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EX-10.30 - EXHIBIT 10.30 - Lithium Exploration Group, Inc.exhibit10-30.htm
EX-10.32 - EXHIBIT 10.32 - Lithium Exploration Group, Inc.exhibit10-32.htm
EX-31.1 - EXHIBIT 31.1 - Lithium Exploration Group, Inc.exhibit31-1.htm
EX-31.2 - EXHIBIT 31.2 - Lithium Exploration Group, Inc.exhibit31-2.htm
EX-32.1 - EXHIBIT 32.1 - Lithium Exploration Group, Inc.exhibit32-1.htm
EX-32.2 - EXHIBIT 32.2 - Lithium Exploration Group, Inc.exhibit32-2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013 or

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission File Number 000-54881

LITHIUM EXPLORATION GROUP, INC.
(Exact name of registrant as specified in its charter)

Nevada 06-1781911
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

3200 N. Hayden Road, Suite 235, Scottsdale, Arizona 85251
(Address of principal executive offices) (Zip Code)

480-641-4790
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES [ ] NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] YES [ ] NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]   Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
[ ] YES [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. 
[ ] YES [ ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 91,403,962 common shares issued and outstanding as of November 14, 2013.


FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION 3
   Item 1. Financial Statements 3
   Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37
   Item 3. Quantitative and Qualitative Disclosures About Market Risk 51
   Item 4. Controls and Procedures 51
PART II – OTHER INFORMATION 51
   Item 1. Legal Proceedings 51
   Item 1A. Risk Factors 52
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 52
   Item 3. Defaults Upon Senior Securities 53
   Item 4. Mine Safety Disclosures 53
   Item 5. Other Information 53
   Item 6. Exhibits 54
SIGNATURES 57

2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated unaudited interim financial statements for the three month period ended September 30, 2013 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

3


LITHIUM EXPLORATION GROUP, INC.
(An Exploration Stage Company)

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

September 30, 2013

(Unaudited)

4



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Balance Sheets

    September 30,     June 30,  
    2013     2013  
    (Unaudited)        
ASSETS            
             
             
Current            
       Cash and cash equivalents $  119,458   $  248,624  
       Prepaid expenses   41,610     44,022  
Total current assets   161,068     292,646  
             
Deposit on Blue Tap (Note 11)   305,078     10,170  
Deposit on Tero Oilfield Services Ltd. (Note 10)   48,832     -  
             
Total Assets $  514,978   $  302,816  
             
             
LIABILITIES            
             
Current            
       Accounts payable and accrued liabilities $  3,744   $  2,928  
       Note payable convertible (Note 5)   -     105,410  
       Derivative liability – convertible promissory notes (Note 7)   476,585     513,375  
       Due to related party (Note 8)   45,332     45,332  
       Convertible debentures (Note 6)   759,499     1,063,077  
       Convertible promissory notes            
       (net of discount of $2,067,989 and $1,475,247) (Note 7)   129,582     37,610  
       Accrued interest – convertible promissory notes (Note 7)   3,491     938  
             
Total Current Liabilities   1,418,233     1,768,670  
             
STOCKHOLDERS’ DEFICIT            
             
Capital stock (Note 3)            
      Authorized:
      100,000,000 preferred shares, $0.001 par value
      500,000,000 common shares, $0.001 par value
 

   

 
             
       Issued and outstanding:
       20,000,000 preferred shares (June 30, 2013 – 20,000,000)
 
20,000
   
20,000
 
       65,981,081 common shares (June 30, 2013 – 54,882,422)   65,983     54,885  
Additional paid-in capital   33,063,526     31,916,501  
Deficit accumulated during the exploration stage   (34,052,764 )   (33,457,240 )
Total Stockholders’ Deficit   (903,255 )   (1,465,854 )
             
Total Liabilities and Stockholders’ Deficit $  514,978   $  302,816  

The accompanying notes are an integral part of these consolidated financial statements.

5



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)

                Cumulative from  
    Three Months     Inception  
    Ended September 30,     (May 31, 2006) to  
    2013     2012     September 30, 2013  
                   
Revenue $  -   $  -   $  -  
                   
Operating Expenses:                  
   Advertising   7,256     39,652     222,355  
   Consulting fees (Notes 3 & 8)   132,400     87,989     938,997  
   Director fees (Note 3)   -     -     17,967,000  
   General and administrative   11,673     17,730     150,298  
   Investor relations (Note 3)   32,000     24,000     996,000  
   Management fees   -     -     45,000  
   Mining expenses (Notes 3 & 5)   10,128     34,321     8,220,322  
   Professional fees   47,401     93,031     818,039  
   Travel   6,520     13,689     131,711  
   Wages   48,443     75,355     556,395  
                   
Loss from operations   (295,821 )   (385,767 )   (30,046,117 )
                   
Other income (expenses)                  
Interest expense (Note 7)   (258,218 )   (1,764,785 )   (7,098,185 )
Gain (Loss) on derivative liability (Note 7)   (41,485 )   676,095     3,091,538  
                   
Loss before income taxes   (595,524 )   (1,474,457 )   (34,052,764 )
                   
Provision for Income Taxes (Note 4)   -     -     -  
                   
Net loss for the period   (595,524 )   (1,474,457 )   (34,052,764 )
                   
Basic and Diluted Loss per Common Share $  (0.01 ) $  (0.03 )      
                   
Weighted Average Number of Common Shares Outstanding   60,190,254     56,309,009        

The accompanying notes are an integral part of these consolidated financial statements.

6



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)(Unaudited)
For the Period of Inception (May 31, 2006) to September 30, 2013

  Preferred Shares     Common Shares                    
                                  Deficit        
                                  Accumulated        
                            Additional     During the        
  Number of           Number of           Paid-in     Exploration     Stockholders’  
  Shares     Amount     Shares     Amount     Capital     Stage     Equity (Deficit)  
                                           
Inception – May 31, 2006   -   $  -     -   $  -   $  -   $  -   $  -  
Common shares issued to a founder at $0.01 cash per share, June 6, 2006   -     -     20,000,000     20,000     -     -     20,000  
Loss for the period (Unaudited)   -     -     -     -     -     (2,687 )   (2,687 )
                                           
Balance – June 30, 2006 (Unaudited)   -     -     20,000,000     20,000     -     (2,687 )   17,313  
Common shares issued to founders at $0.01 per share, July 1, 2006   -     -     10,000,000     10,000     -     -     10,000  
Common shares issued for cash at $0.04 per share, December 11, 2006   -     -     17,375,000     17,375     52,125     -     69,500  
Loss for the year (Unaudited)   -     -     -     -     -     (59,320 )   (59,320 )
                                           
Balance – June 30, 2007 (Unaudited)   -     -     47,375,000     47,375     52,125     (62,007 )   37,493  
Loss for the year   -     -     -     -     -     (22,888 )   (22,888 )
Balance – June 30, 2008   -     -     47,375,000     47,375     52,125     (84,895 )   14,605  
Loss for the year   -     -     -     -     -     (31,624 )   (31,624 )
Balance – June 30, 2009   -     -     47,375,000     47,375     52,125     (116,519 )   (17,019 )
Loss for the year   -     -     -     -     -     (20,639 )   (20,639 )
Balance – June 30, 2010   -     -     47,375,000     47,375     52,125     (137,158 )   (37,658 )
Common shares issued for cash at $1.00 per share, January 27, 2011   -     -     250,000     250     249,750     -     250,000  
Common shares issued for cash at $5.25 per share, April 28, 2011   -     -     190,476     191     999,809     -     1,000,000  
Common shares issued for mining expenses and related finder’s fees   -     -     500,000     500     49,500     -     50,000  

The accompanying notes are an integral part of these consolidated financial statements.

7



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)(Unaudited)
For the Period of Inception (May 31, 2006) to September 30, 2013

    Preferred Shares     Common Shares                    
                                  Deficit        
                                  Accumulated        
                            Additional     During the        
    Number of           Number of           Paid-in     Exploration     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stage     Equity (Deficit)  
                                           
Common shares issued for settlement of mining expenses   -     -     200,000     200     739,800     -     740,000  
                                           
Common shares issued for director fees   -     -     2,300,000     2,300     17,592,700     -     17,595,000  
                                           
Common shares issued for investor relations   -     -     300,000     300     701,700     -     702,000  
                                           
Options issued for mining expenses   -     -             4,940,000         4,940,000  
Loss for the year   -     -     -     -     -     (25,891,334 )   (25,891,334 )
Balance – June 30, 2011   -     -     51,115,476     51,116     25,325,384     (26,028,492 )   (651,992 )
                                           
Common shares issued for consulting fees   -     -     366,364     366     367,634     -     368,000  
                                           
Common shares issued for debt conversion   -     -     2,934,432     2,935     1,713,756     -     1,716,691  
                                           
Loss for the year   -     -     -     -     -     (2,390,439 )   (2,390,439 )
                                           
Balance – June 30, 2012 (Restated)   -     -     54,416,272     54,417     27,406,774     (28,418,931 )   (957,740 )
                                           
Common shares issued for consulting fees   -     -     867,397     868     156,132     -     157,000  
                                           
Common shares issued for director fees   -     -     300,000     300     53,700     -     54,000  
                                           
Common shares issued for investor relations   -     -     648,604     649     131,351     -     132,000  
                                           
Common shares issued for mining expenses   -     -     372,375     373     89,627     -     90,000  
                                           
Common shares issued for debt conversion   -     -     17,249,661     17,250     2,807,670     -     2,824,920  
Common shares issued for exercise of warrants   -     -     1,028,113     1,028     1,271,247     -     1,272,275  
Common shares exchanged for preferred shares   20,000,000     20,000     (20,000,000 )   (20,000 )   -     -     -  
                                           
Net loss for the year   -     -     -     -     -     (5,038,309 )   (5,038,309 )
Balance – June 30, 2013   20,000,000     20,000     54,882,422     54,885     31,916,501     (33,457,240 )   (1,465,854 )

The accompanying notes are an integral part of these consolidated financial statements.

8



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)(Unaudited)
For the Period of Inception (May 31, 2006) to September 30, 2013

    Preferred Shares     Common Shares                    
                                  Deficit        
                                  Accumulated        
                            Additional     During the        
    Number of           Number of           Paid-in     Exploration     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stage     Equity (Deficit)  
                                           
Common shares issued for consulting fees   -     -     645,415     645     81,522     -     82,167  
                                           
Common shares issued for debt conversion   -     -     6,784,475     6,784     565,897     -     572,681  
Common shares issued for exercise of warrants   -     -     3,668,769     3,669     499,606     -     503,275  
                                           
Net loss for the period   -     -     -     -     -     (595,524 )   (595,524 )
                                           
Balance – September 30, 2013   20,000,000   $  20,000     65,981,081 $     65,983   $  33,063,526   $  (34,052,764 ) $  (903,255 )

The accompanying notes are an integral part of these consolidated financial statements.

9



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

                Cumulative from  
    Three Months     Three Months     Inception (May 31,  
    Ended     Ended     2006) to September 30,  
    September 30, 2013     September 30, 2012     2013  
                   
Cash Flows from Operating Activities                  
       Net loss for the period $  (595,524 ) $  (1,474,457 ) $  (34,052,764 )
       Items not affecting cash:                  
               Common shares issued for mining expenses and related finder’s fees   -     -     880,000  
               Common shares issued for director fees   -     -     17,967,000  
               Non-cash mining expenses   -     -     304,060  
               Unrealized foreign exchange gain on note payable   -     -     (4,315 )
               Common shares issued for investor relations   -     -     834,000  
               Common shares issued for consulting fees   82,167     -     289,167  
               Options issued for mining expenses   -     -     4,940,000  
               Interest expense   258,218     1,764,785     7,098,185  
               Gain (loss) on derivative liability   41,485     (676,095 )   (3,091,538 )
                   
       Changes in operating assets and liabilities:                  
               Prepaid expenses   2,412     (185,631 )   (41,610 )
               Accounts payable and accrued liabilities   816     13,614     3,744  
Net cash used in operations   (210,426 )   (557,784 )   (4,874,071 )
                   
Cash Flows from Investing Activities                  
     Investment   -     -     (197,393 )
     Deposit   (343,740 )   -     (353,910 )
Net cash used in investing activities   (343,740 )   -     (551,303 )
                   
Cash Flows from Financing Activities                  
       Advance from related party   -     -     47,537  
       Repayment to related party   -     -     (2,205 )
       Issuance of common shares for cash   -     -     1,349,500  
       Issuance of convertible debentures   -     -     3,000,000  
       Issuance cost of convertible debentures   -     -     (25,000 )
       Issuance of convertible promissory notes   425,000     -     1,175,000  
Net cash provided by financing activities   425,000     -     5,544,832  
                   
Increase (decrease) in cash and cash equivalents   (129,166 )   (557,784 )   119,458  
Cash and cash equivalents - beginning of period   248,624     1,239,603     -  
Cash and cash equivalents - end of period $  119,458   $  681,819   $  119,458  
                   
Supplementary Cash Flow Information                  
       Non-cash investing and financing activities:                  
               Common stock issued for debt $  572,681   $  619,600   $  5,114,292  
       Cash paid for:                  
                   Interest $  -   $  -   $  -  
                   Income taxes $  -   $  -   $  -  

The accompanying notes are an integral part of these consolidated financial statements.

10



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

1. Organization

Lithium Exploration Group, Inc. (formerly Mariposa Resources, Ltd.) (the “Company”) was incorporated on May 31, 2006 in the State of Nevada, U.S.A. It is based in Scottsdale, Arizona, USA. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.

Effective November 30, 2010, the Company changed its name to “Lithium Exploration Group, Inc.,” by way of a merger with its wholly-owned subsidiary Lithium Exploration Group, Inc., which was formed solely for the change of name.

A wholly owned subsidiary, 1617437 Alberta Ltd. was incorporated in the province of Alberta, Canada on July 8, 2011. Effective October 2, 2013, the subsidiary changed its name to “Alta Disposal Ltd.”

The Company is an exploration stage company that engages principally in the acquisition, exploration, and development of resource properties. Prior to June 25, 2009, the Company had the right to conduct exploration work on 20 mineral mining claims in Esmeralda County, Nevada, U.S.A. On July 31, 2009, the Company acquired an option to enter into a joint venture for the management and ownership of the Jack Creek Project, a mining project located in Elko County, Nevada. On September 25, 2009, the joint venture was terminated and the Company entered into an agreement with Beeston Enterprises Ltd., under which the Company was granted an option to acquire an undivided 50% interest in eight mineral claims located in the Clinton Mining District of British Columbia, Canada. On December 16, 2010, the Company entered into an Assignment Agreement to acquire an undivided 100% right, title and interest in and to certain mineral permits located in the Province of Alberta, Canada (see Note 5). On November 8, 2011, the Company entered into a letter agreement with Glottech-USA. Pursuant to the terms of the agreement, the Company was granted an exclusive license to use and distribute the technology within the Swan Hills region of Alberta as well as a non-exclusive right to distribute the technology within Canada.

Exploration Stage Company

The Company is considered to be in the exploration stage as defined in FASC 915-10-05 “Development Stage Entities,” and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7. The Company is devoting substantially all of its efforts to development of business plans and the acquisition of mineral properties.

11



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

2. Significant Accounting Policies

Basis of presentation and consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The consolidated financial statements include the accounts of the Company and its subsidiary Alta Disposal Ltd. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company. Significant estimates that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $119,458 and $248,624 in cash and cash equivalents at September 30, 2013 and June 30, 2013, respectively.

Concentration of Risk

The Company maintains cash balances at a financial institution which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for banks located in the US. As of September 30, 2013 and June 30, 2013, the Company had $nil and $25,935, respectively, in deposits in excess of federally insured limits in its US bank. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash in bank accounts.

Prepaid expenses

Prepaid expenses mainly consist of legal retainers, deposit for mineral property exploration, and shares issued for investor relations. Legal retainers and deposit for mineral property exploration will be expensed in the period when services are completed. Shares issued for investor relations are amortized as investor relation expenses over service term.

Start-Up Costs

In accordance with FASC 720-15-20 “Start-Up Costs,” the Company expenses all costs incurred in connection with the start-up and organization of the Company.

12



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

2. Significant Accounting Policies - Continued

Mineral Acquisition and Exploration Costs

The Company has been in the exploration stage since its formation on May 31, 2006 and has not yet realized any revenue from its planned operations. It is primarily engaged in the acquisition, exploration, and development of mining properties. Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Net Income or (Loss) per Share of Common Stock

The Company has adopted FASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

Potentially dilutive securities are not presented in the computation of EPS since their effects are anti-dilutive.

Foreign Currency Translations

The Company’s functional and reporting currency is the US dollar. All transactions initiated in other currencies are translated into US dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the US dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.

No significant realized exchange gain or losses were recorded from inception (May 31, 2006) to September 30, 2013.

13



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

2. Significant Accounting Policies - Continued

Comprehensive Income (Loss)

FASC Topic No. 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. From inception (May 31, 2006) to September 30 2013, the Company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception (May 31, 2006) to September 30, 2013.

Risks and Uncertainties

The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.

Environmental Expenditures

The operations of the Company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

Warrants

We value our warrants with provisions resulting in derivative liabilities at fair value using the lattice model according to ASC-815-10-55. We revalue our warrants at the end of every period at fair value and record the difference in other income (expense) in the consolidated statement of operations.

Convertible Debentures and Convertible Promissory Notes

We value our convertible debentures and convertible promissory notes with provisions resulting in beneficial conversion features from the embedded derivative at fair value according to ASC-840-10-25-14, rather than have its conversion feature bifurcated and reported separately due to ASC-815-15-25-1b. Because the value of the derivative related to the warrant exceeds the proceeds of the loan, the Company allocated 100% of the proceeds to the warrant derivative and took a day one loss for the difference between the proceeds and the fair value of the warrants, resulting in a debt discount on the full fair value of the debenture because no proceeds were available to be allocated to the debt or its beneficial conversion feature. That debt discount is accreted to interest expense over the stated life of the note using the interest method in accordance with ASC 470-20-35-7a and 835-30-35-2. Unaccreted debt discount on the date of conversion is accreted to interest expense on that date.

14



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

2. Significant Accounting Policies - Continued

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of the short maturity of these instruments.

The Company’s Level 3 financial liabilities consist of the derivative liability of the Company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company used a lattice model which incorporates transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Recent Accounting Pronouncements

Recent accounting pronouncements that are listed below did not, and are not currently expected to, have a material effect on the Company’s financial statements, but will be implemented in the Company’s future financial reporting when applicable.

15



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

2. Significant Accounting Policies - Continued

FASB Statements:

In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.

Accounting Standards Updates ("ASUs") through ASU No. 2013-11 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

3. Capital Stock

Authorized Stock

At inception, the Company authorized 100,000,000 common shares and 100,000,000 preferred shares, both with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

Effective April 8, 2009, the Company increased the number of authorized shares to 600,000,000 shares, of which 500,000,000 shares are designated as common stock par value $0.001 per share, and 100,000,000 shares are designated as preferred stock, par value $0.001 per share.

Share Issuances

For the period ended September 30, 2013:

On July 1, 2013, the Company issued 80,000 common shares at a market price of $0.10 per share for consulting fees.

On July 1, 2013, the Company issued 37,594 common shares at the weighted average price of $0.1330 per share for consulting fees.

On July 3, 2013, the Company issued 954,461 common shares at a deemed price of $0.0825 per share for note payable conversion of $105,410 (Note 5).

On July 9, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.045 per share for debenture conversion of $138,462 (Note 6).

On July 15, 2013, the Company issued 181,818 common shares at a market price of $0.11 per share for consulting fees.

On July 15, 2013, the Company issued 54,545 common shares at a market price of $0.11 per share for consulting fees.

16



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

On August 1, 2013, the Company issued 48,485 common shares at a market price of $0.1650 per share for consulting fees.

On August 1, 2013, the Company issued 46,997 common shares at a weighted average price of $0.1454 per share for consulting fees.

On August 13, 2013, the Company issued 1,585,714 common shares at a deemed price of $0.0735 per share for promissory note and interest conversion of $163,693 (Note 7).

On August 14, 2013, the Company issued 844,300 common shares at a deemed price of $0.0525 per share for debenture conversion of $68,194 (Note 6).

On August 15, 2013, the Company issued 28,736 common shares at a market price of $0.2088 per share for consulting fees.

On September 1, 2013, the Company issued 57,469 common shares at a weighted average price of $0.1450 per share for consulting fees.

On September 1, 2013, the Company issued 61,069 common shares at a market price of $0.1310 per share for consulting fees.

On September 6, 2013, the Company issued 2,375,052 common shares at a deemed price of $0.19 per share for warrants exercise of $446,789 (Note 7).

On September 15, 2013, the Company issued 48,702 common shares at a market price of $0.1232 per share for consulting fees.

On September 19, 2013, the Company issued 1,400,000 common shares at a deemed price of $0.045 per share for debenture conversion of $96,923 (Note 6).

On September 23, 2013, the Company issued 1,293,717 common shares at a deemed price of $0.04 per share for warrants exercise of $56,486 (Note 7).

For the year ended June 30, 2013:

On July 10, 2012, the Company issued 1,504,415 common shares at a deemed price of $0.1925 per share for debenture conversion and accrued interest of $289,600 (Note 6).

On August 21, 2012, the Company issued 815,047 common shares at a deemed price of $0.1595 per share for debenture conversion of $130,000 (Note 6).

On September 17, 2012, the Company issued 1,581,028 common shares at a deemed price of $0.1265 per share for debenture conversion of $200,000 (Note 6).

17



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

On October 25, 2012, the Company cancelled 20,000,000 common shares and in exchange, 20,000,000 preferred shares were issued.

On November 1, 2012, the Company issued 62,500 common shares at a market price of $0.24 per share for mining expenses.

On November 13, 2012, the Company issued 41,667 common shares at a market price of $0.24 per share for investor relation expenses.

On November 22, 2012, the Company issued 949,171 common shares at a deemed price of $0.1170 per share for debenture conversion and accrued interest of $111,053 (Note 6).

On December 1, 2012, the Company issued 55,556 common shares at a market price of $0.27 per share for mining expenses.

On December 13, 2012, the Company issued 38,462 common shares at a market price of $0.26 per share for investor relation expenses.

On January 2, 2013, the Company issued 55,556 common shares at a market price of $0.27 per share for mining expenses.

On January 14, 2013, the Company issued 40,000 common shares at a market price of $0.25 per share for investor relation expenses.

On January 25, 2013, the Company issued 1,028,113 common shares at a deemed price of $0.25 per share for warrants exercise of $257,028 (Note 6).

On February 1, 2013, the Company issued 78,947 common shares at a market price of $0.19 per share for mining expenses.

On February 14, 2013, the Company issued 41,667 common shares at a market price of $0.24 per share for investor relation expenses.

On February 19, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.077 per share for debenture conversion of $154,000 (Note 6).

On March 1, 2013, the Company issued 48,387 common shares at a market price of $0.31 per share for mining expenses.

On March 1, 2013, the Company issued 25,806 common shares at a market price of $0.31 per share for consulting fees.

On March 8, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.077 per share for debenture conversion of $154,000 (Note 6).

18



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

On March 14, 2013, the Company issued 47,619 common shares at a market price of $0.21 per share for investor relation expenses.

On March 15, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.095 per share for debenture conversion of $190,000 (Note 6).

On March 15, 2013, the Company issued 38,876 common shares at a market price of $0.2315 per share for consulting fees.

On March 15, 2013, the Company issued 95,238 common shares at a market price of $0.21 per share for consulting fees.

On March 27, 2013, the Company issued 389,189 common shares at a market price of $0.185 per share for investor relation expenses.

On April 1, 2013, the Company issued 71,429 common shares at a market price of $0.21 per share for mining expenses.

On April 1, 2013, the Company issued 38,095 common shares at a market price of $0.21 per share for consulting fees.

On April 15, 2013, the Company issued 100,000 common shares at a market price of $0.20 per share for consulting fees.

On April 15, 2013, the Company issued 57,007 common shares at a market price of $0.2105 per share for consulting fees.

On April 15, 2013, the Company issued 50,000 common shares at a market price of $0.20 per share for investor relation expenses.

On April 23, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.0805 per share for debenture conversion of $161,000 (Note 6).

On April 29, 2013, the Company issued 300,000 common shares at a market price of $0.18 per share for director fees.

On May 1, 2013, the Company issued 47,059 common shares at a market price of $0.17 per share for consulting fees.

On May 13, 2013, the Company issued 2,000,000 common shares at a deemed price of $0.075 per share for debenture conversion of $150,000 (Note 6).

On May 15, 2013, the Company issued 113,636 common shares at a market price of $0.1760 per share for consulting fees.

19



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

On May 15, 2013, the Company issued 70,588 common shares at a market price of $0.17 per share for consulting fees.

On May 30, 2013, the Company issued 2,400,000 common shares at a deemed price of $0.075 per share for debenture conversion of $180,000 (Note 6).

On June 1, 2013, the Company issued 50,000 common shares at a market price of $0.16 per share for consulting fees.

On June 14, 2013, the Company issued 142,857 common shares at a market price of $0.14 per share for consulting fees.

On June 15, 2013, the Company issued 88,235 common shares at a market price of $0.136 per share for consulting fees.

20



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

Since its inception (May 31, 2006), the Company has issued shares of its common stock as follows, retroactively adjusted to give effect to the 10 for 1 forward split:

Date   Description     Shares     Share     Amount  
06/06/06   Shares issued for cash     20,000,000   $  0.001   $  20,000  
07/01/06   Shares issued for cash     10,000,000     0.001     10,000  
12/11/06   Shares issued for cash     17,375,000     0.004     69,500  
01/18/11   Shares issued for mining expenses     250,000     0.100     25,000  
01/27/11   Shares issued for cash     250,000     1.000     250,000  
03/07/11   Shares issued for mining expenses     250,000     0.100     25,000  
04/27/11   Shares issued for director fees     2,300,000     7.650     17,595,000  
04/29/11   Shares issued for settlement of mining expenses     200,000     3.700     740,000  
05/10/11   Shares issued for cash     190,476     5.250     1,000,000  
06/11/11   Shares issued for investor relation     300,000     2.340     702,000  
11/22/11   Shares issued for debenture conversion     2,000,000     0.2925     585,000  
4/18/12   Shares issued for debenture conversion     610,795     0.352     215,000  
4/18/12   Shares issued for interest     323,637     0.810     262,146  
4/27/12   Shares issued for director fees     300,000     1.060     318,000  
5/1/12   Shares issued for consulting fees     26,041     0.960     25,000  
5/15/12   Shares issued for consulting fees     40,323     0.620     25,000  
7/10/12   Shares issued for debenture conversion     1,504,415     0.1925     289,600  
8/21/12   Shares issued for debenture conversion     815,047     0.1595     130,000  
9/17/12   Shares issued for debenture conversion     1,581,028     0.1265     200,000  
10/25/12   Shares cancelled in exchange for preferred shares     (20,000,000 )   0.0010     (20,000 )
11/1/12   Shares issued for mining expenses     62,500     0.2400     15,000  
11/13/12   Shares issued for investor relation     41,667     0.2400     10,000  
11/22/12   Shares issued for debenture conversion     949,171     0.1170     111,053  
12/1/12   Shares issued for mining expenses     55,556     0.2700     15,000  
12/13/12   Shares issued for investor relation     38,462     0.2600     10,000  
1/2/13   Shares issued for mining expenses     55,556     0.2700     15,000  
1/14/13   Shares issued for investor relation     40,000     0.2500     10,000  
1/25/13   Shares issued for warrants exercise     1,028,113     0.2500     257,028  
2/1/13   Shares issued for mining expenses     78,947     0.1900     15,000  
2/14/13   Shares issued for investor relation     41,667     0.2400     10,000  
2/29/13   Shares issued for debenture conversion     2,000,000     0.0770     154,000  
3/1/13   Shares issued for mining expenses     48,387     0.3100     15,000  
3/1/13   Shares issued for consulting fees     25,806     0.3100     8,000  
3/8/13   Shares issued for debenture conversion     2,000,000     0.0770     154,000  
3/14/13   Shares issued for investor relation     47,619     0.2100     10,000  
3/15/13   Shares issued for consulting fees     38,876     0.2315     9,000  
3/15/13   Shares issued for consulting fees     95,238     0.2100     20,000  
3/15/13   Shares issued for debenture conversion     2,000,000     0.0950     190,000  
3/27/13   Shares issued for investor relation     389,189     0.185     72,000  
4/1/13   Shares issued for mining expenses     71,429     0.2100     15,000  
4/1/13   Shares issued for consulting fees     38,095     0.2100     8,000  
4/15/13   Shares issued for investor relation     50,000     0.2000     10,000  
4/15/13   Shares issued for consulting fees     100,000     0.2000     20,000  
4/15/13   Shares issued for consulting fees     57,007     0.2105     12,000  

21



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

3. Capital Stock - Continued

4/23/13   Shares issued for debenture conversion     2,000,000     0.0805     161,000  
4/29/13   Shares issued for director fees     300,000     0.1800     54,000  
5/1/13   Shares issued for consulting fees     47,059     0.1700     8,000  
5/13/13   Shares issued for debenture conversion     2,000,000     0.0750     150,000  
5/15/13   Shares issued for consulting fees     113,636     0.1760     20,000  
5/15/13   Shares issued for consulting fees     70,588     0.1700     12,000  
5/30/13   Shares issued for debenture conversion     2,400,000     0.0750     180,000  
6/1/13   Shares issued for consulting fees     50,000     0.1600     8,000  
6/14/13   Shares issued for consulting fees     142,857     0.1400     20,000  
6/15/13   Shares issued for consulting fees     88,235     0.1360     12,000  
7/1/13   Shares issued for consulting fees     80,000     0.1000     8,000  
7/1/13   Shares issued for consulting fees     37,594     0.1330     5,000  
7/3/13   Shares issued for note payable conversion     954,461     0.0825     105,410  
7/9/13   Shares issued for debenture conversion     2,000,000     0.0450     138,462  
7/15/13   Shares issued for consulting fees     181,818     0.1100     20,000  
7/15/13   Shares issued for consulting fees     54,545     0.1100     6,000  
8/1/13   Shares issued for consulting fees     48,485     0.1650     8,000  
8/1/13   Shares issued for consulting fees     46,997     0.1454     6,833  
8/13/13   Shares issued for promissory note conversion     1,585,714     0.0735     163,693  
8/14/13   Shares issued for debenture conversion     844,300     0.0525     68,194  
8/15/13   Shares issued for consulting fees     28,736     0.2088     6,000  
9/1/13   Shares issued for consulting fees     57,469     0.1450     8,333  
9/1/13   Shares issued for consulting fees     61,069     0.1310     8,000  
9/6/13   Shares issued for warrants exercise     2,375,052     0.1900     446,789  
9/15/13   Shares issued for consulting fees     48,702     0.1232     6,000  
9/19/13   Shares issued for debenture conversion     1,400,000     0.0450     96,923  
9/23/13   Shares issued for warrants exercise     1,293,717     0.0400     56,486  
                         
    Cumulative Totals     65,981,081         $ 25,414,450  

Of these shares, 11,778,615 were issued to directors and officers of the Company. 18,516,037 were issued to independent investors. 872,375 were issued for mining expenses. 948,604 were issued for investor relation expenses. 200,000 were issued for debt settlement. 24,428,393 were issued for debenture and interest conversion. 1,028,113 were issued for exercise of warrants issued with convertible debentures. 1,585,714 were issued for promissory note and interest conversions. 3,668,769 were issued for exercise of warrants issued with convertible promissory notes. 954,461 were issued for note payable conversion. 2,000,000 were issued for a mining option settlement. As of September 30, 2013, the Company has issued 20,000,000 preferred shares to a director of the Company. The preferred shares have a par value of $0.001 per share and are convertible on a one for one basis into common shares subject to a one year hold period expiring on October 24, 2013. There are no other preferential rights attached to the preferred shares. The Company has no stock option plan, warrants or other dilutive securities, other than warrants issued to acquire 4,073,376 shares of the Company regarding convertible promissory notes (Note 7).

As per management agreements, the Company is obligated to issue 300,000 common shares to two directors by April 27, 2014 provided that they continue to serve as members to the Company’s board of directors. 300,000 common shares were issued to the two directors on April 27, 2011, April 27, 2012 and April 29, 2013 respectively.

22



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

4. Provision for Income Taxes

The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under FASC 740-20-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.

Exploration stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated during the period from May 31, 2006 (date of inception) through September 30, 2013 of $10,188,080 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately $74,779 and $358,641 during the periods ended September 30, 2013 and 2012, respectively.

The Company follows the provisions of uncertain tax positions as addressed in FASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.

The Company has no tax position at September 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. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at September 30, 2013. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended exploration stage activities. The tax years for June 30, 2013, June 30, 2012 and June 30, 2011 are still open for examination by the Internal Revenue Service (IRS).

23



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

5. Mineral Property Costs

Mineral Claims, Clinton Mining District

On September 25, 2009, and amended June 24, 2010, the Company entered into an Option Agreement under which the Company was granted an option to acquire an undivided 50% interest in eight mineral claims located in the Clinton Mining District, Province of British Columbia, Canada (the “Claims”), which Claims total in excess of 3,900 hectares, in consideration of the issuance of 1,500,000 common shares of the Company on or before December 31, 2010. The Claims were subject to a two percent net smelter royalty which can be paid out for the sum of $1,000,000 (CAD). The Company can earn an undivided 50% interest in the Claims by carrying out a $100,000 (CAD) exploration and development program on the Claims on or before December 31, 2010, plus an additional $200,000 (CAD) exploration and development program on the Claims on or before September 25, 2011.

In the event that the Company acquires an interest in the Claims, the Company and the Optionor have further agreed, at the request of either party, to negotiate a joint venture agreement for further exploration and development of the Claims.

On April 29, 2011, the Company entered into a mutual release agreement. The Company is released from any obligations related to the Claims for considerations of a cash payment of CDN $ 54,624 (US$57,901) and the issuance of 200,000 common shares of the Company. The shares have been valued at a market price of $3.70 for a total of $740,000. The total amount of $797,901 has been recorded as mining expenses.

Mineral Permit

On December 16, 2010, the Company entered into an Assignment Agreement to acquire the following:

  a. )

An undivided 100% right, title and interest in and to certain mineral permits located in the Province of Alberta, Canada.

  b. )

All of the assignor’s right, title and interest in and to the Option Agreement.

In consideration for the Assignment, the Company agreed to pay US$90,000 by way of cash or stock of equal value (consisting of amounts previously paid by the Assignor pursuant to the Option Agreement). The full $90,000 (consisting of option payments ‘i’ and ‘vi’ below) was expensed and included in the December 31, 2011 accounts payable balance. The Option shall be in good standing and exercisable by the Company by paying the following amounts on or before the dates specified in the following schedule:

  i.) CDN $40,000 (paid) upon execution of the agreement;
  ii.) CDN $60,000 (paid) on or before January 1, 2012;
  iii.) CDN $100,000 on or before January 1, 2013 (amended);
  iv.) CDN $300,000 on or before January 1, 2014; and
  v.) Paying all such property payments as may be required to maintain the mineral permits in good standing.

vi.)

The Optionee shall provide a refundable amount of CDN$50,000 (paid) to the Optionor by November 2, 2010, which shall be applied by the Optionor towards work assessment expenses acceptable to the Government of Alberta, with any unused portion to be applied against payments required to maintain the permits underlying the property in good standing.

24



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

5. Mineral Property Costs - Continued

On December 31, 2012, the Company entered into an agreement to amend the original payment requirement of CDN$100,000 due on January 1, 2013 to the following payments: CDN $20,000 (paid) cash payment due on January 1, 2013 and CDN $80,000 by a 15% one year promissory note starting January 1, 2013. The promissory note is interest free until March 31, 2013. After then, interest will accrue on the principal balance then in arrears at the rate of 15% per annum. No payments shall be payable until December 31, 2013. At any time, the Optionor may elect to convert the remaining balance of CDN $80,000 plus accrued interest into common shares of the Company at 75% of the closing market price of the Company’s common shares on the election day. The full $100,000 (consisting of cash payment of $20,000 and note payable of $80,000) was expensed. The note is subject to be measured at its fair value in accordance with ASC 480-10-25-14. The fair value at issuance was $106,667. An additional $26,667 was charged to mining expense. An interest expense of CDN$3,058 (US$2,899) was accrued as at June 30, 2013. On July 3, 2013, the Optionor elected to convert the promissory note of CDN $80,000 (US $75,844) plus accrued interest of CDN $3,058 (US $2,899) for the total amount of CDN $83,058 (US $78,743) into 954,461 common shares of the Company at a price of US $0.0825 per share.

Glottech Technology

On March 17, 2011 and subsequently amended on November 18, 2011, the Company entered into a letter agreement to acquire one initial unit of proprietary and patented mechanical ultrasound technology for use in water purification, inclusive of its process of separating from water, as the primary fluid stock, the salt and other minerals and by –products contained therein, with Glottech – USA.

To acquire the unit, the Company must make the following payments:

  a)

US$25,000 upon execution of the agreement (paid);

  b)

US$75,000 within 180 days of execution of the agreement (paid);

  c)

US$700,000 within 10 days of receipt of invoice from Glottech –USA LLC if the payment in b) is made (paid).

  d)

The Company also granted an option to acquire 2,000,000 shares for $1.00 to Glottech – USA upon receipt of the operational ultrasonic generator that they are building for Lithium Exploration Group. The 2,000,000 shares are to be paid from outstanding shares owned by Alex Walsh, company CEO. During the year ended June 30, 2011, the option resulting in additional mining expenses of $4,940,000 was valued using the fair market value of the shares to be issued. On October 1, 2012, Alex Walsh and GD International entered into an agreement to transfer 2,000,000 common shares owned by Alex Walsh to GD International. The shares were received by GD International on October 29, 2012.

Commencing as of the end of an initial sixty day testing and training period following satisfactory delivery and physical setup of the technology, and continuing thereafter for as long as the technology remains in the possession of the Company, the Company shall pay continuing monthly royalties in an amount equal to $2.00 per physical ton of water processed pursuant to the usage of the technology.

25



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

5. Mineral Property Costs - Continued

On June 12, 2012, the Company filed a complaint with the court of common pleas of Chester County, Pennsylvania against Glottech – USA, LLC, Eldredge, Inc., and the Eldredge Companies, Inc. The complaint seeks an order of the court granting possession of the unit, in its current state, to the Company.

Effective August 14, 2012, the Company entered into an option agreement with GD Glottech-International, Limited (“GD International”) to protect our license and distribution rights in the event that GD-Glottech-USA, LLC (“GD USA”) is unable to perform and honor the obligations contingent to a letter agreement dated November 8, 2011.

Pursuant to the terms of the option agreement, we are required to provide an initial deposit of $150,000 to be held in escrow for the option to obtain a license on the patent rights, as set forth in the option agreement. A further $15,000 was required for exercising the option agreement and it will be credited to future fees when patents rights are exercised. We exerised this option agreement on September 1, 2012 and released the funds to GD International.

On October 1, 2012, the Company entered into a sales agency agreement with GD International. The agreement shall replace all agreements entered previously. Pursuant to the agreement, the Company is appointed as GD International’s sales agent for the technology within the territory. As a consideration, 2,000,000 common shares of the Company shall be issued to GD International (issued: see d) above). GD International retains all right, title and interest in the technology. The term of this agreement will be an initial period of five years. The term shall be automatically renewable thereafter for successive five year periods provided that the Company has sold not less than 25 or more technology units during each applicable five year period.

On May 2, 2013, the Company entered into an agreement to retain the future use of the unit. Pursuant to the agreement, the Company must make the following payments:

  a)

US$20,000 within three days of execution of the agreement (paid);

  b)

US$30,000 within three days upon the testing of the unit has been successfully completed.

26



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

6. Convertible Debenture

On May 15, 2012, the Company entered into a securities purchase agreement with an investor. Pursuant to the terms of the agreement, the investor acquired convertible debentures with an aggregate face value of $1,680,000, at an original issuance discount of $180,000; resulting in $1,500,000 net proceeds to the Company. The debenture is due on May 15, 2013 and carries no interest, with an effective interest rate of 561.35% . The debenture is convertible at the lower of $0.45 and 65% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions. The debenture is also subject to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $2,584,615. On February 19, 2013, $154,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.077 per share in accordance with the terms of the agreement. On March 8, 2013, $154,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.077 per share in accordance with the terms of the agreement. On March 15, 2013, $190,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.095 per share in accordance with the terms of the agreement. On April 23, 2013, $161,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.0805 per share in accordance with the terms of the agreement. On May 13, 2013, $150,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.075 per share in accordance with the terms of the agreement. On May 30, 2013, $180,000 in face value of the debenture was converted to 2,400,000 common shares at a price of $0.075 per share in accordance with the terms of the agreement. On July 9, 2013, $90,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.045 per share in accordance with the terms of the agreement. On August 14, 2013, $44,326 in face value of the debenture was converted to 844,300 common shares at a price of $0.525 per share in accordance with the terms of the agreement. On September 19, 2013, $63,000 in face value of the debenture was converted to 1,400,000 common shares at a price of $0.045 per share in accordance with the terms of the agreement. The debenture was extended on July 23, 2013 for 12 months and will expire on May 15, 2014. As of September 30, 2013, the debenture has a remaining balance of $759,499 in fair value ($493,674 in face value).

On September 17, 2012, the Company entered into an amended agreement to revise the conversion price of the debenture entered into on May 15, 2012. The debenture is now convertible at the lower of $0.20 and 65% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions.

27



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

7. Convertible Promissory Notes

On February 13, 2013, the Company entered into a securities purchase agreement with one investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with an aggregate face value of $1,100,000, at an issuance discount of $100,000; resulting in $1,000,000 net proceeds to the Company. On February 13, 2013, $100,000 net proceeds were received with an issuance discount of $10,000 for an aggregate face value of $110,000. On April 24, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On June 4, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On June 27, 2013, $50,000 net proceeds were received with an issuance discount of $5,000 for an aggregate face value of $55,000. On August 14, 2013, $75,000 net proceeds were received with an issuance discount of $7,500 for an aggregate face value of $82,500. On August 13, 2013, $110,000 in face value of the note was converted to 1,585,714 common shares at a price of $0.0735 per share in accordance with the term of the agreement. As of September 30, 2013, total net proceeds of $225,000 were received with an issuance discount of $22,500 for an aggregate face value of $247,500. There is no guarantee the investor will make additional payments. The note of $247,500 is due on February 13, 2016 and carries a one time interest rate of 5% over the term of note, with an effective interest rate of 171.61% . The note is convertible at the lower of $0.25 and 70% of the lowest reported sales price of the common stock for the 20 days immediately prior to conversion date subject to various prescribed conditions. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $353,571. During the period ended September 30, 2013, an interest expense of $990 was accrued.

Effective March 1, 2013, the Company entered into another securities purchase agreement with another investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with an aggregate face value of $672,000, at an issuance discount of $72,000; resulting in $600,000 net proceeds to the Company.

On March 1, 2013, $150,000 net proceeds were received with an issuance discount of $18,000 for an aggregate face value of $168,000. The note of $168,000 is due on March 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $336,000.

28



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

7. Convertible Promissory Notes - Continued

On April 1, 2013, an additional $150,000 of net proceeds were received with an issuance discount of $18,000 for an aggregate face value of $168,000. The note of $168,000 is due on April 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $336,000.

On May 1, 2013, an additional $100,000 of net proceeds were received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on May 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

On June 1, 2013, an additional $100,000 of net proceeds were received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on June 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

On July 1, 2013, the final tranche of $100,000 of net proceeds were received with an issuance discount of $12,000 for an aggregate face value of $112,000. The note of $112,000 is due on July 1, 2014 and carries no interest, with an effective interest rate of 561.36% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on March 1, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior to the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $224,000.

29



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

7. Convertible Promissory Notes - Continued

Effective September 13, 2013, the Company entered into another securities purchase agreement with an investor. Pursuant to the terms of the agreement, the investor acquired a convertible promissory note with aggregate net proceeds of $500,000,

On September 16, 2013, $250,000 net proceeds were received. The note of $250,000 is due on March 16, 2015 and carries an annual interest rate of 15%, with an effective interest rate of 227.33% . The note is convertible at the lower of 50% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to (i) the closing date on September 16, 2013 or (ii) 50 % of the lowest reported sale price for the 20 days prior the conversion date of the Note. The convertible note has a fixed stated principal amount but is not convertible into a fixed number of shares, so the conversion feature is considered an imbedded derivative. However, the convertible note as a standalone instrument is to be measured at its fair value in accordance with ASC 480-10-25-14, rather than have its conversion feature bifurcated and reported separately. The fair value at issuance was $500,000. During the period ended September 30, 2013, an interest expense of $1,563 was accrued.

Pursuant to the agreement, the final tranche of $250,000 net proceeds was received in October 2013. The investor has the option during the 18 months period following September 13, 2013 to purchase additional convertible notes upon the same term and conditions for up to $1,500,000.

Along with the promissory note issued on February 13, 2013, the Company issued warrants for 540,540 shares of the Company at an exercise price of $0.185 expiring February 13, 2018, 263,158 shares of the Company at an exercise price of $0.190 expiring April 24, 2018, 297,619 shares of the Company at an exercise price of $0.168 expiring June 4, 2018, 400,000 shares of the Company at an exercise price of $0.125 expiring June 27, 2018 and 334,821 shares of the Company at an exercise price of $0.224 expiring August 14, 2018 respectively. Along with the promissory note issued on March 1, 2013, the Company issued warrants to acquire a total of 3,632,433 shares of the Company for a period of five years at an exercise price of $0.185. Along with the promissory note entered on September 16, 2013, the Company issued warrants to acquire a total of 2,777,778 shares of the Company for a period of five years at an exercise price of $0.09.

The warrants bear a cashless exercise provision. The warrants also include anti-dilution protection with respect to lower priced issuances of common stock or securities convertible or exchangeable into common stock, which provision resulted in derivative liability treatment under ASC topic 815-10-55. Fair values at issuance totaled $94,594, $1,126,054, $50,000, $50,595, $48,000, $75,000 and $368,333 for warrants issued on February 13, 2013, March 1, 2013, April 24, 2013, June 4, 2013, June 27, 2013, August 14, 2013 and September 16, 2013 respectively.

On September 6, 2013, 3,632,433 warrants were exercised for 2,375,052 common shares of the Company at a deemed price of $0.19 in accordance with the terms of the agreement. A loss of $83,546 was recorded when the warrants were valued prior to the warrants exercise. On September 23, 2013, 540,540 warrants were exercised for 1,293,717 common shares of the Company at a deemed price of $0.04 in accordance with the term of the agreement. A loss of $2,432 was recorded when the warrants were valued prior to the warrants exercise.

30



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

7. Convertible Promissory Notes - Continued

The Company used the Lattice Model for valuing warrants using the following assumptions:

  . Risk-free interest rates: 0.70% - 1.65%
  . Term: 5 years
  . Dividend yield: 0%
  . Underlying stock prices: $0.12 - $0.31
  . Volatilities: 485% - 489%

At September 30, 2013, the warrants were valued at $476,585 resulting in a gain of $62,826 in the period ended September 30, 2013. The corresponding debt discount of the promissory notes was accreted to interest expense over the terms of notes of 3 years, 1 year and 18 months respectively. During the period ended September 30, 2013, an accretion of $91,972 was recognized as interest expense.

                   
    Warrants     Weighted     Weighted  
    Outstanding     Average     Average  
          Exercise     Remaining  
          Price     life  
Balance, June 30, 2013   5,133,750   $  0.180     4.71 years  
   Warrants issued   3,112,599   $  0.104     4.95 years  
   Exercised   (4,172,973 ) $  0.185     -  
   Cancelled   -   $  -     -  
   Expired   -   $  -     -  
Balance, September 30, 2013   4,073,376   $  0.117     4.89 years  

8. Related Party Transactions

During the period ended September 30, 2013, the Company incurred consulting fees of $61,000 (2012 - $9,000) with directors and officers.

As of September 30, 2013, the Company was obligated to a director for a non-interest bearing demand loan with a balance of $45,332 (June 30, 2013 - $45,332). The Company plans to pay the loan back as cash flows become available.

These transactions are in the normal course of operations and are measured at the exchange amount of consideration established and agreed to by the related parties.

31



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

9. Going Concern and Liquidity Considerations

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at September 30, 2013, the Company had a working capital deficiency of $1,257,165 and an accumulated deficit of $34,052,764. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.

The ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtaining additional financing to continue operations, explore and develop the mineral properties and the discovery, development and sale of ore reserves.

In response to these problems, management intends to raise additional funds through public or private placement offerings.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

10. Commitments

Employment Agreements

On January 12, 2012, the Company entered into an employment agreement with a director and officer. Commencing on January 12, 2012, the director and officer will be employed for 24 months ending on January 12, 2014. Pursuant to the agreement, annual salary of US$120,000 is payable monthly in cash or if the Company does not have available cash, in shares of the Company’s common stock.

On May 1, 2012, the Company entered into an employment agreement with an officer. Commencing on May 1, 2012, the officer will be employed for 12 months ending on May 1, 2013. Pursuant to the agreement, annual salary of US$100,000 is payable monthly or in more frequent installments in cash. On May 1, 2012, the officer received 26,041 common shares of the Company at a market price of $0.96 per share for a total of $25,000 as a signing bonus (Note 3). The agreement expired on May 1, 2013.

Consulting Agreements

On January 12, 2012, the Company entered into two consulting agreements with consultants to provide services as members of the Board of Directors in regards to the Company’s management and operations. The compensation for the services to be provided by each consultant will be 150,000 shares of the Company’s common stock issuable at the beginning of each year from an effective date of April 27, 2011 to April 27, 2014, of which 150,000 shares have already been issued to each consultant in each of their first, second and third years of service (Note 3).

32



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

10. Commitments - Continued

On May 15, 2012, the Company entered into a consulting agreement with a contractor to provide services in regards to the Company’s management and operations. Resulting from the consulting agreement the contractor became an officer of the Company. Commencing on May 15, 2012, the officer will be employed for 12 months ending on May 15, 2013. Pursuant to the agreement, a monthly salary of US$3,000 is payable in cash. On May 15, 2012, the officer received 40,323 common shares of the Company at a market price of $0.62 per share for a total of $25,000 as a signing bonus (Note 3). The agreement was terminated and replaced by a new agreement on March 15, 2013. Pursuant to the new agreement, a monthly salary of US$12,000 is payable in cash and/or common shares of the Company at the discretion of the Company for six months starting March 15, 2013. On September 15, 2013, the contract was renewed for an additional four months expiring December 2013.

On March 1, 2013, the Company entered into an agreement with a contractor to provide the services regarding the Company’s management and operation. Pursuant to the agreement, the contractor will receive a number of common shares of the Company valued at $8,000 and $8,000 in cash per month for five months starting March 1, 2013. The contract expired in July 2013.

On May 1, 2013, the Company entered into an agreement with a consultant to provide consulting services in regards to the Company’s operation. Pursuant to the agreement, the consultant will receive $8,333.33 per month in cash and/or common shares of the Company starting from May 1, 2013 and will continue for a period of eight months.

On June 3, 2013, the Company entered into an agreement with a consultant to provide consulting services of internship-market research and financial modeling. Pursuant to the agreement, the consultant will receive $2,000 per month in cash for two months starting June 3, 2013. The contract expired in July 2013.

On July 25, 2013, the Company entered into a Consulting Agreement with Advanced Capital Trading, LLC, pursuant to which Advanced Capital will perform financial consulting services for the Company for a period of three months with an extension of an additional three months based on performance, such services to commence effective August 1, 2013. Compensation payable to Advanced Capital of $10,000 was paid upon execution of the Consulting Agreement.

On September 16, 2013, the Company and Advanced Capital entered into an Expanded Services Agreement which extended the term of the commitment for an additional three months through January 2014.

Acquisition of Tero Oilfield Services Ltd

On August 20, 2013, the Company entered into a letter of intent with Tero Oilfield Services Ltd. (“Tero”), a private company, pursuant to which Tero agreed to sell to the Company 75% of the issued and outstanding common shares of Tero (“Acquisition”) in exchange for an aggregate of $1,500,000, comprised of:

  i).

a non-refundable cash deposit of $50,000 to the shareholder of Tero within 10 days of entering the LOI (US$48,832 paid)

     
  ii).

a payment of $950,000 in cash at the earlier of closing or December 1, 2013 to the shareholder of Tero

     
  iii).

a secured convertible debenture to the shareholder of Tero in the amount of $500,000 payable on December 1, 2014 (the “Debenture”). The Debenture shall be convertible into common shares at a price determined by the Company and Tero prior to close of the Acquisition

In connection with the LOI and the Acquisition, the Company shall loan $500,000 to Tero for the settlement of debt owed to Smith Group Holdings Inc.

33



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

11. Subsequent Events

Acquisition of Blue Tap Resources

On June 11, 2013, the Company entered into a letter of intent for the acquisition of Blue Tap Resources (“Blue Tap”).

Pursuant to the agreement, the Company will purchase not less than 51% of the issued and outstanding securities of Blue Tap. This purchase will be undertaken initially by the making available of $150,000 CDN to be used by Blue Tap, under the Company’s fund control and supervision, for the purposes of carrying out the required step to obtain approval for, and the return of, the facility to active operation as a water disposal facility. The Company will agree to make available an additional $150,000 CDN to be applied toward liability security deposits required under the Alberta Regulatory Framework at the time which it is required. The first two payments of $150,000 to Blue Tap for the aggregate of $300,000 shall be considered a bridge loan, with such terms and repayment provisions to be specified in the Transaction Agreement, until and unless the following conditions are satisfied for the funding of the additional $150,000. Provided that initial efforts to return the facility to revenue producing status are successful and efforts toward obtaining approvals to move the facility to Class 1A waste designation are ongoing with progress satisfactory to the Company, an additional $150,000 CDN will be made available for purposes of continued facility development. Upon funding of $450,000 CDN under the preceding terms, the Company, through its wholly owned subsidiary, Alta Disposal Ltd., shall be considered to have purchased a 51% equity interest in Blue Tap.

Closing of the transaction was subject to a number of conditions. The parties negotiated the definitive terms of the Transaction Agreement.

As of September 30, 2013, CDN $10,000 (US $10,170) was paid by the Company as a deposit.

On July 29, 2013, in anticipation of the completion of a formal agreement with Blue Tap embodying the terms of the LOI, the Company entered into a Convertible Debenture Agreement (the “Debenture”) with Blue Tap pursuant to which the Company has agreed to deliver to Blue Tap up to CDN$300,000 (approximately USD$291,000) payable in two installments of CDN$150,000 deliverable respectively upon execution of the Debenture, and within 5 business days following receipt of regulatory approval for the reactivation of Blue Tap’s waste water disposal facility. Delivery of the first installment of CDN$150,000 has been satisfied. The funds advanced shall be secured against all present and future assets and undertakings of Blue Tap and shall be convertible at the Company’s option into a number of common shares of Blue Tap equal to 51% of its issued and outstanding voting stock. In the event that the Company does not acquire a 51% interest in Blue Tap, the principal amount of the Debenture shall be payable in full by July 30, 2014. The principal amount will bear no interest until maturity, whereafter it will bear interest of 8% per annum.

On October 18, 2013, the Company, through its wholly owned subsidiary, Alta Disposal Ltd., completed the acquisition of 51% of shares of Blue Tap for total payment of $450,000CDN. As of September 30, 2013, CDN $300,000 (US$294,908) was paid regarding the acquisition.

34



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

The acquisition of Blue Tap was completed through the Company’s newly incorporated, wholly owned subsidiary, Alta Disposal Ltd., which was formed in the Province of Alberta for the sole purpose of the transaction with Blue Tap. Concurrent with the closing of the acquisition, Alta entered into a Unanimous Shareholders and Management Agreement (the “Shareholders Agreement”) dated October 18, 2013 with Excel Petroleum Ltd. (which holds 49% of Blue Tap) and Blue Tap itself. Pursuant to the Shareholders Agreement, Alta may continue to fund the current capital requirements of Blue Tap up to an aggregate of $420,000 in consideration of additional shares of Blue Tap at the rate of 163,250 shares (equivalent to approximately 5% of Blue Tap’s common shares on a diluted basis) for each $105,000 funded until Alta holds an aggregate of 70% of Blue Tap’s outstanding common shares. If Alta elects to fund the on-going capital requirements of Blue Tap beyond the aggregate of $870,000 any such funds advanced by Alta will be deemed to be funds loaned by Alta to Blue Tap on a non-interest bearing, unsecured bridge loan basis. Any such funds provided to Blue Tap will be repayable from cash flow generated by Blue Tap. Funds loaned prior to June 30, 2014 will not be due and payable until June 30, 2014 and thereafter will not be due and payable until at least 6 months following the date of any such loan.

The Shareholders Agreement additionally provides for the engagement of Valeura Energy Inc. as the operator of Blue Tap’s lands, wells, the facilities, pipelines and disposal wells pursuant to an Operating Agreement between Blue Tap and Valeura dated July 9, 2013. Valeura will retain a 10% working interest in Blue Tap’s lands until completion of the initial work on the disposal well project and will re-convey that interest to Blue Tap provided that Blue Tap has paid Valeura a cash payment of $2,500 per month for acting as Operator of the Disposal Well and the Lands and upon payment of an amount of $10,000 to Valeura upon completion of the project. The disposal well work program must be mutually approved by Blue Tap and Valeura. Blue Tap will be responsible for all costs and expenses relating to the work program.

35



Lithium Exploration Group, Inc.
(An Exploration Stage Company)
Notes to Consolidated Interim Financial Statements
September 30, 2013
(Unaudited)

11. Subsequent Events – Continued

Issuances of common shares

On October 1, 2013, the Company issued 66,667 common shares at a market price of $0.12 per share for consulting fees.

On October 1, 2013, the Company issued 71,716 common shares at a weighted average price of $0.1162 per share for consulting fees.

On October 9, 2013, the Company issued 1,300,000 common shares at a deemed price of $0.045 per share for debt conversion.

On October 15, 2013, the Company issued 95,643 common shares at a market price of $0.0941 per share for consulting fees.

On October 18, 2013, the Company converted 20,000,000 preferred shares to common shares on a one for one basis.

On October 23, 2013, the Company issued 501,355 common shares for warrants exercise.

On November 11, 2013, the Company issued 1,387,500 common shares at a deemed price of $0.042 per share for an aggregate of $58,275 pursuant to a conversion of a convertible note. .

The Company has evaluated subsequent events from October 1, 2013 through the date of this report, and determined there are no other items to disclose.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. 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 such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our”, and “our company” mean Lithium Exploration Group, Inc. and our wholly owned subsidiary, Alta Disposal Ltd., an Alberta, Canada corporation, unless otherwise indicated.

Corporate History

We were incorporated on May 31, 2006 in the State of Nevada under the name “Mariposa Resources, Ltd.” Effective November 30, 2010, we changed our name to “Lithium Exploration Group, Inc.,” by way of a merger with our wholly-owned subsidiary Lithium Exploration Group, Inc., which was formed solely for the change of name.

Our executive offices are located at 3200 N. Hayden Road, Suite 235, Scottsdale, Arizona 85251, and our telephone number is (480) 641-4790. We also have an office at 840 6th Ave SW Suite 300, Calgary, Alberta T2P 3E5. The phone number for our Calgary office is 403-930-1925.

We have one wholly-owned subsidiary, Alta Disposal Ltd. (formerly 1617437 Alberta Ltd.), an Alberta, Canada corporation. On October 18, 2013, our company, through our wholly owned subsidiary, Alta Disposal Ltd., completed the acquisition of 51% of shares of Blue Tap Resources Inc. for total payment of $450,000CDN. As of September 30, 2013, CDN $300,000 (US$294,908) was paid regarding the acquisition.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

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Our Current Business

We are an exploration-stage company that engages principally in the acquisition, exploration, and development of resource properties

On June 29, 2011, we entered into a securities purchase agreement with Hagen Investments Ltd., as modified on September 17, 2012. Pursuant to the terms of the agreement, Hagen acquired convertible debentures with an aggregate total of $1,500,000. $1,000,000 was paid on June 29, 2011 and $500,000 was paid on July 12, 2011. The release of the full $1,500,000 to us is governed by the terms of an escrow agreement entered into on the same day. The debenture initially carried an interest rate of 12% per annum and was convertible at $0.83 per share subject to various prescribed conditions. Along with the debentures, we issued warrants to acquire a total of 1,204,819 shares of our common stock for a period of 5 years. Pursuant to a registration rights agreement entered into with Hagen on June 29, 2011, we were required to file a registration statement for the shares underlying the convertible debentures, as well as the warrants, within 30 days of the closing of the initial $1,000,000 and ensure that the registration statement is declared effective by the Securities and Exchange Commission within 120 days of the closing. The registration was made effective on February 29, 2012, but because effectiveness was granted following 120 days from closing of the registration rights agreement, we incurred a 10% penalty on all convertible debentures registered pursuant to the agreement. Accordingly, whereas the conversion price of the debentures was previously the lesser of (i) 65% of the lowest reported sale price of our common stock for the 20 trading days immediately prior to the conversion date, or (ii) $0.83, the discounted conversion price became the lesser of (i) 55% of the lowest reported sale price of our common stock for the 20 trading days immediately prior to the conversion date, or (ii) $0.83. All securities under the securities purchase agreement have been converted.

On November 8, 2011, we entered into a letter agreement with Glottech-USA. Pursuant to the terms of the agreement, we were granted an exclusive license to use and distribute the technology within the Swan Hills region of Alberta as well as a non-exclusive right to distribute the technology within Canada.

We previously made the following payments in association with the production of a working unit of Glottech-USA’s technology:

  A.

$25,000 on March 21, 2011 in consideration for entering into the letter agreement dated March 17, 2011;

  B.

$75,000 on May 27, 2011 in consideration for continuance of the March 17, 2011 agreement; and

  C.

$700,000 on May 27, 2011 in consideration for a licensing and technology payment.

As part of the November 8, 2011 agreement, our officer and director, Alexander Walsh, agreed to provide Glottech-USA with the option, for a period of 12 months from delivery of the first unit, to acquire 2,000,000 shares of our common stock currently held by him, for a total price of $1.00. Additionally, if, for any reason, Mr. Walsh failed to deliver the 2,000,000 shares of our common stock to Glottech-USA, we agreed to issue the shares from treasury.

On June 12, 2012, we filed a complaint against Glottech-USA in the Court of Common Pleas of Chester County, Pennsylvania, alleging that Glottech-USA misused our funds and was in breach of our agreements that called for Glottech-USA to deliver one initial unit of the mechanical ultrasound technology. We further alleged that Glottech-USA was financially insolvent and unable to fulfill its promises to us.

On June 12, 2012, we filed a complaint with the Court of Common Pleas of Chester County, Pennsylvania against Glottech-USA, LLC, Eldredge, Inc., and the Eldredge Companies, Inc. The complaint sought an order of the Court granting possession of the unit to our company. As the unit is currently located on the property of Eldredge, Inc., and the Eldredge Companies, Inc., these companies were included as defendants in the complaint. The Eldredge defendants were subsequently dismissed from the lawsuit.

Effective August 14, 2012, we entered into an option agreement with GD Glottech International to protect our license and distribution rights in the event that Glottech-USA became unable to perform and honor its obligations to us.

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Pursuant to the terms of the option agreement, we were required to provide an initial amount of $150,000 to be held in escrow for the option to obtain a license on the patent rights, as set forth in the option agreement. On September 1, 2012, Glottech-USA’s license to the technology expired and also on September 1, 2012, we exercised this option agreement and released the funds to GD Glottech International.

On October 1, 2012, we entered into a license agreement and a sales agency agreement with GD Glottech, regarding GD Glottech International’s proprietary and patented mechanical ultrasound technology for use in water purification in the process of separation of salt and other minerals from lithium bearing brine produced from oil and gas operations. The license agreement and sales agency agreement expands and replaces all prior agreements among our company, GD Glottech International and Glottech-USA, LLC regarding our rights to use and sell the mechanical ultrasound technology, included in our letter of intent dated November 18, 2011, and our option agreement dated August 14, 2012.

Pursuant to the sales agency agreement we have been appointed as sales agent for the patented mechanical ultrasound technology within Canada. Our appointment will be exclusive within the field of non petro-chemical mining and non-exclusive in all other fields of use. In consideration of the sales agency rights, we agreed to issue to GD Glottech International 2,000,000 common shares in our capital stock, which obligation has been satisfied through the transfer to GD Glottech International of 2,000,000 shares held by our officer and director, Alexander Walsh. It was the explicit intention of the parties that this share transfer fulfills the prior obligations of Alexander Walsh and our company with respect to the option contemplated in the March and November 2011 agreements with Glottech-USA. We will receive a royalty in respect of sales of the technology secured by us. The term of the initial agreement will be for 5 years with the possibility of extension if sales targets are achieved.

Pursuant to the license agreement, we have obtained the exclusive right to use the mechanical ultrasound technology within the field of non-petro-chemical mining within the territory of Canada. We may also sublicense our rights under the license in respect of one or more units of the technology to any entity operating within the field of use in which we own or beneficially own at least a 20% equity interest. GD Glottech International has agreed to supply us with up to 5 technology units per 12-month period from the effective date of the license term, which will start from the month of delivery of the unit of the technology. The first unit of the technology provided under the license will be provided at no additional cost to us and subsequent units shall be subject to a fee based on the then current retail price of the units. If we sublicense any of our rights, the term of the applicable license will be for 5 years from the date the applicable unit is delivered. Pursuant to the license agreement, GD Glottech International shall provide ongoing technical assistance and training in respect of our use of the technology at our cost.

In consideration of the license, we will pay to GD Glottech International a royalty based on the tonnage of water produced by our use of the technology in accordance with the agreement. A minimum annual royalty will be applicable. The term of the license agreement shall be for an initial period of 5 years and shall be renewable for additional terms of 5 years provided that we satisfy the minimum royalty requirements during each period.

GD Glottech International’s technology is designed to separate suspended solids from water (brine), which is one step in the process that we are taking to produce commercially viable minerals. The technology produces extremely high temperatures, which destroy organic substances such as bacteria and other toxic agents. We believe that GD Glottech International's technology can provide lower costs of operation as well as reduced time for site clean-up than traditional methods of water treatment. We anticipate using this application to extract dissolved solids like lithium, potassium, and magnesium from oil field brine. The disposal of produced water (brine) from oil and gas production in Alberta is a significant environmental issue for the province and presents a considerable economic issue for producers. We intend to use the technology on our Valleyview Property in Alberta, in cooperation with oil and gas producers, to treat and dispose of their produced water while monetizing the minerals that are contained within that produced water stream that is being brought to the surface during the oil and gas production process. As we own the MAIM (Metals and Industrial Minerals) claims to the minerals on the Valleyview Property, the minerals contained in their produced water stream fall under our rights. While we have had discussions with oil and gas consultants and oil operators regarding their difficulties in treating the brine at some of their fields, we have no formal agreements in place.

39


The technical process is based on the use of mechanical ultrasound generated through the production of a series of cavitations. Mechanical ultrasound is a machine-produced sound of a frequency above the upper limit of the normal range of human hearing. Cavitations are the rapid formation and collapse of bubbles in liquids, caused by the movement of something such as a propeller or by waves of high-frequency sound. The production of mechanical ultrasound allows GD Glottech International’s technology to distill the fluid stock. Using mechanical ultrasound for distillation has been attempted before, but the external energy requirement needed to produce the mechanical ultrasound was far too expensive to make it commercially viable. GD Glottech International’s technology uses the energy released during the cavitations in order to make it commercially viable from an economic perspective. During these cavitations, a millisecond of energy is released. During this release, temperatures can reach 5,000 degrees centigrade.

On October 19, 2012, GD Glottech International moved to intervene as an interested party in the litigation pending against Glottech-USA. GD Glottech International cited its role as owner of the patents as a basis for intervening in the litigation against Glottech-USA. We believe GD Glottech International’s entry into the litigation against Glottech-USA is favorable to our cause in the litigation.

On October 22, 2012, the Court of Common Pleas in Chester County, Pennsylvania, granted our motion to amend our complaint against Glottech-USA to add claims for fraud and damages reflective of the malfeasance which we allege against Glottech-USA and its officers.

On December 12, 2012, GD Glottech International removed the management of Glottech-USA and appointed itself as the manager of Glottech-USA. On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to dissolve Glottech-USA in Mississippi on the basis that Glottech-USA was unable to meet its financial obligations and could not finish or deliver the unit to us.

On December 19, 2012, an attorney purportedly acting on behalf of Glottech-USA filed a motion in the lawsuit pending in Chester County, Pennsylvania, seeking possession of the unit.

GD Glottech International immediately filed a motion to quash Glottech-USA’s motion and for sanctions against the law firm that filed the motion. We also filed a motion, seeking disqualification of the law firm that purported to represent Glottech-USA on the basis that the new management for Glottech-USA had fired the law firm and, as such, the law firm no longer had authority to represent Glottech-USA.

On April 25, 2013, we attended a hearing on the motions pending in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on any of the motions and, instead, stayed the case as to Glottech-USA until December 2013 pending the outcome of the lawsuit seeking dissolution of Glottech-USA.

Given pending litigation against Glottech-USA, and the uncertainties naturally inherent of any litigation (particularly as to outcome and timing thereof), we have moved to assure continuity of our licensing rights through entering into, and exercising, the option to contract directly with the technology inventor and patents owner, GD Glottech International. Thus, regardless of the outcome of the litigation, or indeed any action or inaction of Glottech-USA, our interest in the technology is assured.

On March 28, 2012, we entered into a securities purchase agreement with Hagen, as modified on May 15, 2012 and September 17, 2012. Pursuant to the terms of the agreement, within 45 days Hagen will acquire convertible debentures with an aggregate total of $1,680,000, at an original issuance discount of $180,000, resulting in $1,500,000 net proceeds to us.

40


On May 15, 2012, we received $1,500,000 from Hagen and closed the securities purchase agreement. In conjunction with this closing we issued the convertible debenture in the amount of $1,680,000. The debenture was due on May 15, 2013, carries no interest, and is convertible at the lower of $0.45 per share or 65% of the lowest reported price of our common stock over the 20 trading days immediately prior to the date of conversion. Additionally, we issued Hagen a warrant to acquire 3,333,333 shares of our common stock for a period of five years. On September 17, 2012, we entered into an agreement to modify pricing mechanisms of the warrant and the convertible debenture in the original securities purchase agreement such that the exercise price per share of the common stock under the warrant shall be $0.20, subject to adjustment, and the conversion price of the debenture shall be the lesser of (i) 65% of the lowest reported sale price of the common stock for the 20 trading days immediately prior to the conversion date, or (ii) $0.20. Excluding the modifications to the exercise price of the warrant and to reduce the conversion price of the debenture, the original securities purchase agreement dated March 28, 2012, will remain un-amended and in full force and effect. The debenture was extended and will expire on May 15, 2014.

On February 13, 2013, we entered into a securities purchase agreement with JMJ Financial. Pursuant to the terms of the agreement, our company will also enter into a convertible promissory note in the principal amount of $1,100,000 (for consideration of up to $1,000,000), of which $100,000 shall be paid to our company upon closing of the convertible promissory note and a common stock purchase warrant for the purchase of up to 540,540 shares of our common stock at an exercise price of $0.185 for a period of five years. The convertible promissory note shall have a maturity date of February 13, 2016. The remainder of the convertible debenture can be drawn down on by mutual agreement from JMJ Financial and our company.

On February 19, 2013, we entered into a securities purchase agreement, with an effective date of March 1, 2013, with JDF Capital Inc. Pursuant to the terms of the agreement, our company has issued a secured convertible promissory note in an aggregate principal amount of $672,000 and a warrant to purchase 3,632,433 shares of our company’s common stock with an exercise price of $0.185 per share for an aggregate exercise price of $672,000 for a period of five years, for consideration of $600,000 (original issue discount of $72,000 in lieu of interest), of which $150,000 shall be paid to our company upon closing on March 1, 2013. The note shall have a maturity date of 12 months from each tranche of consideration, as set out in the note. Additional payments of $150,000 are due on April 1, 2013, $100,000 on May 1, 2013, $100,000 on June 1, 2013, and $100,000 on July 1, 2013 to satisfy the aggregate amount of $600,000 as part of the February 19, 2013 agreement. The March, April, May, June and July payments have been received by our company.

Effective October 1, 2012, Alexander Walsh, our company's president and director, established a 10b5-1 Sales Plan in connection with an overall asset diversification strategy. The plan was made effective on October 1, 2012. Under his 10b5-1 Plan, Mr. Walsh may sell shares of our common stock, not to exceed 270,000 shares over the term of the plan. The plan expired on November 30, 2012. The authorized sale price of the shares shall be a limit price, such that sales should only be effected if the market price on the sale day is greater than or equal to eighteen cents $.18 per share. The sale of our company’s common stock owned by Mr. Walsh pursuant to his 10b5-1 Plan was scheduled to occur at regular intervals during the months of October and November 2012, provided that a designated minimum share price is met. Between the effective date of the plan on October 1, 2012 and its expiration on November 30, 2013, Mr. Walsh sold an aggregate of 270,000 shares of our common stock under the plan. Sales transactions occurring under Mr. Walsh’s 10b5-1 Plan were disclosed publicly through Form 4 filings with the SEC and are subject to the restrictions and filing requirements of Rule 144.

Effective February 27, 2013, Alexander Walsh, our company's president and director, established a 10b5-1 Sales Plan in connection with an overall asset diversification strategy. The plan was made effective on March 7, 2013. Under his 10b5-1 Plan, Mr. Walsh may sell a number of shares of our company's common stock not to exceed 10% of the daily volume on any trading day during the term of the plan. The plan expired on May 27, 2013. The authorized sale price of the shares shall be a limit price, such that sales may only be made if the market price on the day of sale is greater than or equal to $0.20 per share, subject to adjustment for capital alterations. The sale of our company’s common stock owned by Mr. Walsh pursuant to his 10b5-1 Plan was scheduled to occur at regular intervals until May 27, 2013, provided that a designated minimum share price is met. Between the effective date of the plan on March 7, 2013 and its expiration on May 27, 2013, Mr. Walsh sold an aggregate of 90,000 shares of our common stock under the plan. Sales transactions occurring under Mr. Walsh’s 10b5-1 Plan were disclosed publicly through Form 4 filings with the SEC and are subject to the restrictions and filing requirements of Rule 144.

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Effective June 4, 2013, Alexander Walsh, our company's president and director, established a 10b5-1 Sales Plan in connection with an overall asset diversification strategy. The plan was made effective on June 4, 2013. Under his 10b5-1 Plan, Mr. Walsh may sell a number of shares of our company's common stock not to exceed 10% of the daily volume on any trading day during the term of the plan. The plan expired on September 1, 2013. The authorized sale price of the shares shall be limited to not trading more than 10% of the daily volume on any trading day during the plan. The sale of our company’s common stock owned by Mr. Walsh pursuant to his 10b5-1 Plan was scheduled to occur at regular intervals until August 27, 2013, provided that a designated minimum share price is met. Between the effective date of the plan on June 4, 2013 and August 27, 2013, Mr. Walsh sold an aggregate of 320,000 shares of our common stock under the plan. Sales transactions occurring under Mr. Walsh’s 10b5-1 Plan were disclosed publicly through Form 4 filings with the SEC and are subject to the restrictions and filing requirements of Rule 144.

On May 1, 2013, we entered into a consulting agreement with Alexander Koretsky whereby, Mr. Koretsky has agreed to provide certain consulting duties and services as requested by our company. The agreement is effective May 1, 2013 and will continue for a period of eight months. As compensation, our company has agreed to pay to Mr. Koretsky a salary of $8,333.33 per month in cash, common shares of our company, or in both cash and common shares of our company, at the sole discretion of our company. Where Mr. Koretsky is paid in common shares of our company, such shares have been previously registered on a Form S-8 registration statement, filed with the United States Securities and Exchange Commission on January 30, 2013.

On June 11, 2013, we entered into a letter of intent with Blue Tap Resources pursuant to which we agreed to acquire not less than 51% of the outstanding securities of Blue Tap in consideration of an aggregate investment of $450,000 in Blue Tap’s waste water disposal facility located in Morinville, Alberta. The closing of the transaction is subject to a number of conditions precedent, including but not limited to completion of due diligence and the negotiation of a definitive long form agreement.

On December 16, 2010, we entered into an assignment agreement with Lithium Exploration VIII Ltd. (not related to our company) to acquire an undivided 100% right, title and interest in and to certain mineral permits located in the Province of Alberta, Canada. Lithium Exploration VIII and Golden Virtue Resources Inc. (formerly First Lithium Resources Inc.) (not related to our company) had entered into an underlying option agreement dated October 6, 2010, which option agreement and interest have been assigned to our company.

On December 31, 2012, our company entered into an amending agreement to amend an original payment requirement of the assignment agreement of CAD$100,000 due on January 1, 2013 to the following payments:

  1.

CAD$20,000 (USD$20,000) cash payment due on January 1, 2013; and

  2.

CAD$80,000 (USD$80,000) by a 15% one year promissory note starting January 1, 2013.

The note was interest free until March 31, 2013. After March 31, 2013, interest accrued on the principal balance then in arrears at the rate of 15% per annum. No payments are due and payable until December 31, 2013. Further, at any time, Lithium Exploration VIII and Golden Virtue may have elected to convert the remaining balance of the note and accrued interest into common shares of our company at 75% of the closing market price of our company’s common shares on the election day.

On July 3, 2013, Lithium Exploration VIII and Golden Virtue elected to convert the note and accrued interest in the combined aggregate amount of CAD$83,057.53 (USD$78,743) into common shares of our company. Pursuant to this election, we issued an aggregate of 954,461 shares of our common stock pursuant to the note and election referred to above at the price of USD$0.0825.

On July 25, 2013, we entered into a consulting agreement with Advanced Capital Trading, LLC, pursuant to which Advanced Capital will perform financial consulting services for our company for a period of three months with an extension of an additional three months based on performance, such services to commence effective August 1, 2013. Compensation payable to Advanced Capital of $10,000 was paid upon execution of the consulting agreement.

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On September 16, 2013, our company and Advanced Capital entered into an expanded services agreement which extended the term of the commitment for an additional three months through January 2014.

On July 29, 2013, in anticipation of the completion of a formal agreement with Blue Tap embodying the terms of the letter of intent, we entered into a convertible debenture agreement with Blue Tap pursuant to which we have agreed to deliver to Blue Tap up to CDN$300,000 (approximately USD$291,000) payable in two installments of CDN$150,000 deliverable respectively upon execution of the convertible debenture, and within 5 business days following receipt of regulatory approval for the re-activation of Blue Tap’s waste water disposal facility. Delivery of the first and second installments totalling CDN$300,000 has been satisfied and the acquisition was finalized as of October 18, 2013. The funds advanced shall be secured against all present and future assets and undertakings of Blue Tap and shall be convertible at our option into a number of common shares of Blue Tap equal to 51% of its issued and outstanding voting stock. In the event that we do not acquire a 51% interest in Blue Tap, the principal amount of the convertible debenture shall be payable in full by July 30, 2014. The principal amount will bear no interest until maturity, whereafter it will bear interest of 8% per annum.

Effective August 1, 2013, we entered into a joint venture agreement with Blue Tap pursuant to which our company and Blue Tap will operate certain lands and facilities including a disposal well in the Morinville Area of Alberta.

On August 21, 2013, we entered into a letter of intent with Tero Oilfield Services Ltd. Pursuant to the letter of intent, Tero agreed to sell and we agreed to purchase 75% of the issued and outstanding common shares of Tero in exchange for an aggregate of $1,500,000, comprised of:

  1.

a non-refundable cash deposit of $50,000 to the shareholder of Tero within 10 days entering the letter of intent (paid);

     
  2.

a payment of $950,000 in cash at the earlier of closing or December 1, 2013 to the shareholder of Tero;

     
  3.

a secured convertible debenture to the shareholder of Tero in the amount of $500,000 payable on December 1, 2014. The debenture shall be convertible into our common shares at a price to be determined by us and Tero prior to the close of the acquisition; and

As further consideration for the acquisition, we will loan $500,000 to Tero for the settlement of debt owed to Smith Group Holdings Ltd.

Effective September 15, 2013, we entered into a consulting agreement with International Compass, LLC for the services of Bryan Kleinlein as chief financial officer of our company for the term of the agreement is four months. As compensation, our company agreed to pay to International Compass $12,000 per month during the term payable in cash and/or common shares registered on Form S-8. The value of the shares of our company issued as compensation, if any, shall be based on the weighted average trading price of the shares of our company in the five trading days immediately preceding the date(s) which the shares are due. Mr. Kleinlein was first appointed as our company’s chief financial officer on May 15, 2012.

On September 13, 2013, we entered into a securities purchase agreement with JDF Capital Inc., pursuant to which JDF Capital has agreed to provide our company with an aggregate investment of $500,000 in consideration of our issuance of convertible promissory notes and common share purchase warrants.

On September 16, 2013 JDF Capital funded a first installment of $250,000 in consideration of a secured convertible promissory note in the amount of $306,250, being $250,000 and 18 months prepaid interest at 15%. The note has a maturity date of 18 months from September 16, 2013. As additional consideration, we have also issued to JDF Capital 2,777,778 warrants with each warrant exercisable for the purchase of 1 common share for a period of five years. The exercise price will be $0.09 per share, subject to anti-dilution adjustment. JDF Capital may, in the alternative, exercise the warrants on a cashless basis in the event the shares underlying the warrants are not registered in a registration statement within 6 months of the securities purchase agreement. The cashless exercise price will be the quotient obtained by dividing [(A-B) (X)] by (A), where:

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  (A)

= the volume weighted average price on the trading day immediately preceding the date on which JDF Capital elects to exercise the warrant by means of a cashless exercise;

     
  (B)

= the cash exercise price of $ 0.09, as adjusted for anti-dilution; and

     
  (X)

= the number of warrant shares that would be issuable upon exercise of the warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

The second $250,000 installment of the financing was paid on October 1, 2013, pursuant to which we issued a second convertible promissory note upon the same terms. Additional warrants with an aggregate exercise price of $250,000 will also be issued with the number of underlying shares to be based on the lowest closing price of our common shares in the 20 trading days preceding the October 15, 2013 closing, multiplied by 150%. JDF Capital may, in the alternative, exercise the warrants on a cashless basis in the event the shares underlying the warrants are not registered in a registration statement within 6 months of the securities purchase agreement.

Once issued, each convertible promissory note will be convertible in whole or in part at JDF Capital’s option before or after maturity into shares of our common stock at a conversion price equal to a 50% discount to the lowest closing price of our common shares in the 20 trading days preceding (i) the date of the purchase agreement; or (ii) the conversion date. Notwithstanding the conversion right, JDF will not be entitled to hold in excess of 9.99 percent of our issued and outstanding common shares at any time.

JDF Capital will have the option during the 18 month period following September 13, 2013 to purchase additional convertible notes upon the same terms and conditions for up $1,500,000 in additional financing.

On October 24, 2012, we entered into a share exchange agreement dated October 18, 2012, with Alexander Walsh, our president and director. Pursuant to the agreement, on October 25, 2012 we issued to Mr. Walsh 20,000,000 Series A Convertible Preferred shares in our capital stock in consideration of the cancellation and return to treasury of 20,000,000 shares of our common stock held by Mr. Walsh. The Series A Convertible Preferred Shares have a par value of $0.001 per share and are convertible on a one for one basis into shares of our common stock after a one year hold period. There are no other preferential rights attached to the Series A Convertible Preferred Shares.

On October 18, 2013, we issued 20,000,000 common shares of our capital stock to Mr. Walsh pursuant to a conversion notice from Mr. Walsh under the share exchange agreement for the right to convert his 20,000,000 Series A Convertible Preferred shares converted on a one for one basis into common shares of our capital stock.

On October 18, 2013 we completed the acquisition of 51% of the outstanding securities of Blue Tap Resources Inc., a corporation formed under the laws of the Province of Alberta, Canada, pursuant to a letter of intent with Blue Tap dated June 11, 2013.

In accordance with the letter of intent, we acquired, through our wholly owned subsidiary, Alta Disposal Ltd., 51% of the outstanding securities of Blue Tap (being 510,000 common shares) in consideration of an aggregate investment of CDN$450,000 (approximately USD$436,000) in Blue Tap’s waste water disposal facility located in Morinville, Alberta, where Blue Tap holds a 100% working interest in 17 freehold mineral leases. There are currently 2 standing natural gas wells and 1 disposal well located on the leases, including water disposal facilities, tanks and equipment. Payment of an initial CDN$300,000 (USD$291,000) of the CDN$450,000 aggregate investment was made pursuant to a secured convertible debenture which has been fully converted into common shares of Blue Tap. The Blue Tap leases are subject to a 3% gross overriding royalty held by Mr. Vincent Murphy pursuant to a gross overriding royalty agreement dated June 30, 2013. The royalty is payable on all fluids separated, treated, or otherwise enhanced for sale on the lease property.

The acquisition of Blue Tap was completed through our, wholly owned subsidiary, Alta Disposal Ltd., which was formed in the Province of Alberta for the sole purpose of the transaction with Blue Tap. Concurrent with the closing of the acquisition, Alta entered into a unanimous shareholders and management agreement (the “Shareholders Agreement”) dated October 18, 2013 with Excel Petroleum Ltd. (which holds 49% of Blue Tap) and Blue Tap itself.

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Pursuant to the Shareholders Agreement, Alta may continue to fund the current capital requirements of Blue Tap up to an aggregate of $420,000 in consideration of additional shares of Blue Tap at the rate of 163,250 shares (equivalent to approximately 5% of Blue Tap’s common shares on a diluted basis) for each $105,000 funded until Alta holds an aggregate of 70% of Blue Tap’s outstanding common shares. If Alta elects to fund the on-going capital requirements of Blue Tap beyond the aggregate of $870,000 any such funds advanced by Alta will be deemed to be funds loaned by Alta to Blue Tap on a non-interest bearing, unsecured bridge loan basis. Any such funds provided to Blue Tap will be repayable from cash flow generated by Blue Tap. Funds loaned prior to June 30, 2014 will not be due and payable until June 30, 2014 and thereafter will not be due and payable until at least 6 months following the date of any such loan.

Other terms of the Shareholders Agreement include:

  • the board of directors of Blue Tap will consist of 3 directors including 2 nominees of Alta and 1 nominee of Excel.
  • Alexander Walsh will serve as chairman of the board of directors, president and chief executive officer of Blue Tap.
  • Approval of the shareholders holding not less than 60% of Blue Tap shares will be required to remove or appoint officers of Blue Tap.
  • Unanimous approval of the shareholders will be required in order to (i) effect capital alterations; (ii) declare dividends except following the completion of a fiscal year end and on a pro-rata basis to all shareholders; or (iii) wind-up; dissolve; or reorganize the corporation or sell or lease substantially all of its assets.
  • Alta will otherwise have sole discretion and authority in respect of any and all management and operational decisions relating to the corporation.
  • Each shareholder of Blue Tap will have a right of first refusal to purchase all shares sought to be sold by the other shareholder.
  • Customary restrictions on the encumbrance and disposition of shares.

The Shareholders Agreement additionally provides for the engagement of Valeura Energy Inc. as the operator of Blue Tap’s lands, wells, the facilities, pipelines and disposal wells pursuant to an operating agreement between Blue Tap and Valeura dated July 9, 2013. Valeura will retain a 10% working interest in Blue Tap’s lands until completion of the initial work on the disposal well project and will re-convey that interest to Blue Tap provided that Blue Tap has paid Valeura a cash payment of $2,500 per month for acting as operator of the disposal well and the lands and upon payment of an amount of $10,000 to Valeura upon completion of the project. The disposal well work program must be mutually approved by Blue Tap and Valeura. Blue Tap will be responsible for all costs and expenses relating to the work program.

On November 11, 2013, we issued 1,387,500 common shares to JMJ Financial at a deemed price of $0.042 per share for an aggregate of $58,275 pursuant to a conversion of a convertible note.

Results of Operations

We have generated no revenues since inception and have incurred $295,821, in operating expenses for the three month period ended September 30, 2013 and $30,046,177 from inception.

The following provides selected financial data about our company for the three month periods ended September 30, 2013 and 2012.

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Three months ended September 30, 2013 and 2012.

    Three months     Three months  
    ended     ended  
    September 30,     September 30,  
    2013     2012  
Revenue $  Nil   $  Nil  
Operating expenses (loss) $  (295,821 ) $  (385,767 )
Other income (expenses):            
         Interest expense $  (258,218 ) $  (1,764,785 )
         Gain (loss) on derivative liability $  (41,485 ) $  (676,095 )
Net loss $  (595,524 ) $  (1,474,457 )

Operating expenses for the three months ended September 30, 2013 decreased as a result of decreases in advertising expenses, general and administrative expenses, mining expenses, professional fees, travel expenses and wages.

Liquidity and Capital Resources

The following table provides selected financial data about our company as of September 30, 2013, and June 30, 2013, respectively.

Working Capital

    As at     As at  
    September 30,     June 30,  
    2013     2013  
Total current assets $  161,068   $  292,646  
Total current liabilities $  1,418,233   $  1,768,670  
Working capital (deficit) $  (1,257,165 ) $  (1,476,024 )

Cash Flows

    Three Months     Three Months  
    ended     ended  
    September 30,     September 30,  
    2013     2012  
Net cash provided by (used in) operating activities $  (210,426 ) $  (557,784 )
Net cash provided by (used in) investing activities $  (343,740 ) $  Nil  
Net cash provided by (used in) financing activities $  425,000   $  Nil  
Increase (Decrease) in cash $  (129,166 ) $  (557,784 )

We had cash of $119,458 as of September 30, 2013 compared to cash of $248,624 as of June 30, 2013. We had a working capital deficit of $1,257,165 as of September 30, 2013 compared to a working capital deficit of $1,476,024 as of June 30, 2013.

The report of our auditors on our audited consolidated financial statements for the fiscal year ended June 30, 2013, contains a going concern qualification as we have suffered losses since our inception. We have minimal assets and have achieved no operating revenues since our inception. We have depended on loans and sales of equity securities to conduct operations. Unless and until we commence material operations and achieve material revenues, we will remain dependent on financings to continue our operations.

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Anticipated Cash Requirements

We estimate that our expenses over the next 12 months will be approximately $1,400,000 as described in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

Description   Estimated     Estimated  
    Completion     Expenses  
    Date     ($)  
General and administrative   12 months   $  250,000  
Mining expenses   12 months   $  50,000  
Professional fees   12 months   $  150,000  
Tero Oilfield Services acquisition requirement   1 month   $  950,000  
Total       $  1,400,000  

We intend to meet our cash requirements for the next 12 months through the use of the cash we have on hand and through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. We currently do not have any other arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Inflation

The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies and Estimates

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The consolidated financial statements include the accounts of our company and our subsidiary Alta Disposal Ltd. Intercompany accounts and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of our company. Significant estimates that may materially change in the near term include the valuation of derivative liabilities and the underlying warrants, as well as fair value of investments.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. Our company had $119,458 and $248,624 in cash and cash equivalents at September 30, 2013 and June 30, 2013, respectively.

Concentration of Risk

Our company maintains cash balances at a financial institution which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for banks located in the US. As of September 30, 2013 and June 30, 2013, our company had $Nil and $25,935, respectively, in deposits in excess of federally insured limits in its US bank. Our company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash in bank accounts.

Prepaid Expenses

Prepaid expenses mainly consist of legal retainers and deposit paid to obtain a license on patent rights. Legal retainers will be expensed in the period when services are completed. Shares issued for investor relations are amortized as investor relation expenses over the service term.

Start-Up Costs

In accordance with FASC 720-15-20 “Start-Up Costs,” our company expenses all costs incurred in connection with the start-up and organization of our company.

Mineral Acquisition and Exploration Costs

Our company has been in the exploration stage since its formation on May 31, 2006 and has not yet realized any revenue from its planned operations. It is primarily engaged in the acquisition, exploration, and development of mining properties. Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

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Concentrations of Credit Risk

Our company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. Our company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. Our company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Net Income or (Loss) per Share of Common Stock

Our company has adopted FASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding during the period.

Potentially dilutive securities are not presented in the computation of EPS since their effects are anti-dilutive.

Foreign Currency Translations

Our company’s functional and reporting currency is the US dollar. All transactions initiated in other currencies are translated into US dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the US dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.

No significant realized exchange gain or losses were recorded from inception (May 31, 2006) to September 30, 2013.

Comprehensive Income (Loss)

FASC Topic No. 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. From inception (May 31, 2006) to September 30, 2013, our company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception (May 31, 2006) to September 30, 2013.

Risks and Uncertainties

Our company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.

Environmental Expenditures

The operations of our company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon our company vary greatly and are not predictable. Our company's policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.

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Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

Warrants

We value our warrants with provisions resulting in derivative liabilities at fair value using the lattice model according to ASC-815-10-55. We revalue our warrants at the end of every period at fair value and record the difference in other income (expense) in the consolidated statement of operations.

Convertible Debentures

We value our convertible debentures with provisions resulting in beneficial conversion features from the embedded derivative at fair value according to ASC-840-10-25-14, rather than have its conversion feature bifurcated and reported separately due to ASC-815-15-25-1b. Because the value of the derivative related to the warrant exceeds the proceeds of the loan, our company allocated 100% of the proceeds to the warrant derivative and took a day one loss for the difference between the proceeds and the fair value of the warrants, resulting in a debt discount on the full fair value of the debenture because no proceeds were available to be allocated to the debt or its beneficial conversion feature. That debt discount is accreted to interest expense over the stated life of the note using the interest method in accordance with ASC 470-20-35-7a and 835-30-35-2. Unaccreted debt discount on the date of conversion is accreted to interest expense on that date.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The carrying amounts of our company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, deposit, accounts payable and accrued liabilities, and due to a related party approximate their fair values because of the short maturity of these instruments.

Our company’s Level 3 financial liabilities consist of the derivative liability of our company’s secured convertible promissory notes and debentures issued to investors, and the derivative warrants issued in connection with these convertible promissory notes and debentures. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Our company used a lattice model which incorporates transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

50



Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. Our company is in the process of adopting specific internal control mechanisms with our board and officers’ collaboration to ensure effectiveness as we grow. We have engaged an outside consultant to assist in adopting new measures to improve upon our internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Other than as set out below, we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

On June 12, 2012, we filed suit against Glottech-USA in the Court of Common Pleas of Chester County, Pennsylvania, alleging that Glottech-USA misused our funds and was in breach of our agreements that called for Glottech-USA to deliver one initial unit of the mechanical ultrasound technology. We further alleged that Glottech-USA was financially insolvent and unable to fulfill its promises to us.

On June 12, 2012, we filed a complaint with the Court of Common Pleas of Chester County, Pennsylvania against Glottech-USA, LLC, Eldredge, Inc., and the Eldredge Companies, Inc. The complaint seeks an order of the Court granting possession of the unit, in its current state, to our company. As the unit is currently located on the property of Eldredge, Inc., and the Eldredge Companies, Inc., these companies were included as defendants in the complaint.

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On August 27, 2012, we filed a motion to amend our complaint to include claims of breach of trust and fiduciary duty, breach of good faith and fair dealing, breach of contract, conversion of funds, fraud, and the imposition of a constructive trust. We believe that this action is necessary to protect our interest against possible misuse of funds by Glottech-USA, LLC and its principals. We will also seek damages as appropriate.

On October 19, 2012, GD Glottech International moved to intervene as an interested party in the litigation pending against Glottech-USA. GD Glottech International cited its role as owner of the patents as a basis for intervening in the litigation against Glottech-USA. We believe GD Glottech International’s entry into the litigation against Glottech-USA is favorable to our cause in the litigation.

On October 22, 2012, the Court of Common Pleas in Chester County, Pennsylvania, granted our motion to amend our complaint against Glottech-USA to add claims for fraud and damages reflective of the malfeasance which we allege against Glottech-USA and its officers.

On December 12, 2012, GD Glottech International removed the management of Glottech-USA and appointed itself as the manager of Glottech-USA. On the same day, Larry Nesbit, Mark Siegel and Ron Fender filed a motion to dissolve Glottech-USA in Mississippi on the basis that Glottech-USA was unable to meet its financial obligations and could not finish or deliver the unit to us.

On December 19, 2012, an attorney purportedly acting on behalf of Glottech-USA filed a motion in the lawsuit pending in Chester County, Pennsylvania, seeking possession of the unit.

GD Glottech International immediately filed a motion to quash Glottech-USA’s motion and for sanctions against the law firm that filed the motion. We also filed a motion, seeking disqualification of the law firm that purported to represent Glottech-USA on the basis that the new management for Glottech-USA had fired the law firm and, as such, the law firm no longer had authority to represent Glottech-USA.

On April 25, 2013, we attended a hearing on the motions pending in the lawsuit filed in Chester County, Pennsylvania. The Court did not rule on any of the motions and, instead, stayed the case as to Glottech-USA until December of 2013 pending the outcome of the lawsuit seeking dissolution of Glottech-USA.

Certain members of Glottech-USA continue to pursue dissolution of the company in Mississippi and its actions clearly establish that Glottech-USA is incapable of fulfilling any obligations under the contracts with us.

We do not believe that Glottech-USA has sufficient capital to complete the technology unit and the former managers of Glottech-USA have admitted these facts in their lawsuit to dissolve Glottech-USA. We have provided full consideration to Glottech-USA and complied with all other agreed upon conditions for the delivery of the unit by Glottech-USA.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 3, 2013, pursuant to the terms of a promissory note under the amended assignment agreement, we issued 954,461 common shares for a combined aggregate amount of CAD$83,057.53 (USD$78,743). All of these shares were issued to one non-US persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

On July 9, 2013, we issued 2,000,000 common shares at a deemed price of $0.045 per share for debt conversion. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

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On August 13, 2013, we issued 1,585,714 common shares at a market price of $0.0735000 per share for debt conversion. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On August 14, 2013, we issued 844,300 common shares at a market price of $0.0525 per share for debt conversion. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On September 6, 2013, we issued 2,375,052 common shares at a market price of $0.045 per share for debt conversion. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On September 19, 2013, we issued 1,400,000 common shares at a deemed price of $0.045 per share for debenture conversion of $96,923. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On September 23, 2013, we issued 1,293,717 common shares at a deemed price of $0.04 per share for warrants exercise of $56,486. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On October 25, 2012, we issued to Mr. Walsh, our president and director, 20,000,000 Series A Convertible Preferred shares in our capital stock in consideration of the cancellation and return to treasury of 20,000,000 shares of our common stock held by Mr. Walsh. The Series A Convertible Preferred Shares have a par value of $0.001 per share and are convertible on a one for one basis into shares of our common stock after a one year hold period. There are no other preferential rights attached to the Series A Convertible Preferred Shares. The securities were issued in reliance on Section 4(2) of the Securities Act of 1933.

On October 18, 2013, we issued 20,000,000 common shares of our capital stock to Mr. Walsh pursuant to a conversion notice from Mr. Walsh under the share exchange agreement for the right to convert his 20,000,000 Series A Convertible Preferred shares converted on a one for one basis into common shares of our capital stock. The securities were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended.

On November 11, 2013, we issued 1,387,500 common shares to JMJ Financial at a deemed price of $0.042 per share for an aggregate of $58,275 pursuant to a conversion of a convertible note. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Description
Number  
(3)

(i) Articles of Incorporation; and (ii) Bylaws

3.1

Articles of Incorporations (incorporated by reference to our Registration Statement on Form SB-2 filed on September 20, 2006)

3.2

Bylaws (incorporated by reference to our Registration Statement on Form SB-2 filed on September 20, 2006)

3.3

Articles of Amendment dated May 31, 2006 (incorporated by reference to our Current Report on Form 8-K filed on April 21, 2009)

3.4

Certificate of Amendment dated April 8, 2009 (incorporated by reference to our Current Report on Form 8-K/A filed on April 23, 2009)

3.5

Articles of Merger dated November 17, 2010 (incorporated by reference to our Current Report on Form 8-K filed on December 7, 2010)

3.6

Articles of Incorporation of Blue Tap Resources Inc. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

3.7

Certificate of Amendment of Blue Tap Resources Inc. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

3.8

Bylaws of Blue Tap Resources Inc. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

3.9

Certificate of Incorporation of 1617437 Alberta Ltd. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

3.10

Articles of Amendment of Alta Disposal Ltd. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

3.11

Bylaws of Alta Disposal Ltd. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

(10)

Material Contracts

10.1

Assignment Agreement between our company and Lithium Exploration VIII Ltd. dated December 16, 2010 (incorporated by reference to our Current Report on Form 8-K filed on January 10, 2011)

10.2

Letter Agreement between our company and Glottech-USA, LLC dated March 17, 2011 (incorporated by reference to our Current Report on Form 8-K filed on May 4, 2011)

10.3

Securities Purchase Agreement between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.4

Registration Rights Agreement between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.5

12% Senior Convertible Debenture between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.6

Escrow Agreement between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.7

Guaranty and Pledge Agreement between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.8

Common Stock Purchase Warrant between our company and Hagen Investments Ltd. dated June 29, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 1, 2011)

10.9

12% Senior Convertible Debenture between our company and Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 13, 2011)

10.10

Common Stock Purchase Warrant between our company and Hagen Investments Ltd. dated July 12, 2011 (incorporated by reference to our Current Report on Form 8-K filed on July 13, 2011)

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Exhibit Description
Number  
10.11

Letter Agreement between our company and Glottech-USA, LLC dated November 18, 2011 (incorporated by reference to our Current Report on Form 8-K filed on November 21, 2011)

10.12

Employment Agreement between our company and Alexander Walsh dated January 12, 2012 (incorporated by reference to our Current Report on Form 8-K filed on January 13, 2012)

10.13

Consulting Agreement between our company and Brandon Colker dated January 12, 2012 (incorporated by reference to our Current Report on Form 8-K filed on January 13, 2012)

10.14

Consulting Agreement between our company and Jonathan Jazwinski dated January 12, 2012 (incorporated by reference to our Current Report on Form 8-K filed on January 13, 2012)

10.15

Securities Purchase Agreement between our company and Hagen Investments Ltd. dated March 28, 2012 (incorporated by reference to our Current Report on Form 8-K filed on April 3, 2012)

10.16

Debenture between our company and Hagen Investments Ltd. dated March 28, 2012 (incorporated by reference to our Current Report on Form 8-K filed on April 3, 2012)

10.17

Debenture between our company and Hagen Investments Ltd. dated May 15, 2012 (incorporated by reference to our Current Report on Form 8-K filed on May 18, 2012)

10.18

Employment Agreement between our company and Alexander Koretsky dated May 1, 2012 (incorporated by reference to our Current Report on Form 8-K filed on June 8, 2012)

10.19

Option Agreement between our company and GD Glottech International, Limited dated August 14, 2012 (incorporated by reference to our Current Report on Form 8-K filed on September 5, 2012)

10.20

Amendment Agreement between our company and Hagen Investments Ltd. dated September 17, 2012 (incorporated by reference to our Current Report on Form 8-K filed on September 18, 2012)

10.21

License Agreement between our company and GD Glottech-International Ltd. dated October 1, 2012 (incorporated by reference to our Current Report on Form 8-K filed on October 10, 2012)

10.22

Sales Agreement between our company and GD Glottech International Ltd. dated October 1, 2012 (incorporated by reference to our Current Report on Form 8-K filed on October 10, 2012)

10.23

Certificate of Designation, Series A Preferred Convertible Stock (incorporated by reference to our Current Report on Form 8-K filed on October 29, 2012)

10.24

Share Exchange Agreement between our company and Alexander Walsh dated October 18, 2012 (incorporated by reference to our Current Report on Form 8-K filed on October 29, 2012)

10.25

Securities Purchase Agreement between our company and JMJ Financial dated February 13, 2013 (incorporated by reference to our Current Report on Form 8-K filed on February 15, 2013)

10.26

Securities Purchase Agreement between our company and JDF Capital Inc. dated February 19, 2013 (incorporated by reference to our Current Report on Form 8-K filed on February 25, 2013)

10.27

Rule 10b5-1 Sales Plan, Client Representations, and Sales Instructions (incorporated by reference to our Current Report on Form 8-K filed on March 15, 2013)

10.28

Consulting Agreement with International Compass, LLC dated effective March 15, 2013 (incorporated by reference to our Current Report on Form 8-K filed on March 29, 2013)

10.29

Letter of Agreement with Blue Tap Resources Inc. dated June 11, 2013 (incorporated by reference to our current report on Form 8-K filed on June 14, 2013)

10.30*

Consulting Agreement with Advanced Capital Trading, LLC dated July 25, 2013

10.31

Convertible Debenture Agreement with Blue Tap Resources Inc. dated July 29, 2013 (incorporated by reference to our Current Report on Form 8-K filed on July 5, 2013)

10.32*

Expanded Consulting Agreement with Advanced Capital Trading, LLC dated September 16, 2013

10.33

Unanimouns Shareholders and Management Agreement among Alta Disposal Ltd., Excel Petroleum Ltd. and Blue Tap Resources Inc. dated October 18, 2013 2013 (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

10.34

Subscription Agreement dated October 18, 2013 between Alta Disposal Ltd. and Blue Tap Resources Inc. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)

55



Exhibit Description
Number  
10.35 Operating Agreement dated July 9, 2013 between Blue Tap Resources Inc. and Valeura Energy Inc. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)
10.36 Gross Overriding Royalty Agreement dated June 30, 2013 between Blue Tap Resources Inc. and Vincent Murphy. (incorporated by reference to our Current Report on Form 8-K filed on October 24, 2013)
(21) Subsidiaries of the Registrant
21.1 Alta Disposal Ltd., an Alberta corporation (wholly-owned)
(31) Rule 13a-14(a)/15d-14(a) Certification
31.1* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
(32) Section 1350 Certification
32.1* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101* Interactive Data Files
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

*

Filed herewith.

   
**

To be filed by amendment pursuant to Section 405(a)(2)(ii) of Regulation S-T.

56


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  LITHIUM EXPLORATION GROUP, INC.
  (Registrant)
   
Date: November 14, 2013 /s/ Alexander Walsh
  Alexander Walsh
  President, Secretary, Treasurer and Director
  (Principal Executive Officer)
   
   
Date: November 14, 2013 /s/ Bryan A. Kleinlein
  Bryan A. Kleinlein
  Chief Financial Officer
  (Principal Financial Officer and Principal Accounting
  Officer)

57