U.S. Lithium Corp. - Quarter Report: 2018 March (Form 10-Q)

---

U.S. LITHIUM, CORP.

Condensed Balance Sheets

Organization and Nature of Operations (note 1)

(The accompanying notes are an integral part of these financial statements)

 

U.S. LITHIUM, CORP.

Condensed Statements of Operations

(unaudited)

(The accompanying notes are an integral part of these financial statements)

 

U.S. LITHIUM, CORP.

Condensed Statements of Cash Flows

(unaudited)

(The accompanying notes are an integral part of these financial statements)

 

1. Organization and Nature of Operations

 

U.S. Lithium, Corp. (formerly Rostock Ventures Corp.) (the “Company”) was incorporated in the State of Nevada on November 2, 2006 and is a natural resource exploration and production company engaged in the exploration, acquisition, and development of mineral properties in the United States. On April 27, 2016, the Company incorporated and merged with its wholly-owned subsidiary, U.S. Lithium Corp. for the sole purpose of enacting a name change and acquired 100% of the titles, interest, and rights to four mineral claims in Esmeralda County, Nevada.

 

On February 23, 2017, the Company entered into an option agreement to acquire 100% interest in the Gochager Lake Nickel-Copper-Cobalt project in exchange for the issuance of 8,000,000 shares of common stock of the Company.

 

 

These interim condensed 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 March 31, 2018, the Company has not earned any revenue, has a working capital deficit of $354,346, and an accumulated deficit of $1,557,469. 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. Management’s plan is to obtain such resources for our company by obtaining capital from significant shareholders to meet our operating expenses through equity or debt financing. However, there are no assurances that the Company will be successful in accomplishing any of our plans. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These 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

 

 

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 December 31.

 

The accompanying interim condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2017. These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

 

The preparation of financial statements in conformity with US GAAP 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of mineral properties, share based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

2. Summary of Significant Accounting Policies (continued)

 

 

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  At March 31, 2018, the Company had 35,813,802 (December 31, 2017 – 39,217,569) potentially issuable shares of common stock related to conversion options on outstanding notes payable.

 

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, bank indebtedness, accounts payable and accrued liabilities, note payables, and amounts due to related party. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

4. Notes Payable (continued)

 

4. Notes Payable (continued)

 

5. Related Party Transactions

 

At March 31, 2018, the Company owed $54,317 (December 31, 2017 - $55,317) to the President of the Company. The amount owing is unsecured, non-interest bearing, and due on demand. During the period ended March 31, 2018, the Company incurred $6,000 (2017 - $6,000) of management fees to the President of the Company.

 

6. Common Stock

 

(a)

On February 12, 2018, the Company issued 5,049,537 common shares at a conversion price of $0.015 per share to settle outstanding convertible debentures of $65,000 and accrued interest of $10,743.  Refer to Notes 4(e) and (g).

 

Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation

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.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean U.S. Lithium, Corp., unless otherwise indicated.

Corporate History

We were incorporated as Rostock Ventures Corp. on November 2, 2006, under the laws of the State of Nevada. We are a natural resource exploration and development company engaged in the exploration, acquisition, and development of mineral properties in North America.  Our business also includes a technology venture, iWeedz.com, our planned internet e-commerce platform and search engine designed to connect consumers with cannabis vendors.

Effective March 12, 2014, we entered into a patent, technical information and trade mark license agreement with Windward International LLC pursuant to which our company acquired an exclusive license to use exploit certain patents, technical information and trademarks comprising the iWeedz.com platform, an e-commerce and marketing platform.  We paid 4,000,000 shares of our company’s common stock in consideration of the license and granted a 2% royalty on all net sales derived from the use of the patents, technical information and trademark.  However, due to a lack of financing, we have not fully developed or launch the iWeedz.com platform.  We continue hold our license in the iWeedz.com platform and to evaluate opportunities to monetize this intellectual property.

On September 30, 2015 our board of directors and a majority of our stockholders approved an increase of our authorized capital from 100,000,000 shares of common stock, par value $0.001 to 500,000,000 shares of common stock, par value $0.001.  A Certificate of Amendment to effect the increase to our authorized capital was filed and became effective with the Nevada Secretary of State on October 20, 2015.

 

 

On April 16, 2017 the Company entered into a securities purchase agreement with Robert  Seeley pursuant to which, in consideration for $8,000 in cash, the Company issued to Mr.  Seeley a convertible  promissory  note for the aggregate principal sum of $8,000  The note bears  simple  interest at a rate of 10% per annum and is  convertible  in common shares of our company for $0.030 per share. This note matures in one year from issuance.

On May 23, 2017 the Company entered into a securities purchase agreement with  Robert  Seeley pursuant to which, in consideration for $25,000 in cash, the Company issued to Mr.  Seeley a convertible  promissory  note for the aggregate principal sum of $25,000  The note, which was subsequently assigned to Catanga International S.A., bears  simple  interest at a rate of 10% per annum and is  convertible  in common shares of our company for $0.023 per share. This note matures in one year from issuance.

Effective July 31, 2017, the Company entered into amendment agreements with each Robert Seeley, and Catanga International S.A., pursuant to which certain convertible promissory notes previously issued to Mr. Seeley and Catanga International were amended to extend their applicable maturity date by six months, in consideration for the reduction of their applicable conversion price to $0.0150.  The resulting amendments are described in the following table:

 

 

The above described notes continue to bear interest at the rate of ten percent (10.0%) per annum, with all unpaid principal and accrued interest being convertible, at the option of the holder, before and after maturity, into shares of our common stock at the prescribed conversion price.  In addition, the holders of the notes will be restricted from converting any outstanding balance payable pursuant to the notes if such conversion would result in them beneficially owning in excess of 9.99% of the Company’s issued and outstanding securities.

On August 1, 2017 our board of directors authorized the issuance of 1,280,827 shares of our common stock pursuant to the conversion of convertible promissory notes dated April 8, 2016, April 21, 2016.  The following table described the value of the converted promissory notes, the applicable conversion prices and the number of shares issued on the conversion date:

Effective September 13, 2017, the Company entered into a Securities Purchase Agreement with Catanga International S.A. pursuant to which we sold and issued to Catanga International S.A., in consideration of $20,000 in cash, a convertible promissory note in the aggregate principal amount of $20,000.  The promissory note, which is payable on September 13, 2018, bears simple interest at a rate of 10% per annum, and is convertible in common shares of our company at the option of the holder, in whole or in part, at the price of $0.029 per share.

Effective February 5, 2018, the Company entered into a Securities Purchase Agreement with Catanga International S.A. pursuant to which we sold and issued to Catanga International S.A., in consideration of $20,000 in cash, a convertible promissory note in the aggregate principal amount of $20,000.  The promissory note, which is payable on February 5, 2019, bears simple interest at a rate of 10% per annum, and is convertible in common shares of our company at the option of the holder, in whole or in part, at the price of $0.021 per share.

 

Current Business

On November 29, 2016 we issued a news release announcing our intention to relaunch our proprietary iWeedz.com search engine and e-commerce platform which was originally launched in February 2014.  The iWeedz.com search engine is a cannabis information resource that connects consumers with vendors or likeminded individuals. iWeedz.com for vendors will be a cloud based solution to manage inventory, post daily deals, attract new customer with proximity marketing via mobile phones, engage with customers via email & text messaging and offer payment processing. We intend to operate this technology platform through a relaunched Website located at www.iWeedz.com, and through mobile application for Apple iPhone operating system (iOS) and Android operating systems. As of the date of this report, our website is not fully functional and our application for Apple iOS and Android operating systems has not been released.

Our decision to revitalize the iWeedz platform comes at a time when several U.S. States have legalized and regulated, or are in the process of legalizing and regulating, medical marijuana.  The states of Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington have also legalized marijuana for recreational use.  Additionally, the Government of Canada has been engaged in an ongoing process of regulating medical marijuana, and is expected to introduce legislation for the legalization of recreational marijuana in the spring of 2017.

iWeedz will generate revenue by charging member cannabis vendors a monthly fee and by selling banner space on its website and application to these vendors. The banners will be viewable by iWeedz consumer members who are within the vendor’s geographic location and who indicate an interest in the vendor or its products, based on the member’s profile or specific user information gathered by the iWeedz technology.  We believe iWeedz’s targeted market intelligence will allow us to charge a premium for ad space. As of the date of this report, we have not yet determined the cost to our vendors for banner space.

Target Market

Our target market includes both businesses and consumers in the local marijuana industry. iWeedz is intended for all types of cannabis consumers including those new to cannabis, medical marijuana patients, or recreational consumers, if recreational use is legally permitted in the consumer’s state of residence. iWeedz also targets both medicinal and recreational dispensaries, depending on whether the specific geographical location legally permits recreational marijuana use.

Our target market further includes consumers who are frequent users of the internet, mobile phones and other mobile devices to locate retailers, conduct online research and act on promotions such as daily deals, coupons or discounts.

Our mineral exploration strategy is focused on the acquisition, and development of Cobalt, nickel, and lithium resources properties to capitalize on the growing energy storage (battery) market associated with the popularization of electric vehicles.

1.

The semi-massive and massive sulphide concentrations in the Gochagar mineralized zone have high Ni/Cu ratios (>10), and Pd/Ir ratios (6-11). Since 1980, it has been speculated that komatiitic nickel sulphide mineralization and potential ores should exist in the central La Ronge meta-volcanic belt because of the recognition of komatiite lavas in the belt.

2.

Research has clearly demonstrated that the komatiitic composition of the massive sulphides in the Gochagar Lake deposit are not compatible with the host rock and rock forming mineral compositions that the sulphides reside in. This suggests that these high grade Ni-Cu-Co sulphides were introduced through an interconnected mineralized plumbing system that was tapping into a much more primitive mineralized komatiitic system at depth or proximal to the main deposit.  This is further corroborated by discoveries in the Gochagar Lake area of discrete high grade massive Ni-Cu-Co sulphides in the surrounding country rock.  These sulphides are devoid of any mafic or ultramafic rock material like that hosting the Gochagar Lake deposit.

 

 

3.	The Gochagar Lake area and deposit sit on the boundary between the Rottenstone Domain and the La Ronge Domain. It is well known that structural boundaries between two major geological terranes are an excellent geological environment for the formation of Ni-Cu deposits.

4.

The area is extensively covered with glacial debris and muskeg, so surface geological prospecting should not reveal any new gossans or outcrop showings, as was the case in the early exploration of the 1960’s. However, a 2,284 km deep penetrating state of the art airborne electromagnetic and magnetic survey (VTEM) was flown in June 2008 and identified numerous potential targets that have yet to be investigated.

Exploration Plan

US Lithium’s initial work plan will involve a digital compilation of all available data into a comprehensive data base, reprocessing of all geophysical data and a complete reinterpretation of the geology.  A new 3-D model will be generated which will allow the Company to better visualize the deposit’s potential size and geometry and prepare its Phase 2 drilling plan.

The Elon claim block consists of four 20-acre placer claims and is located in Esmerelda County, Nevada. Clayton Valley is home to the only mine producing lithium from brine in North America. As at the date of this report, we have not conducted any exploration on the Elon Claims. On August 25, 2016, we renewed the Elon claims until September 1, 2017. We plan to maintain the claims for the foreseeable future but have no plans to conduct exploration on the property during fiscal 2017.

Competition

The mining industry is intensely competitive. We aim to 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 investment funds to support acquisition, exploration and development. There are other competitors that have operations in the areas in which our properties are located, 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.

Compliance with Government Regulation

Regulation related to iWeedz.com

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-spam, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the characteristics and quality of services. It is not clear how existing laws governing issues such as sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. In addition, it is possible that government entities or public interest groups may seek to censor content available on our website and application or may even attempt to completely block our emails or access to our websites. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in certain locations, our ability to increase our customer base may be adversely affected. Currently, we believe we are in compliance with such government regulations and laws.

 

Additionally, a variety of federal and state laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal and state legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. For example, recently there have been Congressional hearings and increased attention to the capture and use of location-based information relating to users of smartphones and other mobile devices. We intend to post privacy policies and practices concerning the collection, use and disclosure of member data on our website and application. Several Internet companies have incurred substantial penalties for failing to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal or state privacy or consumer protection-related laws, regulations or industry self-regulatory principles, could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of consumer members or vendors and adversely affect our business. Federal and state governmental authorities also continue to evaluate the privacy implications inherent in the use of third party web “cookies” for behavioral advertising. The regulation of these “cookies” and other current online advertising practices could adversely affect our business.

Marijuana Regulation

At least 24 States in the USA, and the federal government of Canada have passed some form of legislation related to the permission to grow, cultivate, sell or use marijuana either for medical purposes or for recreational or “adult use” purposes; or both. The various state legislation is not necessarily harmonious with one another, leading to potential conflicts between state laws. It is most often not legal to transport cannabis-related products across state lines and national borders.

We do not intend to directly hold, handle, or distribute any marijuana products in any location within or outside of the USA. We intend to comply with federal law that provides for certain exemptions for agricultural (industrial) hemp and certain byproducts to be manufactured and sold in the US. Our technology may have applications within the legal marijuana sector and we may seek to license that technology to companies that have met and comply with state regulations for the sale or distribution of cannabis related products in any particular jurisdiction.

Mineral Exploration

Any operations at our mineral exploration properties will be subject to various federal, state, or provincial laws and regulations in the US or Canada 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 will be required to obtain those licenses, permits or other authorizations currently required to conduct exploration and other programs. There are no current orders or directions relating to us or to our lithium properties with respect to the foregoing laws and regulations. Such compliance may include feasibility studies on the surface impact of our proposed operations, costs associated with minimizing surface impact, water treatment and protection, reclamation activities, including rehabilitation of various sites, on-going efforts at alleviating the mining impact on wildlife and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that the costs and delays associated with such compliance could become so prohibitive that we may decide to not proceed with exploration, development, or mining operations on any of our mineral properties. We are not presently aware of any specific material environmental constraints affecting our properties that would preclude the economic development or operation of our optioned property.

Environmental Regulations

We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.

 

While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.

Research and Development

We have not incurred any research and development expenditures over the last two fiscal years.

Intellectual Property

Our company acquired an exclusive license to use certain patents, technical information and trademarks for a term of 500 years, pursuant to the license agreement with Windward dated March 12, 2014, including the domain names www.iWeeds.com, www.iWeedz.com and the platform that powers iWeeds.com.

Employees

Results of Operations

Three months ended March 31, 2018 compared to the three months ended March 31, 2017

Our operating expenses for the three month periods ended March 31, 2018 and March 31, 2017 are outlined in the table below:

Operating Revenues

For the three months ended March 31, 2018 and 2017, our company did not record any revenues.

 

Operating Expenses and Net Loss

Operating expenses for the three months ended March 31, 2018 were $16,074 compared with $24,727 for the three months ended March 31, 2017. The decrease in operating expenses was attributed to a decrease in consulting fees of $6,164 for services that were provided for the due diligence of mineral properties that was done in fiscal 2017, a decrease of $1,347 in professional fees due to lower legal costs as additional costs were incurred in the prior year for the due diligence and acquisition of the Gochager Lake Property, and a decrease of $1,142 in general and administrative as the Company sold its interest in Gochager Lake during the current quarter and resulted in less overhead costs compared to prior year.

Net loss for the three months ended March 31, 2018 was $50,099 compared with $62,012 for the three months ended March 31, 2017. In addition to operating expenses, our company incurred interest and amortization expense of $34,025 (2017 - $37,285) relating to interest incurred on the outstanding debt, and amortization of the discount for the convertibility feature of convertible debentures.

Liquidity and Capital Resources

As at March 31, 2018, our cash balance was $60,251 and total assets were $376,296, which was comprised of $316,045 of mineral properties.  As at December 31, 2017, our cash balance was $490 and total assets were $376,045, which included mineral properties of $376,045.  The increase in cash is due to the fact that we received proceeds of $60,000 from the sale of the Gochager Lake property and an additional $20,000 of financing from the issuance of a convertible debenture during the period.  The decrease in mineral properties was due to the receipt of $60,000 as part of the sale of the Gochager Lake property, which also includes 1,000,000 common shares of Cameo Resources Inc., a company traded on the TSX Venture Exchange in Canada, which the Company has not yet received.

As at March 31, 2018, we had total liabilities of $414,597 compared with total liabilities of $447,147 as at December 31, 2017. The decrease in total liabilities was due a decrease in the carrying value of notes payable of $26,060 as the Company issued 5,049,537 common shares for the settlement of notes payable of $65,000 plus accrued interest of $10,743.  The settlement was offset by the issuance of a new note payable for proceeds of $20,000 and for the accretion of the beneficial conversion feature on existing convertible notes. In addition, there was a decrease in accounts payable and accrued liabilities of $5,490 due to the conversion of accrued interest of $10,743 offset by accrued interest during the period of $8,418 as well as timing differences in the payment of outstanding obligations as the Company has more cash to settle amounts owing to creditors.

 

As at March 31, 2018, we had a working capital deficit of $354,346 compared with a working capital deficit of $446,657 as at December 31, 2017. The decrease in working capital deficit is due to the fact that we received $60,000 in proceeds from the sale of the Gochager Lake property during the period and for the conversion of $65,000 of convertible notes payable into common shares of the Company.

Cashflow from Operating Activities

During the three months ended March 31, 2018, we used $20,239 of cash for operating activities compared to the use of $16,154 of cash for operating activities during the three months ended March 31, 2017. The increase in the cash used for operating activities was due to the fact that the Company had more cash assets on hand during the current period compared to the prior year.

Cashflow from Investing Activities

During the three months ended March 31, 2018, the Company received $60,000 from the proceeds of the sale of the Gochager Lake property.  The Company did not have any investing activities during the three months ended March 31, 2017.

Cashflow from Financing Activities

During the three months ended March 31, 2018, we received $20,000 from the issuance of a note payable, which is unsecured, bears interest at 10% per annum, and due within one year.  Comparatively, we received $8,000 from the issuance of a note payable during the three months ended March 31, 2017.

Going Concern

We have not attained profitable operations and are dependent upon the continued financial support from its management and its ability to identify future investments opportunities and obtain the necessary debt or equity financing and generating profitable operation from the Company’s future operations.  For these reasons, there is substantial doubt regarding the Company’s ability to continue as a going concern.

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, capital expenditures or capital resources that are material to stockholders.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Critical Accounting Policies

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 December 31.

The accompanying interim condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2017. These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

 

Use of Estimates

The preparation of financial statements in conformity with US GAAP 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of mineral properties, share based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Loss per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  At March 31, 2018, the Company had 35,813,802 (December 31, 2017 – 39,217,569) potentially issuable shares of common stock related to conversion options on outstanding notes payable.  Foreign Currency Translation

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, note payables, and amounts due to related party. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

 

Recently Issued Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and our company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

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 principal accounting officer) to allow for timely decisions regarding required disclosure.

As of 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 principal 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 principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, 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

On February 12, 2018, the Company issued 5,049,537 common shares at a conversion price of $0.015 per share to settle outstanding convertible debentures of $65,000 and accrued interest of $10,743.

The issuance of the above described common shares was made in reliance on Rule 506 of Regulation D of the Securities Act of 1933, as amended, on the basis that the subscriber represented to our company that they are an “accredited investor” as such term is defined in Rule 501(a) of Regulation D.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

On February 12, 2018, the Company issued 5,049,537 common shares at a conversion price of $0.015 per share to settle outstanding convertible debentures of $65,000 and accrued interest of $10,743.

The issuance of the above described common shares was made in reliance on Rule 506 of Regulation D of the Securities Act of 1933, as amended, on the basis that the subscriber represented to our company that they are an “accredited investor” as such term is defined in Rule 501(a) of Regulation D.

Item 6. Exhibits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Filed herewith

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		U.S. LITHIUM, CORP.
		(Registrant)
Dated: May 23, 2018	By:	/s/ Gregory Rotelli
		Gregory Rotelli
		President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)