Significant accounting policies (Policies) | 9 Months Ended |
Apr. 30, 2014 |
Significant accounting policies: | ' |
Basis of Presentation and Organization | ' |
Basis of Presentation and Organization |
|
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three month period ended April 30, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2014. For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2013. |
|
First Liberty Power Corp. (“First Liberty Power” or the “Company” and formerly Quuibus Technology, Inc.) is a Nevada corporation in the exploration stage. The Company was incorporated under the laws of the State of Nevada on March 28, 2007. The original business plan of the Company was focused on developing and offering a server-based software product for the creation of wireless communities. The Company commenced a capital formation activity to effect a Registration Statement on Form SB-2 with the Securities and Exchange Commission, and raise capital of up to $60,000 from a self-underwritten offering of 1,200,000 shares of newly issued common stock in the public markets. The Registration Statement on Form SB-2 was filed with the SEC on November 13, 2007, and declared effective on November 21, 2007. On February 18, 2008, the Company completed an offering of its registered common stock. |
|
In December 2009, the Company changed its business direction, and the Company’s primary focus is on exploration and development of domestic strategic mineral properties. The accompanying consolidated financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting. |
|
On December 22, 2009, the Company declared a 27 for 1 forward stock split of its authorized and issued and outstanding common stock. The Company’s authorized common stock increased from 20,000,000 shares of common stock with a par value of $0.001 to 540,000,000 shares of common stock with a par value of $0.001. The effect of the stock split has been recognized retroactively in the stockholders’ equity accounts as of March 28, 2007, the date of our inception, and in all shares and per share data in the financial statements. On August 20, 2013, the Company’s authorized common stock increased from 540,000,000 shares of common stock with a par value of $0.001 to 1,080,000,000 shares of common stock with a par value of $0.001. On July 2, 2013, the board of directors of First Liberty Power Corp. (“Company”) approved, and on August 30, 2013, the shareholders of the Company approved, an amendment to the Company’s Articles of Incorporation, permitting the creation of up to 10,000,000 shares of “blank check” preferred stock, par value of $0.001 per share (the “Blank Check Preferred Shares”) which may be issued in one or more classes or series, with such rights, preferences, privileges and restrictions as may be fixed by the Company’s Board of Directors. On March 30, 2014, the board of directors approved, and on April 4th the Company filed a Certificate of Designation with the Secretary of State of the State of Nevada, which sets forth the rights, preferences and privileges of a class of the Company’s preferred stock. Such class was designated as the “Series A Preferred Stock” and the number of shares constituting such series was 5,000,000 shares. |
|
Effective December 22, 2009, the Company changed its name from “Quuibus Technology, Inc.” to “First Liberty Power Corp.” by way of a merger with its wholly owned subsidiary First Liberty Power Corp., which was formed solely for the name change. |
|
|
On August 22, 2012, the Company entered into an agreement with Group8 Minerals, a Nevada Corporation ("Group8”), and Group8 Mining Innovations, a Nevada Corporation (“G8MI”), the sole Shareholder of Group8, whereby G8MI transferred 81% of the total issued and outstanding shares of Group8 in exchange for the issuance of 83,000,000 shares of the Company to G8MI plus one hundred thousand dollars ($100,000) cash payment to G8MI. Further, pursuant to the Agreement, the Company is required to undertake certain payments to Group8 aggregating a total of $2,000,000 for associated property payments and exploration costs as follows: (a) $500,000 on or before October 30, 2012, which has been paid; (b) $500,000 on or before December 31, 2012, which $255,609 has been paid toward this balance; (c) $500,000 on or before February 28, 2013, which amount remains outstanding as of the date of this filing; and (d) $500,000 on or before April 30, 2013, which amount remains outstanding as of the date of this filing. |
|
In accordance with ASC 805, “Business Combinations”, and in particular ASC 805-50-25, the acquisition of Group8 is accounted for as an asset purchase without goodwill as Group8 did not meet the definition of a business per ASC 805 at the time of the acquisition. Additionally the CEO of First Liberty and controlling director of the Company is also a 50% director of G8MI as such the transaction was deemed a transaction under common control. As the Company and Group8 are considered as common controlled entities, the acquisition is a common control transaction; therefore, the financial statements require retrospective combination of the entities for all periods presented as if the combination had been in effect since inception of common control. The 83,000,000 shares of the Company’s common stock issued to G8MI for 81% of Group8 will be recorded as founder’s shares to G8MI at Group8’s inception date, January 26, 2013. On May 22, 2012 and May 31, 2012, Group8 obtained 50% control of Stockpile Reserves, LLC (“SRL”) and Central Nevada Processing Co. LLC (“CNPC”), respectively. SRL has a net liability of $37,681 with non-controlling interest of $53,629 at May 22, 2012. The total net liability assumed by Group8 was $91,310, which will be combined with the Company’s financial statements as of July 31, 2012. There was no operation in CNPC as of July 31, 2012. |
|
|
A summary of SRL net liability allocation is as follows: |
|
Assets acquired: | | | |
Cash and cash equivalents | | $ | 3,555 | |
Advances to related party | | | 9,200 | |
Property and equipment, net | | | 4,314 | |
Total assets acquired | | $ | 17,069 | |
Liabilities assumed: | | | | |
Due to related party | | $ | 54,750 | |
Total liabilities assumed | | $ | 54,750 | |
Non-controlling interest | | | 53,629 | |
Net assets acquired | | $ | -91,310 | |
|
As of July 31, 2013, the Company paid off the $100,000 cash payment to G8MI which was applied against the $100,000 obligation under the agreement to acquire Group8. The 83,000,000 shares of the Company issued to G8MI are valued at $0 as Group8 founder’s shares as of July 31, 2012, and $(100,000) on August 22, 2012 as the Company has the liability to pay G8MI for the acquisition of Group8 when the Company entered into the share exchange agreement with G8MI and Group8. |
Basis of Presentation | ' |
Basis of Presentation |
|
As a result of the acquisition, the accompanying consolidated financial statements include the operations of G8 Minerals since August 23, 2012. The accompanying consolidated financial statements also include the operations of the Company, its 50% owned subsidiary Central Nevada Processing Co. LLC (CNPC) and its 50% owned subsidiary Stockpile Reserves LLC (SRL). CNPC and SRL are both considered variable interest entities (VIE) for which the Company is the primary beneficiary. |
|
The Company consolidates all entities in which the Company holds a “controlling financial interest.” For voting interest entities, the Company is considered to hold a controlling financial interest when the Company is able to exercise control over the investees’ operating and financial decisions. For variable interest entities (“VIEs”), the Company is considered to hold a controlling financial interest when it is determined to be the primary beneficiary. For VIEs, a primary beneficiary is a party that has both: (1) the power to direct the activities of a VIE that most significantly impact that entity's economic performance, and (2) the obligation to absorb losses, or the right to receive benefits, from the VIE that could potentially be significant to the VIE. The determination of whether an entity is a VIE is based on the amount and characteristics of the entity's equity. |
|
All significant inter-company balances and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents, Policy | ' |
Cash and Cash Equivalents |
|
For purposes of reporting within the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. |
Mineral Properties, Policy | ' |
Mineral Properties |
|
The Company is primarily engaged in the business of the acquisition, exploration, development, mining, and production of domestic strategic energy and mineral properties, with a current emphasis on lithium carbonate. Mineral claim and other property acquisition costs are capitalized as incurred. Such costs are carried as an asset of the Company until it becomes apparent through exploration activities that the cost of such properties will not be realized through mining operations. Mineral exploration costs are expensed as incurred, and when it becomes apparent that a mineral property can be economically developed as a result of establishing proven or probable reserve, the exploration costs, along with mine development costs, are capitalized. The costs of acquiring mineral claims, capitalized exploration costs, and mine development costs are recognized for depletion and amortization purposes under the units-of-production method over the estimated life of the probable and proven reserves. If mineral properties, exploration, or mine development activities are subsequently abandoned or impaired, any capitalized costs are charged to operations in the current period. |
Revenue Recognition, Policy | ' |
Revenue Recognition |
|
The Company is in the exploration stage and has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. |
Business Combinations Valuation of Acquired Assets and Liabilities | ' |
Business Combinations – Valuation of Acquired Assets and Liabilities |
|
Allocations of purchase price for business combinations are based on estimates of the fair value of consideration paid and the net assets acquired. Accounting for business combinations requires estimates and judgments as to expectations of future cash flows for acquired businesses and the allocation of those cash flows to identifiable tangible and intangible assets in determining the estimated fair values of assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets and liabilities, including contingent consideration, are based on management’s estimates and assumptions, utilizing customary valuation procedures and techniques. Contingent consideration is measured at its estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in earnings as a component of other income or expense. If actual results differ significantly from the estimates and judgments used in determining the estimated fair values of assets and liabilities recorded as of the date of acquisition, these differences could result in a possible impairment of recorded assets, including intangible assets and goodwill, or require acceleration of amortization expense of finite-lived intangible assets. |
Inventory, Policy | ' |
Inventory |
|
Inventories are stated at the lower of costs incurred or market. Inventories include metals product inventory, which is determined by the stage at which the minerals are in processing (stockpiled minerals, work in process and finished goods). |
|
Stockpiled minerals inventory represents Stibnite ore rock that has been excavated from inside the mine and then placed on pad area before being crushed and bagged. Stockpiles reserves are measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile mineral tonnages are verified by periodic surveys. Costs are allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the minerals, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile’s average cost per recoverable unit. |
|
Work in process inventory represents materials that are currently in the process of being converted to a saleable product and includes inventories in our milling process. This inventory represents excavated stibnite ore that has been removed from the pad, crushed, bagged in one ton storage bags and stored in 40 foot containers at our onsite facilities to be hauled to a third party mill site for processing. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories are valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process. |
|
The Company categorizes all of its inventory as work in process. The Company processes its inventory into which its ships to a refiner for final processing, and therefore it never holds finished goods. |
|
At the present time, our inventories consist of the historical cost of extracting raw minerals from our mine site and transporting raw materials to our milling site for further processing. Until we begin receiving regular revenues from our milling and smelting operations, all milling and smelting costs are expensed as incurred. |
Long-lived assets, Policy | ' |
Long-lived assets |
|
The Company accounts for its long-lived assets in accordance with FASB ASC 360-10, “Property, Plant and Equipment” which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposal value. |
Investment, Policy | ' |
Investments |
|
The Company holdings in marketable securities classified as available-for-sale are carried at fair value. The carrying value of marketable securities is reviewed each reporting period for declines in value that are considered to be other-than temporary and, if appropriate, the investments are written down to their estimated fair value. Realized gains and losses and declines in value judged to be other-than-temporary on available for sale securities are included in the Company’s statements of operations. Unrealized gains and unrealized losses deemed temporary are included in accumulated other comprehensive income (loss). |
|
Effective February 8, 2011, the Company acquired 500,000 shares of New America Energy common stock pursuant to an Agreement between the Company, New America Energy and GeoXplor (refer to Note 3 and 7) for the deemed value of $250,000. The equity investment will be periodically reviewed to determine if impairment is required. During the nine months ended April 30, 2014, the Company realized $2,500 in loss on investment. The Company has realized a total of $249,450 in loss on investment as of April 30, 2014. |
Loss per Common Share, Policy | ' |
Loss per Common Share |
|
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. |
Convertible Debentures, Policy | ' |
| | | | |
Convertible Debentures | | | | |
| | | | |
Beneficial Conversion Feature | | | | |
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | | | | |
Debt Discount | ' |
Debt Discount | | | | |
| | | | |
The Company determines if the convertible debenture should be accounted for as liability or equity under ASC 480, Liabilities — Distinguishing Liabilities from Equity. ASC 480, applies to certain contracts involving a company's own equity, and requires that issuers classify the following freestanding financial instruments as liabilities. Mandatorily redeemable financial instruments, Obligations that require or may require repurchase of the issuer's equity shares by transferring assets (e.g., written put options and forward purchase contracts), and Certain obligations where at inception the monetary value of the obligation is based solely or predominantly on: | | | | |
| | | | |
– A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer's equity shares with an issuance date fair value equal to a fixed dollar amount, | | | | |
| | | | |
– Variations in something other than the fair value of the issuer's equity shares, for example, a financial instrument indexed to the S&P 500 and settleable with a variable number of the issuer's equity shares, or | | | | |
| | | | |
– Variations inversely related to changes in the fair value of the issuer's equity shares, for example, a written put that could be net share settled. | | | | |
|
|
If the entity determined the instrument meets the guidance under ASC 480 the instrument is accounted for as a liability with respective debt discount. The Company records debt discounts in connection with raising funds through the issuance of convertible debt (see Note 4). These costs are amortized to non-cash interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. |
Derivative Financial Instruments | ' |
Derivative Financial Instruments |
|
Derivative financial instruments, as defined in ASC 815, “Accounting for Derivative Financial Instruments and Hedging Activities”, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. |
|
The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has issued financial instruments including senior convertible notes payable and freestanding stock purchase warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. As required by ASC 815, in certain instances, these instruments are required to be carried as derivative liabilities, at fair value, in our financial statements. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
|
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of April 30, 2014, and July 31, 2013, the carrying value of the Company’s financial instruments approximated fair value due to the short-term nature and maturity of these instruments. |
|
Determination of Fair Value | | | | |
The Company’s financial instruments consist of available for sale securities, convertible notes payable and a derivative liability. The Company believes all of the financial instruments’ recorded values approximate their fair values because of their nature and respective durations. | | | | |
|
The Company complies with the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. |
|
|
ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below |
Estimates | ' |
Estimates |
|
The financial statements are prepared on the basis of accounting principles generally accepted in the United States of America. The preparation of 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 as of April 30, 2014 and July 31, 2013, and expenses for the quarters ended April 30, 2014, and 2013, and cumulative from inception. Actual results could differ from those estimates made by management. |
|
Asset Retirement Obligations, Policy | ' |
Asset retirement obligations |
|
The Company has adopted the provisions of FASB ASC 410-20 “Asset Retirement and Environmental Obligations,” which requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the related oil and gas properties. As of April 30, 2014, there have been no asset retirement obligations recorded. |
Cost-Basis Method Valuation | ' |
Cost-Basis Method Valuation |
|
The Company’s non-marketable equity investment is recorded using the cost-basis method of accounting, and is classified as a long-term asset on the accompanying balance sheet as permitted by FASB ASC 325, “Cost Method Investments”, as the Company owned less than 20% of the voting securities and did not have the ability to exercise significant influence over operating and financial policies of the entity. See Note 7, “Investment in Covalent Energy” for more information. |
|