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 February 29, 2012
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______to______.
Commission File Number: 333-149552
TUCANA LITHIUM CORP.
(Exact name of registrant as specified in charter)
| NEVADA | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employee Identification No.) |
3651 Lindell Rd. Suite D155
Las Vegas, NV, 89103
(Address of Principal Executive Offices)
_______________
1-800-854-7970
(Registrants telephone number, including area code)
_______________
(Former Name or Former Address if Changed Since Last Report)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “large accelerated filer,” “accelerated filer” and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer o | Accelerated Filer o |
| Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller Reporting Company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock. As of April 23, 2012, there were 54,824,202 shares of common stock issued and outstanding.
TUCANA LITHIUM CORP. AND SUBSIDIARIES
FORM 10-Q
February 29, 2012
INDEX
PART I-- FINANCIAL INFORMATION
Item 1. | Consolidated Financial Statements | F-1 - F-12 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 1 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 9 |
Item 4. | Control and Procedures | 9 |
PART II-- OTHER INFORMATION
Item 1 | Legal Proceedings | 10 |
Item 1A. | Risk Factors | 10 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
Item 3. | Defaults Upon Senior Securities | 11 |
Item 4. | Mine Safety Disclosures | 11 |
Item 5. | Other Information | 11 |
Item 6. | Exhibits | 11 |
SIGNATURE
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
TUCANA LITHIUM CORP. AND SUBSIDIARIES
CONTENTS
| PAGE | F-1 | CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 29, 2012 AND AS OF AUGUST 31, 2011. |
| PAGE | F-2 | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED FEBRUARY 29, 2012 AND 2011 |
| PAGE | F-3 | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2012 AND 2011 AND FOR THE PERIOD JUNE 5, 2003 (INCEPTION) TO FEBRUARY 29, 2012. |
| PAGE | F-4 | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2012 AND 2011 AND FOR THE PERIOD JUNE 5, 2003 (INCEPTION) TO FEBRUARY 29, 2012. |
| PAGE | F-5 – F-11 | NOTES TO FINANCIAL STATEMENTS. |
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS OF
(Expressed in United States Dollars)
29 February 2011 (Unaudited) | 31 August 2011 (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 18,660 | $ | 86,876 | ||||
| Accounts receivable | 2,035 | - | ||||||
| Prepaid and other | 14,313 | 5,840 | ||||||
| Total Current Assets | 35,008 | 92,716 | ||||||
| Long Term Assets | ||||||||
| Equipment | 1,078 | 1,161 | ||||||
| Mineral rights | 561,978 | 550,000 | ||||||
| Total Long Term Assets | 563,056 | 551,161 | ||||||
| Total Assets | $ | 598,064 | $ | 643,877 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 26,137 | $ | 18,818 | ||||
| Convertible note payable | - | 3,939 | ||||||
| Advances from related party | 48 | 203 | ||||||
| Total Liabilities | 26,185 | 22,960 | ||||||
| Stockholders' Equity | ||||||||
| Capital stock, $0.001 par value; Authorized 100,000,000; Issued and outstanding 54,824,202 (31 August 2011 - 54,464,202) | 54,824 | 54,464 | ||||||
| Additional paid-in capital | 1,650,869 | 1,633,229 | ||||||
| Shares to be issued | 51,065 | - | ||||||
| Accumulated other comprehensive loss | (33,325 | ) | (34,166 | ) | ||||
| Deficit accumulated during the development stage | (1,151,554 | ) | (1,032,610 | ) | ||||
| Total Stockholders' Equity | 571,879 | 620,917 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 598,064 | $ | 643,877 |
The accompanying notes are an integral part of these consolidated financial statements.
F-1
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States Dollars)
(Unaudited)
| For the Three Months Ended 29 February 2012 | For the Three Months Ended 28 February 2011 | |||||||
| SALES | 3,024 | 36 | ||||||
| COST OF GOODS SOLD | 2,175 | - | ||||||
| GROSS PROFIT | 849 | 36 | ||||||
| EXPENSES | ||||||||
| Professional and management fees | 42,664 | 33,450 | ||||||
| Interest and bank charges | 574 | 442 | ||||||
| Depreciation | 57 | 822 | ||||||
| Office and general | 230 | 366 | ||||||
| Advertising and promotion | 502 | 1,810 | ||||||
| Rent | 1,937 | - | ||||||
| Telecommunications | 1,305 | 1,545 | ||||||
| Exploration | 12,334 | - | ||||||
| TOTAL OPERATING EXPENSES | 59,603 | 38,435 | ||||||
| LOSS FROM OPERATIONS | (58,754 | ) | (38,399 | ) | ||||
| Foreign exchange gain | - | (35 | ) | |||||
| Realized loss on disposal of available-for-sale securities | - | - | ||||||
| NET LOSS | $ | (58,754 | ) | $ | (38,434 | ) | ||
| FOREIGN CURRENCY TRANSLATION ADJUSTMENT | (403 | ) | (1,254 | ) | ||||
| COMPREHENSIVE LOSS | (59,157 | ) | (39,688 | ) | ||||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 0.00 | 0.00 | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 54,824,202 | 29,223,333 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States Dollars)
| For the Six Months Ended 29 February | For the Six Months Ended 28 February | For the Period from Inception (5 June 2003) to 29 February | ||||||||||
| 2012 | 2011 | 2012 | ||||||||||
| SALES | 3,024 | 428 | 387,810 | |||||||||
| COST OF GOODS SOLD | 2,175 | - | 268,109 | |||||||||
| GROSS PROFIT | 849 | 428 | 119,701 | |||||||||
| EXPENSES | ||||||||||||
| Professional and management fees | 93,543 | 41,253 | 989,055 | |||||||||
| Interest and bank charges | 880 | 795 | 21,881 | |||||||||
| Depreciation | 1,178 | 1,592 | 22,054 | |||||||||
| Office and general | 356 | 538 | 38,304 | |||||||||
| Advertising and promotion | 2,526 | 2,431 | 45,819 | |||||||||
| Rent and occupancy costs | 3,875 | - | 35,007 | |||||||||
| Vehicle | - | - | 2,158 | |||||||||
| Bad debts | - | - | 9,774 | |||||||||
| Telecommunications | 2,508 | 2,577 | 43,957 | |||||||||
| Exploration | 14,800 | - | 107,867 | |||||||||
| TOTAL OPERATING EXPENSES | 119,666 | 49,186 | 1,315,876 | |||||||||
| LOSS FROM OPERATIONS | (118,817 | ) | (48,758 | ) | (1,196,175 | ) | ||||||
| Foreign exchange loss | (126 | ) | (33 | ) | 18,531 | |||||||
| Interest income | - | - | 11,821 | |||||||||
| Realized loss on disposal of available-for-sale securities | - | - | (2,096 | ) | ||||||||
| Gain on extinguishment of debt | - | - | 19,126 | |||||||||
| Loss on disposal of assets | - | - | (2,762 | ) | ||||||||
| NET LOSS | $ | (118,943 | ) | $ | (48,791 | ) | $ | (1,151,553 | ) | |||
| Unrealized loss on convertible note receivable, net of tax | (23,135 | ) | ||||||||||
| Foreign currency translation adjustment | 841 | (2,170 | ) | (10,190 | ) | |||||||
| COMPREHENSIVE LOSS | $ | (118,102 | ) | $ | (50,961 | ) | (1,184,878 | ) | ||||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | $ | 0.00 | $ | 0.00 | ||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 54,794,532 | 22,268,453 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
For the Six Months Ended 29 February 2012 | For the Six Months Ended 28 February 2011 | For the Period from Inception (5 June 2003) to 29 February 2012 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (118,943 | ) | $ | (48,791 | ) | $ | (1,151,553 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 1,178 | 1,592 | 22,054 | |||||||||
| Loss on disposal of assets | - | - | 2,762 | |||||||||
| Issuance of common stock for services | 18,000 | - | 119,000 | |||||||||
| Write off deferred offering costs | - | - | 120,000 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (2,035 | ) | (2,035 | ) | ||||||||
| Convertible notes receivable | - | - | (21,978 | ) | ||||||||
| Prepaid and sundry | (8,473 | ) | - | (14,313 | ) | |||||||
| Accounts payable and accrued liabilities | 7,319 | 5,506 | 26,137 | |||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES | (102,954 | ) | (41,693 | ) | (899,926 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| (Acquisition) disposition of equipment | (1,130 | ) | - | 3,332 | ||||||||
| Acquisition of mineral rights | (11,978 | ) | - | (40,972 | ) | |||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | (13,108 | ) | - | (37,640 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from convertible note payable | - | 10,000 | 28,540 | |||||||||
| Repayment of convertible note payable | (3,550 | ) | (3,550 | ) | ||||||||
| Loan receivable | - | - | (160,000 | ) | ||||||||
| Advances from stockholder | - | (1,535 | ) | - | ||||||||
| Advances from related party | (155 | ) | (5,032 | ) | 124,835 | |||||||
| Issuance of common shares, net of issuance costs | 51,065 | 67,312 | 972,568 | |||||||||
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 47,360 | 70,745 | 962,403 | |||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 486 | (3,350 | ) | (6,177 | ) | |||||||
| NET (DECREASE) INCREASE IN CASH | (68,216 | ) | 25,702 | 18,660 | ||||||||
| CASH, BEGINNING OF PERIOD | 86,876 | 84 | - | |||||||||
| CASH, END OF PERIOD | $ | 18,660 | $ | 25,786 | $ | 18,660 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TUCANA LITHIUM INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 29 FEBRUARY 2012
(Expressed in United States Dollars)
(Unaudited)
| 1. | ORGANIZATION AND NATURE OF OPERATIONS |
Tucana Lithium Corp., formerly named Oteegee Innovations Inc. and formerly named Pay By The Day Holdings Inc., (the “Company”) was incorporated in August 2007 in the State of Nevada. On 31 August 2007 we entered into a share exchange agreement with Pay By The Day Company Inc., an Ontario Corporation incorporated in June 2003 (“PBTD” or “Pay By The Day”), whereby PBTD became our wholly owned subsidiary.
On 12 March 2010, the Company entered into a non-binding letter of intent (“Letter of Intent”) with Grail Semiconductor, Inc. (“Grail”), to acquire all of the assets of Grail. As a result of entering into the Letter of Intent, on 22 March 2010, the Company filed a certificate of amendment to the Company’s articles of incorporation with the Nevada Secretary of State changing the Company’s name to Oteegee Innovations, Inc.
On 7 April 2010, the Company effected a 1 for 10 forward split of its issued and outstanding common stock. The Company’s issued and outstanding common shares were increased from 1,539,000 to 15,390,000. The Company also increased its authorized common shares from 100,000,000 to 200,000,000.
On 6 July 2010, the Company closed a share exchange agreement with Oteegee International Holdings Limited, a company incorporated in Hong Kong (“Oteegee”). Pursuant to the share exchange agreement, the Company issued 61,647,250 shares of common stock pending the close of the share exchange agreement in exchange for 4,000 common shares representing 40% of Oteegee.
On 20 August 2010, the Company received a notice of termination of the Letter of Intent with Grail, and as a result, the Company cancelled the 61,647,250 of its common shares issued to Oteegee. The Letter of Intent was terminated due to the Company’s inability to raise preliminary funding during the due diligence period of the Letter of Intent. In accordance with the Letter of Intent, the Company is entitled to convert its advances to Grail into equity of Grail.
On 2 December 2010 the Company closed an Asset Purchase Agreement (the “Agreement”) with Alain Champagne and other parties (the “Selling Group”) to acquire a One Hundred (100%) interest in the Abigail Lithium Project located in the James Bay, Quebec region of Canada (the “Property”). It is covered by NTS sheets 320/12 and 320/13. The Property is made up of 222 map-designated cells totaling 11,844 hectares. The claims will expire in May 2012.
Pursuant to the Agreement, on 7 December 2010 the Company issued a total of 15,000,000 shares of common stock plus committed to an additional payment of $250,000 in cash with $100,000 payable 90 days from the closing of the Agreement and $150,000 payable 180 days from the closing of the Agreement. In addition, the Company agreed to a minimum initial exploration work budget of $300,000 to commence no later than 16 May 2011. The Company announced on 27 June 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region.
In March 2011, the Company issued 5,000,000 shares of common stock at $0.02 per share reflecting the first payment of $100,000 for the Property. On 15 May 2011, the Company issued a 10% Convertible Debenture with a principal amount of $150,000 (the “Debenture ”) to Alain Champagne (the “Holder”). The Debenture is due twelve months from the date of issuance. Additionally, the Holder is entitled to convert, at any time, until the Debenture is paid in full, all or any part of the principal plus accrued interest into shares of the Company’s common stock at a per share conversion price of $0.15. On 24 May 2011 the Company repaid $100,000 and on 25 June 2011 the Company paid off the balance of $50,000 fulfilling all the obligations to the Selling Group for the purchase price of the Property. In July 2011, the Ministry of Natural Resources transferred all mining claims into the name of Tucana Exploration Inc., a company incorporated in the State of Wyoming on 22 February 2011 (“Tucana”). Tucana is a 100% wholly owned subsidiary of the Company.
F-5
On 3 May 2011, the Company filed a certificate of amendment to amend the articles of incorporation with the Nevada Secretary of State changing the Company’s name to Tucana Lithium Corp.
On 9 December 2011, the Company staked an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana's subsidiary, Tucana Exploration Inc. The property is made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of staking the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal.
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between March and May 2014. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey
After spending a total amount of $2,500,000 on the Project, the Selling Group will receive an additional 1,000,000 shares of the Company’s common stock and an additional cash payment of $250,000. After spending a total amount of $5,000,000 on the Project, the Seller Group will receive an additional 1,000,000 shares of the Company’s common stock and a further cash payment of $250,000. If a feasibility study is put in place an additional 1,000,000 shares and $250,000 will be delivered to the Selling Group, and if a bank feasibility is put in place a further 2,000,000 shares and $500,000 cash will be delivered to the Selling Group. The Company has also agreed to pay the Selling Group a 3% royalty on any commercial producing mineral deposit.
The Company operates both PBTD and Tucana as wholly owned subsidiaries. The Company operates under the web-site address www.tucanalithium.com with its two website addresses as www.paybytheday.com and www.tucanaexploration.com.
| 2. | BASIS OF PRESENTATION |
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. 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 (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended 29 February 2012 are not necessarily indicative of the results that may be expected for the year ending 31 August 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended 31 August 2011.
The accompanying consolidated financial statements of the Company include the accounts of Tucana Lithium Corp. and its wholly owned subsidiaries, Pay By The Day Company, Inc. and Tucana Exploration Inc. Inter-company balances and transactions have been eliminated upon consolidation.
The Company is considered to be in the development stage as defined in Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company has devoted substantially all of its efforts to business planning and development by means of raising capital for operations. The Company has also not realized any significant revenues. Among the disclosures required by ASC 915 are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations and comprehensive loss, stockholders' equity (deficit) and cash flows disclose activity since the date of the Company's inception.
F-6
| 3. | GOING CONCERN |
These consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. The Company is actively seeking financing to fully execute the next phase of the Company’s exploration campaign and future acquisitions. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital. The Company is optimistic that the financing will be secured. We are in discussions with various parties and believe a successful financing is likely. The Company believes it can satisfy minimum cash requirements for the next twelve months with either an equity financing, convertible debenture or if needed, a loan from our director, Jordan Starkman.
There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these consolidated financial statements.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
| 4. | SIGNIFICANT ACCOUNTING POLICIES |
Mineral Claims and Exploration Costs
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.
Recent Accounting Pronouncements
Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
F-7
| 5. | CONVERTIBLE NOTES PAYABLE |
In August 2010 the Company issued a one-year convertible note payable in the amount of $3,550. The convertible note payable matures in twelve months, is unsecured, bears interest at 5% per annum and interest accrues and is payable in cash upon maturity or repayment of the principal prior to the date of maturity, provided that the elected conversion to common shares does not occur. At any time or times on or before 11 August 2011, the note holder shall be entitled to convert any portion of the outstanding and unpaid amount into fully paid and non-assessable shares of common stock at a conversion price of $0.10 per common share. This debenture has been included with the common stock issuable during the quarter ended November 30, 2011. On 15 December 2011 the note payable was fully paid off in cash, and accordingly removed from common stock issuable.
F-8
| 6. | MINERAL CLAIMS |
On 2 December 2010 the Company closed the Agreement with the Selling Group to acquire a One Hundred (100%) interest in the Property for a total cost of $550,000. The Property is covered by NTS sheets 32O12and 32O13. The Property is made up of 222 map-designated cells totaling 11,844 hectares. The claims expire in May 2012.
Pursuant to the Agreement, on 7 December 2010 the Company issued a total of 15,000,000 shares of common stock plus committed to an additional payment of $250,000 in cash with $100,000 payable 90 days from the closing of the Agreement and $150,000 payable 180 days from the closing of the Agreement. The Company has also agreed to pay the Selling Group a 3% royalty on any commercial producing mineral deposit. In addition, the Company agreed to a minimum initial exploration work budget of $300,000 to commence no later than 16 May 2011. The Company announced on 27 June 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region.
In March 2011, the Company issued 5,000,000 shares of common stock at $0.02 per share reflecting the first payment of $100,000 for the Property. On 15 May 2011 the Company issued the Debenture of $150,000 fulfilling all the obligations to the Selling Group for the purchase price of the Property. The Debenture was repaid in May and June of 2011. In July 2011, the Ministry of Natural Resources transferred all mining claims into the name of Tucana, a 100% wholly owned subsidiary of the Company.
In December 2011, the Company acquired an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana. The claims are made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of acquiring the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal. The Company secured the additional claims based upon Report and the magnetic and gradiometric airborne survey released by the Quebec Ministry of Natural Resources in September 2011.
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between March and May 2014. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey.
The Company's main exploration focus is the Abigail Lithium Property located in the James Bay, Quebec region of Canada. The property now consists of 220 map-designated cells totaling approximately 11,700 hectares within and adjacent to Nemaska Lithium's Whabouchi discovery.
F-9
| 7. | RELATED PARTY TRANSACTIONS |
The transactions with related parties were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:
Advances from a related company controlled by Jordan Starkman, the sole director of the Company are non-interest bearing, unsecured and due on demand.
Consulting fees paid to Jordan Starkman, the sole director of the Company for the six months ended 29 February 2012 were $17,000 (six months ended 28 February 2011 – Nil).
| 8. | CAPITAL STOCK |
In September 2011, the Company entered into a rental agreement for a period of two years commencing September 1, 2011. The Company paid $12,000 in cash and will deliver to the lessor shares of common stock worth $3,500 to fulfill rental payment for the entire term of lease. The shares are expected to be issued in the next quarter.
On 5 September 2011, the Company received $5,000 in exchange for 100,000 shares of common stock at $0.05 per share. These shares are expected to be issued in the next quarter.
On 15 September 2011, the Company issued 360,000 shares of common stock at $0.05 per share for consulting services. The services were valued based on the fair market value of the common stock on the date of issuance.
On 15 December 2011, the Company received $15,000 in exchange for 750,000 shares of common stock at $0.02 per share. These shares are expected to be issued in the next quarter.
On 8 February 2012, the Company received $6,600 in exchange for 220,000 shares of common stock at $0.03 per share. These shares are expected to be issued in the next quarter.
On 29 February 2012, the Company received $26,250 in exchange for 875,000 shares of common stock at $0.03 per share. These shares are expected to be issued in the next quarter.
The Company paid $5,285 in commissions related to raising the above mentioned proceeds and has accordingly been deducted against the shares to be issued.
F-10
| 9. | CONTINGENCIES |
In accordance with the Agreement, the Company will also owe to the Selling Group the following contingent payments:
| o | After spending a total amount of $2,500,000 on the Property, $250,000 and an additional 1,000,000 shares of the Company’s common stock shall be delivered to the Selling Group. |
| o | After spending a total amount of $5,000,000 on the Property, a further $250,000 and 1,000,000 shares of the Company’s common stock shall be delivered to the Selling Group. |
| o | If a feasibility study is put in place an additional $250,000 and 1,000,000 shares of the Company’s common stock shall be delivered to the Selling Group. |
| o | If a bankable feasibility is put in place a further $500,000 and 2,000,000 shares of the Company’s common stock shall be delivered to the Selling Group. |
| 10. | SUPPLEMENTAL CASH FLOW INFORMATION |
During the six months ended 29 February 2012 and 2011 and for the period from inception to 29 February 2012, there was no interest or taxes paid by the Company.
| 11. | SUBSEQUENT EVENTS |
On 13 March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between March and May 2014. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The property now consists of 220 map-designated cells totaling approximately 11,700 hectares within and adjacent to Nemaska Lithium's Whabouchi discovery.
F-11
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to raise adequate financing and develop profitable operations. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
The Company is actively seeking financing for its current projects. The Company is optimistic that the financing will be secured and the going concern risk will be removed. We are in discussions with various parties and believe a successful financing is likely. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of shares of common stock from the Company’s authorized capital.
Plan of Operation for Tucana Segment
The Company's main exploration target in 2012 will be the Abigail Lithium Property (the “Property”) situated within and adjacent to Nemaska Exploration's Whabouchi Lithium discovery (as referenced in the Form 8-K filed with the SEC on December 3, 2010). The Property is located in a gneissic formation between the Lac des Montagnes volcano-sedimentary belt and the Champion Lake granitoids.
The principal exploration target for the Property is lithium-bearing spodumene and the Property is on strike with the high-grade spodumene-bearing pegmatite located on the Whabouchi property. The Property is underlain by the same gneissic formation that hosts the Lac Arques SW pegmatite showings with 1,189 ppm Th and 563 ppm U3O8. Magmatic NI-Cu type deposit associated with ultramafic intrusions may also be found. The Whabouchi spodumene-bearing pegmatite is located in a low magnetic anomaly on the flank of a medium magnetic high. A high magnetic anomaly located about 1 km north of the Whabouchi pegmatite can be interpreted as an ultramafic intrusion. An airborne survey over the Property could lead to the discovery of the same magnetic signature and help locate pegmatite and ultramafic intrusions of the Whabouchi and Nisk-1 type. In addition, the Property is easily accessible with year round roads, electrical power intersecting the Property from the town of Nemaska, cell phone service throughout the region, and a local airport in the town of Nemaska.
Nemaska's Whabouchi deposit continues to confirm high-grade channel samples illustrating the width of the main mineralized zone. Furthermore, Nemaska has recently announced it is partnering with Chengdu Tianqi. Tianqi is the largest lithium battery material provider in China that uses spodumene concentrate as its raw material to produce lithium carbonate and has extensive expertise in lithium products. This relationship validates Nemaska's deposit and signals the strong potential for their lithium assets in the James Bay region.
On June 13, 2011, the Company entered into a geological and management services agreement (the “Exploration Agreement”) with Nemaska Exploration Inc. (“Nemaska”) to coordinate and execute the Company’s Summer 2011 exploration program. The exploration campaign was led by geologist Yves Caron. Mr. Caron is currently Vice-President Exploration for both Nemaska Exploration and Monarques Resources and has been a member of the Ordre des Gйologues du Quйbec since 2001. The Exploration Agreement term which was for a period of six months has expired and the Company is currently negotiating to renew the contract at a future date.
Nemaska provided exploration services to the Company subject to the schedule of fees below.
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| Position | Cost per day | |||
Sr. Consultant - QP Services | $ | 1000 | ||
Project Manager – I.T. Geologist | $ | 600 | ||
Student Geologist | $ | 450 | ||
Geologist Assistant | $ | 350 | ||
The Company had committed to an initial exploration work budget of a minimum of $300,000 to commence no later than May 16, 2011. The Company announced on June 27, 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region. The program was carried out with a team of six people including two geologists and four technicians under a service agreement with Nemaska Exploration. The work program covered geological reconnaissance of approximately 2,500 hectares, mostly in the central and north part of the property. In addition, the Company focused its efforts on the same geological corridor east of the Whabouchi lithium deposit consisting of twelve kilometers on the same geological trend. The purpose of the exploration program was mainly to locate mineralized pegmatites, but also any other kind of economic mineralization. The Company has completed its geological and prospecting program on approximately 15% of the Property for approximately $175,000, falling below the budgeted schedule.
On September 19, 2011 the Company obtained the airborne magnetic survey for the Property from the Ministry of Natural Resources in Quebec. The airborne survey encompasses the entire Property covered by NTS Sheets 32O12 and 32O13 in the Lac Des Montagnes and Lac Abigail region of Quebec. The airborne survey will locate the ultramafic intrusions if they exist, the basalt and/or ultramafic remnants, the contrast between the gneiss and Champion Lake granitoids and, if the magnetic contrast with the encasing rocks is strong enough, the pregmatites. The Company believes the airborne survey is a critical step in the development of the Property. The Company had budgeted $150,000 for the survey, and fortunately was able to obtain the report from the Ministry of Natural Resources at a zero cost base. The Company retained the services of Donald Theberge, a professional engineer, to fulfill a Canadian NI43-101 report on its field operations, and to review the survey in respect to the planning of Phase II of the Company's exploration campaign. The Nemaska report in conjunction with the airborne survey will allow the Company to prepare a plan and budget for Phase II of the exploration campaign on the Property. Phase II of the exploration campaign will involve a geological survey and prospecting program covering the targets to be defined by the airborne survey.
The initial budget to complete the Phase I work program on the Property is described below:
| Airborne Magnetic and Electromagnetic Survey (125m line spacing): | ||||
Airborne survey, mob and demob, lump sum | 20,000 | |||
Survey (Mag and VLF) 1,095km @ $73/km | 79,935 | |||
Wait time, additional survey lines, ect | 35,000 | |||
Contingency 12% | 16,192 | |||
Total Airborne Survey | $ | 151,127 | ||
Geological Survey and Prospecting: | ||||
Geological survey, 2 geologists, 2 helpers, room and board, helicopter support if needed, assays, all inclusive for approximately 45 days | 135,000 | |||
Contingency 12% | 16,200 | |||
Total Geological Survey | $ | 151,200 | ||
Total Airborne and Geological | $ | 302,327 | ||
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On November 4, 2011, the Company received the NI 43-101 report (the “Report”) summarizing the analysis of the airborne survey and containing the details and results from the Nemaska exploration campaign in June 2011. The reconnaissance geology program was carried out on the property by Nemaska Exploration Inc. on behalf of the Company. More than 2,000 GPS points were recorded and 39 samples were taken and analyzed. Samples were mainly taken from pegmatites, but also from granitoid, gabbro, basalts and diabases. Samples were taken where mineralization was seen or suspected, like pegmatite and rusted and/or silicified zones, and when sulphides were observed. Samples were analyzed by ALS Minerals, located at 1322, rue Harricana, Val-d’Or (Quйbec). Two grab samples returned slightly anomalous results. The first, numbered 18070, is from a pegmatite visually containing 1% Mo, which returned 292 ppm Mo and 466 ppm Rb. The second, numbered 18005, is from a pink pegmatite and returned 151.5 ppm Nb, 24 ppm Sm and 147.5 ppm Ta.
No drilling has been done by Tucana since it purchased the Property. According to the NI 43-101 report, the magnetic/gradiometric airborne survey released in September 2011, observed at least three families of magnetic lineaments. The first is oriented at about 070°, and outlines the north boundary of the Lac des Montagnes volcanic belt. The second is oriented at approximately 040° and is located in the paragneiss. The third is oriented NW/SE and has been mapped in the field as a regional diabase dyke. At this point, the most interesting magnetic feature is the magnetic lineament located on the south part of the property, which seems to outline the north boundary of the volcanic belt. In 1987, Westmin detected several Dighem EM anomalies along this lineament, but did not follow up. This horizon can be fertile, mainly for sulphide-type mineralization.
The Company believes the Property has good potential for both rare earths in pegmatites and for sulphide deposits in volcanics. In addition, the airborne survey has found magnetic anamalies for kimberlite targets. Several kimberlite targets were discovered in the immediate vicinity of the Property, from one to three kilometers to the north/west of the Property. On November 9, 2011, the Company entered into a letter of intent to secure the purchase of these 37 mining claims relevant to these kimberlite targets. As of February 29, 2012, the Asset Purchase Agreement has not been finalized and is expected to be completed in the next quarter.
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To fully explore the potential of the Property, a two-phase program is recommended. It is described in the proposed budget shown below:
| Phase I (Compilation, geophysical and geological surveys and sampling with 2000 m of drilling) |
| Work | Quantity | Unit | Unit Cost | Total | ||||||||||||||||
Compilation of the EM Input (SDBJ) and Dighem (2007) anomalies (location of anomalies and interpretation) | $ | 10,000 | ||||||||||||||||||
Line cutting (cut every 100 m and picketed every 25 m) on the main coincident Mag and EM anomalies. Provision of 125 km | 125 | km | $ | 550 | $ | 68,750 | ||||||||||||||
Ground geophysics, EM (MaxMin) and Mag | 125 | km | $ | 350 | $ | 43,750 | ||||||||||||||
Geology and prospecting on the cut lines and on the north part of the property (including room and board, transportation, etc.) | $ | 100,000 | ||||||||||||||||||
Stripping, trenching and sampling, all inclusive | $ | 50,000 | ||||||||||||||||||
Drilling on the target to be defined ($225/m, all inclusive) | 2,000 | m | $ | 225 | $ | 460,000 | ||||||||||||||
Report update, NI 43-101 and for statutory purposes | $ | 10,000 | ||||||||||||||||||
Contingency, estimated at 10% | ||||||||||||||||||||
TOTAL PHASE I | $ | 805,750 | ||||||||||||||||||
Phase II | ||||||||||||||||||||
Provision of 5,000 m of drilling to test the targets defined during Phase I | 5,000 | m | $ | 225 | $ | 1,125,000 | ||||||||||||||
Report update, NI 43-101 and for statutory purposes | $ | 12,000 | ||||||||||||||||||
Contingency, estimated at 10% | $ | 113,700 | ||||||||||||||||||
TOTAL PHASE II | $ | 1,250,700 | ||||||||||||||||||
TOTAL PHASE I AND II | $ | 2,056,450 | ||||||||||||||||||
In December 2011, the Company staked an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana's subsidiary, Tucana Exploration Inc. The property is made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of staking the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal. The Company secured the additional claims based upon the NI 43-101 technical report and the magnetic and gradiometric airborne survey released by the Quebec Ministry of Natural Resources in September 2011. The Lac des Montagnes formation is the most fertile rock in this area for massive sulfides, and it is the same kind of volcano-sedimentary belt you would find in the Rouyn-Noranda and Val d'Or area yet more metamorphosed. The gradiometric magnetic survey shows magnetic anomalies are present on the property and should be further investigated.
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between March and May 2014. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey. The majority of the claims are located in the Lac des Montagnes volcano-sedimentary formation, and its immediate surrounding area. This is the most fertile ground in the area, and resembles the Abitibi greenstone volcano-sedimentary formations. The Company believes it has kept the most promising portion of the Abigail property based upon the geology reports. The property now consists of 220 map-designated cells totaling approximately 11,700 hectares within and adjacent to Nemaska Lithium's Whabouchi discovery.
In March 2012, the Company also retained the services of Gestion SDM Inc. to represent the Company and manage all of the Company's mineral claims with the Department of Natural Resources in Quebec.
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The Company believes the Report facilitates further development of the Property and will utilize such report to plan and coordinate the next phase of the Company's exploration program. The Company is currently negotiating financing in the amount of $1,000,000 to further explore the Property. The Company will review the survey, and begin to coordinate and plan Phase II of the exploration campaign once the funds are secured. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital.
Plan of Operation for PBTD Segment
The Company will continue with the Pay By The Day operations during the Company’s exploration of the Abigail Property. The promotion of PBTD brand and program is contingent upon the Company successfully obtain financing and will begin with the production of a new 30 second direct response commercials. The campaign will be nationwide with multiple station coverage. We are currently in discussions with a Canadian based media company to produce an infomercial that will air on stations across Ontario. The cost of producing and airing the infomercial is approximately $20,000. We expect the profits generated from the infomercial campaign to fund additional air time slots. PBTD anticipates the production of the infomercial and commercial to begin 6-8 months once the financing is obtained. We produced two 30 second spot commercials in 2004 that aired Canada wide with a focus on Northern Ontario and all of Alberta. The new television advertising campaign will be initiated with the guidance of an advertising agency. We determine the areas of interest and the agency provides us with various rates, time slots available, and the stations catering to our focus area.
We plan to hire 2-3 additional sales people plus 1 administrative staff member. The hiring of additional staff will take place once the funds are raised to advertise more aggressively. Depending on the number of incoming calls to us and the success of the advertising campaign, we may also be required to upgrade our phone system and upgrade our current database to allow for easier access to customer files. Currently, management is able to process applications and handle the incoming calls with our current resources.
We have formed a relationship with Equifax. This allows us to process the credit files and check customers credit scores ourselves prior to sending the application to our third party finance service provider. The cost of running an Equifax file is $10. This is an additional expense to the company that will be added into our customer's purchases. We have also been approved by Equifax to report customer's trade files to Equifax on a monthly basis. There is no fee associated with reporting to Equifax.
The fundamental concept of our business involves the granting of credit by either our third party finance service provider or by PBTD internally. Our relationship with our third party finance service provider is one that will hopefully expedite our growth process by providing an easy application process with a high probability of customer approval rates. They have the ability to finance both A and B level credit on a Conditional Sales Contract program or a 3 year lease contract. A Conditional Sales Contract is commonly known as buying on an installment plan and requires the giving of a promissory note for the purchase price under the contract. It is a type of agreement to sell whereby a seller retains title to the goods sold and delivered to a purchaser until full payment has been made. A conditional buyer has the right of possession of the goods so long as the terms and conditions of the agreement are met. A Conditional Sales Contract is similar to a lease contract except at the end of the term the buyer obtains ownership of the goods as soon as the final payment to the seller is made.
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We receive 100% of the transaction amount on “A” credit deals and due to the added risk for “B” credit customers, the payout is 90% of the transaction amount. For example, if the purchase amount is $1,000, our third party service provider pays us 100% of the $1,000 for an “A” credit customer. If the customer has “B” level credit then the payout amount to us is 90% of the $1,000 transaction amount. There is no recourse on transactions rated as an “A” credit deal, however we have 1st payment recourse on “B” credit deals. Once the customer has made there 1st payment, we are no longer liable for the sale amount. We currently have no exposure at this point in time. We are currently being funded on deals once the merchandise has been shipped from our facilities and the customer acknowledges receipt of goods. We currently have a 3-5 hour turnaround time for approvals or declines. We are not related to any of our service providers except for the relationships described.
Our business operation relies upon a third party service provider to approve for credit and finance our customer’s purchases. If we encounter difficulty in obtaining customer credit approvals for financing, the company’s business will suffer. Due to our difficulty in obtaining credit approvals, we have reached an agreement with Tanner Financial Services Inc. in July 2008 to accept and process our customer applications.
We believe the relationship with Tanner Financial will increase our approval rates leading to increased sales, as they are a more aggressive lender willing to take on additional risk by financing A, B, and C level credit customers. The terms and conditions of the agreement with Tanner Financial are the same as previous 3rd party finance providers. Furthermore, the company has turned to self-financing and has financed new/off-lease desktop computers and laptops, and consumer electronics for customers willing to put down 50% of the total purchase price of their order. The main selling features and the attractiveness of our financing route is the 0% interest rate and the reporting of the trade to Equifax on a monthly basis, allowing the customers who can afford the 50% down to rebuild or reestablish credit history. The key component is the 50% down payment, and we realize this financing option is not for everybody. The 50% down payment can translate into a $200-$500 down payment which is significant for customers who wish to pay for purchases on a payment plan and for those who cannot afford to make purchases at their local store.
We believe we can continue the operation of financing merchandise internally with a limited amount of capital because the 50% down payment required by the customer covers the majority of the cost of the merchandise. We have limited our exposure and risk in case of default by the customer, and there is limited capital required to finance these purchases. As we raise additional capital, we will on a case-by-case basis determine if additional risk is warranted based on the customer’s credit rating.
Results of Operations for the six months ended February 29, 2012 compared to the six months ended February 28, 2011
For the period from inception through February 29, 2012, we had $387,810 in revenue. Cost of goods sold and operating expenses for the period from inception totaled $268,109 and $1,315,876, respectively, and our loss from operations was $1,196,175 and our net loss was $1,151,553.
Revenue for the six months ended February 29, 2012 was $3,024 compared to $428 for the six months ended February 28, 2011. The lack of revenue was due to the low number of applications generated from the Pay By The Day web site and the poor consumer credit leading to a low level of customer credit approvals. The revenue was generated from the sale of computer and consumer electronics financed through PBTD.
Operating expenses for the six months ended February 29, 2012 were $119,666 compared to $49,186 for the six months ended February 28, 2011. The increase in operating expenses during the six months ended February 29, 2012 compared to the six months ended February 28, 2011 was primarily attributed to professional fees and management fees and exploration. Professional fees and management fees for the six months ended February 29, 2012 were $93,543 and $41,253 for the six months ended February 28, 2011. These fees paid in the six months ended February 29, 2012 were attributable to legal, accounting, consulting, and auditing services related to quarterly and audit filings. In addition, advisory services, public/investor relations relating to the Company’s current operation and future planned corporate acquisitions. The exploration costs for the six months ended February 29, 2012 was $14,800 and nil for the six months ended February 28, 2011, because the Company didn’t have any exploration activity during the six months ended February 28, 2011.
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Net loss was $118,943 for the six months ended February 29 2012 and $48,791 for the six months ended February 28, 2011. The increase in professional fees relating to the acquisition of the Abigail property contributed to the increase in the net loss in the six months ended February 29, 2012. Since the acquisition has now been completed, the Company does not expect to incur such large professional fees the next quarter unless other acquisitions are considered.
During the quarter ending February 29, 2012 and 2011, we had no provision for income taxes due to the net operating losses incurred.
We currently have no known mineral reserves and have generated no revenue from our mining activities.
All of our sales since inception consist of computer and electronic products financed through our internal financing program or our third party finance service provider. The profit is generated from the margins on the products sold. We charge 0% interest on our internal financing and CreditPlus card, and we do not have any interest charges revenue. Service fees revenue from our CreditPlus Card is nil. We expect to generate service fees revenue once our CreditPlus advertising campaign begins.
We have experienced a dramatic decrease in sales from fiscal year August 31, 2005 to February 29, 2012. Our slow growth and decrease in sales is attributed to the difficulty in effectively approving customer credit applications. We have also been affected by the current credit market conditions and as a result approval rates have decreased due to the poor credit quality of customers applying for credit.
If our third party finance providers increase the criteria for credit approvals or its parameters for credit approvals, the increased restriction on credit approvals will make customer applications more difficult to finance. In this situation, it is uncertain if we will be able to continue to finance customer‘s purchases through our third party service provider. We may have to enter into additional agreements with multiple third party finance providers, or increase the number of transactions financed internally. Our decrease in sales from inception to date is also attributed to the lack of advertising dollars to fully market the Company and our offerings. In addition, over the past three years there has been a significant drop in the selling prices of computers and consumer electronics making these goods easily accessible at local retailers without the need for customer financing. Furthermore, the dramatic drop in retail prices of computers and consumer electronics has reduced our profit margins.
Liquidity and Capital Resources
As of February 29, 2012 we had a cash balance of $18,660 and a working capital surplus of $8,823.
The Company is actively seeking financing in the amount of $1,000,000 to fully execute the next phase of the Company’s exploration campaign in accordance with the NI 43-101 and future acquisitions. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital. The Company is optimistic that the financing will be secured and our going concern risk will be removed. We are in discussions with various parties and believe a successful financing is likely.
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In the event the Company is not successful in completing its obligations pursuant to the Agreement, the Company will continue with its prior business model and plan of operation. Our liquidity and capital requirements for our current business plan is discussed below.
We anticipate that our fixed costs made up of legal & accounting and general & administrative expenses for the next twelve months will total approximately $30,000. Legal and accounting expenses of $25,000 represents the minimum funds needed to sustain operations. The $25,000 will be financed through the Company’s cash on hand, additional financing, net sales and if needed, advances from our director, Jordan Starkman. Currently there is no firm loan commitment between the Company and Jordan Starkman in place.
Operations of PBTD segment
We are currently seeking funding for our planned expansion and would like to raise a minimum of $200,000 in order to aggressively promote and advertise our brand and the Pay By The Day program. To achieve our goals, a large portion of the funds raised will be invested in advertising. Our success is contingent upon our customers seeing our ads and calling our 1-800 phone number. There is a distinct correlation between the number of dollars invested in advertising and the number of sales made. The proceeds raised will also be used to fund a greater portion of transactions through our internal financing program. We expect to raise additional funds within the next 6-8 months. A private placement is the most likely scenario for the company to achieve success in raising additional funds for its operations. There are no discussions with any parties at this point in time for additional funding; however, we will attempt to discuss our business plan with various brokers in the US.
We believe we can satisfy our cash requirements for the next twelve months with our expected revenues and if needed an additional loan from our sole director, Jordan Starkman. However, completion of our plan of operations is subject to attaining adequate revenue. We cannot assure investors that adequate revenues will be generated. In the absence of our projected revenues, we may be unable to proceed with our plan of operations. Even without adequate revenues within the next twelve months, we still anticipate being able to continue with our present activities, but we may require financing to achieve our profit, revenue, and growth goals.
We anticipate that our operational, and general & administrative expenses for the next 12 months will total approximately $25,000. The $25,000 will be financed through our cash balance currently held by the Company plus if needed, an advance from our sole director, Jordan Starkman. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees, unless financing is raised. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and required, and our progress with the execution of our business plan.
In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern. We will need approximately $200,000 to aggressively pursue and implement our growth goals through an advertising campaign.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.
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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not required for Smaller Reporting Companies.
| Item 4. | Controls and Procedures |
Evaluation of disclosure controls and procedures
Disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were not fully effective for the purpose for which it is intended due to the following reasons as of February 29, 2012:
| · | Due to limited resources available, the Company currently does not employ any employees except for its sole director and officer, Jordan Starkman. As such, there is no segregation of duties within the Company. |
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings. |
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
| Item 1A. | Risk Factor |
Not required for Smaller Reporting Company.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On 5 September 2011, the Company received $5,000 in exchange for 100,000 shares of common stock at $0.05 per share. These shares are expected to be issued in the next quarter.
On 15 September 2011, the Company issued 360,000 shares of common stock at $0.05 per share for consulting services.
On 15 December 2011, the Company received $15,000 in exchange for 750,000 shares of common stock at $0.02 per share. These shares are expected to be issued in the next quarter.
On 8 February 2012, the Company received $6,600 in exchange for 220,000 shares of common stock at $0.03 per share. These shares are expected to be issued in the next quarter.
On 29 February 2012, the Company received $26,250 in exchange for 875,000 shares of common stock at $0.03 per share. These shares are expected to be issued in the next quarter.
The Company paid $5,285 in commissions related to raising the above mentioned proceeds and has accordingly been deducted against the issues to be issued.
The above proceeds will be used to fund operations and our initial work program costs for the Abigail Lithium Project as discussed in our Plan of Operations.
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| Item 3. | Defaults Upon Senior Securities. |
None
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information. |
None
| Item 6. | Exhibits |
31.1 Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive Data File (Form 10-Q for the quarterly period ended February 29, 2012 furnished in XBRL).
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date | TUCANA LITHIUM CORP. | ||
April 23, 2012 | By: /s/ Jordan Starkman | ||
President, Chief Executive Officer, Chief Financial Officer (Duly Authorized Officer, Principal Executive Officer, and Principal Financial Officer) |
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