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 June 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.)
200 S Virginia Street - 8th Floor Reno, Nevada 89501
(Address of principal executive offices) (Zip Code)
775.398.3047
(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). [ ] 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 August 10, 2011.
LITHIUM CORPORATION
FORM 10-Q INDEX
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 4T. 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 six
month periods ended June 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
June 30, December 31,
2011 2010
---------- ----------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $1,250,179 $1,398,758
Prepaid expenses 70,106 62,900
---------- ----------
TOTAL CURRENT ASSETS 1,320,285 1,461,658
---------- ----------
Other Assets
Computer equipment, net of amortization -- 498
Mineral properties 628,788 527,445
---------- ----------
TOTAL OTHER ASSETS 628,788 527,943
---------- ----------
TOTAL ASSETS $1,949,073 $1,989,601
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 20,931 $ 41,887
Due to directors, net 5,350 5,350
---------- ----------
TOTAL CURRENT LIABILITIES 26,281 47,237
---------- ----------
TOTAL LIABILITIES 26,281 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 (1,284,458) (1,093,386)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,922,792 1,942,364
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,949,073 $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)
For the Three and Six Months Ended June 30, 2011 and 2010
For the Period from January 30, 2007 (Inception) to June 30, 2011
From
January 30, 2007
Three Months Three Months Six Months Six Months (Inception)
Ended Ended Ended Ended to
June 30, June 30, June 30, June 30, June 30,
2011 2010 2011 2010 2011
------------ ------------ ------------ ------------ ------------
REVENUE $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
EXPENSES
Professional fees 8,435 29,961 10,249 37,424 120,865
Amortization 248 250 498 500 2,002
Exploration expenses 49,498 35,055 88,908 70,743 337,893
Consulting fees 28,162 175,000 28,162 175,000 206,906
Insurance expense 3,914 -- 7,774 -- 11,077
Investor relations 20,549 17,580 34,384 56,235 144,971
Interest expense -- 1,183 -- 5,252 10,451
Management fees -- 32,600 -- 41,800 53,800
Transfer agent and filing fees 2,853 2,590 5,195 3,192 27,554
Travel 4,913 9,556 11,005 11,755 37,528
Stock option compensation -- -- -- -- 244,045
Website development costs -- -- -- -- 3,912
Write-down of website costs -- -- -- -- 12,000
Write-down of mineral properties -- -- -- -- 15,396
General and administrative 4,017 5,277 5,574 13,031 56,321
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSES 122,589 309,052 191,749 414,689 1,284,721
------------ ------------ ------------ ------------ ------------
LOSS BEFORE FROM OPERATIONS (122,589) (309,052) (191,749) (414,689) (1,284,721)
OTHER ITEM
Interest income 263 -- 677 -- 263
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES (122,326) (309,052) (191,072) (414,689) (1,284,458)
PROVISION FOR INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS $ (122,326) $ (309,052) $ (191,072) $ (414,689) $ (1,284,458)
============ ============ ============ ============ ============
NET LOSS PER SHARE: BASIC AND DILUTED $ nil $ nil $ nil $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING: BASIC AND DILUTED 63,337,360 62,603,844 63,175,138 61,683,402
============ ============ ============ ============
See the accompanying notes to the interim consolidated financial statements
5
Lithium Corporation
(An Exploration Stage Company)
Consolidated Statement of Stockholders' Equity (unaudited)
For the Period from January 30, 2007 (Inception) to June 30, 2011
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
June 30, 2011 -- -- -- -- -- (191,072) (191,072)
------------ --------- ---------- ---------- -------- ----------- ----------
Balance, June 30, 2011 63,661,408 $ 63,662 $1,647,300 $1,252,243 $244,045 $(1,284,458) $1,922,792
============ ========= ========== ========== ======== =========== ==========
See the accompanying notes to the interim consolidated financial statements
6
Lithium Corporation
(An Exploration Stage Company)
Consolidated Statements of Cash Flows (unaudited)
For the Six Months Ended June 30, 2011 and 2010
For the Period from January 30, 2007 (Inception) to June 30, 2011
From
Six Months Six Months January 30, 2007
Ended Ended (Inception) to
June 30, June 30, June 30,
2011 2010 2011
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (191,072) $ (414,689) $ (1,284,458)
Adjustment for non-cash items:
Write-down of software development -- -- 12,000
Write-down of mineral properties -- -- 15,396
Stock option compensation expense -- -- 244,045
Amortization 498 500 2,002
Changes in assets and liabilities:
(Increase) Decrease in prepaid expenses (7,206) 22,665 (70,106)
Increase (decrease) in accounts payable
and accrued liabilities (20,956) (80,818) 20,931
------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES (218,736) (472,342) (1,060,190)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment -- -- (2,002)
Purchase of software development -- -- (12,000)
Interest in mineral properties (13,843) (144,990) (381,684)
------------ ------------ ------------
CASH USED IN INVESTING ACTIVITIES (13,843) (144,990) (395,686)
------------ ------------ ------------
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 2,087,500 2,700,705
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 84,000 1,917,153 2,706,055
------------ ------------ ------------
Increase in cash (148,579) 1,299,821 1,250,179
Cash, beginning of period 1,398,758 360,511 --
------------ ------------ ------------
Cash, end of period $ 1,250,179 $ 1,660,332 $ 1,250,179
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ -- $ 5,252 $ 10,451
============ ============ ============
Cash paid for income taxes $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Common stock issued for mineral properties $ 87,500 $ 87,500 $ 262,500
============ ============ ============
See the accompanying notes to the interim consolidated financial statements
7
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 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.
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.
8
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
9
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 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.
10
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 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 $1,284,458 as of June 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.
11
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2011
NOTE 3 - PREPAID EXPENSES
Prepaid expenses consisted of the following:
June 30, December 31,
2011 2010
-------- --------
Professional fees $ 6,225 $ 10,275
Exploration costs 22,000 34,352
Bonds 36,756 12,975
Rent 536 298
Insurance 4,589 --
Consulting -- 5,000
-------- --------
Total prepaid expenses $ 70,106 $ 62,900
======== ========
NOTE 4 - COMPUTER EQUIPMENT
Cost Accumulated Amortization Net Book Value
---- ------------------------ --------------
Computer Equipment $2,002 $2,002 $ --
Depreciation in the six months ended June 30, 2011 was $498.
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 04th 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)
12
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2011
NOTE 5 - MINERAL PROPERTIES (CONTINUED)
Staked Properties
The Company has staked claims with various registries as summarized below:
Name Claims (Area in Acres) Amount
---- ---------------------- ------
Salt Wells 156 (12,480) $73,318
Cortez 62 (4,960) $43,595
Other $ 6,800
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.
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 June
30, 2011.
13
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2011
NOTE 6 - CAPITAL STOCK (CONTINUED)
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date June 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.
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 Weighted
Total Remaining Average
Exercise Options Life Exercise Options
Prices Outstanding (Years) 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 June 30, 2011:
Outstanding at
Issue Date Number Price Expiry Date June 30, 2011
---------- ------ ----- ----------- -------------
September 23, 2010 500,000 $0.28 September 23, 2011 500,000
September 23, 2010 450,000 $0.24 September 23, 2011 450,000
14
Lithium Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 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 June 30, 2011 and December 31, 2010 are as follows:
June 30, December 31,
2011 2010
-------- --------
Deferred tax asset attributable to:
Net operating losses carried forward $282,581 $240,545
Valuation allowance (282,581) (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 $282,581 at June 30,
2011 is necessary to reduce the deferred tax assets to the amount that will more
likely not be realized.
At June 30, 2011, the Company had net operating loss carry-forwards amounting to
approximately $1,284,458 that expire in various amounts through 2030 in the U.S.
NOTE 8 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to June 30, 2011 and through
July 25, 2011, the date these financial statements were issued, and has
determined that it does not have any other material subsequent events to
disclose.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) 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 stocks
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, Salt Wells, and Cortez
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 plans to drill
this property later on in the summer of 2011. 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 31st 2011. To date all disbursements have been made of stock
worth a total of $350,000, and our company has transferred claim ownership.
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
17
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.
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.
Our company recently received approval of its drill permit application from the
BLM in Carson City, and commenced drilling the beginning of June. Ground
conditions were too wet, and it was decided to terminate the program after only
four drill holes. Currently our company is conducting a gravity geophysical
survey on the property, and the drill program is slated to resume in early
August.
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. The property is easily
accessed by gravel roads, and power is available on the eastern side of the
playa.
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. During the course of the program our company drilled 3,355
feet, in 29 different drill holes. Due to the nature of direct push drilling
usually only a single sample can be taken from each boring, so several borings
may be made at a single site. The deepest hole drilled was in the order of 225
feet subsurface, and sampling depths ranged from 50 to 195 feet subsurface
during the program. The average sample depth was approximately 98 feet
subsurface. Drilling at Cortez outlined an elongate brine anomaly which measures
0.6875 miles wide by 1.5 miles long. Brines have now been recovered in this area
from depths ranging from the immediate subsurface to 195 feet deep. All samples
have been submitted to Inspectorate Corporation's lab in Reno, Nevada.
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 JUNE 30, 2011 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2010
We had a net loss of $122,326 for the three month period ended June 30, 2011,
which was $186,726 less than the net loss of $309,052 for the three month period
ended June 30, 2010. The significant change in our results over the two periods
is primarily the result of decrease in consulting, professional and management
fees.
The following table summarizes key items of comparison and their related
increase (decrease) for the three month periods ended June 30, 2011 and 2010:
Change Between
Three Month Period
Three Months Three Months Ended
Ended Ended June 30, 2011 and
June 30, June 30, June 30,
2011 2010 2010
-------- -------- --------
Revenue $ Nil $ Nil $ Nil
Professional fees 8,435 29,961 (21,526)
Amortization 248 250 (2)
Exploration expenses 49,498 35,055 14,443
Consulting expenses 28,162 175,000 (146,838)
Investor relations 20,549 17,580 2,969
Interest -- 1,183 (1,183)
Insurance 3,914 -- 3,914
Management fees -- 32,600 (32,600)
Transfer agent and filing fees 2,853 2,590 263
Travel 4,913 9,556 (4,643)
General and administrative 4,017 5,277 (1,260)
Interest income (263) -- (263)
-------- -------- --------
Net loss $122,326 $309,052 $186,726
======== ======== ========
Revenue
We have not earned any revenues since our inception and we do not anticipate
earning revenues in the upcoming quarter.
19
Equity Compensation
We currently do not have any stock option or equity compensation plans or
arrangements.
Purchase or Sale of Equipment
We do not expect to purchase or sell any plant or significant equipment.
SIX MONTHS ENDED JUNE 30, 2011 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2010
We had a net loss of $191,072 for the six month period ended June 30, 2011,
which was $223,617 less than the net loss of $414,689 for the six month period
ended June 30, 2010. The significant change in our results over the two periods
is primarily the result of decrease in consulting, professional and management
fees.
The following table summarizes key items of comparison and their related
increase (decrease) for the six month periods ended June 30, 2011 and 2010:
Change Between
Six Month Period
Six Months Six Months Ended
Ended Ended June 30, 2011 and
June 30, June 30, June 30,
2011 2010 2010
---------- ---------- ----------
Revenue $ Nil $ Nil $ Nil
Professional fees 10,249 37,424 (27,175)
Amortization 498 500 (2)
Exploration expenses 88,908 70,743 18,165
Consulting expenses 28,162 175,000 (146,838)
Investor relations 34,384 56,235 (21,851)
Interest Nil 5,252 (5,252)
Management fees Nil 41,800 (41,800)
Transfer agent and filing fees 5,195 3,192 2,003
Travel 11,005 11,755 (750)
General and administrative 5,574 13,031 (7,457)
Interest income (677) -- (677)
---------- ---------- ----------
Net loss $ 191,072 $ 414,689 $ 223,617
========== ========== ==========
Liquidity and Capital Resources
Our balance sheet as of June 30, 2011, reflects assets of $1,949,073. We had
cash in the amount of $1,250,179 and a working capital in the amount of
$1,294,004 as of June 30, 2011. We have sufficient working capital to enable us
to carry out our stated plan of operation for the next twelve months.
20
At At
June 30, 2011 December 31, 2010
------------- -----------------
Current assets $1,320,285 $1,461,658
Current liabilities 26,281 47,237
---------- ----------
Working capital $1,294,004 $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.
CASH FLOWS
Six Months Ended
June 30,
2011 2010
---- ----
Net cash (used in) operating activities $ (218,736) (472,342)
Net Cash (used in) investing activities (13,843) (144,990
Net cash provided by financing activities 84,000 1,917,153
Net increase (decrease) in cash during period $ (148,579) 1,299,821
OPERATING ACTIVITIES
Net cash flow used in operating activities during the six months ended June 30,
2011 was $218,736 a decrease of $83,943 from the $472,342 net cash outflow
during the six months ended June 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 six months ended June 30, 2011 was
$13,843, which was a decrease of $131,147 from the $144,990 of cash used
investing activities during the six months ended June 30, 2010. This decrease in
the cash used in investing activities was primarily due to less cash used to
secure the mineral property.
FINANCING ACTIVITIES
Cash from financing activities during the six months ended June 30, 2011 was
$84,000, which was a decrease of $1,833,153 from the $1,917,153 of cash from
financing activities during the six months ended June 30, 2010. This decrease in
the cash from financing activities was primarily due to the Company completing a
private placement in the previous period whereas the current period's sole
financing activity was funds raised through the exercise of options.
We estimate that we will spend approximately $350,000 on general and
administrative expenses, $375,000 on exploration and $50,000 on travel over the
next 12 months.
21
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 $350,000
Exploration Expenses 375,000
Travel 50,000
--------
TOTAL $775,000
========
We have suffered recurring losses from operations. The continuation of our
company is dependent upon our company attaining and maintaining profitable
operations and raising additional capital as needed.
The continuation of our business is dependent upon obtaining further financing,
a successful program of exploration and/or development, and, finally, achieving
a profitable level of operations. The issuance of additional equity securities
by us could result in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required
for our continued operations. As noted herein, we are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be unable to conduct our operations as planned, and we will not be able
to meet our other obligations as they become due. In such event, we will be
forced to scale down or perhaps even cease our operations.
Cash on hand as of June 30, 2011 was $1,250,179.
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.
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
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.
22
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 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.
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.
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 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.
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.
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
24
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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (our principal executive
officer, principal financial officer and principle accounting officer) to allow
for timely decisions regarding required disclosure.
As of June 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.
25
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 June 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.
26
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.
----------
* Filed herewith
27
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: August 11, 2011 /s/ Tom Lewis
----------------------------------------
Tom Lewis
President, Treasurer, Secretary and
Director (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
28