Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
American Graphite Technologies Inc. (Formerly Green & Quality Home Life, Inc.) (the “Company”)
is in the initial
exploration stage and has incurred losses since inception totaling $514,538. The Company was incorporated on June 1, 2010 in the State of Nevada and established a fiscal year end at June 30. The Company is an exploration stage company as defined in FASB ASC 915. We were originally organized to offer a portfolio of products and services to provide solutions for every family to automate domestic activities, making them less time consuming, easy to manage and leveraging the quality of life of every member of a family. We are currently an exploration stage company intending to be engaged in the exploration of mineral properties and the development of related technologies.
On May 23, 2012, Rick Walchuk, the sole director and officer of American Graphite Technologies Inc, acquired a total of 12,000,000 pre-forward split shares of the Company’s common stock from Fabio Alexandre Narita, the Company’s former director and officer, in a private transaction for an aggregate total of $350,000. The funds used for this share purchase were Mr. Walchuk’s personal funds. Mr. Walchuk’s 12,000,000 shares amounted to approximately 98% of the Company’s then currently issued and outstanding common stock. This transaction effected a change in control of the Company. With the change in control of the Company management determined to abandon the original business plan and has determined to enter into the business of exploration and development of mining projects and technology related to graphite and grapheme. The Company currently has no projects and is in negotiations to acquire both mining concessions and technology.
As part of the sale of his shares Mr. Narita agreed to extinguish all debts owed to him by the Company.
Also on May 23, 2012, Fabio Alexandre Narita resigned as a director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of our Company. In connection with the resignation of Mr. Narita, Rick Walchuk was appointed President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer, Secretary and a director. Mr. Walchuk is now the sole member of our board of directors and also our sole officer.
On June 11, 2012, our Board of Directors unanimously approved the following items:
1. an amendment to our Articles of Incorporation to change our name to “American Graphite Technologies Inc.” (the “Name Change”);
2. an amendment to our Articles of Incorporation to increase our authorized capital from 75,000,000 to 200,000,000 shares of common stock, $0.001 par value (the “Increase in Authorized Capital”); and
3. an authorization to the Board of Directors to effect a forward split of the Company’s common stock, par value $0.001 per share at an exchange ratio of one hundred and twenty-five (125) for one (1) (the “Forward Split”) and to file such amendments as may be required with the requisite regulatory bodies to effect the Forward Split, so that every one (1) outstanding share of Common Stock before the Forward Split shall represent one hundred and twenty-five (125) shares of Common Stock after the Forward Split.
On June 11, 2012, our majority stockholder executed written consent in lieu of a special meeting approving the Amendments.
Pursuant to these actions to be undertaken by the Company, Mr. Walchuk returned a total of 11,640,000 pre-forward split shares of common stock which were cancelled by the Company and returned to treasury.
Effective July 18, 2012, in accordance with approval from the Financial Industry Regulatory Authority (“FINRA”), we changed our name from Green & Quality Home Life, Inc. to American Graphite Technologies Inc. and increased our authorized capital from 75,000,000 to 200,000,000 shares of common stock, par value of $0.001. In addition, our issued and outstanding shares of common stock increased from 619,500 to 77,437,500 shares of common stock, par value of $0.001 on the basis of a 125:1 forward split of our issued and outstanding shares of common stock. The forward split has been retroactively applied to all shares and per share figures in these financial statements.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
The name change and forward split became effective with the Over-the-Counter Bulletin Board at the opening of trading on July 18, 2012.
Going concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a
going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have material assets aside from cash, nor does it have operations or a source of revenue sufficient to cover its operating costs. While there are sufficient funds to carry out the current operations of the Company, with no revenue generating operations there remains substantial doubt about our ability to continue as a going concern. As at March 31, 2013, the Company has an accumulated deficit of $547,538. While we presently have cash on hand, the Company may be dependent upon the raising of additional capital through placement of our common stock in order to fully implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on attaining profitable operations, accordingly there remains substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exploration stage
The Company's financial statements are presented as those of an Exploration stage enterprise. Activities during the Exploration stage primarily include implementation of the business plan, and obtaining additional debt and/or equity related financing.
Basis of Presentation
The financial statements present the balance sheets and statements of operations, stockholders' equity (deficit) and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized. Accounting guidance now codified as FASB ASC Topic 740-20, “Income Taxes –
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes (continued)
Intra-period Tax Allocation,” clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets.
Net Loss per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2013 and 2012. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
Stock-based Compensation
Stock-based compensation is accounted for using the Equity-Based Payments to Non-Employees Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based Compensation(continued)
The Company determines the value of stock issued at the date of grant. It also determines at the date of grant, the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
Recent Accounting Pronouncements
The Company has evaluated the recent accounting pronouncements and believes that none of them will have a material effect on the company’s financial statements.
NOTE 3 – TECHNOLOGY LICENSING AGREEMENT
On December 3, 2012 we entered into and executed a non-exclusive technology License agreement for patent and trade secret technology in the field of graphene oxide or “Bucky” paper with Cheap Tubes, Inc. Pursuant to the terms of the agreement, we acquired the rights to further develop, commercialize, market and distribute certain proprietary inventions and know-how related to the manufacturing processes for graphene products, including graphene paper, also known as Bucky Paper. We agreed to fund commercial development activities based on the payment schedules defined below and we received a license for the rights on a nonexclusive basis for marketing products and/or services. Pursuant to the terms of the agreement, we agreed to provide the following payments to Cheap Tubes:
A minimum of $250,000 over 18 months, payable as follows:
|
|
·
|
$10,000 on the execution of the agreement; (paid)
|
|
|
·
|
$40,000 per quarter on January 1, 2013, April 1, 2013, July 1, 2013 and October 1, 2013 and on January 1, 2014 and April 1, 2014.
|
Under the terms of the agreement, Cheap Tubes was to incorporate a new corporation (“Newco”) and assign all rights and obligations of the agreement with us as well as the patent agreement. The newly formed corporation would then become the party to this agreement. Until such time as Newco was formed all funds paid were to remain in an attorney escrow. Further, in order to have funds released from escrow the parties must formulate and agree to a milestone schedule to be met by Cheaptubes or Newco as the case may be. Each quarter the milestones from the prior quarter must be met as a pre-condition to the upcoming quarterly funding. Under the agreement the Company was granted a non-exclusive license to market and distribute Bucky Paper using the patents, trade secrets and knowhow (the “Proprietary Rights”) throughout the world. Newco or Cheap Tubes will manufacture the Bucky Paper products and we shall have no rights to sublicense the Proprietary Rights to a third party. As the agreement is non-exclusive, Cheap Tubes will also have the right to market and distribute Bucky Paper products, subject to our ongoing fees, as described below.
As consideration for funding, Cheap Tubes will pay us 40% of the Net Cheap Tubes Sales Revenue for Bucky Paper until the amount we have received equals our capital investment regardless of whether we or Cheap Tubes are the ultimate vendors on the sale. Thereafter, we will receive 30% of our capital investment until such time as we have received an amount equal to 20% of the $250,000 invested, 25% for the next five years and 20% for the remaining five years, at which time all obligations to us from Cheap Tubes or Newco shall cease.
Any new opportunities presented to us or Mike Foley (the shareholder of Cheap Tubes), Cheap Tubes or Newco shall be negotiated and if agreement is reached then shall be formalized in a mutually acceptable definitive agreement; with no obligation upon either party to enter into an agreement should they not be able to negotiate mutually acceptable terms. However, it is the intent of the parties to work toward furthering the business of Cheap Tubes, Newco, our business and any new business that may present itself.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 3 – TECHNOLOGY LICENSING AGREEMENT (continued)
On December 21, 2012, we received the required schedule under the Agreement. On December 24, 2012, we received notification that of the incorporation of CTI Nanotechnologies LLC (“CTI”), and the assignment of the patents to CTI. As per the terms of the Agreement, all conditions have been satisfied and therefore the funds have been released from escrow. The Company will commence funding as required under the Agreement to further develop the technology.
During the period ended March 31, 2013, the Company paid cash in the amount of $90,000 pursuant to the agreement, and recorded the amount as prepaid advances on future revenue under the licensing agreement.
NOTE 4 – MINERAL PROPERTIES
During January, 2013, we engaged the services of Geomap Exploration Inc. to identify and stake certain mineral claims in an area in Quebec, Canada that has existing exploration for graphite being undertaken by adjacent companies. The staking has been completed and a total of 100 mineral claims have been staked for transfer to the Company. The mineral claims encompass an area of approximately 5400 hectares (13,343 acres) in Quebec, Canada. They are located in the vicinity of an identified high grade graphite deposits, the Lac Gueret project belonging to Mason Graphite Corp., and new discoveries recently announced by Focus Graphite. Geologically, the property has mineralization similar to other graphite deposits/discoveries in the area. The mineral claims are in an area where the property has been designated by the Quebec Government for major economic, social and environmental development. The mineral claims are 100% owned by the Company with no royalty or net smelter return requirements. The Company intends to undertake exploration programs on the mineral claims during 2013.
The costs for staking of $7,179 and fees of $17,289 for geological services rendered to stake the claims were recorded as exploration expenses in the period.
NOTE 5 – PREPAID EXPENSES AND ADVANCES
The following table provides detail of the Company’s prepaid expenses as of March 31, 2013 and June 30, 2012:
|
|
|
March 31, 2013
|
|
|
June 30, 2012
|
|
|
Prepaid legal fees
|
|
$
|
-
|
|
|
$
|
2,412
|
|
|
Prepaid news releases expense
|
|
|
4,713
|
|
|
|
-
|
|
|
Prepaid audit fee
|
|
|
4,500
|
|
|
|
-
|
|
|
Advances related to technology licensing agreement – Note 3
|
|
|
90,000
|
|
|
|
-
|
|
|
|
|
$
|
99,213
|
|
|
$
|
2,413
|
|
NOTE 6 – FINANCING AGREEMENT
On August 29, 2012, we entered into an Equity Based Financing Agreement with one non-US investor pursuant to which, the investor will make available up to $2,500,000 by way of advances until August 29, 2013 (the “Completion Date”) in accordance with the terms of the agreement. The Completion Date may be extended for an additional term of up to twelve months at the option of our company or the investor upon written notice on or before the Completion Date in accordance with the notice provisions of the Financing Agreement. We will issue, within ten (10) Banking Days following the date of the receipt by our company of any advance under the agreement, shares of our common stock at a price equal to 80% of the average of the closing prices of our common stock for the preceding 5 Banking Days immediately preceding the date of the notice, as quoted on Yahoo Finance or other source of stock quotes as agreed to by the parties.
During the six month period ended March 31, 2013, the Company received $500,000 under the financing agreement by way of an equity private placement for 781,250 shares of common stock at $0.64 per share.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 6 – FINANCING AGREEMENT (continued)
The shares were issued as follows:
|
Issue Date
|
|
Shares Issued
|
|
Value Per Share
|
|
Issuance Valuation
|
|
September 4, 2012
|
|
|
781,250
|
|
|
$
|
0.64
|
|
|
$
|
500,000
|
|
NOTE 7 – CAPITAL STOCK
Effective On July 18, 2012, in accordance with approval from the FINRA, we increased our authorized capital from 75,000,000 to 200,000,000 shares of common stock, par value of $0.001. In addition, our issued and outstanding shares of common stock increased from 619,500 to 77,437,500 shares of common stock, par value of $0.001 on the basis of a 125:1 forward split of our issued and outstanding shares of common stock. All references to shares and per share information in the financial statements and related notes have been adjusted to reflect the stock split on a retroactive basis.
On September 5, 2012, we issued 781,250 shares of our common stock at a price of $0.64 per share, pursuant to the closing of a private placement, for gross proceeds of $500,000. The private placement was undertaken pursuant to a financing agreement that we entered into on August 29, 2012 (see Note 3 above).
As of March 31, 2013, 78,218,750 common stock shares were issued and outstanding.
NOTE 8 – STOCK OPTIONS
On July 30, 2012, the Company entered into two 12-month Consulting Services (the “Consulting Agreements”) with third parties. The Consulting Agreements require the consultants to provide to the Company, customized problem and opportunity research, new business or services development, strategy development and refinements, acquisition assistance, marketing and investor relation services and the Company is required to grant to each of the consultants a total of 150,000 stock options vesting immediately and exercisable at $0.25 per share. The Company has therefore granted 300,000 stock options which have vested.
The following table summarizes information concerning stock options outstanding as of March 31, 2013:
|
|
|
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Unvested, at June 30, 2012
|
|
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
300,000
|
|
|
$
|
0.25
|
|
|
Vested
|
|
|
300,000
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
Unvested, at March 31, 2013
|
|
|
-
|
|
|
$
|
0.25
|
|
The Company recognized a stock-based compensation of $187,200 in the current nine month period ended March 31, 2013.
Valuation Assumptions
The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 8 – STOCK OPTIONS (continued)
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when options are given for service without further recourse. The Company issued stock options to contractors to provide services to the Company over the next 12 months. However, the stock options have already
been granted to the service providers and there is no claw back provision in the options if services are not performed. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of compensation for services to be rendered with no recourse.
The following table presents the range of the weighted average fair value of options granted and the related assumptions used in the Black-Scholes model for stock option grants made during the six month period ended March 31, 2013:
|
|
|
Options Granted
|
|
|
|
2012
|
|
Fair value of options granted
|
|
$
|
0.85
|
|
|
Assumptions used:
|
|
|
|
|
|
Expected life (years)
(a)
|
|
|
1.00
|
|
|
Risk free interest rate
(b)
|
|
|
0.18
|
%
|
|
Volatility
(c)
|
|
|
111
|
%
|
|
Dividend yield
(d)
|
|
|
0.00
|
%
|
|
|
a)
|
Expected life
: The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.
|
|
|
|
|
|
|
b)
|
Risk-free interest rate
: The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options.
|
|
|
c)
|
Volatility:
The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the Company’s stock price calculated over a period of time representative of the expected life of the options.
|
|
|
|
|
|
|
d)
|
Dividend yield
: The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the stock.
|
NOTE 9 – SHORT TERM LOAN
On June 20, 2012, the Company received funds from a third party in the amount of $40,000.
During the nine month period ended March 31, 2013, the Company repaid in full a total of $40,876, which includes the principal amount of $40,000 and accrued interest of $876, based on 10% per annum as agreed to between the Company and the lender.
NOTE 10 – RELATED PARTY TRANSACTIONS
On May 1, 2012, the Company entered a consulting agreement with Rick Walchuk, the Company’s sole officer and director for management services. The consulting agreement became effective as of May 1, 2012 and shall continue to May 1, 2015. Under the consulting agreement, the Company shall pay $2,500 a month for the first six months, $5,000 a month for the next six months and $7,500 for the balance of the agreement payable on the 1st of each month. During the six month period ended March 31, 2013, Mr. Walchuk invoiced the company for the services in the amount of $35,000, which was paid in full.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2013
(Unaudited)
NOTE 11 – SUBSEQUENT EVENTS
On April 21, 2013, effective as of April 15, 2013, American Graphite Technologies Inc. received back an executed agreement from Rosevale Capital S.A. (“Rosevale”) whereby the Company has engaged Rosevale to provide investor relations and marketing services for the Company (the “Agreement”).
The Agreement will be effective April, 15, 2013, and will remain in full force and effect for a Six (6) month period up to and including the close of business on October 14, 2013, and
In consideration of Rosevale having rendered services to the Company, the Company will:
|
|
a)
|
pay to Rosevale a fee in the amount of Two Thousand and Five Hundred Dollars (USD$ 2,500) forthwith on the 15th day of April 2013 , and Two Thousand Five Hundred Dollars (USD$ 2,500) on the 15th day of every month following, in which this Agreement is in effect;
|
|
|
b)
|
Upon signing of this agreement the Company will be required to pay Rosevale for the first three months of service in advance. The total amount will be $7,500; and
|
|
|
c)
|
the Company will reimburse Rosevale for all expenses and disbursements, including all reasonable travel expenses incurred by Rosevale in connection with the performance of Rosevale's duties, however Rosevale shall not make any single expenditure or any series of expenditures in connection with any single matter or any number of connected matters, exceeding one thousand USD ($1,000USD).
|
