PINX:LEXG Lithium Exploration Group Annual Report 10-K Filing - 6/30/2012

Effective Date 6/30/2012

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

FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2012

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

For the transition period from [   ] to [   ]

Commission file number 333-137481

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

Nevada 06-1781911
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
3200 N. Hayden Road, Suite 235, Scottsdale, AZ 85251
(Address of principal executive offices) (Zip Code)
   
Registrant's telephone number, including area code: 480.641.4790

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange On Which Registered
N/A N/A

Securities registered pursuant to Section 12(g) of the Act:

N/A
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.
Yes [   ]     No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
Yes [   ]     No [X]


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 last 90 days.
Yes [X]     No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]     No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

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 definition 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 [   ] 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 [   ]     No [X]

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

The aggregate market value of Common Stock held by non-affiliates of the Registrant on December 31, 2011 was $13,318,183 based on a $0.54 closing price for the Common Stock on December 30, 2011. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

56,735,734 shares of common stock issued & outstanding as of September 7, 2012

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

Item 1. Business 4
     
Item 1A. Risk Factors 9
     
Item 1B. Unresolved Staff Comments 15
     
Item 2. Properties 15
     
Item 3. Legal Proceedings 19
     
Item 4. Mine Safety Disclosures 19
     
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 19
     
Item 6. Selected Financial Data 20
     
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
     
Item 8. Financial Statements and Supplementary Data 26
     
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 26
     
Item 9A. Controls and Procedures 26
     
Item 9B. Other Information 28
     
Item 10. Directors, Executive Officers and Corporate Governance 28
     
Item 11. Executive Compensation 31
     
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 33
     
Item 13. Certain Relationships and Related Transactions, and Director Independence 35
     
Item 14. Principal Accountants Fees and Services 35
     
Item 15. Exhibits, Financial Statement Schedules 36

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PART I

Item 1.           Business

This annual 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, including the risks in the section entitled “Risk 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 financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this annual report, the terms “we”, “us”, “our company”, mean Lithium Exploration Group, Inc. a Nevada 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 have one wholly-owned subsidiary, 1617437 Alberta Ltd., an Alberta, Canada corporation. 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.

Our Current Business

We are an exploration-stage company that engages principally in the acquisition, exploration, and development of resource properties. Prior to June 25, 2009, we had the right to conduct exploration work on 20 mineral mining claims in Esmeralda County, Nevada. On July 31, 2009, we 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 we entered into an agreement with Beeston Enterprises Ltd., under which our 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 February 14, 2011, we sent notice to Beeston to terminate the option agreement.

On December 16, 2010, we 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. To date, our activities have been limited to our formation, the raising of equity capital and our mining exploration work program.

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On January 18, 2011, we entered into a purchase option agreement with Salta Water Co. and we have acquired a 60% interest on the Salta Aqua claims in Salta Province, Argentina. We have a further option to acquire the remaining 40% interest from Salta Water. On February 1, 2011, we issued 250,000 common shares at a deemed price of $0.10 per share for mining expenses relating to the Salta Aqua Claims. The price of the issued shares was based on the market price of the shares on January 31, 2011.

On January 18, 2012, we elected not to pursue our option to purchase the property at our Salta Project in Argentina. The decision was made after reviewing the geological findings, evaluating both the short- and long-term financial commitments of the option agreement, considering the recent political unrest in Argentina, and, most importantly, the decision to focus our company’s attention on our Valleyview Project in Alberta, Canada.

On March 17, 2011, we entered into a letter agreement between our company and Glottech-USA, LLC, for an acquisition of one initial unit of certain proprietary and patented mechanical ultrasound technology for use in the water treatment in regards to our lithium operations in Alberta, Canada. Our officer and director Alex Walsh met the principals of Glottech-USA in 2009 in the course of operating his consulting company, AW Enterprises LLC. Pursuant to the terms of the agreement, Glottech-USA will assemble and ship to our company one unit of the technology specifically designed for our water treatment purposes and will license the use of the technology. Furthermore, in the event that we have purchased a minimum of five technology units within twelve months from the date of execution, Glottech-USA has agreed that it will neither license nor lease the technology to any third party for the purposes of mineral extraction in the country of Canada.

In exchange for the acquisition of the technology, we have agreed to pay to Glottech-USA a licensing and technology payment in the amount of $800,000 as follows:

  (1)

$25,000 upon execution of the agreement;

     
  (2)

$75,000 within 180 days of the date of execution which shall serve as confirmation by the company of its intent to formally proceed with the intent of the agreement (the “confirmation payment”);

     
  (3)

$700,000 within 10 days of receipt of invoice from Glottech-USA to cover the cost of components and assembly for one technology unit; and monthly royalties, to be paid within 15 calendar days from the receipt of the invoice, in an amount of $2.00 per physical ton of water processed pursuant to the usage of the technology following satisfactory delivery and physical setup of the technology and continuing thereafter for as long as the technology remains in our possession.

In addition, as amended, the agreement provides for the issuance to Glottech-USA of an option to acquire up to 2,000,000 shares of our common stock owned by our president, Alex Walsh. Such option is exercisable for a period of 12 months at a total price of $1.00. The share issuance to Glottech-USA will come from the shares held by president, Alex Walsh. This pledge is written into the terms of the agreement and as such there is no separate pledge agreement between Mr. Walsh and Glottech-USA.

Glottech-USA’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 Glottech-USA'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.

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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 Glottech-USA’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. Glottech-USA’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 5000 degrees Centigrade. As this is a pilot unit, no other units are currently in production.

On November 18, 2011, we entered into a letter agreement with Glottech-USA, LLC, which will govern distribution rights, exclusivity and royalty provisions as they relate to Glottech-USA’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.

Pursuant to the terms of the agreement, we are granted an exclusive license to use and distribute the technology within the Swan Hills region of Alberta as well as the non-exclusive right to distribute the technology within Canada. Glottech-USA has agreed not to distribute, or license, this product within Canada for the term of the agreement to any entities involved in the business of mineral exploration or production. Our distribution rights will be subject to a distribution agreement to be entered into by the two parties.

We will be subject to royalty payments on any revenue created by the use or distribution of the acquired technology. We have applied to the Securities and Exchange Commission for confidential treatment pursuant to Rule 26b-2 of the Securities Exchange Act of 1934 regarding the particulars of the royalty payments. We believe that public disclosure of these terms could potentially damage the ability of Glottech-USA and our company to distribute the technology to other users.

Pursuant to the terms of the agreement we will acquire one initial unit of Glottech-USA’s technology for operations in the Swan Hills region of Alberta. The use of this unit will be subject to a license and lease agreement to be entered into by both parties.

We have 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; and

  C.

$700,000 on May 27, 2011.

The term of the letter agreement, and consequently our ability to distribute the unit of Glottech-USA’s technology, shall be for an initial period of five years, automatically renewable thereafter for successive five-year periods of time so long as we, directly or indirectly through third party purchasers, have licensed five technology units from Glottech-USA per year. The initial year of the contract was waived from this obligation because the initial unit was not delivered to us before May 31, 2012.

Additionally, as part of the letter agreement, Alexander Walsh, our director and officer, will also 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. If, for any reason, Mr. Walsh fails to deliver the 2,000,000 shares of our common stock to Glottech, it will be our responsibility to issue the shares from treasury.

This letter agreement replaces all agreements previously entered into between our company and Glottech-USA.

6


On March 28, 2012, we entered into a securities purchase agreement with one investor. Pursuant to the terms of the agreement, within 45 days the investor 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.

The debentures will be due within 12 months of receipt of funds, will carry no interest, and will be convertible at $0.45 per share subject to various prescribed conditions. Along with the debentures, we will issue warrants to acquire a total of 3,333,333 shares of our common stock for a period of five years at a price of $0.69. The warrants will also include cashless exercise provisions.

On May 15, 2012, we entered into an amendment to the securities purchase agreement to adjust the exercise price of the warrant to be issued in conjunction with the closing of the securities purchase agreement from $0.69 per share to $0.45 per share.

Also on May 15, 2012, we received $1,500,000 from the investor 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 is 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 twenty trading days immediately prior to the date of conversion. Additionally, we issued the investor a warrant to acquire 3,333,333 shares of our common stock for a period of five years at an exercise price of $0.45 per share.

Effective August 14, 2012, we entered into an option agreement with GD Glottech-International, Limited to protect our license and distribution rights in the event that GD-Glottech-USA, LLC 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 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. We exercised this option agreement on September 1, 2012 and released the funds to GD International.

Given pending litigation against GD 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, this option to contract directly with the technology inventor and patents owner, GD International. Thus, regardless of the outcome of the litigation, or indeed any action or inaction of GD USA, our interest in the technology is assured. As the fate of the current prototype is dependent upon the litigation, development of the next-generation prototype will begin shortly under the direction of the technology inventor.

Competition

The mineral exploration industry is highly competitive. We are a new exploration-stage company and have a weak competitive position in the industry. We compete with junior and senior mineral exploration companies, independent producers and institutional and individual investors who are actively seeking to acquire mineral exploration properties throughout the world together with the equipment, labor and materials required to operate on those properties. Competition for the acquisition of mineral exploration interests is intense with many mineral exploration leases or concessions available in a competitive bidding process in which we may lack the technological information or expertise available to other bidders.

Many of the mineral exploration companies with which we compete for financing and for the acquisition of mineral exploration properties have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquiring mineral exploration interests of merit or on exploring or developing their mineral exploration properties. This advantage could enable our competitors to acquire mineral exploration properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development. Such competition could adversely impact our ability to attain the financing necessary for us to acquire further mineral exploration interests or explore and develop our current or future mineral exploration properties.

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We also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to invest in such companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their mineral exploration properties or the price of the investment opportunity. In addition, we compete with both junior and senior mineral exploration companies for available resources, including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, mineral exploration supplies and drill rigs.

General competitive conditions may be substantially affected by various forms of energy legislation and/or regulation introduced from time to time by the governments of the United States and other countries, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for mineral exploration.

In the face of competition, we may not be successful in acquiring, exploring or developing profitable mineral properties or interests, and we cannot give any assurance that suitable oil and gas properties or interests will be available for our acquisition, exploration or development. Despite this, we hope to compete successfully in the mineral exploration industry by:

  • keeping our costs low;
  • relying on the strength of our management’s contacts; and
  • using our size and experience to our advantage by adapting quickly to changing market conditions or responding swiftly to potential opportunities.

Intellectual Property

We have the trademark “Lithium Exploration Group” for the use of mining exploration, namely, lithium exploration services, in class 42 (U.S. CLS. 100 and 101). The registration number is 4,075,565 and was registered on December 20, 2011. We do not have any other intellectual property.

Government Regulation

Any operations at our Lithium properties will be subject to various federal and state laws and regulations in Canada which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. We will be required to obtain those licenses, permits or other authorizations currently required to conduct exploration and other programs. There are no current orders or directions relating to us or to our lithium properties with respect to the foregoing laws and regulations. Such compliance may include feasibility studies on the surface impact of our proposed operations, costs associated with minimizing surface impact, water treatment and protection, reclamation activities, including rehabilitation of various sites, on-going efforts at alleviating the mining impact on wildlife and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that the costs and delays associated with such compliance could become so prohibitive that we may decide to not proceed with exploration, development, or mining operations on any of our mineral properties. We are not presently aware of any specific material environmental constraints affecting our properties that would preclude the economic development or operation of property in Canada.

Environmental Regulations

We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.

While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.

8


Employees

We currently employ three individuals: Alexander Walsh as Chief Executive, Alex Koretsky as Chief Operating Officer, and Shanon Chilson as an administrative assistant and controller. Bryan Kleinlein, a consultant, is serving as our Chief Financial Officer. Outside consultants have been engaged for administrative duties and industry specialties. We also have two other directors, Jon Jazwinski and Brandon Colker, who spend approximately 15 hours per month on various company activities. Mr. Jazwinski’s primary role is to review the geological findings and exploration strategies taken by management at the direction of consultants. Mr. Colker’s primary role is to work with management on research and networking with global industry contacts and capital sources. Mr. Jazwinski and Mr. Colker are both responsible for shaping the direction of our company and assist with the submission of corporate filings.

Research and Development

We have not spent any amounts which have been classified as research and development activities in our financial statements during the last two fiscal years.

Going Concern

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to exit the exploration phase of our company and reach development and revenue. We do not have enough cash on hand to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.

Subsidiaries

We have one wholly-owned subsidiary, 1617437 Alberta Ltd., a company incorporated in the province of Alberta, Canada on July 8, 2011. This subsidiary was formed to stake MAIM (Metallic and Industrial Mineral) rights in Alberta directly from the government. 1617437 Alberta Ltd. presently holds approximately 550,000 acres of MAIM rights in Alberta that were staked between July and December of 2011.

REPORTS TO SECURITY HOLDERS

We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together with our annual audited financial statements upon request. We are required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.

The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.

Item 1A.         Risk Factors

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward-looking statements.” Such forward-looking statements include any projections and estimates made by us and by our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

9


Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements.”

Risks Related to Our Business

We have a limited operating history and as a result there is no assurance we can operate on a profitable basis.

We have a limited operating history. Our company's operations will be subject to all the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered by resource exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of our properties may not result in the discovery of reserves. Problems such as unusual or unexpected formations of rock or land and other conditions are involved in resource exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial reserves, we may decide to abandon our claims and acquire new claims for new exploration or cease operations. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. There can be no assurance that we will be able to operate on a profitable basis.

If we do not obtain additional financing, our business will fail and our investors could lose their investment.

We had cash in the amount of $1,239,603 and working capital deficiency of $2,609,678 as of the period ended June 30, 2012. We currently do not generate any revenues from our operations. Any direct acquisition of a claim under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on potential properties. The requirements are substantial. Obtaining additional financing would be subject to a number of factors, including market prices for resources, investor acceptance of our properties and investor sentiment. These factors may negatively affect the timing, amount, terms or conditions of any additional financing available to us. The most likely source of future funds presently available to us is through the sale of equity capital and loans. Any sale of share capital will result in dilution to existing shareholders.

Because of the speculative nature of exploration of mineral properties, we may never discover a commercially exploitable quantity of minerals, our business may fail and investors may lose their entire investment.

We are in the very early exploration stage and cannot guarantee that our exploration work will be successful, or that any minerals will be found, or that any production of minerals will be realized. The search for valuable minerals as a business is extremely risky. Substantial investment will be required to move the company toward the production of minerals. This may require bringing in a partner to make the necessary investment, but there are no plans at this time for any form of partnership or merger. We can provide investors with no assurance that exploration on our properties will establish that commercially exploitable reserves of minerals exist on our property. Additional potential problems that may prevent us from discovering any reserves of minerals on our property include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of commercially exploitable reserves of minerals on our property, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.

10


We have no known mineral reserves and we may not find any lithium and, even if we find lithium, it may not be in economic quantities. If we fail to find any lithium or if we are unable to find lithium in economic quantities, we will have to suspend operations.

We have no known mineral reserves. Additionally, even if we find lithium in sufficient quantity to warrant recovery, it ultimately may not be recoverable. Finally, even if any lithium is recoverable, we do not know that this can be done at a profit. Failure to locate lithium in economically recoverable quantities will cause us to suspend operations.

Supplies needed for exploration may not always be available. If we are unable to secure exploration supplies we may have to delay our anticipated business operations.

Competition and unforeseen limited sources of supplies needed for our proposed exploration work could result in occasional spot shortages of supplies of certain products, equipment or materials. There is no guarantee we will be able to obtain certain products, equipment and/or materials as and when needed, without interruption, or on favorable terms. Such delays could affect our anticipated business operations and increase our expenses.

Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.

Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims. If this happens, our business will likely fail.

The marketability of natural resources will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources, which may be acquired or discovered by us, will be affected by numerous factors beyond our control. These factors include market fluctuations in lithium pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of mineral resources and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Exploration and production activities are subject to certain environmental regulations, which may prevent or delay the commencement or continuation of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuation of a given operation. Specifically, we may be subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.

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Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The business of mineral exploration and development is subject to substantial regulation under various countries’ laws relating to the exploration for, and the development, upgrading, marketing, pricing, taxation, and transportation of mineral resources and related products and other matters. Amendments to current laws and regulations governing operations and activities of mineral exploration and development operations could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the properties mineral exploration industry generally will not be changed in a manner which may adversely affect our progress and cause delays, inability to explore and develop or abandonment of these interests.

Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of exploration and development. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry. There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions, which may adversely affect our exploration and development activities.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan.

Our success is largely dependent on our ability to hire highly qualified personnel. This is particularly true in highly technical businesses such as resource exploration. These individuals are in high demand and we may not be able to attract the personnel we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.

Our independent certified public accounting firm, in their report on the audited financial statements for the year ended June 30, 2012, states that there is a substantial doubt that we will be able to continue as a going concern.

As of June 30, 2012, we have experienced significant losses since inception. Failure to arrange adequate financing on acceptable terms and to achieve profitability would have an adverse effect on our financial position, results of operations, cash flows and prospects. Accordingly, there is substantial doubt that we will be able to continue as a going concern.

Risks relating to the industry in general

Planned exploration, and if warranted, development and mining activities involve a high degree of risk.

We cannot assure you of the success of our planned operations. Exploration costs are not fixed, and resources cannot be reliably identified until substantial development has taken place, which entails high exploration and development costs. The costs of mining, processing, development and exploitation activities are subject to numerous variables, which could result in substantial cost overruns. Mining for base or precious metals may involve unprofitable efforts, not only from dry properties, but from properties that are productive but do not produce sufficient net revenues to return a profit after accounting for mining, operating and other costs.

Our operations may be curtailed, delayed or cancelled as a result of numerous factors, many of which are beyond our control, including economic conditions, mechanical problems, title problems, weather conditions, compliance with governmental requirements and shortages or delays of equipment and services.

We do not insure against all risks associated with our business because insurance is either unavailable or its cost of coverage is prohibitive. The occurrence of an event that is not covered by insurance could have a material adverse effect on our financial condition.

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The impact of government regulation could adversely affect our business.

Our business is subject to applicable domestic and foreign laws and regulations, including laws and regulations on taxation, exploration, and environmental and safety matters. Many laws and regulations govern the spacing of mines, rates of production, prevention of waste and other matters. These laws and regulations may increase the costs and timing of planning, designing, drilling, installing, operating and abandoning our mines and other facilities. In addition, our operations are subject to complex environmental laws and regulations adopted by domestic and foreign jurisdictions where we operate. We could incur liability to governments or third parties for any unlawful discharge of pollutants into the air, soil or water, including responsibility for remedial costs.

The submission and approval of environmental impact assessments may be required.

Environmental legislation is evolving in a manner which means stricter standards; enforcement, fines and penalties for noncompliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.

Because the requirements imposed by these laws and regulations frequently change, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business.

Decline in mineral prices may make it commercially infeasible for us to develop our property and may cause our stock price to decline.

The value and price of your investment in our common shares, our financial results, and our exploration, development and mining activities may be significantly adversely affected by declines in the price of minerals and other precious metals. Mineral prices fluctuate widely and are affected by numerous factors beyond our control, such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of mineral-producing countries throughout the world. The price of minerals fluctuates in response to many factors, which are beyond anyone’s prediction abilities. The prices used in making the estimates in our plans differ from daily prices quoted in the news media. Because mining occurs over a number of years, it may be prudent to continue mining for some periods during which cash flows are temporarily negative for a variety of reasons. Such reasons include a belief that the low price is temporary, and/or the expense incurred is greater when permanently closing a mine.

We may not have access to all of the supplies and materials we need to begin exploration, which could cause us to delay or suspend operations.

Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies such as dynamite as well as certain equipment like bulldozers and excavators that we might need to conduct exploration. If we cannot obtain the necessary supplies, we will have to suspend our exploration plans until we do obtain such supplies.

Risks Associated with Our Common Stock

Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like NYSE or Amex. Accordingly, shareholders may have difficulty reselling any of the shares.

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Penny stock rules will limit the ability of our stockholders to sell their stock.

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder's ability to buy and sell our stock.

In addition to the penny stock rules described above, FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for its shares.

We do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.

We have never paid dividends and do not intend to pay any dividends for the foreseeable future. To the extent that we may require additional funding currently not provided for in our financing plan, our funding sources may prohibit the declaration of dividends. Because we do not intend to pay dividends, any gain on your investment will need to result from an appreciation in the price of our common stock. There will therefore be fewer ways in which you are able to make a gain on your investment.

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Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.

Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which imposes additional sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement from you prior to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline.

Other Risks

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

Item 1B.         Unresolved Staff Comments

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

Item 2.           Properties

We currently rent an office totaling approximately 1400 square feet located at 3200 N. Hayden Road, Suite 235, Scottsdale, AZ, 85251 for $1930.64 a month. Our telephone number is 480-641-4790.

Valleyview Property

There are more than a hundred active oil or gas wells on our property. Oil and/or gas coexist within the same aquifers as our lithium- and potassium-bearing brines. In recovering the oil and gas, brine is also drawn to the surface, but generally in much larger quantities. The energy operator must process the brine and then separate it from the oil and/or gas. When this process is completed, the brine is returned to the aquifer. Given these circumstances, potential exists for a symbiotic relationship between us and other energy companies, with a result being that we may never have to drill to extract our own resource. Barrick Energy Inc., Paramount Resources, Signalta Resources Ltd, Penn West Petroleum Ltd and Canadian Natural Resources Ltd are among the companies actively operating wells on property for oil and gas deposits. We have rights to any minerals produced from their activity. In addition to lithium and potassium, other rare metals and minerals on the property include calcium, magnesium, iodine, and bromine. There can be no assurance that we will be able to locate and extract commercially viable amounts of lithium or any other minerals. This property is without known reserves and the proposed program is exploratory in nature to comply with the guidance in paragraph (b)(4)(i) of Industry Guide 7. There is significant infrastructure here, including power from a local utility and 12-month road access. At this point we have no intention of doing any drilling or traditional exploration of any kind. We will be sampling and taking the produced water from oil companies that is already coming to the surface and being separated from the oil and gas as part of their operation. Taking possession and processing the minerals and water will require certain permits and royalty agreements with the local and provincial governments.

Location and Access

The property covers approximately 650,000 acres through two contiguous land holdings. Our northern land holdings are approximately 517,000 acres surrounding Valleyview, Alberta and our southern land holdings are approximately 133,000 acres and are located just south and west of Fox Creek, Alberta. The north and south properties are approximately 20 miles apart. Almost all of the property has paved roads and year-round access. Alberta Provincial Highway 43 runs north to south and is the major access road for both properties. The properties are 1.5 hours driving distance from Grand Prairie, Alberta and 3.5 hours driving distance from Edmonton, Alberta.

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16


Ownership Interest

On December 16, 2010, we entered into an assignment agreement with Lithium Exploration VIII Ltd., a Nevada company, in regards to the acquisition of an option interest in the Valleyview Property. First Lithium Resources Inc. and Lithium Exploration VIII had entered into an option agreement dated October 6, 2010, in regards to an option interest in certain mineral permits in Alberta, Canada, which option agreement and interest have been assigned to our company. Specifically, Lithium Exploration acquired an option to acquire a 100% interest in five mineral permits (which are issued on a “per township” basis in Canada) totaling 45,952 hectares (110,000 acres) in Alberta, Canada, which we have assumed.

In regards to the option agreement for the property, our obligations for the property that we have assumed consist of:

 
  • Making payments in the aggregate amount of $500,000 in annual periodic payments escalating from $40,000 to $300,000, to January 1, 2014. Our next payment to First Lithium Resources Inc. is due on or before January 1, 2013.

     
  • Complying with the net smelter royalty payments upon commercial production, which consists of 1% to First Lithium and certain underlying royalties payable to the original property vendor (a 3% net smelter return royalty and a 5% gross overriding royalty, which latter royalty is specific to diamond production).

    The first cash payment of $40,000 has been made by Lithium Exploration VIII, and in addition they also made a payment of $50,000 towards work assessment payments and for maintenance of the permits. In consideration for the assignment, we have paid Lithium Exploration VIII $90,000 in cash.

    History of Operations

    A 1995 report authored by S. Bachu, M. Brulotte and L.P. Yuan of the Alberta Research Council, "Resource Estimates of Industrial Minerals in Alberta Formation Waters," discusses the area in which the Valleyview Property is located as having potential for resources of lithium within formation waters.

    Of the more than 1,511 records in the 1995 AGS study, the well with the highest concentration of lithium (140mg/L or ppm) is located nearly in the center of the Valleyview Property, based on longitude and latitude coordinates. In addition, a second well in the top 50 is located approximately a mile from that well.

    More recently, in January 2010, D.R. Eccles and G.M. Jean of the Alberta Geological Survey (AGS) published "Lithium Ground and Formation Water Geochemical Data," with the intention of enabling present and future companies to better evaluate their targets and characterize their resource estimates by being able to distinguish between background and anomalous concentrations of lithium throughout Alberta. The report, researched during 2009, is a compilation of ground- and formation-water geochemical lithium data from government sources and from AGS data holdings, resulting in 1,511 records.

    Current State and Plan of Operations

    We completed a 12-week sample-testing program on May 31, 2011. We are initiating the process to complete the resource estimates for the Valleyview Project, and hope to have it completed by January 31, 2013. Immediate plans include conducting bulk sampling to be utilized in the design of a separation process to produce battery-grade lithium carbonate, potash (KCl), and magnesium hydroxide. This process is expected to begin in October of 2012. Once the bulk sampling and separation process have been completed we will raise capital to build a pilot scale plant in Valleyview to begin the production of the outlined minerals.

    The substantive steps and timeline for our Valleyview Project for the recent past and coming months are as follows:

     
  • January 1 to January 15, 2012: Receive and integrate aquifer data into APEX technical report and Micromine. Commence block modeling and in-situ resource estimate.

     
  • January 16 to February 28, 2012: Complete resource estimation and create preliminary draft of Resource Technical Report, and, upon review, complete Resource Technical Report. Review of draft of Resource Technical Report and complete final draft of Resource Technical Report. This portion of the project has been completed.

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  • April 1 to August 31, 2012: The following studies were commissioned to expand upon the results of the initial Resource Technical Report. All of the following studies have been commissioned with results to be provided periodically but to be finalized by the end of August 2012.

     

    o

    A QA/QC study was commissioned to define the parameters used for the initial testing program by Maxxam Analytics to ensure accuracy of those tests and future results using the same program. This study will also include duplicate sampling of wells that were tested in 2011 to ensure consistency and accuracy of the 2011 results. We completed this study in July of 2012 and intend to utilize it as the standard for future sampling efforts.

     

    o

    A five-phase study from Niven Fischer in Calgary, Alberta was commissioned to identify the ideal location for a pilot plant including pricing of land leases and environmental considerations for building the plant to process the brine, which we are targeting for mineral production. As part of the five phases, they also provided data on water disposal in the region (volume and pricing), background on oil and gas production in the region, and data on what it would take to license an injection well of our own for water disposal in the region. All five phases of the Niven Fischer study were completed by the end of July 2012.

     

    o

    The University of Alberta has been commissioned to begin lab testing of their mineral processing techniques that were designed in their 2011 study to produce lithium carbonate, potassium chloride, and magnesium hydroxide. This study has been delayed temporarily to allow for the testing of the ultrasonic generator to be completed.

     

    o

    A study was commissioned with the assistance of a former government official with the minerals and mining branch of the Alberta Government to outline the required steps and timelines to obtain the proper approvals for moving the Valleyview Project to a pilot scale project and eventually to full commercial production. This study was completed in June of 2012 and will be utilized in our development plans.

     
  • September 1 to December 31, 2012: Upon completion of all of the studies we will compile all of the data into a business plan and solicit input on next steps with the required firms to build an initial facility to house our pilot plant and ultrasonic technology unit. The planning can begin immediately even if the technology is not ready for delivery to the site on September 1.

    Our total budget for above phase of studies is $150,000 and all of it has been deployed to venders.

    Geology

    In 1993, a data set comprising nearly 130,000 formation water analyses from the Alberta Basin was reviewed for potential economic industrial mineral interest (Hitchon, B., Underschultz, J.R. and Bachu, S. 1993: Industrial mineral potential of Alberta formation waters. Alberta Research Council, Alberta Geological Survey, Open File Report 1993-15, 85 p). The study identified anomalous values of certain elements in Devonian formation waters associated with producing oil and gas wells in the Valleyview and Swan Hills areas of west-central Alberta including brines with up to 140 mg/L lithium. This value is significant considering the median values of lithium in Alberta formation waters is 0.2 mg/L (based on 1,511 analyses; Eccles, D.R. and Berhane, H. (2011): Geological introduction to lithium-rich formation water in Alberta, west-central Alberta; Energy Resources Conservation Board, ERCB/AGS Open FileReport, 36 p.). Further modeling in 1995 (Bachu, S. Yuan, L.P. and Brulotte, M. (1995): Resource estimates of industrial minerals in Alberta formation waters. The Li-rich formation waters appear to be associated with carbonate build-ups of the Leduc Formation (both Leduc north and south) in the Woodbend Group and the Swan Hills Formation of the Beaverhill Lake Group. The Woodbend Group carbonates, including the Leduc and Cooking Lake formations, reach thicknesses of >300 m in places, while the Beaverhill Lake carbonate platform varies in thickness from >150 m in the southern reef portion to around 50 m in the northwest. However, in the Swan Hills area the carbonate platform of the Cooking Lake Formation and the reefs of the Leduc Formation (both of Woodbend Group) directly overlie the Beaverhill Lake Group carbonates, such that it is likely difficult to differentiate between the various formation waters. The source of lithium in oil field waters remains subject to debate. Explanations generally conform with those for Li-rich brine solutions and include recycling of earlier deposits/salars, mixing with pre-existing subsurface brines, weathering of volcanic and/or basement rocks, and transport from hydrothermal volcanic activity, but none of these hypotheses has clearly pointed to the ultimate source for the anomalous values of lithium. However, in a recent isotopic study, Eccles and Berhane (2011) suggested that any viable lithium source model in northwestern Alberta should invoke direct contact between Devonian formation water and the crystalline basement or with immature siliciclastics deposited above the basement (basal Cambrian sandstone, Granite Wash or the Gilwood Member), and mobilization of silicate-bearing fluids to the aquifer.

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    Item 3.           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 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.

    We do not believe that Glottech-USA has sufficient capital to complete the technology unit. Our company does have the capital and believes that a formal complaint with the court of Chester County, Pennsylvania ordering that the unit be delivered to us, is the most efficient and expeditious manner in which to recover the technology unit and prepare it for testing and operations. 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 4.          Mine Safety Disclosures

    Not applicable.

    PART II

    Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

    Our common stock is quoted on the OTC Bulletin Board under the Symbol "LEXG".

    The high and low bid prices of our common stock for the periods indicated below are as follows:

    OTC Bulletin Board
    Quarter Ended (1) High Low
    June 30, 2012 $1.18 $0.38
    March 31, 2012 $0.96 $0.54
    December 31, 2011 $1.95 $0.45
    September 30, 2011 $1.87 $0.86
    June 30, 2011 $10.68 $1.20
    March 31, 2011 $1.42 $0.10
    December 31, 2010 $0.10 $0.10
    September 30, 2010 $0.30 $0.30
    June 30, 2010 $0.40 $0.30

    Our common shares are issued in registered form. VStock Transfer, 77 Spruce St, Suite 201, Cedarhurst, New York 11516 (Telephone: (212)-828-8436; Facsimile: (646) 536-3179) is the registrar and transfer agent for our common shares.

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    On September 7, 2012, the list of stockholders for our shares of common stock showed 35 registered stockholders and 56,735,734 shares of common stock outstanding.

    Dividends

    We have not declared any dividends on our common stock since the inception of our company on March 8, 2006. There is no restriction in our Articles of Incorporation and Bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

    Equity Compensation Plan Information

    As of June 30, 2012, we have not adopted an equity compensation plan under which our common stock is authorized for issuance.

    Purchase of Equity Securities by the Issuer and Affiliated Purchasers

    We did not purchase any of our shares of common stock or other securities during the year ended June 30, 2012.

    Recent Sales of Unregistered Securities

    None.

    Item 6.           Selected Financial Data

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

    Item 7.           Management’s Discussion and Analysis of Financial Condition and Results of Operations

    The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended June 30, 2012 and June 30, 2011 that appear elsewhere in this annual 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 annual report, particularly in the section entitled "Risk Factors" beginning on page 9 of this annual report.

    Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

    Plan of Operation

    Capital Expenditures

    We do not intend to invest in capital expenditures during the twelve-month period ending June 30, 2013.

    General and Administrative Expenses

    We expect to spend $650,000 during the twelve-month period ending June 30, 2013 on general and administrative expenses including legal and auditing fees, rent, office equipment and other administrative related expenses.

    Product Research and Development

    We do not anticipate expending any funds on research and development, manufacturing and engineering over the twelve months ending June 30, 2013.

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    Purchase of Significant Equipment

    We do not intend to purchase any significant equipment over the twelve months ending June 30, 2013.

    Results of Operations for the Years Ended June 30, 2012 and 2011

    The following summary of our results of operations should be read in conjunction with our audited financial statements for the years ended June 30, 2012 and 2011.

    Our operating results for the years ended June 30, 2012 and 2011 are summarized as follows:

        Year Ended  
        June 30  
        2012     2011  
                 
    Revenue $  Nil   $  Nil  
    Operating Expenses $  2,430,664   $  24,812,912  
    Net Loss $  3,190,439   $  25,891,334  

    Revenues

    We have not earned revenues since our inception.

    Operating Expenses

    Our operating expenses for the year ended June 30, 2012 and June 30, 2011 are outlined in the table below:

        Year Ended  
        June 30  
        2012     2011  
                 
    Advertising $  113,132   $  27,095  
    Consulting $  274,423   $  111,900  
    Director fees (Note 3) $  318,000   $  17,595,000  
    General and administrative $  49,235   $  13,361  
    Investor relations (Note 3) $  637,600   $  150,400  
    Management fees $  Nil   $  45,000  
    Mining expenses (Note 5) $  465,153   $  6,771,118  
    Professional fees $  313,911   $  84,041  
    Travel $  45,329   $  14,997  
    Wages $  213,881   $  Nil  

    The decrease in operating expenses for the year ended June 30, 2012, compared to the same period in fiscal 2011, was mainly due to a decrease in director and management fees and mining expenses.

    Liquidity and Financial Condition

    As of June 30, 2012, our total current assets were $1,239,603 and our total current liabilities were $3,849,281 and we had a working capital deficit of $2,609,678. Our financial statements report a net loss of $3,190,439 for the year ended June 30, 2012, and a net loss of $29,218,931 for the period from May 31, 2006 (date of inception) to June 30, 2012.

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    We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through equity offerings and loan transactions.

    Cash Flows

        At     At  
        June 30, 2012     June 30, 2011  
                 
    Net Cash (Used in) Operations $  (1,545,792 ) $  (1,251,186 )
    Net Cash Provided by (Used In) Investing Activities $  (197,393 ) $  Nil  
    Net Cash Provided by Financing Activities $  1,972,795   $  2,260,738  
    Cash (decrease) increase during the year $  229,610   $  1,009,552  

    We had cash in the amount of $1,239,603 as of June 30, 2012 as compared to $1,009,993 as of June 30, 2011. We had a working capital deficit of $2,609,678 as of June 30, 2012 compared to working capital deficit of $651,992 as of June 30, 2011.

    Our principal sources of funds have been from sales of our common stock and convertible debentures.

    Anticipated Cash Requirements

    We estimate that our expenses over the next 12 months will be approximately $650,000 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 500,000
    Mining expenses 12 months 100,000
    Professional fees 12 months 50,000
    Total   $650,000

    We intend to meet our cash requirements for the next 12 months through the use of the cash we have on hand. On May 15, 2012, our company entered into a securities purchase agreement. Pursuant to the terms of the agreement, the investor acquired 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 our company. The debenture is due on May 15, 2013 and carries no interest. The debenture is convertible at the lower of $0.43 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. It 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. 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.

    Contractual Obligations

    As a “smaller reporting company,” we are not required to provide tabular disclosure obligations.

    Going Concern

    The audited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

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    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.

    APPLICATION OF CRITICAL ACCOUNTING POLICIES

    Our audited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

    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 $1,239,603 and $1,009,993 in cash and cash equivalents at June 30, 2012 and June 30, 2011, 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 June 30, 2012 and 2011, our company had $1,016,716 and $784,993, 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, 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,” our company expenses all costs incurred in connection with the start-up and organization of our company.

    23


    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.

    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 June 30, 2012.

    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 June 30 2012, our company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception (May 31, 2006) to June 30, 2012.

    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.

    24


    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.

    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, 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.

    Recent Accounting Pronouncements

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

    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. 2012-03 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 our company or their effect on the financial statements would not have been significant.

    25


    Item 7A.         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 8.           Financial Statements and Supplementary Data

    Our audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

    The following audited financial statements are filed as part of this annual report:

      Report of Registered Independent Public Accountant.
       
      Audited Balance Sheets as at June 30, 2012 and 2011.
       
      Audited Statements of Operations for the years ended June 30, 2012 and June 30, 2011.
       
      Audited Statements of Changes in Stockholders' Equity for the years ended June 30, 2012 and June 30, 2011.
       
      Audited Statements of Cash Flows for the for the years ended June 30, 2012 and June 30, 2011.
       
      Notes to the Financial Statements.

    26


     

     

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

    CONSOLIDATED FINANCIAL STATEMENTS

    June 30, 2012 and 2011

     

     

    F-1


    F-2



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Consolidated Balance Sheets
    As of June 30,

        2012     2011  
              (Restated)  
    ASSETS
                 
    Current            
           Cash and cash equivalents $  1,239,603   $  1,009,993  
           Prepaid expenses   -     647,168  

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

    F-3


    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Consolidated Balance Sheets
    As of June 30,

    Total current assets   1,239,603     1,657,161  
                 
    Investment (Note 8)   197,393     -  
                 
    Total Assets $  1,436,996   $  1,657,161  
                 
                 
    LIABILITIES            
                 
    Current            
           Accounts payable and accrued liabilities $  52,898   $  183,194  
           Derivative liability (Note 6)   2,159,035     2,060,240  
           Due to related party (Note 7)   45,332     47,537  
           Convertible debentures (net of discount of $2,283,600 and $1,800,000) (Note 6)   1,573,743     18,182  
           Accrued interest (Note 6)   18,273     -  
                 
    Total Current Liabilities   3,849,281     2,309,153  
                 
    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: 
           54,416,272 common shares (June 30, 2011 – 51,115,476)
      54,417     51,116  
    Additional paid-in capital   26,752,229     25,325,384  
    Deficit accumulated during the exploration stage   (29,218,931 )   (26,028,492 )
    Total Stockholders’ Deficit   (2,412,285 )   (651,992 )
                 
    Total Liabilities and Stockholders’ Deficit $  1,436,996   $  1,657,161  

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

    F-4



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

                    Cumulative from  
        Year Ended June 30,     Inception  
        2012     2011     (May 31, 2006)
              (Restated)     to June 30, 2012  
                       
    Revenue $  -   $  -   $  -  
                       
    Operating Expenses:                  
       Advertising   113,132     27,095     140,227  
       Consulting fees (Notes 3 & 7)   274,423     111,900     386,323  
       Director fees (Note 3)   318,000     17,595,000     17,913,000  
       General and administrative   49,235     13,361     72,503  
       Investor relations (Note 3)   637,600     150,400     788,000  
       Management fees                  
        -     45,000     45,000  
       Mining expenses (Notes 3 & 5)   465,153     6,771,118     7,287,536  
       Professional fees   313,911     84,041     473,938  
       Travel   45,329     14,997     60,326  
       Wages   213,881     -     213,881  
                       
    Loss from operations   (2,430,664 )   (24,812,912 )   (27,380,734 )
                       
    Other income (expenses)                  
    Interest expense (Note 6)   (3,733,671 )   (1,186,856 )   (4,920,527 )
    Gain on derivative liability (Note 6)   2,973,896     108,434     3,082,330  
                       
    Loss before income taxes   (3,190,439 )   (25,891,334 )   (29,218,931 )
                       
    Provision for Income Taxes (Note 4)   -     -     -  
                       
    Net loss for the Year   (3,190,439 )   (25,891,334 )   (29,218,931 )
                       
    Basic and Diluted Loss per Common Share $  (0.06 ) $  (0.55 )      
                       
    Weighted Average Number of Common Shares Outstanding   54,375,949     47,818,327        

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

    F-5



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
    For the Period of Inception (May 31, 2006) to June 30, 2012

        Common Stock           Deficit          
                    Additional     Accumulated        
        Number of           Paid-in     During the     Stockholders’  
        Shares     Amount     Capital     Exploration 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  
    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(Restated)   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     1,059,211     -     1,062,146  
                                   
    Loss for the year   -     -     -     (3,190,439 )   (3,190,439 )
                                   
    Balance – June 30, 2012   54,416,272   $  54,417   $  26,752,229   $  (29,218,931 ) $  (2,412,285 )

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

    F-6



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
    For the Period of Inception (May 31, 2006) to June 30, 2012

                    Cumulative from  
        Year Ended     Year Ended     Inceptions (May  
        June 30, 2012     June 30, 2011     31, 2006) to June  
              (Restated)     30, 2012  
                       
    Cash Flows from Operating Activities                  
           Net loss for the year $  (3,190,439 ) $  (25,891,334 ) $  (29,218,931 )
           Items not affecting cash:                  
                   Common shares issued for mining expenses                  
                   and related finder’s fees   -     790,000     790,000  
                   Common shares issued for director fees   318,000     17,595,000     17,913,000  
                   Common shares issued for investor relations   -     702,000     702,000  
                   Common shares issued for consulting fees   50,000     -     50,000  
                   Options issued for mining expenses   -     4,940,000     4,940,000  
                   Interest accrued on derivative liability   132,155     -     132,155  
                   Interest expense   3,601,516     1,186,856     4,788,372  
                   Gain on derivative liability   (2,973,896 )   (108,434 )   (3,082,330 )
                       
           Changes in operating assets and liabilities:                  
                   Prepaid expenses   647,168     (646,968 )   -  
                   Accounts payable and accrued liabilities   (130,296 )   181,694     52,898  
    Net cash used in operations   (1,545,792 )   (1,251,186 )   (2,932,836 )
                       
    Cash Flows from Investing Activities                  
         Investment   (197,393 )   -     (197,393 )
    Net cash used in investing activities   (197,393 )   -     (197,393 )
                       
    Cash Flows from Financing Activities                  
           Advance from related party   -     10,738     47,537  
           Repayment to related party   (2,205 )   -     (2,205 )
           Issuance of common shares for cash   -     1,250,000     1,349,500  
           Issuance of convertible debentures   2,000,000     1,000,000     3,000,000  
           Issuance cost of convertible debentures   (25,000 )   -     (25,000 )
    Net cash provided by financing activities   1,972,795     2,260,738     4,369,832  
                       
    Increase in cash and cash equivalents   229,610     1,009,552     1,239,603  
    Cash and cash equivalents - beginning of year   1,009,993     441     -  
    Cash and cash equivalents - end of year $  1,239,603   $  1,009,993   $  1,239,603  
                       
    Supplementary Cash Flow Information                  
           Non-cash investing and financing activities:                  
                     Common stock issued for debt $  1,062,146   $  -   $  1,062,146  
           Cash paid for:                  
                       Interest $  -   $  -   $  -  
                       Income taxes $  -   $  -   $  -  

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

    F-7



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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.

    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 January 18, 2011, the Company entered into a Purchase Option Agreement to acquire an undivided 60% interest in certain mineral claims known as the Salta Aqua Claims located in Salta Province, Argentina (See Note 5). To date, the Company’s activities have been limited to its formation, the raising of equity capital and its mining exploration work program.

    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.

    F-8



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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 1617437 Alberta 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 $1,239,603 and $1,009,993 in cash and cash equivalents at June 30, 2012 and June 30, 2011, 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 June 30, 2012 and 2011, the Company had $1,016,716 and $784,993, 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.

    F-9



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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 June 30, 2012.

    F-10



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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 June 30 2012, the Company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception (May 31, 2006) to June 30, 2012.

    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

    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, 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.

    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.

    F-11



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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. 2012-03 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 year ended June 30, 2012:

    On November 22, 2011, the Company issued 2,000,000 common shares at a deemed price of $0.2925 per share for debenture conversion of $585,000 (Note 6).

    On April 18, 2012, the Company issued 610,795 common shares at a deemed price of $0.352 per share for debenture conversion of $215,000 (Note 6).

    On April 18, 2012, the Company issued 323,637 common shares at a market price of $0.81 for conversion of interest payable and interest expense of $262,146 (Note 6).

    On April 27, 2012, the Company issued 300,000 common shares at a market price of $1.06 per share for director fees (Note 10).

    On May 1, 2012, the Company issued 26,041 common shares at a market price of $0.96 per share for consulting fees (Note 10).

    On May 15, 2012, the Company issued 40,323 common shares at a market price of $0.62 per share for consulting fees (Note 10)

    F-12



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    3. Capital Stock - Continued

    For the year ended June 30, 2011:

    On January 27, 2011, the Company issued 250,000 shares of common stock in a private placement to two unrelated off-shore investors at $1 per share for total cash proceeds of $250,000.

    On April 27, 2011, the Company issued 2,300,000 common shares at a market price of $7.65 per share for director fees.

    On January 18, 2011, the Company issued 250,000 common shares at a market price of $0.10 per share for mining expenses relating to the Salta Aqua Claims (Note 5)

    On March 7, 2011, the Company issued 250,000 common shares at a market price of $0.10 per share for finder’s fees relating to the Salta Aqua Claims (Note 5)

    On April 29, 2011, the Company issued 200,000 common shares at a market price of $3.70 per share for settlement of mineral claims in Clinton Mining District (Note 5)

    On May 10, 2011, the Company issued 190,476 shares of common stock in a private placement to an unrelated off-shore investor at $5.25 per share for total cash proceeds of $1,000,000.

    On June 11, 2011, the Company issued 300,000 common shares at a market price of $2.34 per share for investor relations.

    Effective April 30, 2009, the Company effected a 10 for 1 forward split of its common stock, under which each stockholder of record on that date received ten (10) new shares of the Corporation’s $0.001 par value stock for every one (1) old share outstanding.

    F-13



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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:

                Price Per        
    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         0.810     262,146  
          323,637              
    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  
                         
      Cumulative Totals   54,416,272         $ 21,866,646  

    Of these shares, 32,666,364 were issued to directors and officers of the Company. 17,815,476 were issued to independent investors. 500,000 were issued for mining expenses (Note 5). 300,000 were issued for investor relation expenses. 200,000 were issued for debt settlement. 2,934,432 were issued for debenture and interest conversion (Note 6). There are no preferred shares outstanding. The Company has no stock option plan, warrants or other dilutive securities, other than an option granted to Glottech for 2,000,000 shares (Note 5) and warrants issued to acquire 5,140,562 shares of the Company regarding a convertible debenture (Note 6).

    As per management agreements, the Company is obligated to issue 300,000 common shares to two directors by April 27, 2013 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 and April 27, 2012 respectively.

    F-14



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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 718-740-20 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 June 30, 2012 of $6,307,488 will begin to expire in 2026. Accordingly, deferred tax assets were offset by the valuation allowance that increased by approximately $1,475,522 and $9,109,972 during the years ended June 30, 2012 and 2011, 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 June 30, 2012 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 June 30, 2012. 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, 2012, June 30, 2011, June 30, 2010 and June 30, 2009 are still open for examination by the Internal Revenue Service (IRS).

    F-15



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    4. Provision for Income Taxes - Continued

        2012  
        Amount     Tax Effect (35%)
                 
    Net operating losses $  3,190,439   $  1,116,654  
    Shares issued for consulting fees and director fees   (368,000 )   (128,800 )
    Accretion of debt discount   (1,580,561 )   (553,196 )
    Gain on derivative liability   2,973,896     1,040,864  
                 
    Total   4,215,774     1,475,522  
                 
    Valuation allowance   (4,215,774 )   (1,475,522 )
                 
    Net deferred tax asset (liability) $  -   $  -  

        2011  
        Amount     Tax Effect (35%)  
                 
    Net operating losses $ 2,091,744   $  732,110  
    Shares issued for directors fees, mining expenses, investor relations   19,087,000     6,680,450  
    Accretion of debt discount   18,182     6,364  
    Options granted for mining expenses   4,940,000     1,729,000  
    Gain on derivative liability   (108,434 )   (37,952 )
                 
    Total   26,028,492     9,109,972  
                 
    Valuation allowance   (26,028,492 )   (9,109,972 )
                 
    Net deferred tax asset (liability) $ -   $  -  

    F-16



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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;

      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.

    F-17



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    5. Mineral Property Costs - Continued

    Mineral Claims, Salta Agua Claims

    By agreement dated January 18, 2011, the Company entered into a Purchase Option Agreement to acquire an undivided 60% interest in certain mineral claims known as the Salta Agua Claims located in Salta Province, Argentina.

    To earn an undivided 60% interest in the Property, the Company must:

      i)

    pay to the Optionor a total of US$375,000 as follows:


      a) US$25,000 (paid) upon execution of the agreement;
      b) US$50,000 (paid) within thirty days after the effective date;
      c) US$100,000 on or before January 18, 2012 (not paid);
      d) US$100,000 on or before January 18, 2013;
      e) US$100,000 on or before January 18, 2014;

      ii)

    allot and issue to the Optionor, up to a total of 1,000,000 common shares as follows:


      a) 250,000 Shares within thirty days after the effective date (issued)(Note 3);
      b) 250,000 Shares on or before January 18, 2012 (not issued);
      c) 250,000 Shares on or before January 18, 2013;
      d) 250,000 Shares on or before January 18, 2014;

      iii)

    incur Exploration Expenditures of not less than a cumulative total of US$4,000,000 as follows:


      a) US$250,000 on or before January 18, 2013;
      b) US$500,000 on or before January 18, 2014;
      c) US$1,250,000 on or before January 18, 2015;
      d) US$2,000,000 on or before January 18, 2016.

    Upon completion of the above terms, the Company will acquire the remaining 40% interest in the Property by paying the sum of $6,000,000, payable either in a lump sum due 180 days later, or by paying $3,000,000 at such time and $3,000,000 plus interest at the rate of LIBOR plus 5% interest 12 months later.

    Upon the commencement of Commercial Production, the Company will pay to the Optionor a Royalty of 3% Gross Returns.

    During the year ended June 30, 2011, the Company paid a finder’s fee of $10,000 and issued 250,000 common shares of the Company to the finder. The shares are valued at a market price of $0.10 for a total of $25,000.

    The agreement has been terminated on January 18, 2012 and no further payments are due on this option.

    F-18



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    5. Mineral Property Costs - Continued

    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.

    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.

    On June 12, 2012, the Company filed a compliant 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.

    The option (resulting in additional mining expenses of $4,940,000 was valued using the fair market value of the shares to be issued.

    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. We exerised this option agreement on September 1, 2012 and released the funds to GD International.

    Given pending litigation against GD USA, and the uncertainties natually 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 exerising, this option to contract directly with the technology inventor and patents owner, GD International. Thus, regardless of the outcome of the litigation, or indeed any action or inaction of GD USA, our interest in the technology is assured. As the fate of the current prototye is dependent upon the litigation, development of the next-generation prototype will begin shortly under the direction of the technology inventor.

    F-19



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    6. Convertible Debentures

    On June 29, 2011, the company entered into a securities purchase agreement with one investor. Pursuant to the terms of the agreement, the investor acquired convertible debentures with an aggregate face amount of $1,500,000. The debenture is due on December 28, 2012 and carries an interest rate of 12% per annum, with an effective interest rate of 680.71% . The debenture is convertible at the lower of $0.83 and 55% of the lowest reported sales price of the common stock for the 10 days immediately prior to conversion date subject to various prescribed conditions. The convertible loan 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 debenture as a standalone instrument is to be measure 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 $2,727,273. On November 22, 2011, $585,000 in face value of the debenture was converted to 2,000,000 common shares at a price of $0.2925 per share in accordance with the terms of the agreement. On April 18, 2012, $215,000 in face value of the debenture was converted to 610,795 common shares at a price of $0.352 per share in accordance with the terms of the agreement. During the year ended June 30, 2012, an interest expense of $132,155 was accrued. On April 18, 2012, accrued interest on the debenture was converted to 323,637 common share at the same rate used for conversion of principal.

    On May 15, 2012, the Company entered into another securities purchase agreement with the same 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 $0.43 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. It 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.

    Along with the debenture issued on June 29, 2011, the Company issued warrants to acquire a total of 1,807,299 shares of the Company for a period of five years at an exercise price of $0.913 of which 1,204,819 warrants were granted on June 29, 2011 and 602,410 warrants were granted on July 12, 2011. Along with the debenture entered into on May 15, 2012, the company issued warrants to acquire a total of 3,333,333 shares of the Company for a period of five years at an exercise price of $0.45.

    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 totaled $2,168,674, $1,006,025 and $2,066,666 for warrants issued on June 29, 2011, July 12, 2011 and May 15, 2012 respectively.

    F-20



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    6. Convertible Debentures – Continued

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

    • Risk-free interest rate – 0.72%
    • Term – 5 years
    • Dividend yield – 0%
    • Underlying stock price - $0.42
    • Volatility – 274%

    At June 30, 2012, the warrants were valued at $2,159,035 resulting in a gain on derivative liability of $2,973,896 in the year ended June 30, 2012. The corresponding debt discount of the debentures were accreted to interest expense over the terms of debentures of 18 months and 12 months respectively. During the year ended June 30, 2012, an accretion of $1,476,667 was recognized as interest expense.

        Warrants     Weighted     Weighted  
        Outstanding     Average     Average  
              Exercise Price     Remaining life  
    Balance, June 30, 2010   -   $  -     -  
       Warrants issued   1,204,819   $ 0.913     5 years  
       Exercised   -   $  -     -  
       Cancelled   -   $  -     -  
       Expired   -   $  -     -  
    Balance, June 30, 2011   1,204,819   $ 0.913     5 years  
       Warrants issued   3,935,743   $ 0.521     4.75 years  
       Exercised   -   $  -     -  
       Cancelled   -   $  -     -  
       Expired   -   $  -     -  
    Balance, June 30, 2012   5,140,562   $ 0.613     4.57 years  

    7. Related Party Transactions

    During the year ended June 30, 2012, the Company incurred consulting fees of $81,000 (2011 - $Nil) with directors and officers.

    During the year ended June 30, 2012, the Company incurred director fees of $318,000 (2011 - $17,595,000) with directors.

    As of June 30, 2012, the Company was obligated to a director for a non-interest bearing demand loan with a balance of $45,332 (2011 - $47,537). 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.

    8. Investment

    During the year ended June 30, 2012, the Company paid US$197,393 (CDN $200,000) in consideration for 800,000 shares of First Reef Energy Inc.

    The Company intends to sell the securities purchased in the near term, and accordingly, has classified them as Available-for-Sale securities, wherein, unrealized gains or losses resulting from marking the securities to market are recorded in other comprehensive income. The securities are valued using Tier Three inputs in accordance with FASB ASC 870-10: Fair Value Measurements and Disclosure (FASB 157) resulting in estimated fair value of $197,393 at June 30, 2012. Resulting other comprehensive income is nominal.

    F-21



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    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 June 30, 2012, the Company had a working capital deficiency of $2,609,678 and an accumulated deficit of $29,218,931. 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).

    F-22



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    10. Commitments - Continued

    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 and second years of service (Note 3).

    On May 1, 2012, the Company entered into two consulting agreements with consultants. Pursuant to agreements, consultants will receive monthly payments of $5,000 and $10,000 respectively ending on July 31, 2012.

    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).

    11. Subsequent Event

    On July 10, 2012, the Company issued a total of 1,504,415 common shares at a discounted price of $0.1925 per share to convert $19,600 in interest and $270,000 in principal with a fair value of $490,909 pursuant to the security purchase agreement entered prior to June 30, 2011. After the conversion, the initial $1,000,000 debenture received prior to June 30, 2011 has been fully satisfied and the remaining balance of the initial $500,000 debenture received on July 12, 2011 is $430,000 with a fair value of $781,818 (Note 6).

    The Company has evaluated subsequent events from June 30, 2012 through the date of this report, and determined there are no other items to disclose.

    F-23



    Lithium Exploration Group, Inc.
    (An Exploration Stage Company)
    Notes to Consolidated Financial Statements
    June 30, 2012 and 2011

    12. Restatement of June 30, 2011 Financial Statement

    Subsequent to the issuance of the June 30, 2011 financial statements, management determined that an option had not been properly valued. The financial statements have been revised to accurately record the transaction. Accordingly, the balance sheet as of June 30, 2011 and the statements of operations, changes in stockholders’ equity (deficit) and cash flows have been revised as follows:

        As Previously              
    Effect of corrections   Reported     As Restated     Adjustment  
                       
    BALANCE SHEET                  
    At June 30, 2011                  
    LIABILITIES                  
    Convertible debentures   -     18,182     18,182  
                       
    STOCKHOLDERS’ EQUITY                  
    Additional paid-in capital   24,781,907     25,325,384     543,477  
    Deficit accumulated during the                  
    exploration stage   (25,466,833 )   (26,028,492 )   (561,659 )
                       
    STATEMENT OF OPERATIONS                  
    Year ended June 30, 2011                  
    Mining expenses   6,227,641     6,771,118     543,477  
    Loss from operations   (24,269,435 )   (24,812,912 )   (543,477 )
    Interest expense   (1,168,674 )   (1,186,856 )   (18,182 )
    Net loss   (25,329,675 )   (25,891,334 )   (561,659 )
    Basic and diluted loss per share $ (0.53 ) $ (0.55 ) $ (0.02 )
                       
    STATEMENT OF CHANGES IN                  
    STOCKHOLDERS’ EQUITY (DEFICIT)                  
    At June 30, 2011                  
    Additional paid-in capital   24,781,907     25,325,384     543,477  
    Loss for the year   (25,329,675 )   (25,891,334 )   (561,659 )
    Deficit accumulated during the                  
    exploration stage   (25,466,833 )   (26,028,492 )   (561,659 )
                       
    STATEMENT OF CASH FLOWS                  
    Year ended June 30, 2011                  
    Net loss for the year   (25,329,675 )   (25,891,334 )   (561,659 )
    Options issued for mining expenses   4,396,523     4,940,000     543,477  
    Interest expense   1,168,674     1,186,856     18,182  

    13. Reclassifications

    Certain items on the 2011 financial statements have been reclassed to conform to the 2012 presentation.

    F-24


    Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    On or about August 1, 2012, Child, Van Wagoner & Bradshaw, PLLC (“CVB”), the principal accountant for our company ceased its accounting practice for SEC reporting companies. At or about the same time Anderson Bradshaw PLLC was established as a successor firm to CVB to continue performing audits for SEC reporting companies. As Anderson Bradshaw is viewed as a separate legal entity, our company dismissed CVB as our principal accountant and engaged Anderson Bradshaw, as our principal accountant for our fiscal year ending June 30, 2012 and the interim periods for 2012 and 2013. The decision to change principal accountants was approved by our board of directors.

    None of the reports of CVB, on our company's financial statements for either of the past two years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles except to indicate that there was substantial doubt about our company’s ability to continue as a going concern.

    There were no disagreements between our company and CVB, for the two most recent fiscal years and any subsequent interim period through August 1, 2012 (date of dismissal) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of CVB, would have caused them to make reference to the subject matter of the disagreement in connection with its report. Further, CVB has not advised our company that:

      1)

    internal controls necessary to develop reliable financial statements did not exist; or

         
      2)

    information has come to the attention of CVB which made it unwilling to rely upon management's representations, or made it unwilling to be associated with the financial statements prepared by management; or

         
      3)

    the scope of the audit should be expanded significantly, or information has come to the attention of CVB that they have concluded will, or if further investigated , might materially impact the fairness or reliability of a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal year ended June 30, 2012.

    (b) New independent registered public accounting firm

    On or about August 1, 2012 we engaged Anderson Bradshaw as our principal accountant to audit our financial statements as successor to CVB. During our two most recent fiscal years or subsequent interim period, we have not consulted with the entity of Anderson Bradshaw regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor did the entity of Anderson Bradshaw provide advice to our company, either written or oral, that was an important factor considered by our company in reaching a decision as to the accounting, auditing or financial reporting issue.

    Further, during our two most recent fiscal years or subsequent interim period, we have not consulted the entity of Anderson Bradshaw on any matter that was the subject of a disagreement or a reportable event.

    Item 9A.         Controls and Procedures

    As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2012.

    26


    Our management, with the participation of our president (our principal executive officer) and our chief financial officer (our principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended ( the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer) and our chief financial officer (principal accounting officer and principal financial officer) have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our president (our principal executive officer and our principal accounting officer and principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.

    Management’s Report on Internal Control over Financial Reporting

    Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer) and our chief financial officer (our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

    Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

    Management has conducted, with the participation of our president (our principal executive officer) and our chief financial officer (our principal accounting officer and principal financial officer), an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2012 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of June 30, 2012, our company’s internal control over financial reporting was not effective based on present company activity. The company is in the process of adopting specific internal control mechanisms with our board and officers collaboration to ensure effectiveness as we grow. We are presently engaging 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.

    This annual report does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only the management’s report in this annual report.

    27


    Change In Internal Control Over Financial Reporting

    There were no changes in our internal control over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

    Item 9B.         Other Information

    None.

    PART III

    Item 10.         Directors, Executive Officers and Corporate Governance

    All of the directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. Our officers are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

          Date First Elected
    Name Position Held with the Company Age or Appointed
    Alexander Walsh President, Chief Executive Officer and Director 31 November 4, 2010
    Jonathan Jazwinski Director 31 January 21, 2011
    Brandon Colker Director 40 January 21, 2011
    Alexander Koretsky Chief Operating Officer 42 May 1, 2012
    Bryan A. Kleinlein Chief Financial Officer 40 May 15, 2012

    Business Experience

    The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.

    Alexander Walsh, President, Chief Executive Officer, Secretary, Treasurer and Director

    Mr. Walsh was appointed President, Chief Executive Officer, Secretary, Treasurer, and Director of Lithium Exploration in November 2010. From May 2008 to November of 2010, Alex Walsh was a management consultant at AW Enterprises, LLC. AW Enterprises was established as a management consulting firm assisting small and middle market businesses in expanding their revenue and profits through strategic partnerships. Mr. Walsh’s efforts included strategic planning for companies looking to raise capital and assisting clients with forming strategic partnerships that could increase their revenue and profits. From May 2006 to May 2008, Mr. Walsh was a small business consultant and managing partner for Business Strategies Group. Business Strategies Group is a highly specialized team focusing on providing employee benefits, retirement programs, and insurance products to small and middle market companies.

    He attended DePauw University in Greencastle, Indiana where he majored in economics and management.

    Mr. Walsh was chosen as one of our directors due to his background in venture capital, investor relations and corporate development.

    28


    Bryan Kleinlein, Chief Financial Officer

    Bryan Kleinlein was appointed Chief Financial Officer on May 15, 2012. Mr. Kleinlein is a consultant to the company who is serving as our Chief Financial Officer. Mr. Kleinlein has over 15 years of Finance and Treasury experience with a specialty in global business. Mr. Kleinlein has been responsible for managing $1 billion of global capital expenditures as well as leading strategic financial planning, analysis and international expansion efforts of other multi-national companies. From 2006 to 2011, Mr. Kleinlein was Director of International Finance and Treasury for FreeLife International, Inc in Phoenix, Arizona.

    Mr. Kleinlein holds an MBA from Thunderbird – School of Global Management. He acquired his Bachelors in Finance from Illinois State University, where he received scholastic and athletic honors.

    Alexander Koretsky, Chief Operating Officer

    Alexander Koretsky was appointed our Chief Operating Officer on May 1, 2012. Mr. Koretsky is a business executive with experience in planning and launching various ventures. His expertise includes business development, strategic alliances, multi-disciplinary team management and project delivery. From January 2005 to November 2008, Mr. Koretsky was Director of Strategy for TCS Bank (Moscow, Russia). From March 2009 to November 2009, Mr. Koretsky was Marketing Director at StreamLogic in Los Altos, California. From November of 2009 to April of 2011, Mr. Koretsky was a Managing Director at Sustainable Venture Capital in Walnut Creek, CA. Mr. Koretsky was also a consultant to Lithium Exploration Group from July of 2011 to December of 2011 assisting management in various strategic matters.

    Mr. Koretsky is a graduate of USC's Marshall School of Business with a Bachelor's Degree in Business Administration. He was born in California and is fluent in Russian having lived for many years in both St. Petersburg and Moscow.

    Jonathan Jazwinski, Director.

    Mr. Jazwinski was appointed a director in January 2011. Mr. Jazwinski has a BS in Mining Engineering from the University of Arizona (graduated in 2004) and an MBA from the University of Phoenix (graduated in 2009). He began his career with SRK Consulting (from August 2004 to May 2005) working as a field engineer on BHP Billiton’s San Manuel Mine Closure Project. This project remains one of the largest, most comprehensive mine closures and environmental remediations to date. He managed environmental QA/QC testing and construction/demolition documentation.

    From May 2005 to present, Mr. Jazwinski has been employed with Freeport-McMoRan. From May 2005 to June 2011, Mr. Jazwinski worked at Freeport-McMoRan Sierrita leading the short-range planning department. From July 2011 to today, Mr. Jazwinski has been the Lead Mining Engineer at Freeport-McMoRan Baghdad.

    Mr. Jazwinski is a member of the Society for Mining, Metallurgy and Exploration and has current MSHA (Mine Safety and Health Administration) certification for surface metal mining. Mr. Jazwinski was chosen as one of our directors due to his experience in the mining industry.

    Mr. Jazwinski is an independent director based on the definition of independence in the listing standards of the NYSE Corporate Governance Rules.

    Brandon Colker, Director.

    Mr. Colker became a director in January 2011. Brandon Colker is the CEO of Sustainable Venture Capital, a company involved in private financial funding. Mr. Colker has been involved in real estate and corporate finance throughout his career. In 2002, Mr. Colker founded Meridian Capital and ran that operation until 2008. In 2008 he formed CFT Capital as a real estate and project financing entity and in 2009 he formed Sustainable Venture Capital focusing efforts on capital financing for sustainable technologies.

    29


    In May 1997, Mr. Colker graduated from the University of California at Santa Barbara with a degree in Economics.

    Mr. Colker is an independent director based on the definition of independence in the listing standards of the NYSE Corporate Governance Rules.

    Family Relationships

    There are no family relationships among our directors or officers.

    Involvement in Certain Legal Proceedings

    To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

    1.

    been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

       
    2.

    had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

       
    3.

    been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

       
    4.

    been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

       
    5.

    been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

       
    6.

    been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

    Section 16(a) Beneficial Ownership Compliance

    Our common stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, our officers, directors, and principal stockholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.

    30


    Audit Committee and Audit Committee Financial Expert

    Our board of directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

    We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.

    Code of Ethics

    We have adopted a Code of Ethics that applies to, among other persons, our company’s principal executive officers and senior financial executives, as well as persons performing similar functions. As adopted, our Code of Ethics sets forth written policies to promote:

    • honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
    • full, fair, accurate, timely and understandable disclosure in all reports and documents that the Corporation files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Corporation that are within the Senior Officer’s area of responsibility;
    • compliance with applicable governmental laws, rules and regulations;
    • the prompt internal reporting of violations of the Code; and
    • accountability for adherence to the Code.

    Our Code of Ethics and Business Conduct was filed with the Securities and Exchange Commission as Exhibit 14.1 to our annual report on Form 10-KSB on September 28, 2007. We will provide a copy of the Code of Ethics and Business Conduct to any person without charge, upon request. Requests can be sent to: Lithium Exploration Group, Inc. 3200 N. Hayden Road, Suite 235, Scottsdale, AZ 85251.

    Item 11.         Executive Compensation

    The particulars of the compensation paid to the following persons:

    • our principal executive officer;
    • each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended June 30, 2012 and 2011; and
    • up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended June 30, 2012 and 2011,

    who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:

    31



       SUMMARY COMPENSATION TABLE   







    Name
    and Principal
    Position









    Year








    Salary
    ($)








    Bonus
    ($)







    Stock
    Awards
    ($)







    Option
    Awards
    ($)






    Non-Equity
    Incentive Plan
    Compensation
    ($)


    Change in
    Pension
    Value and
    Nonqualified
    Deferred
    Compensation
    Earnings
    ($)






    All
    Other
    Compensation
    ($)








    Total
    ($)
    Alexander
    Walsh(1)
    President, Chief
    Executive Officer,
    Chief Financial
    Officer
    2012
    2011



    120,000
    Nil



    Nil
    Nil



    Nil
    15,300,000



    Nil
    Nil



    Nil
    Nil



    Nil
    Nil



    Nil
    45,000



    120,000
    15,345,0
    00


    Bryan A.
    Kleinlein(2)
    Chief Financial
    Officer
    2012
    2011

    6,000
    N/A

    25,000
    N/A

    Nil
    N/A

    Nil
    N/A

    Nil
    N/A

    Nil
    N/A

    Nil
    N/A

    31,000
    N/A

    Alexander
    Koretsky(3)
    Chief Operating
    Officer
    2012
    2011


    20,000
    N/A


    25,000
    N/A


    Nil
    N/A


    Nil
    N/A


    Nil
    N/A


    Nil

    N/A

    Nil
    N/A


    45,000
    N/A


    Nanuk Warman(4)
    Former President,
    Chief Executive
    Officer and Chief
    Financial Officer
    2012
    2011


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil


    N/A
    Nil



      (1)

    Alexander Walsh was appointed President, Chief Executive Officer, Chief Financial Officer and director on November 4, 2010 and resigned as Chief Financial Officer on May 15, 2012.

         
      (2)

    Bryan A. Kleinlein was appointed Chief Financial Officer on May 15, 2012.

         
      (3)

    Alexander Koretsky was appointed Chief Operating Officer on May 1, 2012.

         
      (4)

    Nanuk Warman resigned as an officer and director on November 4, 2010.

    Stock Options/SAR Grants

    During the period from inception to June 30, 2012, we did not grant any stock options to our executive officers.

    Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

    There were no options exercised during our fiscal year ended June 30, 2012 or June 30, 2011 by any officer or director of our company.

    Outstanding Equity Awards at Fiscal Year End

    No equity awards were outstanding as of the year ended June 30, 2012.

    32


    Compensation of Directors

    We reimburse our directors for expenses incurred in connection with attending board meetings. We paid $17,595,000 in directors fees in our fiscal year ending June 30, 2011 and $318,000 in directors fees in our fiscal year ending June 30, 2012.

    We have no formal plan for compensating our directors for their service in their capacity as directors.. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

    Employment Contracts and Termination of Employment and Change in Control Arrangements

    Other than as set out below, we have not entered into any employment agreement or consulting agreement with our directors and executive officers.

    Effective January 12, 2012, we entered into an employment agreement with Alexander Walsh for provision of services as our president and chief executive officer. The employment agreement will terminate on January 12, 2014.

    Pursuant to the terms of the employment agreement, Mr. Walsh will receive an annual salary of $120,000 payable in monthly cash installments or, in the event cash is unavailable, in shares of our company’s common stock. The employment agreement also provides for liability insurance and any travel and out-of-pocket expenses incurred and approved by our company.

    Also on January 12, 2012, we entered into consulting agreements, effective April 27, 2011, with Brandon Colker and Jonathan Jazwinski, both directors of our company, to provide services on behalf of our company. The consulting agreements will terminate on April 27, 2014.

    On May 1, 2012, we entered into an employment agreement with Alexander Koretsky whereby, Mr. Koretsky has agreed to provide certain duties and services as chief operating officer of our company for the period ending May 1, 2013. As compensation, our company has agreed to pay to Mr. Koretsky an initial salary of $100,000 per annum in addition to a signing bonus in the amount of $25,000 converted into 26,041 shares of our company’s common stock at $0.96 per share.

    Also on May 15, 2012, our company entered into a management consulting agreement with Bryan A. Kleinlein whereby, Mr. Kleinlein has agreed to provide certain duties and services as chief financial officer of our company for the period ending May 15, 2013. As compensation, our company has agreed to pay to Mr. Kleinlein a salary of $3,000 per month in addition in addition to a signing bonus in the amount of $25,000 converted into 40,323 shares of our company’s common stock at $0.62 per share.

    There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

    Item 12.         Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    The following table sets forth, as of September 7, 2012, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

    33




    Name and Address of Beneficial Owner
    Amount and Nature of
    Beneficial Owner(1)
    Percentage of
    Class
     Alexander Walsh 27,000,000 common 47.59%
     320 E. Fairmont Dr.,    
     Tempe, AZ, 85282    
     Jonathan Jazwinski 300,000 common *
     3200 North Hayden Road, Suite 235    
     Scottsdale, AZ, 85251    
     Brandon Colker 300,000 common *
     3200 North Hayden Road, Suite 235    
     Scottsdale, AZ, 85251    
     Alexander Koretsky 26,041 common *
     3200 North Hayden Road, Suite 235    
     Scottsdale, AZ, 85251    
     Bryan A. Kleinlein 40,323 common *
     3200 North Hayden Road, Suite 235    
     Scottsdale, AZ, 85251    
    All Officers and Directors 27,666,364 common 48.76%
    As a Group    
     Gekko Industries, Inc.(2) 5,000,000 common 8.81%
     Albrook, Calle Caoba    
     Local 55 A, Planta Baja    
     Ciudad De Panama, Panama    
    *represents an amount less than 1%    

    (1)

    Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on September 7, 2012. As of September 7, 2012, there were 56,735,734 shares of our company’s common stock issued and outstanding.

       
    (2)

    Manuel Mauricio Monge Acuna has sole voting and investment control over Gekko Industries, Inc.

    Changes in Control

    We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

    34


    Item 13.         Certain Relationships and Related Transactions, and Director Independence

    Except as disclosed herein, there have been no transactions or proposed transactions in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of our common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.

    The promoters of our company are our directors and officers.

    Director Independence

    We currently act with three directors, consisting of Alexander Walsh, Jonathan Jazwinski and Brandon Colker. We have determined that Jonathan Jazwinski and Brandon Colker are “independent directors” as defined in NASDAQ Marketplace Rule 4200(a)(15).

    We do not have a standing audit, compensation or nominating committee, but our entire board of directors act in such capacity. We believe that our directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. Our directors do not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, we believe that retaining additional independent directors who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.

    Item 14.         Principal Accountants Fees and Services

    The aggregate fees billed for the most recently completed fiscal year ended June 30, 2012 and for fiscal year ended June 30, 2011 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:


    Year Ended
    June 30

    2012
    ($)
    2011
    ($)
    Audit Fees 24,900 13,400
    Audit Related Fees Nil Nil
    Tax Fees 550 Nil
    All Other Fees Nil Nil
    Total 25,450 13,400

    Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

    Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

    35


    PART IV

    Item 15.         Exhibits, Financial Statement Schedules

    (a)

    Financial Statements

         
    (1)

    Financial statements for our company are listed in the index under Item 8 of this document

         
    (2)

    All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.

         
    (b)

    Exhibits

    Exhibits required by Item 601 of Regulation S-K

    Exhibit No.

    Description

     

    (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).

     

    (10)

    Material Contracts

     

    10.1

    Option to Enter Joint Venture Agreement between our company and USA Uranium Corp. dated July 31, 2009 (incorporated by reference to our Current Report on Form 8-K filed on August 5, 2009).

     

    10.2

    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).

     

    10.3

    Purchase Option Agreement between our company and Salta Water Co. dated January 18, 2011 (incorporated by reference to our Current Report on Form 8-K filed on February 2, 2011).

     

    10.4

    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).

     

    10.5

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

     

    10.6

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

     

    10.7

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

    36



    Exhibit No. Description  
       
    10.8

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

       
    10.9

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

       
    10.10

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

       
    10.11

    Debenture dated May 15, 2012 (incorporated by reference to our Current Report on Form 8-K filed on May18, 2012).

       
    10.12

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

       
    10.13

    Management Consulting Agreement with Bryan A. Kleinlein dated May 15, 2012 (incorporated by reference to our Current Report on Form 8-K filed on June 8, 2012).

       
    (31)

    Rule 13a-14(a)/15d-14(a) Certification

       
    31.1*

    Section 302 Certification under Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.

       
    31.2* Section 302 Certification under Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
     

     

    (32)

    Section 1350 Certification

       
    32.1*

    Section 906 Certification under Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.

       
    32.2* Section 906 Certification under Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
       
    (101)**

     Interactive Data File (Form 10-K for the Year Ended April 30, 2012)

       
     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.

       
    **

    Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

    37


    SIGNATURES

    In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

      LITHIUM EXPLORATION GROUP, INC.
       
       
       
      /s/ Alexander Walsh
      Alexander Walsh
      President, Chief Executive Officer, and Director
      (Principal Executive Officer)
       
      Date: September 26, 2012
       
       
       
      /s/ Bryan A. Kleinlein
      Bryan A. Kleinlein
      Chief Financial Officer
      (Principal Financial Officer and Principal Accounting Officer)
       
      Date: September 26, 2012

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

    Signature Title Date
         
      President, Chief Executive Officer,  
    /s/ Alexander Walsh and Director September 26, 2012
    Alexander Walsh    
         
         
    /s/ Jonathan Jazwinski Director September 26, 2012
    Jonathan Jazwinski    
         
         
    /s/ Brandon Colker Director September 26, 2012
    Brandon Colker    

    38


    PINX:LEXG Lithium Exploration Group Annual Report 10-K Filling

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