fifteen trading days prior to conversion. Upon the due date on January 15, 2019, if the loan remains unpaid, the interest will increase to 22% per annum. As at June 30, 2018, the carrying value of the note payable is $80,391 (September 30, 2017 - $nil), the unamortized discount on the note is $5,409 (September 30, 2017 - $nil), and accrued interest of $2,392 (September 30, 2017 - $nil) has been recorded in accounts payable and accrued liabilities.
(g)
On April 9, 2018, the Company entered into a loan agreement with a non-related party for $150,000, net of an original issue discount of $2,500, of which $75,000 is a front-end note and $75,000 is a back-end note. The amounts owing are unsecured, bear interest at 10% per annum, are due on April 8, 2018, and are convertible into common shares at 66% of the lowest trading price for the twenty trading days prior to conversion. As at June 30, 2018, the carrying value of the note payable is $3,376 (September 30, 2017 - $nil), the unamortized discount on the note is $146,624 (September 30, 2017 - $nil), and accrued interest of $3,375 (September 30, 2017 - $nil) has been recorded in accounts payable and accrued liabilities.
(h)
On April 20, 2018, the Company entered into a loan agreement with a non-related party for $58,800, net of an original issue discount of $5,800. The amount owing is unsecured, bears interest at 12% per annum, is due on January 30, 2019, and is convertible into common shares at $0.15 per share until October 20, 2018 (180 days following the issuance date of the loan) when the conversion price is equal to 75% of the lowest trading price during the fifteen trading days prior to conversion. Upon the due date on January 30, 2019, if the loan remains unpaid, the interest will increase to 22% per annum. As at June 30, 2018, the carrying value of the note payable is $54,445 (September 30, 2017 - $nil), the unamortized discount on the note is $4,355 (September 30, 2017 - $nil), and accrued interest of $1,445 (September 30, 2017 - $nil) has been recorded in accounts payable and accrued liabilities.
(i)
On June 11, 2018, the Company entered into a loan agreement with a non-related party for $60,500 net of an original issue discount of $5,500. The amount owing is unsecured, bears interest at 12% per annum, is due on March 30, 2019, and is convertible into common shares at $0.15 per share until November 11, 2018 (180 days following the issuance date of the loan) when the conversion price is equal to 75% of the lowest trading price during the fifteen trading days prior to conversion. Upon the due date on March 30, 2019, if the loan remains unpaid, the interest will increase to 22% per annum. As at June 30, 2018, the carrying value of the note payable is $51,587 (September 30, 2017 - $nil), the unamortized discount on the note is $8,913 (September 30, 2017 - $nil), and accrued interest of $620 (September 30, 2017 - $nil) has been recorded in accounts payable and accrued liabilities.
(j)
On June 18, 2018, the Company entered into a loan agreement with a non-related party for proceeds up to $165,000. On June 26, 2018, the Company received proceeds of $55,000, net of an original issue discount of $5,500. The amount owing is unsecured, bears interest at 10% per annum, is due on June 18, 2019, and is convertible into common shares at 65% of the lowest trading price for the twenty trading days prior to conversion. Upon the due date on June 18, 2019, if the loan remains unpaid, the interest will increase to 15% per annum. As at June 30, 2018, the carrying value of the note payable is $183 (September 30, 2017 - $nil), the unamortized discount on the note is $54,817 (September 30, 2017 - $nil), and accrued interest of $183 (September 30, 2017 - $nil) has been recorded in accounts payable and accrued liabilities.
4.
Related Party Transactions
(a)
As of June 30, 2018, the Company owes $120,147 (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 of June 30, 2018, 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.
9
OROPLATA RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(unaudited)
4.
Related Party Transactions (continued)
(c)
As of June 30, 2018, the Company owes $250,411 (September 30, 2017 - $100) to the Chief Executive Officer of the Company for accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand.
(d)
As of June 30, 2018, the Company owes $81,591 (September 30, 2017 – $85,000) to directors of the Company for accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand.
5.
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 5, 2017, the Company issued 578,696 common shares as part of a conversion of $66,550 of convertible notes payable and accrued interest.
(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.
(c)
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.
(d)
On January 29, 2018, the Company issued 3,600,000 common shares with a fair value of $360,000 of which $135,000 has been recorded in prepaid expense as at June 30, 2018. In addition, the Company issued 2,400,000 common shares for consulting services with a fair value of $240,000, of which $180,000 has been recorded as prepaid expense as at June 30, 2018
(e)
On January 29, 2018, the Company issued 1,440,000 common shares for professional fees with a fair value of $144,000.
(f)
On February 2, 2018, the Company issued 578,696 common shares as part of a conversion of $66,550 of convertible notes payable and accrued interest.
(g)
On March 8, 2018, the Company issued 2,000,000 common shares to officers of the Company for management fees with a fair value of $190,000, of which 1,000,000 common shares were issuable on each of January 1, 2018 and June 1, 2018.
(h)
On March 8, 2018, the Company issued 350,000 common shares for consulting services with a fair value of $33,250.
(i)
On April 19, 2018, the Company issued 717,391 common shares as part of a conversion of $82,500 of convertible notes payable and accrued interest.
(j)
On May 11, 2018, the Company issued 1,052,174 common shares as part of a conversion of $121,100 of convertible notes payable and accrued interest.
(k)
On May 23, 2018, the Company issued 817,391 common shares as part of a conversion of $94,000 of convertible notes payable.
(l)
On June 22, 2018, the Company issued 666,666 common shares for proceeds of $667 pursuant to the exercise of warrants.
10
OROPLATA RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(unaudited)
6.
Derivative Liabilities
The Company records the fair value of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivatives was calculated using a multi-nominal lattice model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. For the six months ended June 30, 2018, the Company recorded a loss on the change in fair value of derivative liability of $12,442 (June 30, 2017 - $nil). As at June 30, 2018, the Company recorded a derivative liability of $209,442 (December 31, 2017 - $nil).
The following inputs and assumptions were used to value the derivative liabilities outstanding during the periods ended June 30, 2018 and December 31, 2017, assuming no dividend yield:
|
June 30,
2018
|
December 31,
2017
|
|
|
|
Expected volatility
|
138-140%
|
–
|
Risk free rate
|
0.78-0.97%
|
–
|
Expected life (in years)
|
0.8-1.0
|
–
|
A summary of the activity of the derivative liabilities is shown below:
|
$
|
|
|
Balance, December 31, 2017
|
–
|
Derivative loss due to new issuances
|
197,000
|
Mark-to-market adjustments
|
12,442
|
|
|
Balance, June 30, 2018
|
209,442
|
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
|
0.05
|
Issued
|
1,000,000
|
0.10
|
Exercised
|
(666,666)
|
0.001
|
|
|
|
Balance, June 30, 2018
|
3,075,334
|
0.10
|
11
OROPLATA RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements
For the period ended June 30, 2018
(unaudited)
7.
Share Purchase Warrants (continued)
Additional information regarding share purchase warrants as of June 30, 2018, is as follows:
|
Outstanding and exercisable
|
Range of
Exercise Prices
$
|
Number of Warrants
|
Weighted Average Remaining Contractual Life (years)
|
|
|
|
0.001
|
1,333,334
|
3.6
|
0.10
|
1,000,000
|
4.4
|
0.15
|
500,000
|
3.6
|
0.50
|
242,000
|
3.2
|
|
|
|
|
3,075,334
|
3.9
|
8.
Subsequent Events
(a)
On June 29, 2018, the Company entered into a loan agreement with a non-related party for proceeds of $82,500. On July 11, 2018, the Company received proceeds of $75,000, net of an original issue discount of $7,500. The amount owing is unsecured, bears interest at 12% per annum, is due on March 29, 2019, and is convertible into common shares at the lesser of (i) $0.15 per common share, (ii) 75% of the lowest trading price for the fifteen trading days prior to the date of the note, or (iii) 75% of the lowest trading price for the fifteen trading days prior to conversion. Upon the due date on March 29, 2019, if the loan remains unpaid, the interest will increase to 24% per annum. On July 17, 2018, pursuant to the terms of the agreement, the Company issued to the lender 37,500 restricted common shares.
(b)
On June 29, 2018, the Company entered into a loan agreement with a non-related party for proceeds of $27,500. On July 11, 2018, the Company received proceeds of $25,000, net of an original issue discount of $2,500. The amount owing is unsecured, bears interest at 12% per annum, is due on March 29, 2019, and is convertible into common shares at the lesser of (i) $0.15 per common share, (ii) 75% of the lowest trading price for the fifteen trading days prior to the date of the note, or (iii) 75% of the lowest trading price for the fifteen trading days prior to conversion. Upon the due date on March 29, 2019, if the loan remains unpaid, the interest will increase to 24% per annum. On July 17, 2018, pursuant to the terms of the agreement, the Company issued to the lender 12,500 restricted common shares.
(c)
On July 9, 2018, the Company issued 1,850,000 restricted common shares with a fair value of $240,500 as compensation to various advisors.
(d)
On July 10, 2018, the Company entered into a loan agreement with a non-related party for proceeds of $58,800. On or about July 11, 2018, the Company received proceeds of $53,000, net of an original issue discount of $5,800. The amount owing is unsecured, bears interest at 12% per annum, is due on April 30, 2019. Prior to 180 days following the date of funding, the conversion price is $0.15 per share. After 180 days following the date of funding, the conversion price is equal to 75% of the average of the lowest trading prices for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the conversion date. Upon the due date on April 30, 2019, if the loan remains unpaid, the interest will increase to 22% per annum.
(e)
On July 13, 2018, the Company entered into an equity purchase agreement with a non-related investor, whereby the Company shall have the right to require the investor to purchase up to $1,500,000 of the Company’s common stock at a purchase price equal to 75% of the lowest daily volume-weighted average price of the Company’s common shares during the five trading days prior to the closing of the sale. On July 17, 2018, the Company issued 500,000 restricted common shares to an affiliate of the investor.
12