Notes to the Financial Statements
(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 $959,324. 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 involved in the exploration of existing mineral claims while concurrently developing certain grapheme related technologies . 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.
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 the development of technologies related to graphite and grapheme. The Company currently is funding two developing technologies and will be funding the exploration of acquired mining assets.
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. On December 13, 2013, the Board of the Directors of the Company appointed Con Evan Anast to the Board of Directors of the Company and elected him Secretary of the Company, having received the resignation of Mr. Walchuk as Company Secretary.
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.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
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 and prepaid expenses, 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 December 31, 2013, the Company has an accumulated deficit of $992,324. 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.
Warrants
We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815
“Derivatives and Hedging – Contracts in Entity’s Own Equity”
(ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. We classify derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date, subsequent to the initial issuance. We use the Monte Carlo Options Lattice model, depending on the applicable terms of the warrant agreement, to value the derivative warrant liabilities. Changes in the fair value of the warrants are reflected in the statement of operations as “Change in the fair value of warrant liability.”
See,
Note 6 – financial agreement – (3) Securities Purchase Agreement, for a detailed description of our accounting for derivative warrant liabilities.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Tax – 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. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company had the following potential common stock equivalents at December 31, 2013:
Since the Company reflected a net loss in fiscal year 2013 and 2012, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 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.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments (continued)
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.
The following table summarizes changes in the fair value of the common stock warrants measured on a recurring basis using Level 3 inputs for the three month period ended December 31, 2013:
|
Balance at June 30, 2013
|
|
$
|
-
|
|
|
Issuance of common stock warrants on September 9, 2013
|
|
|
1,243,455
|
|
|
Change in fair value of common stock warrant liability
|
|
|
(29,999)
|
|
|
Balance at December 31, 2013
|
|
$
|
1,213,456
|
|
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. 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 AGREEMENTS
|
(1)
|
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:
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 3 – TECHNOLOGY AGREEMENTS (continued)
|
(1)
|
Technology Licensing Agreement cont’d:
|
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 were to formulate and agree to a milestone schedule to be met by Cheap Tubes 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, we will receive 40% of the Net Sales Revenue for Bucky Paper until the amount we have received equals our capital investment regardless of whether we, Cheap Tubes or CTI 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 capital 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 CTI shall cease.
Under the agreement, any new opportunities presented to us or Mike Foley (the shareholder of Cheap Tubes), Cheap Tubes or CTI are to 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, CTI, our business and any new business that may present itself.
As at December 31, 2013, the Company has paid cash in the amount of $260,000 pursuant to the agreement, and recorded the amount as prepaid expense - advances on future revenue under the licensing agreement. All payments due under the licensing agreement are current per the terms of the agreement.
|
(2)
|
Technology Development Agreement
|
On April 24, 2013 the Company signed a letter of intent (LOI) with the National Academy of Science of Ukraine; National Science Centre; Kharkov Institute of Physics and Technology ("KIPT"), Kharkov, Ukraine in regard to a research project dubbed “P-600”.
P-600 will research the properties of nanocarbon contained matter (graphene) as working material for 3D printing. The project will be a partnership between the Company, Science and Production Establishment “Renewable Energy Sources and Sustainable Technologies" (“RESST”) National Science Center "KIPT" National Academy of Science of Ukraine and Institute of Solid State Physics and Material Science National Science Center "KIPT" National Academy of Science of Ukraine.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 3 – TECHNOLOGY AGREEMENTS (continued)
|
(2)
|
Technology Development Agreement cont’d:
|
On October 17, 2013, the Company finalized an intellectual property agreement for its 3D Project P-600 with the project manager and National Science Centre KIPT of the National Academy of Sciences of Ukraine and remitted the funds to allow commencement of the Project.
Under the agreement, the Company agreed to Project costs of $42,697. Changes to the proposed budget could be made based on agreement of both sides. During the period ended December 31, 2013, the Company paid $44,832 under the Project.
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 had intended to undertake exploration programs on the mineral claims during 2013; however, it may be required to undertake the exploration programs during 2014, dependent on finalizing funding and weather conditions.
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 fiscal year ended June 30, 2013.
NOTE 5 – PREPAID EXPENSES AND ADVANCES
The following table provides detail of the Company’s prepaid expenses as of December 31, 2013 and June 30, 2013:
|
|
|
December 31,
2013
|
|
|
June 30,
2013
|
|
|
News releases
|
|
$
|
1,762
|
|
|
$
|
-
|
|
|
Advances related to technology agreement – Note 3
|
|
|
260,000
|
|
|
|
170,000
|
|
|
|
|
$
|
261,762
|
|
|
$
|
170,000
|
|
NOTE 6 – FINANCING AGREEMENTS
On August 29, 2012, we entered into an Equity Based Financing Agreement with one non-US investor pursuant to which, the investor agreed to 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.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 6 – FINANCING AGREEMENTS (continued)
During the fiscal year ended June 30, 2013, the Company received amounts totaling $550,000 under the financing agreement by way of equity private placements for 781,250 shares of common stock at $0.64 per share and 65,736 shares of common stock at $0.76062, respectively. The agreement expired without agreement to extend and therefore the Company will have no further ability to draw down under the agreement.
The shares were issued as follows:
|
Issue Date
|
|
Shares Issued
|
|
Value Per Share
|
|
Issuance Valuation
|
|
September 4, 2012
|
|
|
781,250
|
|
|
$
|
0.64
|
|
|
$
|
500,000
|
|
|
May 3, 2013
|
|
|
65,736
|
|
|
$
|
0.76062
|
|
|
$
|
50,000
|
|
|
(2)
|
Private Placement Agreement
|
On May 9th and May 20th, 2013 respectively, we entered into two Private Placement Agreements, one with a U.S. investor and one with a non-US investor pursuant to which, the investors have funded a total of $85,000 by way of private placement units subscription agreements for a total of 188,888 units of the common stock of the Company at a price of $0.45 per unit, each unit consisting of one share and one share purchase warrant entitling the subscribers to purchase one additional share of common stock at $0.75 per share within one year from the original date of the private placement. The 188,888 shares of common stock were issued as of September 30, 2013.
|
(3)
|
Securities Purchase Agreement (“SPA”)
|
On September 9, 2013, the Company entered into securities purchase agreements (the “SPA”) to raise a total $600,000 with five accredited investors introduced by Palladium to the Company. Under the terms of the SPA, the purchasers subscribed for a total of 4,000,000 shares of the common stock of the Company at $0.15 per share and an equal number of warrants exercisable at $0.30 per share for a period of five years. Under the SPA the purchasers have the option to purchase up to an equal number of shares and warrants as those purchased on the initial closing for a period of nine months from the initial closing date. Each purchaser shall be entitled to one closing on the exercise of the subsequent closing option warrants have piggy back registration rights. Subject to no effective registration statement registering the warrants within 180 days after the initial exercise date of the warrants, then the warrants shall have a cashless exercise provision. The warrants further have exercise limitations of 4.99% as a beneficial ownership limitation which the holder may increase or decrease upon 61 days prior notice to the Company, however, the beneficial ownership limitation shall not exceed 9.99% of the number of shares held by the holder.
Under the terms of the SPA, the purchasers that hold outstanding stock or warrants at the time of any subsequent funding have the right to participate in any subsequent financing up to 100% of the subsequent financing on the terms negotiated with any funders for a period of eighteen months from the date of the SPA. Further, the shares of common stock issued under the SPA have a purchase price reset until the sooner of (i) the purchaser no longer holds and securities, and (ii) five years after the initial closing date whereby should the Company issue or sell any shares of common stock or any common stock equivalent at a price less than the per share purchase price(the Dilutive Financing”), then the Company shall issue additional shares of common stock to the purchasers who hold outstanding shares on the date of such Dilutive Financing for no additional consideration. The warrants also have a warrant dilution adjustment which requires the issuance of additional warrant shares to reflect any dilutive financing undertaken by the Company whereby the holders of any outstanding warrants shall receive additional warrants based on the price of the Dilutive Financing.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 6 – FINANCING AGREEMENTS (continued)
|
(3)
|
Securities Purchase Agreement (“SPA”) - continued
|
The gross proceeds from issuance of the common stock under the SPA were allocated, at the date of the transaction, based upon the common stock and warrant’s relative fair values. The Company obtained third-party valuations to assist in quantifying the relative fair value of the debt and equity components. As a result of the fact that the warrants include a full reset dilutive feature we have treated the warrants as a derivative liability as of issuance and revalue at each quarterly period thereafter until expiry. The fair value of the warrants was determined using a Monte Carlo Options Lattice model.
Allocation of proceeds arising from the SPA on the inception date is as follows:
|
Classification
|
|
Allocation
|
|
|
Common Stock (par value)
|
|
|
4,000
|
|
|
Paid-in Capital (Common Stock)
|
|
|
(647,455)
|
|
|
Derivative Liabilities (Warrants)
|
|
|
1,243,455
|
|
|
Proceeds
|
|
$
|
600,000
|
|
Information and significant assumptions embodied in our valuations (including ranges for certain assumptions during the subject periods that instruments were outstanding) as of the inception date is illustrated in the following tables:
|
|
|
Warrant
Derivative
|
|
|
Warrants to purchase common stock:
|
|
|
|
|
Strike price
|
|
$
|
0.30
|
|
|
Volatility
|
|
|
110
|
%
|
|
Term (years)
|
|
|
5.00
|
|
|
Risk-free rate
|
|
|
1.71
|
%
|
|
Dividends
|
|
|
-
|
|
Information and significant assumptions embodied in our valuations (including ranges for certain assumptions during the subject periods that instruments were outstanding) as of December 31, 2013 are illustrated in the following tables:
|
|
|
Warrant
Derivative
|
|
|
Warrants to purchase common stock:
|
|
|
|
|
Strike price
|
|
$
|
0.30
|
|
|
Volatility
|
|
|
120
|
%
|
|
Term (years)
|
|
|
4.69
|
|
|
Risk-free rate
|
|
|
1.75
|
%
|
|
Dividends
|
|
|
--
|
|
On December 31, 2013 as a result of the revaluation of the warrant derivatives the Company recorded a gain of $29,999 in respect of the change in the fair value of the warrant liability.
|
(4)
|
Big North Subscription Agreement:
On September 9, 2013, the Company entered into a unit subscription agreement with Big North Graphite Corp., for a total of 2,666,667 units at $0.075 per unit. The transaction was subsequently rescinded and the proceeds have been returned to the Company. No shares were issued to the Company by Big North and no shares will be issued as the Offering will not be finalized.
|
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 7 – COMMITMENTS
|
(1)
|
Investor Relations and Marketing Contracts
|
|
(i)
|
On April 21, 2013, effective as of April 15, 2013, American Graphite Technologies Inc. entered into an agreement with Rosevale Capital S.A. (“Rosevale”) whereby the Company has engaged Rosevale to provide investor relations and marketing services for the Company (the “Agreement”). The Agreement was for a term of six (6) months, up to and including the close of business on October 14, 2013.
|
In consideration of services to be rendered under the agreement the Company was obligated to:
|
|
a)
|
pay to Rosevale a fee in the amount of Two Thousand Five Hundred Dollars (USD$ 2,500) per month;
|
|
|
b)
|
upon signing of the Agreement, pay Rosevale for the first three months of service in advance or $7,500;
|
|
|
c)
|
reimburse Rosevale for all expenses and disbursements, including all reasonable travel expenses incurred by Rosevale in connection with the performance of Rosevale's duties which amount is not to exceed one thousand USD ($1,000USD) per any one matter.
|
The Company paid $7,500 for the first three months of services during the fiscal year ended June 30, 2013.
During the three month period ended September 30, 2013, the Company paid $7,500 for the second three months of services.
|
(ii)
|
(ii) On September 12, 2013 the Company entered into an agreement with an Investor Relations consulting firm whereby in consideration for management consulting, business advisory, shareholder information and public relations services, the Company agreed to pay $40,000 and issue 250,000 shares of restricted common stock. The $40,000 was paid in cash during the period ended September 30, 2013.
During the period ended September 30, 2013 we issued 250,000 shares of our common stock valued at $0.168 per, totaling $42,000, the fair market value of the shares on the date of issuance has been expensed as stock based compensation.
|
|
(i)
|
On May 20, 2013, American Graphite Technologies Inc. entered into an agency agreement with Carter Terry & Company (“CT”) whereby the Company engaged CT to act as a non-exclusive financial advisor investment bank and placement agent on a “best efforts” basis for a period of twelve months, with an option to extend for an additional six months. CT is to assist the Company in one or more capital raises which might result in a private placement, merger, acquisition, sale of assets, sale of common stock, sale of ownership interest or any other financial transaction. The Company is seeking to raise additional investment capital to fund its current projects.
|
In consideration of CT entering into the agreement, the Company is required to:
|
a)
|
pay to CT a fee by way of 75,000 restricted shares of the common stock of the Company;
|
|
b)
|
pay a success fee by way of cash consideration of 10% of the amount for any capital raised other than an equity line and 4% cash consideration for an equity line or equity enhanced program and pay an amount of restricted shares equal to 10,000 shares per $100,000 of capital raise for a period of two years. The shares will have piggy back registration rights. The Company shall also be responsible for the payment of any expenses related to the entry into and drafting of any documents as required, subject to prior approval on any expenditures exceeding $2,500.
|
|
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 7 – COMMITMENTS (continued)
During the fiscal year ended June 30, 2013, we issued 75,000 shares of our common stock valued at $0.59 per, totaling $44,250, which was the fair market value of the shares on the date of issuance and has been expensed as stock based compensation.
|
|
(ii)
|
On August 12, 2013, the Company entered into a Placement Agent Agreement with Palladium Capital Advisors, LLC (“Palladium”) whereby Palladium agreed to act as the Company’s non-exclusive agent in a private placement or similar unregistered transaction of equity or equity-linked securities of the Company. The Agreement is for a period of twelve months from the date of execution. The Company shall pay to Palladium, upon the closing of each transaction with investors, (i) seven percent (7%) of the aggregate consideration raised in each closing in cash; (ii) three percent (3%) of the aggregate consideration in shares of the Company’s common stock, calculated based upon the price of the common stock as offered in each transaction; and (iii) warrants to purchase seven (7%) of the Company’s common stock at each closing, identical to any warrants issued to investors. The foregoing fees are payable for any sale of securities during the twelve month term or within twenty-four months thereafter with respect to investors identified by Palladium. The Company is further required to pay expenses incurred by Palladium, including the fees and expenses of its legal counsel and any advisor retained by Palladium. Fees and expenses in excess of $15,000 require prior written authorization from the Company.
On September 9, 2013, the Company closed a financing with five subscribers (ref note 6(3)) and paid to Palladium cash consideration of $42,000, share consideration by way of the issuance of 120,000 shares of common stock of the Company and issued a total of 280,000 stock purchase warrants, each warrant exercisable at $0.30 per share for a period of five years from the date of issuance.
|
NOTE 8 – CAPITAL STOCK
On July 18, 2012, in accordance with approval from the Financial Industry Regulatory Authority (“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 June 21, 2010, a former director of the Company purchased 1,500,000,000 (pre-forward split - 12,000,000) shares of the common stock in the Company at $0.001 per share for $12,000.
On August 26, 2011, the Company issued 32,437,500 shares of common stock for $5,190.
On June 11, 2012, a director of the Company returned a total of 1,455,000,000 shares for cancellation. Due to the fact that the shares under this agreement have been cancelled for no consideration to reduce the number of shares outstanding, the Company considered the change in capital structure from the cancellation a reverse stock split. In accordance with SAB Topic 4.c, the Company recorded the cancellation retroactively.
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 now note 6(1) above).
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 8 – CAPITAL STOCK (Continued)
On May 3, 2013, we issued 65,736 shares of our common stock at a price of $0.76062 per share, pursuant to the closing of a private placement, for gross proceeds of $50,000. The private placement was undertaken pursuant to a financing agreement that we entered into on August 29, 2012 (see Note 6 (1) above).
On May 9th and May 20th, 2013 respectively, we entered into two Private Placement Agreements, one with a U.S. investor and one with a non-US investor pursuant to which, the investors have funded a total of $85,000 by way of private placement units subscription agreements for a total of 188,888 units of the common stock of the Company at a price of $0.45 per unit, each unit consisting of one share and one share purchase warrant entitling the subscribers to purchase one additional share of common stock at $0.75 per share within one year from the original date of the private placement.
On May 20, 2013, we issued 75,000 shares of our common stock valued at $0.59 per share, totaling $44,250, the fair market value of the shares on the date of issuance, pursuant to the agency agreement (see Note 7(2)(i) above).
On July 11, 2013 we issued total of 188,888
units at a price of $0.45 per unit in connection with the private placements accepted on May 9 and May 20th 2013.
On September 9, 2013, the Company issued total of 4,000,000 shares of the common stock of the Company at $0.15 per share and an equal number of warrants exercisable at $0.30 per share for a period of five years
for gross proceeds of $600,000. (see Note 6(3) above).
On September 12, 2013, the Company issued total of 120,000 shares of the common stock of the Company at par value and an equal number of warrants exercisable at $0.30 per share for a period of five years
under the placement agent agreement. (see Note 7(2)(ii) above).
On September 16, 2013 the Company issued 250,000 shares of restricted common stock valued at $0.168 per share, totaling $42,000, the fair market value of the shares on the date of issuance, pursuant to the Investor Relations agreement (see Note 7(1)(ii) above).
As of December 31, 2013, 82,918,374 shares of common stock were issued and outstanding.
NOTE 9 – STOCK OPTIONS
On July 30, 2012, the Company entered into two 12-month Consulting Services and Finder’s Fee Agreements (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 granted 300,000 stock options which have vested. The stock options expired on September 30, 2013 which was 60 days after the termination of the Consulting Agreements.
The following table summarizes information concerning stock options as of December 31, 2013:
|
|
December 31, 2013
|
|
June 30, 2013
|
|
|
|
Shares
|
|
Weighted Average Exercise Price
$
|
|
Shares
|
|
Weighted Average Exercise Price
$
|
|
Outstanding at beginning of the year
|
|
|
300,000
|
|
0.25
|
|
|
-
|
|
-
|
|
Granted
|
|
|
-
|
|
-
|
|
|
300,000
|
|
0.25
|
|
Exercised
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
Expired or cancelled
|
|
|
(300,000)
|
|
(0.25)
|
|
|
-
|
|
-
|
|
Outstanding at end of period
|
|
|
-
|
|
-
|
|
|
300,000
|
|
0.25
|
The Company recognized stock-based compensation of $187,200 in the fiscal year ended June 30, 2013.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 9 – STOCK OPTIONS (continued)
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.
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 during the fiscal year. 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 fiscal year ended June 30, 2013:
|
|
|
Options Granted
|
|
|
|
July 30, 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.
|
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 10 – SHARE PURCHASE WARRANTS
On May 9th and May 20th, 2013 respectively, we entered into two Private Placement Agreements, one with a U.S. investor and one with a non-US investor pursuant to which, the investors have funded a total of $85,000 by way of a private placement units subscription agreement for a total of 188,888 units of the common stock of the Company at a price of $0.45 per unit, each unit consisting of one share and one share purchase warrant entitling the subscriber to purchase one additional share of common stock at $0.75 per share within one year from the original date of the private placement.
On September 9, 2013, the Company entered into securities purchase agreements (the “SPA”) to raise a total $600,000 with five accredited investors introduced by Palladium to the Company. Under the terms of the SPA, the purchasers subscribed for a total of 4,000,000 shares of the common stock of the Company at $0.15 per share and an equal number of warrants exercisable at $0.30 per share for a period of five years (see note 6(3) above).
On September 12, 2013, the Company issued total of 120,000 shares of the common stock of the Company at par value and an equal number of warrants exercisable at $0.30 per share for a period of five years
under the placement agent agreement. (see Note 7(2)(ii))above).
As at December 31, 2013, the Company had the following warrants outstanding:
|
Exercise
Price
|
Expiry
Date
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding
at
June 30,
2013
|
Issued
|
Exercised
|
Expired
|
Outstanding
at
December 31,
2013
|
|
$ 0.75
|
May 9, 2014
|
0.35
|
88,888
|
-
|
-
|
-
|
88,888
|
|
$ 0.75
|
May 20, 2014
|
0.38
|
100,000
|
-
|
-
|
-
|
100,000
|
|
$ 0.30
|
September 4, 2018
|
4.68
|
-
|
4,000,000
|
-
|
-
|
4,000,000
|
|
$ 0.30
|
September 12, 2018
|
4.70
|
-
|
120,000
|
-
|
-
|
120,000
|
|
|
|
|
188,888
|
4,120,000
|
-
|
-
|
4,308,888
|
NOTE 11 – SHORT TERM LOAN
On June 20, 2012, the Company received funds from a third party in the amount of $40,000.
During the fiscal year ended June 30, 2013, the Company repaid in full in the amount of $40,876, which included 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 12 – RELATED PARTY TRANSACTIONS
On May 1, 2012, the Company entered into 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 periods ended December 31, 2013 and December 31, 2012, Mr. Walchuk invoiced the company for the services in the amount of $45,000 and $20,000, respectively. As at December 31, 2013 no amounts are owing to Mr. Walchuk.
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)
NOTE 12 – RELATED PARTY TRANSACTIONS (Continued)
On December 13, 2013, the Board of the Directors of the Company appointed Con Evan Anast to the Board of Directors of the Company.
On December 15, 2013, the Company entered into a consulting agreement with Mr. Anast for the provision of services to the Company as Secretary and management consultant. Under the terms of the consulting agreement, Mr. Anast has agreed to provide a minimum of 40 hours per month to the Company’s business operations. The contract is for a term of three years commencing on December 15, 2013 for a monthly consulting fee of $5,000 per month, of which a total of $2,000 is payable and $3,000 per month is to be accrued monthly. During the period ended December 31, 2013, Mr. Anast invoiced the company for the services in the amount of $2,900, of which a total of $1,160 is payable and paid in full as of December 31, 2013 and $1,740 is accrued.
NOTE 13 – PROVISION FOR INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
Operating loss carry-forwards generated during the period from June 1, 2010 (date of inception) through December 31, 2013 of approximately $715,873, will begin to expire in 2030. The Company applies a statutory income tax rate of 35%. Accordingly, deferred tax assets related to net operating loss carry-forwards total approximately $250,555 at December 31, 2013. For the six month periods ended December 31, 2013 and 2012, the valuation allowance increased by approximately $106,918 and $61,649, respectively.
The Company has no tax positions at December 31, 2013, or June 30, 2013, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accruals for interest and penalties since inception.
The tax returns for the years from inception to June 30, 2013 are subject to examination by the Internal Revenue Service.
NOTE 14 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there were no subsequent events to disclose.