ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in the Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.
Background
We are a start-up, exploration mining company whose purpose is to explore mineral properties which, hopefully, will contain lithium and other economic minerals. We were incorporated under the laws of the State of Nevada on October 6, 2011 for the purpose of acquiring rights to mineral properties with the eventual objective of being a producing mineral company, if and when it ever occurs.
We have limited operating history and have not yet generated or realized any revenues from our activities. We performed limited exploration work on our former property, the Leomary Gold Claim located in the Dominican Republic. To date we have not performed any exploration work on our new mineral claim called the Mogollon located in the Dominican Republic.
On January 10, 2012 we incorporated a wholly-owned subsidiary under the laws of the Dominican Republic named "Oroplata Exploraciones E Ingenieria, Orexi, SRL" (“Oroplata Exploraciones”) in order to hold the mineral rights to a claim named "Leomary Gold Claim" consisting of 4,500 mining hectors (approximately 11,100 acres) located in the province of Monseñor Nouelan, municipality of Bonao. After performing limited exploration work, in September 2014, we lost the rights to the Leomary Gold Claim.
We subsequently acquired rights to a new mineral claim in the Dominican Republic called Mogollon (the “Mogollon Claim”) whereby the Company paid $10,000 for the rights to the minerals on the Mogollon Claim and for the completion of a geological report thereon. To date we have not performed, and do not expect to perform in the future, any exploration on the Mogollon Claim. Furthermore, management is currently investigating whether we have any remaining rights in any mineral claims located in the Dominican Republic.
On June 1, 2016, we entered into a Mineral Claim Purchase Agreement with Plateau Ventures LLC., a Utah corporation (“PVL”) to acquire five hundred (500) lithium mineral claims, totaling 10,000 acres, called the Western Nevada Basin, situated in Railroad Valley in Nye County, Nevada (the “WNB Clto veaim”). In the second half of 2016, we engaged experts to evaluate the region and the WNB Claim to target on-site exploration efforts, which we expect to begin in 2017.
We have two wholly-owned subsidiaries: Oroplata Exploraciones, which was incorporated under the laws of the Dominican Republic on January 10, 2012; and Lithortech Resources Inc., which we incorporated under the laws of Nevada on August 8, 2016.
We own no real estate, other than the mineral rights to the Mogollon concession located in the Dominican Republic (which Oroplata is investigating) and the Nye County properties located in Nevada, United States.
Oroplata has not earned any revenues to date and we do not anticipate earning revenues until such time as we have undertaken sufficient exploration work to identify an ore body. Exploration work will take a number of years and there is no certainty we will ever reach a production stage. Our Company is considered to be in the exploration stage due to not having done exploration work which would result in a development decision.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we intend to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
allowance to provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
reduced disclosure about our executive compensation arrangements;
no non-binding advisory votes on executive compensation or golden parachute arrangements; and
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exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering (our “IPO”); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you have beneficial ownership. In addition, we have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Exchange Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
Our auditors have issued a going concern opinion on the September 30, 2016 financial statements. This means that our auditors believe there is substantial doubt that it can continue as an on-going business for the next twelve months unless it obtains additional capital to pay for its operations. This is because it has not generated any revenues and no revenues are anticipated until it begins removing and selling minerals, if ever. Accordingly, it must raise cash from sources other than the sale of minerals found on the Mogollon concession. That cash must be raised from other sources. Our only other source for cash at this time is investment by others in our Company, advances from its sole director or institutional financing. We must raise cash to implement its planned exploration program
We review and evaluate long-lived assets, such as its former and present mineral claims, for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Our assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When we determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Recent Developments
Recent Appointments
On August 7, 2017, the Board of Directors appointed Mr. Douglas D Cole, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors.
On July 30, 2017 Mr. Michael Mason resigned from all officer and director positions with the company and its subsidiary Lithortech Resources.
On May 25, 2017 The Board of Directors removed Mr. Craig Alford from any positions with the company.
On the same date, the Board of Directors appointed Mr. Douglas Cole to serve as Controller, interim Treasurer and interim Secretary, effective March 14, 2017, until such time as the Company appoints a qualified, permanent replacement to such positions. Mr. Cole will also continue to serve the Company as a member of the Board of Directors.
Also effective March 14, 2017, the Board of Directors appointed Mr. Michael Mason, the Company’s Chief Executive Officer and director, to act as interim Chief Financial Officer and to assume such related duties of Principal Financial Officer until such time as the Company appoints a qualified, permanent replacement Chief Financial Officer.
Appointment of Mr. Douglas Cole
On February 20, 2017, the Board of Directors of the Company appointed Douglas Cole to serve as a member of the Board of Directors, effective February 28, 2017.
Appointment of Mr. Michael Mason and Resignation of Mr. Craig Alford
On February 15, 2017, Craig Alford resigned from his officer positions with the Company and was simultaneously appointed Chief Operating Officer of the Company. Mr. Alford will continue to serve on the Board of Directors of the Company.
On February 15, 2017, Michael Mason was appointed Chief Executive Officer of the Company. Mr. Mason will continue to serve on the Board of Directors of the Company.
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Appointment of Mr. William Hunter
On June 10, 2016, the Board of Directors of the Company appointed William Hunter to the Board of Directors.
Appointment of Mr. Gregory Kuzma
On June 10, 2016 the Board of Directors of the Company appointed Gregory Kuzma to the Board of Directors.
Appointment of Mr. Michael Mason
On July 22, 2016 the Board of Directors of the Company appointed Michael Mason to the Board of Directors.
Preceding the above appointments, the following developments occurred:
Appointment of Mr. Craig Alford and Resignation of Mr. Ruben Ricardo Vasquez
On May 31, 2016, Craig Alford acquired control of twenty-five million (25,000,000) shares (the “Purchased Shares”) of the Company’s issued and outstanding common stock, representing approximately 62.5% of the Company’s total then issued and outstanding common stock, from Ruben Ricardo Vasquez in accordance with a stock purchase agreement between Mr. Alford and Mr. Vasquez (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Mr. Alford paid an aggregate purchase price of twenty-five thousand dollars ($25,000.00) to Mr. Vasquez in exchange for the Purchased Shares.
As a result of the Stock Purchase Agreement, the following changes to the Company's directors and officers have occurred:
As of May 31, 2016, Ruben Ricardo Vasquez resigned from all officer positions with the Company, including but not limited to those of President, Chief Executive Officer, Chief Financial Officer and Secretary.
On May 31, 2016, Craig Alford was appointed as the Company’s President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary.
On June 13, 2016, Mr. Vasquez resigned from his position as the sole director of the Company and Mr. Alford was appointed as the sole director of the Company.
As a result of these transactions, control of the Company passed to Mr. Alford. The Purchased Shares acquired by Mr. Alford constituted 62.5% of the then issued and outstanding common stock of the Company.
Entrance into Mineral Claim Purchase Agreement with Plateau Ventures LLC
On June 1, 2016, the Company entered into Mineral Claim Purchase Agreement (the “Agreement”) with Plateau Ventures LLC., a Utah corporation (“PVL”). Pursuant to the Agreement, upon the satisfaction of various closing conditions, PVL will sell to the Company the title to five hundred (500) lithium mineral claims situated in Railroad Valley in the Western Nevada Basin of Nye County, Nevada (the “Claims”).
The terms of the Agreement are as follows:
Purchase Price:
As consideration for the sale of the Claims, the Company:
Issue sixteen million (16,000,000) shares of common stock to PVL or its designee(s);
Pay PVL one hundred thousand dollars ($100,000); and
Pay PVL a royalty equal to two percent (2%) of the Net Smelter Returns (“NSR”) from the production or sale of Minerals from the Property. The Royalty may be reduced to one percent (1%) of NSR with payment of one million dollars ($1,000,000) to PVL at any time prior to commencement of commercial production.
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Expenditures:
The Company paid seventy seven thousand, five hundred dollars ($77,500), or $155 per claim, to the US Bureau of Land Management; and
Shall pay annual maintenance fees as applicable.
In July 2016, the Company amended the terms of the Agreement to remove the royalty payment of the NSR in exchange for the issuance of 636,943 common shares. In November 2016, the terms of the Agreement were again amended to increase the payment to 2,000,000 common shares, which were issued on November 8, 2016. In February 2017, PVL returned the original 636,943 common shares to the Company.
The Company has full entitlement to the Claims as all filing requirements have been processed and accepted by the Bureau of Land Management (BLM) in Nevada. The Company is required to make payments of $155 per claim for the BLM maintenance fee, on September 1, each year to maintain the claims. Although no assurances can be made, the Company believes it will be compliant with all BLM procedures.
Plans for the WNB Claims:
If we are successful in acquiring full entitlement of the WNB Claims, we expect to initiate an exploration program during 2017. The results of the initial exploration program will dictate subsequent work on the property.
Dominican Republic Claims
On January 10, 2012 Oroplata incorporated a wholly-owned subsidiary under the laws of the Dominican Republic named "Oroplata Exploraciones E Ingenieria, Orexi, SRL" in order to hold the mineral rights to a claim named "Leomary Gold Claim". In order to determine what mineralization was present on the Leomary the Company hired Ismael Martinez, Professional Geologist, to undertake an exploration program on the Leomary at a cost of $25,800. The exploration program centered mainly on obtaining soil, sediment and rock samples from various areas within the Leomary Gold Claim to determine what minerals were present. Based on the results on these initial findings, Oroplata undertook a further exploration program during the summer of 2013, at a cost of $18,800, to identify mineralization in other parts of the Leomary and to resample the previous high grade samples. This additional exploration work was completed at the end of August 2013. Unfortunately the Company lost the rights to any minerals on the Leomary in September 2014.
The Company acquired rights to a new mineral claim in the Dominican Republic called Mogollon (the “Mogollon Claim”) whereby the Company paid $10,000 for the rights to the minerals on the Mogollon Claim and for the completion of a geological report thereon. To date we have not performed, and do not expect to perform in the future, any exploration on the Mogollon Claim. Furthermore, management is currently investigating whether we have any remaining rights in any mineral claims located in the Dominican Republic.
Western Nevada Basin Property
On June 1, 2016, the Company entered into an agreement to acquire the mineral rights to 500 Placer claims situated in the Railroad Valley, Nye County, Nevada in exchange for $100,000 and the issuance of 16,000,000 common shares of the Company. The original agreement was subject to a 2% net smelter return from the production or sale of minerals from the claims which could be reduced to 1% on a one-time payment of $1,000,000 at any time prior to commencement of commercial production. In July 2016, the agreement was amended to remove the net smelter return and in exchange, the Company issued an additional 636,943 common shares.
The Western Nevada Basin (WNB) Property is located in east central Nye County approximately 93 miles northeast of the county seat of Tonopah, NV, the major commercial center for the region; 56 miles southwest of the town of Ely, NV and 120 miles northeast of the village of Silver Peak the only currently operating Lithium producer in the State. The Western Nevada Basin Property covers a total of 10,000 acres. Each of the 500 Placer claims covers approximately 20 acres and was laid out by aliquot parts as required by the Bureau of Land Management.
Lithium is a locatable mineral according to the Code of Federal Regulations. Lithium should be located by lode claims where it occurs in bedrock and by placer claims where it occurs in sediments. A body of legal precedence set during the original development of lithium brines in the area provides that lithium in valley sediments by nature of the unconsolidated host rock are staked by and produced from placer claims.
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The WNB project is held by 500, 20 acre placer claims, which are located on public Federal lands managed by the Bureau of Land Management. The placer claims are located on U.S. Surveyed lands and fit to aliquot parts.
In Nevada, the claim staking procedure requires recording documents with both the county Recorder’s Office and then with the state Bureau of Land Management office. Claims must be held by posts at the claims four corners and Notice of Location which describe the claims legal description of location and owner. The claims are required to be recorded at the county courthouse within the proper jurisdiction within 90 days from the staking date.
Placer claims on Federal lands are held to a September 1 to August 31 assessment year when Intent to Hold or Proof of Labor documents need to be filed with the county for the annual assessment work. The pertinent documents are filed with the Nye County Recorder’s Office.
The current annual maintenance fee is $155 per 20 acre (or a portion thereof) placer claim (http://www.blm.gov/ca/st/en/info/iac/miningfacts.html). Payment of those fees allows the claim to stay on the BLM active data base. Non-payment results in the claims moving to ‘closed’ status. Before August 31st each year, a payment of $155 per claims is made to the BLM to hold the claims in good standing for the following assessment year. The total cost for the 500 WNB claims is $77,500.
The claims were transferred to the Company by a transfer method of a ‘Quit Claim Deed’ which transfers official title to the Company. Before Oct 31st each year, it is necessary to make a payment to the county of $10 per claim to file an affidavit of assessment fees paid and notice of intent to hold the claims into the next assessment year. The total cost for the 500 WNB claims will be $5,000.
As public lands, there is right of free access and both surface and mineral rights are held by the Federal government. Public records (Management, Bureau of Land) show no military withdrawals or Areas of Critical Environmental Concern. The Railroad Valley Wildlife Management Area is located to the west of the WNB claim boundary and has no effect on any planned work on the WNB claim area.
There is free access to the Federal land in Railroad Valley and there are no restrictions on casual prospecting. New exploration drilling will trigger a permitting process. There are two major levels of permitting: Notice of Intent (NOI) and Plan of Operations (POO). Historically, if the proposed disturbance was less than 5 acres or 1,000 tons, then the work can proceed under a NOI if there are no complications such as ancient ruins or endangered species. Application for a NOI is relatively simple with requirements like bonding the access route and re-seeding afterwards. A NOI is valid for two years and may be renewed on a two year basis. Maintaining it requires maintaining bonds and seeding disturbed areas when the work is complete. A POO is more complicated with requirements like an archeological survey, environmental assessment, etc. The BLM may respond within 15 days to a NOI application whereas a POO may require several months to years for final acceptance.
Any drilling planned will require a NOI filed with the Tonopah office of the BLM. To the best of the Company’s knowledge, there are no known environmental liabilities to which the property is subject or other significant factors and risks that may affect access, title, or the right or ability to perform work on the property.
Geologic Setting
The claims are located in the Basin and Range physiographic province which stretches from southern Oregon and Idaho to Mexico. It is characterized by extreme elevation changes between mountains and flat intermountain valleys or basins.
Plate tectonics powered by crustal spreading broadly generates two types of forces: compression as plates are moved together and extension as those forces relax. Compression was the dominant geologic force affecting the western United States beginning about 200 million years ago as the Pacific Ocean plate moved eastward under the North American continent. Those forces compressed the overlying pile of sedimentary rocks accumulated over hundreds of millions of years into a thick stack reaching up to elevations of 10 – 14,000 feet, similar to the altiplano of Mexico and South America which formed at the same time from similar forces. That highland plateau stretched west – east from the Sierra Nevada Mountains in California to the Wasatch Range in Utah.
Extension became the dominant force beginning in the Eocene - Oligocene epochs approximately 55 to 25 million years ago. Also, the relative movement of the tectonic plates changed about 30 million years ago with the movement becoming more oblique to the continent. That relaxed the compressional forces and also tended to ‘tear’ the crust apart, creating diagonal extensions.
The resulting compressional and extensional tectonics have created throughout Nevada a classical Basin and Range province consisting of narrow, N- to NE-trending, fault block mountain chains separated by flat, linear valleys. This geological pattern is repeated across the State and has created a number of currently arid, ‘trapped’ or closed basins with respect to drainage that have the potential of containing Lithium Brine deposits.
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Geology of Lithium Brines
Lithium brine deposits are accumulations of saline groundwater that are enriched in dissolved lithium. All producing lithium brine deposits share a number of first-order characteristics: (1) arid climate; (2) closed basin containing a salt flat (Playa or Salar); (3) tectonically driven subsidence; (4) associated igneous or geothermal activity; (5) suitable lithium source-rocks; (6) one or more adequate aquifers; and (7) sufficient time to concentrate a brine.
The single most important factor determining if a non-marine basin can accumulate lithium brine is whether or not the basin is closed.
Lithium enriched brines are formed by complex and multiple processes of evaporation, re-mobilization, and salt and lithium clay dissolution and precipitation. In essence, lithium is liberated by weathering or derived from hydrothermal fluids from a variety of rock sources within a closed basin where Lithium, a lightweight element, cannot escape.
Lithium is highly soluble and, unlike sodium (Na), potassium (K), or calcium (Ca), does not readily produce evaporite minerals when concentrated by evaporation. Instead it ends up in residual brines in the shallow subsurface. Economic brines have Li concentrations in the range of 200 to 4,000 milligrams per liter (mg/l). 1 mg/l = 1 ppm.
Clayton Valley contains the only currently producing Lithium Brine project in Nevada. Production has been on-going since 1967. The production at Clayton Valley is located approximately 120 miles west of the Railroad Valley. Evidence from Clayton Valley suggests that felsic vitric tuffs are a particularly favorable primary source of Lithium, as well, uplifted Neogene lake beds from earlier in the basin’s history, which have been altered to hectorite, may provide a source of Lithium.
Oroplata's Main Product
Oroplata's main product will be the sale of Lithium Carbonate or Lithium Hydroxide that can be extracted from its Western Nevada Basin Project once the claim has been explored. Since the Western Nevada Basin has yet to be explored by us, we have yet to find an ore body and therefore cannot sell any ore.
Exploration and Office Facilities
The Company has no plans to construct a mine or smelter on the Mogollon until an ore body of reasonable worth is found; which might never happen. While in the exploration stage, the crew of workers will be housed in a nearby town or tent facilities will be established on the property itself. This will initially avoid building any structures either permanent or removable on the Mogollon concession.
Oroplata's office is at 1802 N Carson Street Suite 206, Carson City Nevada 89701-1238. At the present time Oroplata does not require its own office space due to having no employees, other than our one officer, Mr. Cole, but will consider renting office space shortly.
Other Mineral Properties
The Company has no other properties other than the Mogollon property located in the Dominican Republic (which Oroplata is investigating), and the Nye County mineral claims located in Nevada, United States.
Employees
Other than our Board of Directors and our one officer, Mr. Cole who are engaged by the Company as a consultant, we do not have any employees. Our officer devotes approximately 20-30 hours a week, collectively, to our operations but will increase the number of hours when an exploration program is undertaken on our mineral properties.
Investigation of Prior Agreements.
At the request of the Board of Directors, the Company is reviewing all prior agreements and stock issuances of the Company entered into by the previous management of the Company to ensure their validity.
Significant Accounting Policies
Research and Development Expenditures
Oroplata has not expended any money on research and development since its inception.
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Patents and Trademarks
Oroplata does not have any patents or trademarks.
RESULTS OF OPERATIONS FOR THE THREE and NINE MONTHS ENDED June 30, 2017 AND 2016
Oroplata has not realized any revenue from its exploration activities on the Mogollon concession or the Nye County properties and it is extremely doubtful that the mineral property will be able to produce any revenue for many years. Without an ore reserve Oroplata cannot seek substantial investors to further fund the Company so that production can be achieved. Not until commercial production is realized will Oroplata have any chance of recognizing any form of revenue.
Results of Operations
Revenues
During the three and nine months ended June 30, 2017 and 2016, the Company has not realized any revenues.
Expenses
Three months ended June 30, 2017 and 2016
During the three months ended June 30, 2017, the Company incurred of $143,254 of operating expenses compared to $27,082,217 during the three months ended June 30, 2016. The decrease is due to an impairment loss of $27,051,848 during fiscal 2016 for the impairment of the acquisition cost of the Nye County property offset by an increase in operating expenses due to the increase in operating activity during the current fiscal year which included $53,600 of payroll expenses to employees at Lithortech, a wholly-owned subsidiary of the Company, and an increase in day-to-day operating costs.
In addition to operating expenses, the Company incurred interest and accretion expense of $92,673 during the three months ended June 30, 2017 compared to $nil during the three months ended June 30, 2016. The increase is due to the issuance of convertible notes to fund the Company’s operations which resulted in the recognition of interest expense for the notes outstanding as well as accretion expense for the beneficial conversion feature of the convertible notes.
Net Loss
During the three months ended June 30, 2017, the Company incurred a net loss of $235,927 or $nil loss per share compared to a net loss of $27,082,217 or $0.68 loss per share during the three months ended June 30, 2016.
Nine months ended June 30, 2017 and 2016
During the nine months ended June 30, 2017, the Company incurred operating expenses of $2,024,376 compared to $27,108,588 for the nine months ended June 30, 2016. The decrease is due to an impairment loss of $27,051,848 during fiscal 2016 for the impairment of the acquisition cost of the Nye County property offset by an increase in operating expenses including $600,000 of exploration costs for the issuance of 2,000,000 common shares for a fair value of $600,000 to remove the net smelter return of the Nye County properties. The remaining amount was related to general and administrative expense which was a result of increased operating activity including the issuance of a convertible note for $75,000 for a commitment fee, stock-based compensation for share purchase warrants of 500,000 warrants with an exercise price of $0.15 and 2,000,000 warrants with an exercise price of $0.001 (issued in conjunction with the cancellation of 2,000,000 common shares) with a fair value of $652,977. Furthermore, during the period, the Company issued 300,000 common shares for investor relation services with a fair value of $87,000, 500,000 common shares for consulting services with a fair value of $130,000, and 300,000 common shares for legal services with a fair value of $75,000. In addition to share-based compensation, the Company also incurred management fees of $60,000 to the former Chief Executive Officer and Director of the Company, $24,000 to the current Chief Executive Officer and Director of the Company, $115,495 of consulting fees to consultants for services, $10,500 of investor relation services, $36,000 of professional fees for accounting, audit, and legal services, and $64,000 of payroll costs relating to operating activity of its wholly-owned subsidiary, Lithortech Resources. During the comparative nine month period ended June 30, 2016, the Company incurred no exploration costs and $56,740 of operating expenses which consisted primarily of professional services for the Company’s SEC filing requirements and day-to-day operating costs which were minimal given that the Company had limited operations and cash flows.
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In addition to operating expenses, the Company incurred interest and accretion expense of $234,101 with respect to outstanding loans and convertible notes payable issued and outstanding and settled $60,000 of outstanding accounts payable with the issuance of 400,000 common shares with a fair value of $96,000 which resulted in a loss on settlement of debt of $36,000. Comparatively, the Company had no outstanding loans and convertible debts during the nine month period ended June 30, 2016 and did not settle any outstanding accounts payable with the issuance of common shares.
Net Loss
During the nine months ended June 30, 2017, the Company incurred a net loss of $2,294,477 or $0.04 loss per share compared to a net loss of $56,740 or $nil loss per share during the nine months ended June 30, 2016.
Liquidity and Capital Resources
At June 30, 2017, the Company had cash and total assets of $33,755 compared to $90,040 as at September 30, 2016. The decrease in cash and total assets were due to the use of cash at a higher rate than funding, as the Company currently earns no cash from operations and is reliant on cash received from financing activities until such time that the Company earns revenue from its operating activities.
The Company had total current liabilities of $959,895 at June 30, 2017 compared to $306,033 at September 30, 2016. The increase in current liabilities is due to a $52,486 increase in accounts payable and accrued liabilities for outstanding day-to-day operating costs for which the Company has not repaid, $45,100 increase in amounts due to related parties for unpaid management fees, and $281,344 increase in the carrying value of convertible notes payable which is due to an increase in the overall issuance of convertible notes payable from $231,000 of notes issued as at September 30, 2016 to $556,000 of notes issued as at June 30, 2017, and $274,932 increase in note payable as the note has been reclassified to current liabilities as it is due within 12 months of the reporting date.
As at June 30, 2017, the Company had a working capital deficit of $651,208 compared to a working capital deficit of $215,993 at September 30, 2016. The increase in the working capital deficit was due to the fact that the Company financed its operating costs, including acquisition of mineral properties, through the issuance of shares of its common stock, loans and notes payable and did not earn any cash flow from operating activities.
In addition, as at June 30, 2017, the Company also has $274,932 of outstanding notes payable, which are unsecured, bears interest at 2.5% per annum, and is due June 15, 2018. During the nine months ended June 30, 2017, the Company received an additional $6,000 of funding from this note while repaying $34,068 on the principal balance of the note.
During the period ended June 30, 2017, the Company issued 2,000,000 common shares to remove the net smelter return on the Nye County properties that were acquired during fiscal 2016, issued 800,000 common shares for services, issued 300,000 common shares for legal fees, issued 400,000 shares to settle outstanding accounts payable, and cancelled 636,943 common shares that were returned due to an amendment in the acquisition of the Nye County properties, and 2,000,000 common shares which were returned to treasury and replaced with the issuance of 2,000,000 share purchase warrants. As at June 30, 2017, the Company had 58,000,000 common shares outstanding compared to 57,136,943 common shares outstanding as at September 30, 2016.
During the nine months ended June 30, 2017, the Company issued 500,000 share purchase warrants which are exercisable at $0.15 per share until February 15, 2022 as compensation to waive certain events of default relating to an agreement between the Company and the convertible note holder which included the extension of the July 18, 2016 and the September 30, 2016 notes to December 31, 2017. Furthermore, the Company issued 2,000,000 share purchase warrants which are exercisable at $0.001 per share until February 16, 2022 in exchange for the cancellation of 2,000,000 common shares. As at June 30, 2017, the Company had 2,742,000 outstanding share purchase warrants compared to 242,000 outstanding share purchase warrants at September 30, 2016.
As at June 30, 2017 and September 30, 2016, the Company does not have any issued or outstanding stock options.
Cash Flows
Cash from Operating Activities.
During the nine months ended June 30, 2017, the Company used $255,197 of cash for operating activities compared to $29,160 of cash during the nine months ended June 30, 2016. The increase in the use of cash for operating activities is due to the fact that the Company received more cash funding from financing activities during the period which was used to settle outstanding day-to-day operating costs incurred by the Company.
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Cash from Investing Activities
During the nine months ended June 30, 2017 and 2016, the Company did not have any investing activities.
Cash from Financing Activities
During the nine months ended June 30, 2017, the Company received $198,912 of cash from financing activities compared to $20,265 received during the nine months ended June 30, 2016. The increase in the cash received from financing activities is due to $226,480 received from the issuance of convertible notes payable and $6,000 from a note payable during the current period compared to $nil funds received from loans and notes during the prior year as the Company relied solely on $20,265 of funding from related parties to support the limited operations from prior year. In addition, the Company repaid $34,068 of outstanding note payable during the current period.
Off-Balance Sheet Arrangements
None.
Trends
From Oroplata's date of inception it has produced no revenue and maybe will not be able to produce revenue. To the knowledge of its management Oroplata is unaware of any trends or past and future events which will have a material effect upon it, its income and business, both in the long and short term. Please refer to Oroplata's assessment of Risk Factors as noted below.
Critical Accounting Policies and Estimates
In presenting Oroplata's financial statements in conformity with U.S. generally accepting accounting principles, or GAAP, Oroplata is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures.
Some of the estimates and assumptions Oroplata is required to make relate to matters that are inherently uncertain as they pertain to future events. Oroplata bases these estimates and assumptions on historical experience or on various other factors that it believes to be reasonable and appropriate under the circumstances. On an ongoing basis, Oroplata reconsiders and evaluates its estimates and assumptions. Actual results may differ significantly from these estimates.
Oroplata believes that the critical accounting policies listed below involve its more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on its financial statements. In addition, Oroplata believes that a discussion of these policies is necessary to understand and evaluate the financial statements contained in this filing.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Mineral claim acquisition and exploration costs
The cost of acquiring mineral properties or claims is initially capitalized and then tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Mineral exploration costs are expensed as incurred.
Income Taxes
Oroplata utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
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Recent Accounting Pronouncements
Oroplata does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.
Foreign Currency
The Company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign currency transactions are translated to United States dollars in accordance with ASC 830,
Foreign Currency Translation Matters
, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.