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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K

(Mark One)
 
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 2012
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to __________
 
Commission File No. 333-149552
 
TUCANA LITHIUM CORP.
(Exact name of registrant as specified in its charter)
 
NEVADA
(State or other jurisdiction of incorporation or organization)
 
 
(IRS Employer Identification No.)
 
3651 Lindell Rd. Suite #D155
Las Vegas, NV 
89103
(Address of principal executive offices)
(Zip Code)
 
1-800-854-7970
(Registrant’s telephone number, including area code)
 
Securities registered under Section 12(b) of the Exchange Act:
 
Title of each class registered: None
Name of each exchange on which registered: None
 
Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $.001
(Title of class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.        Yes o    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 o     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 past 90 days. Yes x No o

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

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 Part III of this Form 10-K or any amendment to this Form 10-K.   x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
 
Accelerated filer
o
         
Non-accelerated filer
(Do not check if a smaller reporting company)
o
 
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

As of November 28, 2012, the registrant had 59,360,869 shares of common stock issued and outstanding.

Documents Incorporated by Reference:
None.
 
 

 
 
TABLE OF CONTENTS
 
PART I
 
1
    ITEM 1.
BUSINESS
1
    ITEM 1A
RISK FACTORS
5
    ITEM 1B
UNRESOLVED STAFF COMMENTS
10
    ITEM 2.
PROPERTIES
11
    ITEM 3.
LEGAL PROCEEDINGS
11
    ITEM 4.
MINE SAFETY DISCLOSURES
11
PART II
 
11
    ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
11
    ITEM 6.
SELECTED FINANCIAL DATA
 12
    ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
12
    ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
18
    ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
F-1
    ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
20
    ITEM 9A.
CONTROLS AND PROCEDURES
20
    ITEM 9B.
OTHER INFORMATION
20
PART III
 
21
    ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
21
    ITEM 11.
EXECUTIVE COMPENSATION
23
    ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
23
    ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
24
    ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
24
PART IV
 
24
    ITEM 15.
EXHIBITS AND SIGNATURES
24
 
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Annual Report on Form 10-K.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
 
 
 

 
 
USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” “the Company”, or “Tucana Lithium” are to the combined business of Tucana Lithium Corp. and its consolidated subsidiary, Tucana Exploration Inc..
 
 In addition, unless the context otherwise requires and for the purposes of this report only
 
●  
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
●  
“SEC” refers to the United States Securities and Exchange Commission;
●  
“Securities Act” refers to the Securities Act of 1933, as amended;

 
 
 

 
 
PART I
 
ITEM 1.    BUSINESS
 
General
 
Tucana Lithium is a U.S. based mineral exploration company currently focusing on the acquisition and development of mining properties throughout North America.  
 
Tucana Lithium, formerly named Oteegee Innovations Inc. and formerly named Pay By The Day Holdings Inc., was incorporated in August 2007 in the State of Nevada.  On August 31, 2007 we entered into a share exchange agreement with Pay By The Day Company Inc., an Ontario Corporation incorporated in June 2003 (“PBTD” or “Pay By The Day”), whereby PBTD became our wholly owned subsidiary. PBTD commenced operations in July 2003 and at the time of the share exchange agreement the sole owner of PBTD was Jordan Starkman, the Company’s sole officer and director.

On April 7, 2010, the Company effected a 1 for 10 forward split of its issued and outstanding common stock. The Company’s issued and outstanding common shares were increased from 1,539,000 to 15,390,000. The Company also increased its authorized common shares from 100,000,000 to 200,000,000.

On July 6, 2010, the Company closed a share exchange agreement with Oteegee International Holdings Limited, a company incorporated in Hong Kong (“Oteegee”). Pursuant to the share exchange agreement, the Company issued 61,647,250 shares of common stock pending the close of the share exchange agreement in exchange for 4,000 common shares representing 40% of Oteegee.  

On August 20, 2010, the Company received a notice of termination of the Letter of Intent with Grail, and as a result, the Company cancelled the 61,647,250 of its common shares issued to Oteegee. The Letter of Intent was terminated due to the Company’s inability to raise preliminary funding during the due diligence period of the Letter of Intent.  In accordance with the Letter of Intent, the Company is entitled to convert its advances to Grail into equity of Grail.

On December 2, 2010 the Company closed an Asset Purchase Agreement (the “Abigail purchase Agreement”) with Alain Champagne and other parties (the “Selling Group”) to acquire a One Hundred (100%) interest in the Abigail Lithium Project located in the James Bay, Quebec region of Canada (the “Property”). It is covered by NTS sheets 320/12 and 320/13.  The Property is made up of 222 map-designated cells totaling approx 11,844 hectares.   Pursuant to the Abigail purchase Agreement, on December 7, 2010 the Company issued a total of 15,000,000 shares of common stock plus committed to an additional payment of $250,000 in cash with $100,000 payable 90 days from the closing of the Agreement and $150,000 payable 180 days from the closing of the Agreement.  In addition, the Company agreed to a minimum initial exploration work budget of $300,000 to commence no later than May 16, 2011.  The Company announced on June 27, 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region.

In March 2011, the Company issued 5,000,000 shares of common stock at $0.02 per share reflecting the first payment of $100,000 for the Property.  On May 15, 2011, the Company issued a 10% Convertible Debenture with a principal amount of $150,000 (the “Debenture”) to Alain Champagne (the “Holder”). The Debenture is due twelve months from the date of issuance. Additionally, the Holder is entitled to convert, at any time, until the Debenture is paid in full, all or any part of the principal plus accrued interest into shares of the Company’s common stock at a per share conversion price of $0.15. On May 24, 2011 the Company repaid $100,000 and on June 25, 2011 the Company paid off the balance of $50,000 fulfilling all the obligations to the Selling Group for the purchase price of the Property.  In July 2011, the Ministry of Natural Resources transferred all mining claims into the name of Tucana Exploration Inc., a company incorporated in the State of Wyoming on February 22, 2011 (“Tucana”).  Tucana is a 100% wholly owned subsidiary of the Company.

On May 3, 2011, the Company filed a certificate of amendment to amend the articles of incorporation with the Nevada Secretary of State changing the Company’s name to Tucana Lithium Corp. 
 
After spending a total amount of $2,500,000 on the Project, the Seller Group will receive an additional 1,000,000 shares of the Company’s common stock and an additional cash payment of $250,000. After spending a total amount of $5,000,000 on the Project, the Seller Group will receive an additional 1,000,000 shares of the Company’s common stock and an additional cash payment of $250,000.  If a feasibility study is put in place an additional 1,000,000 shares and $250,000 will be delivered to the Seller Group, and if a bank feasibility is put in place a further 2,000,000 shares and $500,000 cash will be delivered to the Seller Group.  The Company has also agreed to pay the Selling Group a 3% royalty on any commercial producing mineral deposit.

In December 2011, the Company staked an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana's subsidiary, Tucana Exploration Inc. The property is made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of staking the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal. The Company secured the additional claims based upon the NI 43-101 technical report and the magnetic and gradiometric airborne survey released by the Quebec Ministry of Natural Resources in September 2011. The Lac des Montagnes formation is the most fertile rock in this area for massive sulfides, and it is the same kind of volcano-sedimentary belt you would find in the Rouyn-Noranda and Val d'Or area yet more metamorphosed. The gradiometric magnetic survey shows magnetic anomalies are present on the property and should be further investigated.
 
 
1

 
 
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between April and May 2014 and exploration work in the amount of $84,000 will be required upon renewal. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey.

Recent Development
 
On May 11, 2012, Tucana Lithium Corp., a Nevada corporation (the “Company”) entered into an Asset Purchase Agreement (the “Assets Purchase Agreement”) with a group of sellers with Alain Champagne as the representative (“the Selling Group”) to acquire from the Selling Group all of the interest in two mining properties known as the Lac Kame and EM-1 both located in the Nemaska area of James Bay, Quebec region of Canada (the “Acquired Mines”), and in exchange, the Company shall issue a total of 2,000,000 shares of the Company’s common stock (the “Shares”) and make a cash payment of $3,000 to the Selling Group(the “Assets Acquisition”). The amount of consideration paid for the Acquired Mines is less than 10% of the total assets of the Company as of the closing of the Assets Acquisition. In addition, pursuant to the Assets Purchase Agreement, the Company agreed to an additional payment of $50,000 and the issuance of 1,000,000 shares to the Selling Group if and when the Company spends a total of $1,000,000, an additional payment of $100,000 and the issuance of 1,000,000 if and when the Company spends $2,500,000, and an additional payment of $150,000 and the issuance of 1,000,000 shares if and when the Company spends a total of $5,000,000 on the Acquired Mines. The amount of spending by the Company on the Acquired Mines is deemed as an index of any previously unidentified and additional value of the properties. The Company also agreed to pay the Selling Group a 3% net smelter royalty on any commercial producing mineral deposit from the Acquired Mines pursuant to the Assets Purchase Agreement. The Company's main interest with the newly acquired claims will be magnetic anomalies for kimberlite based upon the airborne magnetic survey released in October 2011. 

On May 11, 2012, the Company also entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with (i) Pay By The Day Company Inc., a Ontario corporation and a wholly owned subsidiary of the Company (“Pay By The Day”); and (ii) Jordan Starkman, Chief Executive Officer and the sole director of the Company and President of the Subsidiary (“Starkman”), pursuant to which, Starkman acquired all of the issued and outstanding common shares of Pay By The Day, and in exchange, Starkman assumed and agreed to pay, perform and discharge any and a all the liabilities and obligations of Pay By The Day.

The Company operates under the web-site address www.tucanalithium.com and www.tucanaexploration.com .

Lithium Industry

The market for lithium is still small and relatively restricted. Lithium is a key component in existing battery technology, particularly for portable electronics applications. The lithium sector has been further stimulated with the need to develop more environmentally friendly transportation choices.  A combination of rising gasoline prices and environmentally-conscious consumers further spurred the hybrid and electric vehicle sector in 2009, culminating in a US government stimulus package directed at the lithium battery and electric vehicle sector in 2009.

Lithium is a light, highly reactive metal with uses in a variety of industrial applications including ceramics, lubricants and pharmaceuticals.  The fastest growing market for lithium is as lithium carbonate for use in batteries, including those in cell phones, computers and new generations of electric and hybrid vehicles.  The supply of lithium necessary to produce lithium carbonate can come from two principal sources: (1) brines containing high concentrations of lithium and other elements; and (2) the mineral spodumene, which is usually concentrated in pegmatite deposits.  Lithium from spodumene is in silicate form and following mining and production of a concentrate, requires processing to be converted to lithium carbonate. The Company believes that lithium demand will grow as its value as a preferred battery material is fully realized.

The Company is still driven in its belief in technology and is looking to stay in the vertical technology space.  Our growth will continue with a focus in the commodity supply side starting with the Property.  Lithium is a viable entry point into the mining sector due to its diverse range of end uses.  This environmentally benign metal is the established power for literally billions of applications.  We consider the battery market, primarily for hybrid and electric vehicles and as storage batteries for wind and solar power plants, as its target market.  Lithium ion batteries have become the rechargeable battery of choice for the makers of cell phones, laptop computers, power tools, and hybrid cars.  Lithium dominates the battery market because of its relatively lighter weight and energy density three times that of its nickel metal hydride competitor.  As well, it recharges faster, lasts longer and operates in temperatures well below freezing.  In addition, the future of lithium lies in the global demand for environmentally friendly plug-in electric cars.  In the US, 300,000+ hybrid cars were sold last year and as a further spur to the market, the US government has pledged US$27.4 billion in loans/grants to electric vehicle and lithium battery markets.

 
2

 
 
Operations of Tucana

The Abigail Lithium Project is located in the James Bay, Quebec region and is made up of 177 map-designated cells totaling approx 9,400 hectares. In addition, the Company holds 12 map-designated cells just north of the Abigail property named Lac Kame and 25 map-designated cells named EM-1.  Combined the Lac Kame property and EM-1 total 966 hectares.  They are covered by NTS sheets 320/12 and 320/13.  The Abigail Property is situated in the north-eastern part of the Superior Province, which itself lies in the heart of the Canadian Shield. The Superior Province extends from Manitoba to Quebec, and is mainly made up of Archean rocks. The general metamorphism is at the greenschist facies, except in the vicinity of intrusive bodies, where it can go to the amphibolite-to-granulite facies.

The Property is located in a gneissic formation between the Lac des Montagnes volcano-sedimentary belt and the Champion Lake granitoids. The geological maps by Valiquette reveal the presence of basalt and/or amphibolite remnants in a gneissic formation intruded by granites.

Historical work done by the Quebec Ministry of Natural Resources can be summarized by two reports. The first is a description of the geology of the area accompanied by a geological map, and was released in 1975 as RG 158. This report outlined the geology of the whole area, including the Lac des Montagnes volcanic belt found on the south part of the property. The other survey was released in 2011 and consisted of an airborne magnetic/gradiometric survey that outlined several magnetic lineaments on the property. Only two mining companies can be considered to have performed historical work on the property, the SDBJ in 1981, with an EM-Input airborne survey, and Westmin from 1986 to 1988, with airborne Dighem survey and minor ground work, mainly prospection and VLF-EM survey. The Dighem survey revealed EM anomalies along a major magnetic lineament, which crosses the south part of the property. Up until now, no drill holes have been reported on the Property.

From a geological standpoint, the Property can be divided in two parts: north and south of the Route du Nord. The part north of Route du Nord is mainly underlain by paragneiss and diorites, with granite and granodiorites in the extreme north part of the property. Remnants of basaltic flows have been recognized in the paragneiss. This paragneiss is in fact made up of metamorphosed sediments and probably represents a Precambrian sedimentary basin.  The part of the property south of the Route du Nord is mainly underlain by the Lac des Montagnes Formation, a metamorphosed greenstone belt composed of biotite, sillimanite and stauride-bearing schist. Ultramafic to felsic flows along with ultramafic intrusions can be recognized in places in the Lac des Montagnes Formation. A diabase dyke crosses the western part of the property in a NW/SE direction, and an unexplained circular magnetic structure is observed just to the SE of the property.

Mineralized zones have not been discovered or estimated on the property and no production has ever occurred on the Property, however recent work in the area has been performed by Golden Goose Resources outlined in Nisk-1 deposit, approximately 6.5 km to the SE of the Property. NI-43-101 compliant resources were evaluated by RSW, This deposit is now owed by Nemaska Exploration, who bought Golden Goose’s interest in all its claims in the James Bay area in 2009. In May 2010, Nemaska reported NI-43-101 resources estimated by Geostat System International on the Whabouchi property; this deposit contains Li2O and BeO and is located 1.5 km to the W of the Property.

The geology of the Property is relatively complex and unexplored.  Five deposit types can be considered to guide exploration of the property; they are as follows:

Lithium (spodumene)-bearing pegmatites
In 1962-63, a lithium occurrence was discovered in a pegmatite close to the boundary of the gneissic formation and the Lac des Montagnes belt, about 3 km west of the Property. Values of up to 2.34% Li2O, 0.13% BeO/6.4 m and 2.63% Li2O, 0.16% BeO/6.4 m in Hole 14891 and 1.44% Li2O over 83.2 m in Hole 24042 were reported in GM 57880 by Canico. Forty years later, Inco re-sampled the same pegmatite for its tantalum content and obtained 0.026% Ta over 1.0 m and 3.53% Li2O also over 1.0 m in channel samples. This spodumene4-bearing pegmatite is now owned by Nemaska Exploration Inc., and is known as the Whabouchi property. The resource estimate for Whabouchi deposit is given in the preceding item.
 
 
3

 
 
Magmatic nickel sulphide deposits associated with an ultramafic intrusion
In 2008, Golden Goose produced an updated resource estimate for the Nisk-1 deposit (Lac Levac property), located about 7 km SE of the Property. The Nisk-1 deposit is located close to the boundary between the gneissic formation and the Lac des Montagnes belt. It is related to an ultramafic intrusion that cuts the surrounding rocks. Nisk-1 was described by Pierre Trudel, Eng, Ph.D.5, as a magmatic nickel sulphide deposit associated with an ultramafic intrusion. Known orebodies of this type are Voisey’s Bay (Labrador) and Lynn Lake (Manitoba). The NI 43-101 resource reported by Golden Goose is shown in Table 3.

TABLE 3:NISK-1 RESOURCE
 
Resource Category
 
Tonnes
(millions)
   
Ni
%
   
Cu
%
   
Co
%
   
Pd
(g/t)
   
Pt
(g/t)
 
Measured
    1.255       1.09       0.56       0.07       1.11       0.2  
Indicated
    0.783       1       0.53       0.06       0.91       0.29  
Inferred
    1.053       0.81       0.32       0.06       1.06       0.5  

Volcanogenic Massive Sulphide (VMS) deposits
As the Property covers part of the Lac des Montagnes volcano-sedimentary formation, volcanogenic massive sulphide (VMS) type deposits associated with metamorphosed intermediate-to-felsic volcanics should be considered. Known examples of this type of deposit, albeit in less metamorphosed formations, are the Horne Mine in Rouyn-Noranda and the Matagami Lake Mine in Matagami.

Uranium and associated elements in pegmatites
A uranium–thorium occurrence was discovered around 1978 in a pegmatite with 1,189 ppm ThO2 and 565 ppm U3O8, approximately 15 km ENE of the property in a pegmatite located within the same gneissic formation. It is identified on the map in Figure 6, “Property Geology and Diamond Drill Holes” as the Lac Arques SW occurrence.

Chromite deposits
Since the early sixties, chromite occurrences have been known to occur in the Lac des Montagnes area, close to the SE shore of Lac des Montagnes, at the base of an ultramafic intrusion west of the Property. Over the years, Noranda, Inco, Canex Placer, SDBJ, Freewest and Muscocho Explorations have worked on these chromite showings. In 1978, SDBJ reported a grade of 30.87% Cr with 11.84% Fe in a grab sample, for a Cr/Fe ration of 2.6. In 1988, Freewest obtained 36.55% Cr in a chip sample, over a length of 1.05 m.

The Property is on strike with the spodumene-bearing pegmatite located on the Whabouchi property held by Nemaska Exploration Inc. The Property is underlain by the same gneissic formation that hosts the Lac Arques SW pegmatite showings with 1,189 ppm Th and 563 ppm U3O8. Magmatic NI-Cu type deposit associated with ultramafic intrusions may also be found. The Whabouchi spodumene-bearing pegmatite is located in a low magnetic anomaly on the flank of a medium magnetic high. A high magnetic anomaly located about 1 km north of the Whabouchi pegmatite can be interpreted as an ultramafic intrusion. An airborne survey over the Property could lead to the discovery of the same magnetic signature and help locate pegmatite and ultramafic intrusions of the Whabouchi and Nisk-1 type.
 
The Property is easily accessible which greatly enhances the economics of the project, as “Route du Nord” crosses the south part of the Property. This road originates in the town of Chibougamou, approximately 280 km to the SSE, and leads to the village of Nemaska and the Route de la Baie-James. Due to the size of the Property, parts of the property must be accessed by boat, using the network of lakes and rivers, and by foot.  Several parts of the Property will probably require helicopter support, being too isolated. There are no mining infrastructures on the property. Room and board are provided by CCDC Relais Routier Nemiscau, 23 km west of the Property.  A Hydro-Quebec powerline has been built along the “Route du Nord” in the region of the Property, and the Nemiscau airport is located 20 km west of the property, serviced by Air Creebec and chartered flights. The village of Nemaska and the Relais Routier CCDC located respectively 35 and 15 km to the west of the Property may be used to house workers and service the Property. In addition, the Property is covered by the cellular networks.
 
 
4

 
 
The Company’s acquisition of the Property allows us to experience and prosper from the booming mining sector. Furthermore, we are fortunate to be situated beside Nemaska Exploration’s Whabouchi project.  The Property is located 1.5 km west of Nemaska Exploration’s Whabouchi lithium project.  The Whabouchi property has confirmed high grade spodumene concentrate, and has been ranked 1st in Canada and 3rd in the world amongst hard rock pegmatite projects being developed by researcher signumBOX.

Our growth will continue with a focus in the commodity supply side starting with the Property.  Lithium is a viable entry point into the mining sector due to its diverse range of end uses.  This environmentally benign metal is the established power for literally billions of applications.  We consider the battery market, primarily for hybrid and electric vehicles and as storage batteries for wind and solar power plants, as its target market.  Lithium ion batteries have become the rechargeable battery of choice for the makers of cell phones, laptop computers, power tools, and hybrid cars.  Lithium dominates the battery market because of its relatively lighter weight and energy density three times that of its nickel metal hydride competitor.  As well, it recharges faster, lasts longer and operates in temperatures well below freezing.  In addition, the future of lithium lies in the global demand for environmentally friendly plug-in electric cars.  In the US, 300,000+ hybrid cars were sold last year and as a further spur to the market, the US government has pledged US$27.4 billion in loans/grants to electric vehicle and lithium battery markets.

We will seek to form strategic relationships with large technology companies for distribution of potentially all end products.  The Company believes it is in the most opulent area for future growth and creating shareholder value.

Competition

We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties.  Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us.  Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties.  In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties.  This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration.  This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.

Compliance with Governmental Regulation

We are committed to complying with and are, to our knowledge, in compliance with, all governmental and environmental regulations applicable to our company and our Property. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our Property if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our Property.
 
Employees
 
As of August 31, 2012, we had one employee and two part-time consultants to the Company.
 
ITEM 1A.      RISK FACTORS

Our business, operating results, financial condition, and prospects are subject to a variety of significant risks, many of which are beyond our control. The following is a description of some of the important risk factors that may cause our actual results in future periods to differ substantially from those we currently expect or seek. The risks described below are not the only risks facing us. There are additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that also may materially adversely affect our business, operating results, financial condition, or prospects.
 
 
5

 
 
We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
 
We were incorporated in Nevada in August 2007. With the exception of $11,191 in cash, we have no significant financial resources and limited revenues to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
   
Our auditor has expressed substantial doubt as to our ability to continue as a going concern.
 
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. For the year ended August 31, 2012 we have incurred a net loss of $260,343 and an accumulated deficit of $1,292,953. If we cannot generate sufficient revenues from our services, we may have to delay the implementation of our business plan.
   
Our future success is dependent, in part, on the performance and continued service of Jordan Starkman, our only officer. Without his continued service, we may be forced to interrupt or eventually cease our operations.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of Jordan Starkman our only Officer and Director. We currently do not have an employment agreement with Mr. Starkman. The loss of his services could have a material adverse effect on our business, financial condition or results of operation.
  
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.

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.
 
 
6

 
 
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.

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.
 
 
7

 
 
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.
 
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.

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.
 
 
8

 
 
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.
 
The ability to successfully deploy our business model is heavily dependent upon United States’ and Canadian economic conditions.
 
The ability to successfully deploy our business model is heavily dependent upon the general state of the US and Canadian economy. We cannot assure you that favorable conditions will exist in the future. A general economic recession in the United States and Canada or a devaluation of the US Dollar and Canadian Dollar relative to the Euro could have a serious adverse economic impact on us and our ability to obtain funding and generate projected revenues. 
 
There is no assurance of an active public market or that the common stock will ever trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.
 
There is no established public trading market for our common stock. Our shares are not and have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.

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.
 
 
9

 
 
We face risks related to compliance with corporate governance laws and financial reporting standards.

The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, referred to as Section 404, have materially increased our legal and financial compliance costs and made some activities more time-consuming and more burdensome.
 
Our common stock is considered a penny stock, which is subject to restrictions on marketability, so you may not be able to sell your shares.
 
If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our stockholders to sell their securities. 
 
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). 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 that provides information about penny stocks and the 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 broker-dealer must also 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 requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
 
ITEM 1B.      UNRESOLVED STAFF COMMENTS

Not applicable.
 
 
10

 
 
ITEM 2.    PROPERTIES
 
Our principal executive office location and mailing address is 3651 Lindell Rd. Suite #D155, Las Vegas, NV, 89103. Currently, this space is sufficient to meet our office and telephone facility needs; however, if we expand our business to a significant degree, we will have to find a larger space.  In addition, the Company has facilities in Toronto, Ontario sufficient to sustain our office in Canada at a cost of $2000 per month.

ITEM 3.    LEGAL PROCEEDINGS
 
We are not presently parties to any litigation, nor to our knowledge and belief is any litigation threatened or contemplated.
 
ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.
PART II
 
ITEM 5.     MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
 
No Public Market for Common Stock
 
There is no established current public market for the shares of our common stock.  Our common stock is quoted on the OTC QB under symbol TUCA.  Minimal trading has occurred through the date of this annual report. There can be no assurance that a liquid market for our securities will ever develop. Transfer of our common stock may also be restricted under the securities or blue sky laws of various states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time

Holders
 
As of the August 31, 2012, we had 45 stockholders of our common stock.
 
Dividends
 
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
 
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
 
 
11

 
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
As of the end of the fiscal year ended August 31, 2012, we do not have any compensation plan under which equity securities of the Company are authorized for issuance.
 
ITEM 6.     SELECTED FINANCIAL DATA.

Not applicable.
 
ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes 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 7 of this annual report.

Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
 
From inception to August 31, 2012 we have incurred a net loss of $1,768,314 and an accumulated deficit of $1,768,314. The ability of the Company to continue as a going-concern depends upon its ability to raise adequate financing and develop profitable operations. If we cannot generate sufficient revenues from our services, we may have to delay the implementation of our business plan.
 
Plan of Operations for Tucana segment

The Company's main exploration target in 2012/2013 will be the Abigail Lithium Property (the “Property”) situated within and adjacent to Nemaska Exploration's Whabouchi Lithium discovery (as referenced in the Form 8-K filed with the SEC on December 3, 2010). The Property is located in a gneissic formation between the Lac des Montagnes volcano-sedimentary belt and the Champion Lake granitoids.  The principal exploration target for the Property is lithium-bearing spodumene and the Property is on strike with the high-grade spodumene-bearing pegmatite located on the Whabouchi property. The Property is underlain by the same gneissic formation that hosts the Lac Arques SW pegmatite showings with 1,189 ppm Th and 563 ppm U3O8. Magmatic NI-Cu type deposit associated with ultramafic intrusions may also be found. The Whabouchi spodumene-bearing pegmatite is located in a low magnetic anomaly on the flank of a medium magnetic high. A high magnetic anomaly located about 1 km north of the Whabouchi pegmatite can be interpreted as an ultramafic intrusion. An airborne survey over the Property could lead to the discovery of the same magnetic signature and help locate pegmatite and ultramafic intrusions of the Whabouchi and Nisk-1 type. In addition, the Property is easily accessible with year round roads, electrical power intersecting the Property from the town of Nemaska, cell phone service throughout the region, and a local airport in the town of Nemaska.
 
 
12

 
 
Nemaska's Whabouchi deposit continues to confirm high-grade channel samples illustrating the width of the main mineralized zone. Furthermore, Nemaska has recently announced it is partnering with Chengdu Tianqi. Tianqi is the largest lithium battery material provider in China that uses spodumene concentrate as its raw material to produce lithium carbonate and has extensive expertise in lithium products. This relationship validates Nemaska's deposit and signals the strong potential for their lithium assets in the James Bay region.
 
On June 13, 2011, the Company entered into a geological and management services agreement (the “Exploration Agreement”) with Nemaska Exploration Inc. (“Nemaska”) to coordinate and execute the Company’s Summer 2011 exploration program.  The exploration campaign was led by geologist Yves Caron. Mr. Caron is currently Vice-President Exploration for both Nemaska Exploration and Monarques Resources and has been a member of the Ordre des Gйologues du Quйbec since 200 1.  The Exploration Agreement term which was for a period of six months has expired and the Company is currently negotiating to renew the contract at a future date. 

Nemaska provided exploration services to the Company subject to the schedule of fees below. 

Position
 
Cost per day
 
Sr. consultant - QP services
 
$
1000
 
Project manager – i.t. geologist
 
$
600
 
Student geologist
 
$
450
 
Geologist assistant
 
$
350
 
 
The Company had committed to an initial exploration work budget of a minimum of $300,000 to commence no later than May 16, 2011. The Company announced on June 27, 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region. The program was carried out with a team of six people including two geologists and four technicians under a service agreement with Nemaska Exploration. The work program covered geological reconnaissance of approximately 2,500 hectares, mostly in the central and north part of the property. In addition, the Company focused its efforts on the same geological corridor east of the Whabouchi lithium deposit consisting of twelve kilometers on the same geological trend. The purpose of the exploration program was mainly to locate mineralized pegmatites, but also any other kind of economic mineralization. The Company has completed its geological and prospecting program on approximately 15% of the Property for approximately $175,000, falling below the budgeted schedule listed below.
 
On September 19, 2011 the Company obtained the airborne magnetic survey for the Property from the Ministry of Natural Resources in Quebec. The airborne survey encompasses the entire Property covered by NTS Sheets 32O12 and 32O13 in the Lac Des Montagnes and Lac Abigail region of Quebec. The airborne survey will locate the ultramafic intrusions if they exist, the basalt and/or ultramafic remnants, the contrast between the gneiss and Champion Lake granitoids and, if the magnetic contrast with the encasing rocks is strong enough, the pregmatites. The Company believes the airborne survey is a critical step in the development of the Property. The Company had budgeted $150,000 for the survey, and fortunately was able to obtain the report from the Ministry of Natural Resources at a zero cost base. The Company retained the services of Donald Theberge, a professional engineer, to fulfill a Canadian NI43-101 report on its field operations, and to review the survey in respect to the planning of Phase II of the Company's exploration campaign. The Nemaska report in conjunction with the airborne survey has allowed the Company to prepare a plan and budget for Phase II of the exploration campaign on the Property.  Phase II of the exploration campaign will involve a geological survey and prospecting program covering the targets to be defined by the airborne survey.
 
 
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The already completed initial budget for the Phase I work program on the Property is described below:

Airborne Magnetic and Electromagnetic Survey (125m line spacing):
     
Airborne survey, mob and demob, lump sum
   
20,000
 
Survey (Mag and VLF) 1,095km @ $73/km
   
79,935
 
Wait time, additional survey lines, ect
   
35,000
 
Contingency 12%
   
16,192
 
Total Airborne Survey
 
$
151,127
 
         
Geological Survey and Prospecting:
       
Geological survey, 2 geologists, 2 helpers, room and board, helicopter support if needed, assays, all inclusive for approximately 45 days
   
135,000
 
Contingency 12%
   
16,200
 
Total Geological Survey
 
$
151,200
 
Total Airborne and Geological
 
$
302,327
 
 
On November 4, 2011, the Company received the NI 43-101 report (the “Report”) summarizing the analysis of the airborne survey and containing the details and results from the Nemaska exploration campaign in June 2011.  The reconnaissance geology program was carried out on the property by Nemaska Exploration Inc. on behalf of the Company. More than 2,000 GPS points were recorded and 39 samples were taken and analyzed. Samples were mainly taken from pegmatites, but also from granitoid, gabbro, basalts and diab ases.  Samples were taken where mineralization was seen or suspected, like pegmatite and rusted and/or silicified zones, and when sulphides were observed.  Samples were analyzed by ALS Minerals, located at 1322, rue Harricana, Val-d’Or (Quйbec).  Two grab samples returned slightly anomalous results. The first, numbered 18070, is from a pegmatite visually containing 1% Mo, which returned 292 ppm Mo and 466 ppm Rb. The second, numbered 18005, is from a pink pegmatite and returned 151.5 ppm Nb, 24 ppm Sm and 147.5 ppm Ta.
 
No drilling has been done by Tucana since it purchased the Property.  According to the NI 43-101 report, the magnetic/gradiometric airborne survey released in September 2011, observed at least three families of magnetic lineaments. The first is oriented at about 070 ° , and outlines the north boundary of the Lac des Montagnes volcanic belt. The second is oriented at approximately 040 ° and is located in the paragneiss. The third is oriented NW/SE and has been mapped in the field as a regional diabase dyke.  At this point, the most interesting magnetic feature is the magnetic lineament located on the south part of the property, which seems to outline the north boundary of the volcanic belt. In 1987, Westmin detected several Dighem EM anomalies along this lineament, but did not follow up. This horizon can be fertile, mainly for sulphide-type mineralization.
 
The Company believes the Property has good potential for both rare earths in pegmatites and for sulphide deposits in volcanics.  In addition, the airborne survey has found magnetic anamalies for kimberlite targets.   Several kimberlite targets were discovered in the immediate vicinity of the Property, from one to three kilometers to the north/west of the Property. On May 11, 2012, the Company entered into an Asset Purchase Agreement to acquire 37 mining claims relevant to these kimberlite targets.   
 
 
14

 
 
To fully explore the potential of the Property, a two-phase program is recommended. It is described in the proposed budget shown below:
 
        Phase I (Compilation, geophysical and geological surveys and sampling with 2000 m of drilling)
 

Work
 
Quantity
   
Unit
   
Unit Cost
   
Total
       
Compilation of the EM Input (SDBJ) and Dighem (2007) anomalies (location of anomalies and interpretation)
                    $ 10,000        
                                 
Line cutting (cut every 100 m and picketed every 25 m) on the main coincident Mag and EM anomalies. Provision of 125 km
    125    
km
    $ 550     $ 68,750        
                                     
Ground geophysics, EM (MaxMin) and Mag
    125    
km
    $ 350     $ 43,750        
                                     
Geology and prospecting on the cut lines and on the north part of the property (including room and board, transportation, etc.)
                        $ 100,000        
                                     
Stripping, trenching and sampling, all inclusive
                        $ 50,000        
                                     
Drilling on the target to be defined ($225/m, all inclusive)
    2,000       m     $ 225     $ 460,000        
                                       
Report update, NI 43-101 and for statutory
purposes
                          $ 10,000        
                                       
Contingency, estimated at 10%
                                     
                           
TOTAL PHASE I
    $ 805,750  
                                         
Phase II
                                       
Provision of 5,000 m of drilling to test the targets defined during Phase I
    5,000       m     $ 225     $ 1,125,000          
                                         
Report update, NI 43-101 and for statutory
purposes
                          $ 12,000          
                                         
Contingency, estimated at 10%
                          $ 113,700          
                                         
                           
TOTAL PHASE II
    $ 1,250,700  
                                         
                                         
                           
TOTAL PHASE I AND II
    $ 2,056,450  
 
In December 2011, the Company staked an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana's subsidiary, Tucana Exploration Inc. The property is made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of staking the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal. The Company secured the additional claims based upon the NI 43-101 technical report and the magnetic and gradiometric airborne survey released by the Quebec Ministry of Natural Resources in September 2011. The Lac des Montagnes formation is the most fertile rock in this area for massive sulfides, and it is the same kind of volcano-sedimentary belt you would find in the Rouyn-Noranda and Val d'Or area yet more metamorphosed. The gradiometric magnetic survey shows magnetic anomalies are present on the property and should be further investigated.
 
 
15

 
 
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between April and May 2014 and exploration work in the amount of $84,000 will be required upon renewal. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey. The majority of the claims are located in the Lac des Montagnes volcano-sedimentary formation, and its immediate surrounding area. This is the most fertile ground in the area, and resembles the Abitibi greenstone volcano-sedimentary formations. The Company believes it has kept the most promising portion of the Abigail property based upon the geology reports. The property now consists of 220 map-designated cells totaling approximately 11,400 hectares within and adjacent to Nemaska Lithium's Whabouchi discovery.
 
In March 2012, the Company also retained the services of Gestion SDM Inc. to represent the Company and manage all of the Company's mineral claims with the Department of Natural Resources in Quebec .
 
The Company believes the Report facilitates further development of the Property and will utilize such report to plan and coordinate the next phase of the Company's exploration program. The Company is currently negotiating financing in the amount of $1,000,000 to further explore the Property. The Company will review the survey, and begin to coordinate and plan Phase II of the exploration campaign once the funds are secured. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital.

In addition to the Abigail Property, the Company closed an Lac Kame and EM-1 Purchase Agreement to acquire a One Hundred (100%) interest in two mining properties known as the Lac Kame and EM-1 both located in the James Bay, Quebec region of Canada. It is covered by NTS sheets 32O13. The property is made up of 37 map-designated cells totaling 1,961 hectares. The claims will expire in November 2013 and exploration work in the amount of $44,000 will be required upon renewal. The Company's main interest with the newly acquired claims will be magnetic anomalies for kimberlite based upon the airborne magnetic survey released in October 2011.   The Company plans on raising an addition $150,000 to commence an initial exploration campaign designed to discover the precise location of drill test targets identified by the aireborne electromagnetic (EM) data.  Each identified target will be surveyed with ground EM instruments to insure that the character of the anomaly is consistent with known kimberlites.

Plan of Operation for PBTD Segment
 
On May 11, 2012, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with (i) Pay By The Day Company Inc., a Ontario corporation and a wholly owned subsidiary of the Company (“Pay By The Day”); and (ii) Jordan Starkman, Chief Executive Officer and the sole director of the Company and President of the Subsidiary (“Starkman”), pursuant to which, Starkman acquired all of the issued and outstanding common shares of Pay By The Day, and in exchange, Starkman assumed and agreed to pay, perform and discharge any and a all the liabilities and obligations of Pay By The Day (the “Spin-out”). The Company has divested its interest and will no longer operate and own as a wholly owned subsidiary Pay By The Day Company Inc.
 
Results of Operations for the years ended August 31, 2012 and 2011

Continuing operations

We currently have no known mineral reserves and have not generated any revenue from our mining activities.
 
 
16

 
 
For the period from inception through August 31, 2012, our operating expenses and loss from continuing operation were $1,168,333, and our net loss from continued operations was $1,632,003.

Operating expenses from continuing operation for the year ended August 31, 2012 was $256,471 compared to $483,813 for the year ended August 31, 2011. The decrease in operating expenses during the year ended August 31, 2012 compared to the year ended August 31, 2011 is primarily attributed to a decrease in exploration costs and in professional fees related to the acquisition of the Property.  Professional fees and management fees for the year ended August 31, 2012 were $211,817 and $375,022 for the year ended August 31, 2011. The Company’s professional fees mainly consisted of consulting fees, accounting, audit and legal fees related to the acquisition. In addition, advisory services, public/investor relations relating to the Company’s current operation and future planned corporate acquisitions were responsible for the professional and management fees. The exploration costs for the year ended August 31, 2012 was $22,656 and 93,067 for the year ended August 31, 2011. The decrease in exploration costs was due to the lack of financing required to complete Phase I of the exploration campaign.   

Loss from continuing operations was $256,471 for year ended August 31, 2012 and $483,813 for year ended August 31, 2011.

Net loss was $731,962 for year ended August 31, 2012 and $483,813 for year ended August 31, 2011. The Company dropped 85 mineral property claims due to the lack of financing to complete the required exploration campaign, and resulted $451,870 of impairment of mineral property claims, which was the sole contributing factor for the increased loss during the period. Professional fees relating to advisory services for the Company’s current operations and future planned corporate actions contributed to the net loss for the year ended August 31, 2012.  In addition, explorations costs for the year ended August 31 2012 contributed to the net loss.

During the years ending August 31, 2012 and 2011, we had no provision for income taxes due to the net operating losses incurred.

Discontinued operations

For the period from inception through August 31, 2012, we had $387,810 in revenue and $268,109 in cost of goods sold. Since all sales are from PBTD segment, both revenue and cost of goods are presented within discontinued operation on the consolidated statement of operations. Operating expenses from discontinued operations for the period from inception through August 31, 2012 totaled $256,012, and our loss from discontinued operation was $136,311.

Revenue for the fiscal year ended August 31, 2012 was $3,024 compared to $425 for fiscal year end August 31, 2011. The revenue was generated from the sale of computer and consumer electronics financed through PBTD.

Liquidity and Capital Resources

As of August 31, 2012 we had a cash balance of $11,191 and a working capital deficiency of $121,549.

The Company raised approximately $54,378, net of commissions, from the issuance of shares of common stock of the Company during the year ended August 31, 2012. The proceeds were used to fund operating activities of $223,353. Our current cash will be used to fund the Company’s operations and costs associated with the Property, and any additional claims acquired as discussed above in our Plan of Operations.

The Company is actively seeking financing in the amount of $1,000,000 to fully execute the next phase of the Company’s exploration campaign in accordance with the NI 43-101 and future acquisitions. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital.  The Company is optimistic that the financing will be secured and our going concern risk will be removed.  In addition, the Company is seeking a dual listing on a Canadian exchange to further increase its access to capital funding. 
 
 
17

 
 
We anticipate that our fixed costs made up of legal & accounting and general & administrative expenses for the next twelve months will total approximately $45,000.  Legal and accounting expenses of $35,000 represents the minimum funds needed to sustain operations.  The $35,000 will be financed through the Company’s cash on hand, additional financing, and if needed, advances from our director, Jordan Starkman. Currently there is no firm loan commitment in place between the Company and Jordan Starkman. 

We believe we can satisfy our cash requirements for the next twelve months with our cash balances and if needed an additional loan from our sole director, Jordan Starkman. However, completion of our plan of operations is subject to attaining adequate revenue and adequate financing. We cannot assure investors that adequate revenues will be generated from our mining properties. In the absence of our projected revenues, we may be unable to proceed with our plan of operations. Even without adequate revenues within the next twelve months, we still anticipate being able to continue with our present activities, but we may require financing to achieve our growth and exploration goals.
 
We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees, unless financing is raised. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and required, and our progress with the execution of our business plan.
 
In the event we are not successful in reaching our initial revenue targets or operational goals, additional funds may be required, and we may not be able to proceed with our business plan for the development and exploration of our mining targets. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.  We will need approximately $1,000,000 to aggressively pursue and implement our business plan’s exploration campaign. 
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Smaller reporting companies are not required to provide the information required by this item.
 
 
18

 
 
ITEM 8. 
FINANCIAL STATEMENTS
 
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
31 AUGUST 2012 AND 2011
 
CONTENTS
 
 
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-1
CONSOLIDATED FINANCIAL STATEMENTS
 
Consolidated Balance Sheets
F-2
Consolidated Statements of Operations and Comprehensive Loss
F-3
Consolidated Statements of Stockholders' Equity (Deficit)
F-4
Consolidated Statements of Cash Flows
F-5
Notes to the Consolidated Financial Statements
F-6 – F-13
 
 
19

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Tucana Lithium Corp. and subsidiaries

We have audited the accompanying consolidated balance sheets of Tucana Lithium Corp. and subsidiary (an Exploration Stage Company) as of 31 August 2012 and 2011 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years ended 31 August 2012 and 2011 and for period from the date of inception (5 June 2003) to 31 August 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement preparation.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tucana Lithium Corp. and subsidiaries (an Exploration Stage Company) as of 31 August 2012 and 2011, and the results of its operations and comprehensive loss, cash flows and changes in stockholders’ equity for the years ended 31 August 2012 and 20011 and for period from the date of inception (5 June 2003) to 31 August 2012, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has significant operating losses, is in the exploration stage with no established source of revenue and is dependent on its ability to raise capital from stockholders or other sources to sustain operations, which raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ DNTW Chartered Accountants, LLP
Licensed Public Accountants
Markham, Canada
29 November 2012
 
 
F-1

 
 
TUCANA LITHIUM CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS AS OF
(Expressed in United States Dollars)

 
   
31 August
2012
   
31 August
2011
 
ASSETS
           
Current Assets
           
Cash
 
$
11,191
   
$
86,876
 
Prepaid and sundry
   
11,129
     
5,840
 
Total Current Assets
   
22,320
     
92,716
 
Long Term Assets
               
Mineral property claims
   
133,108
     
550,000
 
Equipment
   
958
     
1,161
 
Total Long Term Assets
   
134,066
     
551,161
 
Total Assets
 
$
156,386
   
$
643,877
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
           
Current Liabilities
           
Accounts payable and accrued liabilities
 
$
32,539
   
$
18,818
 
Convertible notes payable
   
111,330
     
3,939
 
Advances from a related party
   
-
     
203
 
Total Liabilities
   
143,869
     
22,960
 
 
Stockholders' Equity
               
Capital stock, $0.001 par value; Authorized 200,000,000; Issued and outstanding 59,360,869  (31 August 2011 - 54,464,200)
   
59,361
     
54,464
 
Additional paid-in capital
   
1,731,010
     
1,633,229
 
Accumulated other comprehensive loss
   
(9,540
)    
(34,166
)
Deficit accumulated during the development stage
   
(1,768,314
)    
(1,032,610
)
Total Stockholders' Equity
   
12,517
     
620,917
 
Total Liabilities and Stockholders' Equity
 
$
156,386
   
$
643,877
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2

 

TUCANA LITHIUM CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED 31 AUGUST 2012 AND 2011 AND FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 AUGUST 2012
(Expressed in United States Dollars)

 
   
For the Year Ended 31 August
2012
   
For the Year Ended 31 August
2011
   
For the Period from Inception
(5 June 2003) to 31 August
 2012
 
EXPENSES
                 
Professional fees
    211,817       375,022       998,329  
Exploration
    22,656       93,067       115,723  
Advertising and promotion
    1,788       7,393       9,181  
Telecommunications
    2,184       2,128       10,633  
Rent and occupancy costs
    7,728       3,000       10,860  
Office and general
    4,470       1,229       13,218  
Interest and bank charges
    5,708       1,974       10,269  
Depreciation
    120       -       120  
TOTAL OPERATING EXPENSES
    256,471       483,813       1,168,333  
LOSS FROM OPERATIONS
    (256,471 )     (483,813 )     (1,168,333 )
Interest income
    -       -       11,821  
Impairment of mineral property claims
    (451,870 )     -       (451,870 )
Impairment of convertible note receivable
    (23,621 )     -       (23,621 )
LOSS FROM CONTINUING OPERATIONS BEFORE TAX
    (731,962 )     (483,813 )     (1,632,003 )
Income tax
    -       -       -  
LOSS FROM CONTINUING OPERATIONS
    (731,962 )     (483,813 )     (1,632,003 )
LOSS FROM DISCONTINED OPERATION, NET OF TAX
    (3,742 )     (14,581 )     (136,311 )
NET LOSS
  $ (735,704 )   $ (498,394 )   $ (1,768,314 )
OTHER COMPREHENSIVE LOSS FROM CONTINUING OPERATIONS
                       
Foreign currency translation adjustment
    896       (4,388 )        
Unrealized loss on convertible note receivable and available-for-sale securities, net of tax
    23,621       (23,621 )        
COMPREHENSIVE LOSS OF CONTINUING OPERATIONS
  $ (707,445 )   $ (511,822 )        
OTHER COMPREHENSIVE LOSS FROM DISCONTINUED OPERATIONS
                       
Foreign currency translation adjustment
    109       (1,142 )        
COMPREHENSIVE LOSS OF DISCONTINUED OPERATIONS
    (3,633 )     (15,723 )        
TOTAL COMPREHENSIVE LOSS
    (711,078 )     (527,545 )        
LOSS FROM CONTINUING OPERATIONS PER SHARE - BASIC AND DILUTED
    (0.01 )     (0.02 )        
LOSS FROM DISCONTINUED OPERATIONS PER SHARE - BASIC AND DILUTED
    -       -          
NET LOSS PER SHARES - BASIC AND DILUTED
  $ (0.01 )   $ (0.02 )        
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED
    56,983,073       31,402,603          
 
The accompanying notes are an integral part of these consolidated financial statements.
  
 
F-3

 

TUCANA LITHIUM CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 AUGUST 2012
(Expressed in United States Dollars)


   
Common Stock
    Additional Paid     Common Stock     Accumulated Other Comprehensive     Deficit Accumulated During The Development     Total Stockholders'  
   
Shares
   
Amount
   
In Capital
   
 Issuable
   
Loss
   
 Stage
   
 Deficit
 
Opening Balance
                                         
Issuance of common stock at inception
   
2,000,000
   
$
2,000
   
$
(1,800
)
                   
$
200
 
Foreign currency translation
                                 
(109
)
         
(109
)
Net loss
                                         
(1,257
)
   
(1,257
)
Balance, 31 August 2003
   
2,000,000
     
2,000
     
(1,800
)
         
(109
)
   
(1,257
)
   
(1,166
)
Foreign currency translation
                                 
(505
)
           
(505
)
Net loss
                                         
(5,825
)
   
(5,825
)
Balance, 31 August 2004
   
2,000,000
     
2,000
     
(1,800
)
         
(614
)
   
(7,082
)
   
(7,496
)
Foreign currency translation
                                 
(504
)
           
(504
)
Net loss
                                         
(5,810
)
   
(5,810
)
Balance, 31 August 2005
   
2,000,000
     
2,000
     
(1,800
)
         
(1,118
)
   
(12,892
)
   
(13,810
)
Foreign currency translation
                                 
8,200
             
8,200
 
Net loss
                                         
(18,388
)
   
(18,388
)
Balance, 31 August 2006
   
2,000,000
     
2,000
     
(1,800
)
         
7,082
     
(31,280
)
   
(23,998
)
Issuance of common stock for cash
   
500,000
     
500
     
(450
)
                         
50
 
Unrealized loss on available-for-sale securities, net of taxes
                                 
(2,815
)
           
(2,815
)
Foreign currency translation
                                 
(12,682
)
           
(12,682
)
Net loss
                                         
(16,945
)
   
(16,945
)
Balance, 31 August 2007
   
2,500,000
   
$
2,500
   
$
(2,250
)
       
$
(8,415
)
 
$
(48,225
)
 
$
(56,390
)
Issuance of common stock for cash
   
3,590,000
     
3,590
     
32,310
                           
35,900
 
Issuance of common stock for services
   
100,000
     
100
     
900
                           
1,000
 
Unrealized loss on available-for-sale securities, net of taxes
                                 
(1,994
)
           
(1,994
)
Foreign currency translation
                                 
3,926
             
3,926
 
Net loss
                                         
(94,389
)
   
(94,389
)
Balance, 31 August 2008
   
6,190,000
   
$
6,190
   
$
30,960
         
$
(6,483
)
 
$
(142,614
)
 
$
(111,947
)
Issuance of common stock for services
   
1,000,000
     
1,000
     
49,000
                           
50,000
 
Foreign currency translation
                                 
(973
)
           
(973
)
Net loss
                                         
(124,214
)
   
(124,214
)
Balance, 31 August 2009
   
7,190,000
   
$
7,190
   
$
79,960
         
$
(7,456
)
 
$
(266,828
)
 
$
(187,134
)
Issuance of common stock for conversion of notes payable
   
6,000,000
     
6,000
     
114,000
                           
120,000
 
Issuance of common stock for cash
   
2,000,000
     
2,000
     
73,000
                           
75,000
 
Issuance of common stock for accounts payable
   
200,000
     
200
     
9,800
                           
10,000
 
Issuance of common stock for consulting services
                           
50,000
                     
50,000
 
Foreign currency translation
                                   
2,442
             
2,442
 
Forgiveness of advances from related party
                   
120,000
                             
120,000
 
Net loss
                                           
(267,389
)
   
(267,389
)
Balance, 31 August 2010
   
15,390,000
   
$
15,390
   
$
396,760
   
$
50,000
   
$
(5,014
)
 
$
(534,217
)
 
$
(77,081
)
Issuance of common stock for mineral claims
   
20,000,000
     
20,000
     
380,000
                             
400,000
 
Issuance of common stock for cash, net of commissions
   
16,474,200
     
16,474
     
794,079
                             
810,553
 
Issuance of common stock for accounts payable
   
2,000,000
     
2,000
     
48,000
     
(50,000
)
                   
-
 
Issuance of common stock for debt conversion
   
600,000
     
600
     
14,390
                             
14,990
 
Unrealized loss on convertible notes receivable
                                   
(23,621
)            
 
(23,621
)
Foreign currency translation
                                   
(5,530
)            
(5,530
)
Net loss
                                           
(498,394
)
   
(498,394
)
Balance, 31 August 2011
   
54,464,200
   
$
54,464
   
$
1,633,229
   
$
-
   
$
(34,166
)  
$
(1,032,610
)  
$
620,917
 
Issuance of common stock for rent
   
125,000
     
125
     
3,375
     
     
     
     
3,500
 
Issuance of common stock for cash, net of commissions
   
2,411,669
     
2,412
     
51,966
     
     
     
     
54,378
 
Issuance of common stock for consulting services
   
360,000
     
360
     
17,640
     
-
     
     
     
18,000
 
Issuance of common stock for purchase of properties
   
2,000,000
     
2,000
     
18,000
     
     
     
     
20,000
 
Convertible debentures equity portion
                   
6,800
                             
6,800
 
Realized loss on convertible notes receivable
                                   
23,621
             
23,621
 
Foreign currency translation
                                   
1,005
             
1,005
 
Net loss
                                           
(735,704
)    
(735,704
)
Balance, 31 August 2012
   
59,360,869
   
$
59,361
   
$
1,731,010
   
$
-
   
$
(9,540
)  
$
(1,768,314
)  
$
12,517
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 

TUCANA LITHIUM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 AUGUST 2012 AND 2011 AND FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 AUGUST 2012
(Expressed in United States Dollars)
 
   
For the Year Ended 31
August 2012
   
For the Year Ended 31
August 2011
   
For the Period from Inception
(5 June 2003) to 31 August
2012
 
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss
 
$
(735,704
 
$
(498,394
)  
$
(1,768,314
Less: Loss from discontinued operations, net of tax expense
   
3,742
     
14,581
     
136,311
 
Loss from continuing operations
   
(731,962
)    
(483,813
)    
(1,632,003
)
Items not affecting cash
                       
Depreciation
   
120
     
-
     
120
 
Accretion expense on convertible note payable
   
5,630
     
-
     
5,630
 
Impairment of mineral property claims
   
451,870
     
-
     
451,870
 
Impairment of convertible note receivable
   
23,621
     
-
     
23,621
 
Loss on disposal of assets
   
-
     
-
     
2,762
 
Issuance of common stock for services
   
18,000
     
-
     
119,000
 
Issuance of common stock for rental
   
3,500
     
-
     
3,500
 
Write off of deferred offering costs
   
-
     
-
     
120,000
 
Change in prepaid and sundry
   
(5,289
)    
-
     
(11,129
)
Change in accounts payable and accrued liabilities
   
13,721
     
(59,170
)    
32,539
 
Net cash used in operating activities from continuing operations
   
(220,789
)    
(542,983
)    
(884,090
)
Net cash used in operating activities from discontinued operations
   
(2,564
)    
(11,344
)    
(114,257
)
CASH FLOWS USED IN OPERATING ACTIVITIES
   
(223,353
)    
(554,327
)    
(998,347
)
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Acquisition of mineral property claims
   
(14,978
   
-
     
(14,978
)
Disposition of equipment
   
-
     
-
     
4,462
 
Acquisition of equipment
   
(1,130
)    
(918
)    
(30,124
)
CASH FLOWS USED IN INVESTING ACTIVITIES
   
(16,108
)
   
(918
)    
(40,640
)
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Convertible notes receivable
   
-
     
-
     
(21,978
)
Proceeds from convertible note payable
   
112,500
     
10,000
     
141,040
 
Repayment of convertible notes payable
   
(3,550
)    
(160,000
)    
(163,550
)
Advances (to) from a stockholder
   
-
     
(6,668
)    
-
 
Advances (to) from a related party
           
(4,797
)    
125,000
 
Repayment of advance from a related party
   
(203
)    
-
     
-
 
Issuance of common stock, net of commissions
   
54,378
     
810,553
     
975,881
 
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
   
163,125
     
649,088
     
1,056,393
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
   
651
     
(7,051
   
(6,215
)
NET INCREASE IN CASH
   
(75,685
)    
86,792
     
11,191
 
CASH, BEGINNING OF YEAR
   
86,876
     
84
     
-
 
CASH, END OF YEAR
 
$
11,191
   
$
86,876
   
$
11,191
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-5

 
 
TUCANA LITHIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(An Exploration Stage Company)
FOR THE YEARS ENDED 31 AUGUST 2012 AND 2011 AND FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 AUGUST 2012
(Expressed in United States Dollars)

 
1.
NATURE OF OPERATIONS AND ORGANIZATION

Tucana Lithium Corp., formerly named Oteegee Innovations Inc. and formerly named Pay By The Day Holdings Inc., (the “Company”) was incorporated in August 2007 in the State of Nevada.  On 31 August  2007 we entered into a share exchange agreement with Pay By The Day Company Inc., an Ontario Corporation incorporated in June 2003 (“PBTD” or “Pay By The Day”), whereby PBTD became our wholly owned subsidiary. The Company is primarily engaged in exploration for lithium deposits at the Abigail Lithium Property in the James Bay region of Quebec, Canada.

On 12 March 2010, the Company entered into a non-binding letter of intent (“Letter of Intent”) with Grail Semiconductor, Inc. (“Grail”), to acquire all of the assets of Grail. As a result of entering into the Letter of Intent, on 22 March 2010, the Company filed a certificate of amendment to the Company’s articles of incorporation with the Nevada Secretary of State changing the Company’s name to Oteegee Innovations, Inc.

On 7 April 2010, the Company effected a 1 for 10 forward split of its issued and outstanding common stock. The Company’s issued and outstanding common shares were increased from 1,539,000 to 15,390,000. The Company also increased its authorized common shares from 100,000,000 to 200,000,000.

On 6 July 2010, the Company closed a share exchange agreement with Oteegee International Holdings Limited, a company incorporated in Hong Kong (“Oteegee”). Pursuant to the share exchange agreement, the Company issued 61,647,250 shares of common stock pending the close of the share exchange agreement in exchange for 4,000 common shares representing 40% of Oteegee.

On 20 August 2010, the Company received a notice of termination of the Letter of Intent with Grail, and as a result, the Company cancelled the 61,647,250 of its common shares issued to Oteegee. The Letter of Intent was terminated due to the Company’s inability to raise preliminary funding during the due diligence period of the Letter of Intent.  In accordance with the Letter of Intent, the Company is entitled to convert its advances to Grail into equity of Grail.
 
On 2 December 2010 the Company closed an Asset Purchase Agreement (the “Abigail Purchase Agreement”) with Alain Champagne and other parties (the “Selling Group”) to acquire a One Hundred (100%) interest in the Abigail Lithium Project located in the James Bay, Quebec region of Canada (the “Property”) for a total cost of $550,000. The Property is covered by NTS sheets 320/12 and 320/13.  The Property is made up of 222 map-designated cells totaling 11,844 hectares.   The claims expire between January 2011 and May 2012.
 
Pursuant to the Abigail Purchase Agreement, on 7 December 2010 the Company issued a total of 15,000,000 shares of common stock plus committed to an additional payment of $250,000 in cash with $100,000 payable 90 days from the closing of the Abigail Purchase Agreement and $150,000 payable 180 days from the closing of the Abigail Purchase Agreement.  The Company has also agreed to pay the Selling Group a 3% royalty on any commercial producing mineral deposit. In addition, the Company agreed to a minimum initial exploration work budget of $300,000 to commence no later than 16 May 2011.  The Company announced on 27 June 2011 it started its first phase of the exploration campaign on the Property. The program commence date was delayed due to poor weather conditions in the region.
 
 
F-6

 
 
In March 2011, the Company issued 5,000,000 shares of common stock at $0.02 per share reflecting the first payment of $100,000 for the Property.  On 15 May 2011, the Company issued a 10% Convertible Debenture with a principal amount of $150,000 (the “Debenture ”) to Alain Champagne (the “Holder”). The Debenture is due twelve months from the date of issuance. Additionally, the Holder is entitled to convert, at any time, until the Debenture is paid in full, all or any part of the principal plus accrued interest into shares of the Company’s common stock at a per share conversion price of $0.15. On 24 May 2011 the Company repaid $100,000 and on 25 June 2011 the Company paid off the balance of $50,000 fulfilling all the obligations to the Selling Group for the purchase price of the Property.  In July 2011, the Ministry of Natural Resources transferred all mining claims into the name of Tucana Exploration Inc., a company incorporated in the State of Wyoming on 22 February 2011 (“Tucana”).  Tucana is a 100% wholly owned subsidiary of the Company.

On 3 May 2011, the Company filed a certificate of amendment to amend the articles of incorporation with the Nevada Secretary of State changing the Company’s name to Tucana Lithium Corp.
 
On 9 December 2011, the Company staked an additional 83 claims in the James Bay region of Quebec. The claims are 100% owned by the Company and registered in the name of Tucana's subsidiary, Tucana Exploration Inc. The property is made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of staking the claims was $8,215. The claims will expire in November 2013 and exploration work in the amount of $100,000 will be required upon renewal. 
 
In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011. These claims will expire between April and May 2014 and exploration work in the amount of $84,000 will be required upon renewal.  In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey.
 
In May 2012, the Company entered into an asset purchase agreement (“Lac Kame and EM-1 Purchase Agreement”) to acquire a 100% interest in two mining properties known as the Lac Kame and EM-1 both located in the James Bay, Quebec region of Canada. The two properties are covered by NTS sheets 32O13. The properties are made up of 37 map-designated cells totaling 1,961 hectares. The claims will expire in November 2013 and exploration work in the amount of $44,000 will be required upon renewal.  In addition, pursuant to the Lac Kame and EM-1 Purchase Agreement, the Company agreed to an additional payment of $50,000 and the issuance of 1,000,000 shares to the selling group if and when the Company spends a total of $1,000,000, an additional payment of $100,000 and the issuance of 1,000,000 if and when the Company spends $2,500,000, and an additional payment of $150,000 and the issuance of 1,000,000 shares if and when the Company spends a total of $5,000,000 on the acquired properties. The amount of spending by the Company on the acquired properties is deemed as an index of any previously unidentified and additional value of the properties. The Company also agreed to pay the selling group a 3% net smelter royalty on any commercial producing mineral deposit from the acquired properties.  The Company's main interest with the newly acquired claims will be magnetic anomalies for kimberlite based upon the airborne magnetic survey released in October 2011. 

On 11 May 2012, the Company also entered into a stock purchase agreement with Jordan Starkman, Chief Executive Officer and the sole director of the Company, pursuant to which, Mr. Starkman acquired all of the issued and outstanding common shares of the Company’s wholly-owned subsidiary Pay By The Day Company Inc. (“PBTD”).  Upon sale of PBTD, the Company didn’t recognize a gain or loss since PBTD is dormant with limited transactions.
 
The Company operates Tucana Exploration as a wholly owned subsidiary. The Company operates under the web-site address www.tucanalithium.com and www.tucanaexploration.com
 
2.
BASIS OF PRESENTATION

The accompanying consolidated financial statements of the Company include the accounts of Tucana Lithium Corp. and its wholly owned subsidiary, Tucana Exploration Inc. Inter-company balances and transactions have been eliminated upon consolidation.
 
 
F-7

 
 
The Company is considered to be in the development stage as defined in Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company has devoted substantially all of its efforts to business planning and development by means of raising capital for operations. The Company has also not realized any significant revenues. Among the disclosures required by ASC 915 are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations and comprehensive loss, stockholders' equity and cash flows disclose activity since the date of the Company's inception.

3.
GOING CONCERN

These consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. The Company is actively seeking financing to fully execute the next phase of the Company’s exploration campaign and future acquisitions. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital.  The Company is optimistic that the financing will be secured.  We are in discussions with various parties and believe a successful financing is likely.  The Company believes it can satisfy minimum cash requirements for the next twelve months with either an equity financing, convertible debenture or if needed, a loan from our director, Jordan Starkman.
 
There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these consolidated financial statements.
 
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States of America.  Presented below are those policies considered particularly significant:
 
Exploration Stage Company

The Company is an exploration stage company.  The Company is still devoting substantially all of its efforts on establishing the business.  All losses accumulated, since inception, have been considered as part of the Company’s exploration stage activities.

Mineral Properties and Exploration and Development Costs

The costs of acquiring mineral rights are capitalized at the date of acquisition. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration costs incurred on mineral properties are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves (which exclude non-recoverable reserves and anticipated processing losses). When the Company receives an option payment related to a property, the proceeds of the payment are applied to reduce the carrying value of the exploration asset.
 
Carrying Value of Mineral Property Interests
 
The cost of acquiring mineral property interests is capitalized. Capitalized acquisition costs are expensed in the period in which it is determined that the mineral property has no future economic value. Capitalized amounts may be written down if future cash flows, including potential sales proceeds related to the property, are estimated to be less than the carrying value of the property. The Company reviews the carrying value of mineral property interests periodically and whenever events or changes in circumstances indicate that the carrying value may not be recoverable, reductions in the carrying value of each property would be recorded to the extent the carrying value of the investment exceeds the property’s estimated fair value.
 
 
F-8

 
 
Cash and Cash Equivalents
 
Cash and cash equivalents consist of commercial accounts and interest-bearing bank deposits and are carried at cost, which approximates current value. Items are considered to be cash equivalents if the original maturity is three months or less.
 
Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with the requirements of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
 
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information
 
Foreign Translation Adjustment

The accounts of the Company’s foreign subsidiaries whose functional currency is the Canadian dollar, were translated into United States dollars in accordance with the provisions of ASC 830, Foreign Currency Matters.  In accordance with the provisions of ASC 830, transaction gains and losses on these assets and liabilities are included in the determination of income for the relevant periods.  Adjustments resulting from the translation of the consolidated financial statements from their functional currencies to United States dollars are accumulated as a separate component of accumulated other comprehensive income (loss) and have not been included in the determination of income for the relevant periods.
 
Income Taxes

The Company accounts for income taxes pursuant to ASC 740, Income Taxes.  Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
 
Use of Estimates
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The estimates on depreciation were based on the estimated useful lives of the Company's assets. Any estimates during the period have had an immaterial effect on earnings. 
 
Earnings or Loss Per Share

The Company accounts for earnings per share pursuant ASC 260, Earnings per Share, which require disclosure on the financial statements of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year.  Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.
 
 
F-9

 
 
There were no dilutive financial instruments for the year ended 31 August 2012 and 2011 or for the period from inception (5 June 2003) to 31 August 2012.
 
Comprehensive Income
 
The Company follows the guidance in ASC 220, Comprehensive Income. ASC 220 establishes standards for the reporting and presentation of comprehensive income and its components in a full set of consolidated financial statements.  Comprehensive income is presented in the statements of changes in stockholders' equity (deficit), and consists of unrealized gains (losses) on available for sale marketable securities and foreign currency translation adjustments.  ASC 220 requires only additional disclosures in the consolidated financial statements and does not affect the Company's financial position or results of operations.
 
Equipment
 
Equipment is stated at cost less accumulated depreciation.  Depreciation, based on the estimated useful lives of the assets, is provided using the under noted annual rates and methods:
 
Furniture and fixtures
20% declining balance
Computer
30% declining balance
 
Stock-Based Compensation
 
The Company accounts for Stock-Based Compensation in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity ’ s equity instruments or that may be settled by the issuance of those equity instruments.  ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements.  That cost is measured based on the fair value of the equity or liability instruments issued.
 
Impairment of Long-Lived Assets
 
In accordance with ASC 360, Property and Equipment, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  The Company evaluates annually at year end whether events and circumstances have occurred that indicate possible impairment.  If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable.  In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.  Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell.
 
 
F-10

 
 
Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  ASU No. 2011-04 does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The ASU is effective for interim and annual periods beginning after 15 December 2011. The Company will adopt the ASU as required.  The ASU will affect the Company’s fair value disclosures, but will not affect the Company’s results of operations, financial condition or liquidity.
 
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income.  The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements.  ASU No. 2011-05 is effective for interim and annual periods beginning after 15 December 2011.  The Company will adopt the ASU as required.  The Company does not expect ASU No. 2011-05 to have a material effect on the Company’s results of operations, financial condition or liquidity.
 
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, an update to existing guidance on the assessment of goodwill impairment.  This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before performing the two-step impairment review process.  It also amends the examples of events or circumstances that would be considered in a goodwill impairment evaluation.  The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after 15 December 2011. Early adoption is permitted. The Company does not expect ASU No. 2011-08 to have a material effect on the Company’s results of operations, financial condition or liquidity.

Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

5.
DISCONTINUED OPERATIONS

On 11 May 2012, the Company entered into a stock purchase agreement with Jordan Starkman, Chief Executive Officer and the sole director of the Company, pursuant to which, Mr. Starkman acquired all of the issued and outstanding common shares of the Company’s wholly-owned subsidiary PBTD.  Upon sale of PBTD, the Company didn’t recognize a gain or loss since PBTD is dormant with limited transactions.

The operating results and cash flows of PBTD are reflected as discontinued operations in the consolidated financial statements for all periods presented. Although net earnings are not affected, the Company has reclassified the results from the discontinued operations in the comparative periods presented.

The following table summarizes the operating results of the discontinued operation for the period indicated:

   
For the Year Ended
31 August
2012
   
For the Year Ended
31 August
2011
   
For the Period
from Inception
(5 June 2003) to
31 August 2012
 
Revenue
  $ 3,024     $ 425     $ 387,810  
Cost of goods sold
    2,175       -       268,109  
Gross profit
  $ 849     $ 425     $ 119,701  
Operating expenses
    4,591       15,006       256,012  
Loss from discontinued operations before tax
    (3,742 )     (14,581 )     (136,311 )
Income taxes
    -       -       -  
Loss from discontinued operations after income tax expenses
    (3,742 )     (14,581 )     (136,311 )
 
 
F-11

 

6.
EQUIPMENT

The components of equipment were as follows:

   
Cost
   
Accumulated Depreciation
   
Net
2011
   
Net
2010
 
Furniture and equipment
 
$
3,711
   
$
(2,931
 
$
780
   
$
1,272
 
Computer
   
16,025
     
(15,644
)
   
381
     
1,941
 
   
$
19,736
   
$
(18,575
)
 
$
1,161
   
$
3,213
 
 
7.
MINERAL CLAIMS

The Company's main exploration focus is the Abigail Lithium Property located in the James Bay region of Quebec, Canada. As of 31 August 2012 the property consists of 177 map-designated cells totaling approximately 9,400 hectares. In addition, the Company holds 12 map-designated cells just north of the Abigail property named Lac Kame and 25 map-designated cells named EM-1.  Combined the Lac Kame property and EM-1 total 966 hectares.

The Abigail Lithium Property was initially acquired for a cost of $550,000 on December 2, 2010 and was made up of 222 map-designated cells covering 11,844 hectares and having claims which expired in May 2012. These claims are covered by NTS sheets 320/12 and 320/13. In addition, the Company is subject to a 3% net smelter returns royalty on any commercial production from mineral deposits on this property.

In December 2011, the Company acquired an additional 83 claims which are contiguous to the initial 222 claim units. The claims are 100% owned by the Company and registered in the name of Tucana Exploration. The claims are made up of 83 map-designated cells totaling 4,439 hectares with 82 claims covered by NTS sheets 32O12 and 1 claim covered by NTS sheets 32N09. The cost of acquiring the claims was $8,215. The claims will expire in November 2013. The Company secured the additional claims based upon the magnetic and gradiometric airborne survey released by the Quebec Ministry of Natural Resources in September 2011. 

In March 2012, the Company renewed 71 mineral claims on the Abigail property based upon the exploration work reported in the summer of 2011.  These claims will expire between April and May 2014 and exploration work in the amount of $84,000 will be required upon renewal. In addition, the Company has dropped 85 mineral claims located on the northern perimeter of the property. The Company's decision was based upon the results from the exploration program in the summer 2011 and a review of the airborne magnetic survey. Due to these circumstances, the Company evaluated the recoverability of the mineral claims and recognized an impairment loss of $451,870 on the mineral property claims for the year ended 31 August 2012 (2011 – Nil).

In May 2012, the Company closed the Lac Kame and EM-1 purchase agreement to acquire the Lac Kame and EM-1 Properties, which are located to the north of the Abigail Lithium Property in the James Bay region of Quebec, Canada. These properties are covered by NTS sheets 320/13 and are made up of 37 map-designated cells totaling 1,961 hectares. The claims will expire in June 2014.  The Company issued 2,000,000 shares in connection with the acquisition of the Lac Kame and EM-1 Properties are disclosed in note 8
 
 
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8.
ADVANCES FROM STOCKHOLDER

The advances from stockholder were from the sole director and shareholder, Jordan Starkman.  The amount is non-interest bearing, unsecured and due on demand.  The carrying value of the advances approximates the market value due to the short term maturity of the financial instruments. The advances from stockholder have been fully paid back in the year ended 31 August 2012.
 
9.
CONVERTIBLE NOTES PAYABLE
 
In August 2010 the Company issued a one-year convertible note payable in the amount of $3,550.  The convertible note payable matures in twelve months, is unsecured, bears interest at 5% per annum and interest accrues and is payable in cash upon maturity or repayment of the principal prior to the date of maturity, provided that the elected conversion to common shares does not occur.  At any time or times on or before 11 August 2011, the note holder shall be entitled to convert any portion of the outstanding and unpaid amount into fully paid and non-assessable shares of common stock at a conversion price of $0.10  per common share.  On 15 December 2011 the note payable was fully paid off in cash.

On 16 May 2012, the Company issued a one-year convertible note payable in the amount of $125,000.  The convertible note payable matures in twelve months, is unsecured, bears interest at 4% per annum and interest accrues and is payable in cash upon maturity or repayment of the principal prior to the date of maturity, provided that the elected conversion to common shares does not occur.  At any time or times on or before 16 May 2013, the note holder shall be entitled to convert any portion of the outstanding and unpaid amount, including accrued interest, into fully paid and non-assessable shares of common stock at a conversion price of $0.025 per common share. In accordance with ASC 470-20, Debt with Conversions and Other Options, the Company has identified a beneficial conversion feature imbedded within this convertible debenture. Accordingly, the Company recognized $6,800 which is equal to the fair value of the imbedded beneficial conversion feature and was deducted from the proceeds of issuance and was attributed to additional paid-in capital. The beneficial conversion feature will be amortized over the term to maturity. Accretion expense of $1,983 was recognized for the year ended 31 August 2012 (2011 – Nil) and is presented within interest expense on the consolidated statement of operations.

The Company paid $12,500 in commissions related to raising the above mentioned proceeds which were reduced from the liability component of the debentures are being amortized over the term to maturity. Accretion expense of $3,646 was recognized for the year ended 31 August 2012 (2011 – Nil) and is presented within professional fees on the consolidated statement of operations.
 
10.
RELATED PARTY TRANSACTIONS
 
The transactions with related parties were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:
 
Advances to a related company controlled by Jordan Starkman, the sole director of the Company are non-interest bearing, unsecured and due on demand.

Consulting fees paid to Mr. Starkman for the year ended 31 August 2012 were $41,289 (2011 – Nil).

As disclosed in note 1, on 11 May 2012, Mr. Starkman acquired all the shares of common stock of Pay By The Day Company Inc. from the Company.  Upon sale of PBTD, the Company didn’t recognize a gain or loss since PBTD is dormant with limited transactions.
 
 
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11.
CAPITAL STOCK
 
During fiscal 2003, the Company completed non-brokered private placements of 2,000,000 shares of common stock for proceeds of $200.
 
During fiscal 2007, the Company completed non-brokered private placements of 500,000 shares of common stock for proceeds of $50.
 
During fiscal 2008, the Company issued 100,000 shares of common stock for legal services rendered at $0.01 per share.
 
During fiscal 2008, the Company issued 3,590,000 shares of common stock for cash at $0.01 per share.
 
In August 2009 the company issued 1,000,000 shares of common stock for consulting services rendered at $0.05 per share.
 
In January 2010 a $120,000 note payable was converted to 6,000,000 shares of common stock in the Company at a price of $0.02 per share.
 
In January 2010 the Company issued 2,000,000 shares of common stock for cash at $0.0375 per share.
 
In February 2010 the Company issued 200,000 shares of common stock in settlement of accounts payable at $0.05 per share.
 
On 7 April 2010, the Company affected a 1 for 10 forward split of its issued and outstanding common stock. The Company’s issued and outstanding common shares were increased from 1,539,000 to 15,390,000.  All references in the financial statements to the number of shares outstanding and per share amounts of the Company’s common stock have been restated retroactively to reflect the effect of the stock split for all periods presented. The Company also increased its authorized common shares from 100,000,000 to 200,000,000.

During the year ended 31 August 2010, the Company recorded $50,000 for consulting services rendered in exchange for common shares to be issued.  On 1 March 2011, the Company issued 2,000,000 shares of common stock at a price of $0.025 per share in settlement of these services.

In May 2010 the Company issued a one-year convertible note payable in the amount of $14,990.  On 16 April 2011 the note payable was converted to 600,000 shares of common stock of the Company at $0.025 per share.

In December 2010, pursuant to the Agreement, the Company issued 15,000,000 shares of common stock at $0.02 per share to the Selling Group to acquire a 100% interest in the Property. On 1 March 2011, the Company issued an additional 5,000,000 shares of common stock at a price of $0.02 per share reflecting payment of $100,000 towards the Property. The shares issued in connection with the Property acquisition were based on the fair market value of the stock on the date of issuance.

During the year ended 31 August 2011, the Company issued 16,474,200 shares of common stock for total gross proceeds of $891,551 from various issuances in prices ranging from $0.03 to $0.11 per share. The Company paid $80,998 in commissions related to raising these proceeds and has accordingly been deducted from additional paid-in capital.  The net proceeds from these issuances were $810,553.

In September 2011, the Company entered into a rental agreement for a period of two years commencing 1 September 2011. The Company paid $12,000 in cash and will deliver to the lessor shares of common stock worth $3,500 to fulfill rental payment for the entire term of lease. In April 2012, the Company issued 125,000 shares of common stock pursuant to the rental agreement at a price of $0.028 per share.
 
On 5 September 2011, the Company received $5,000 in exchange for 100,000 shares of common stock at $0.05 per share.  These shares were issued on 17 May 2012.
 
On 15 September 2011, the Company issued 360,000 shares of common stock at $0.05 per share for consulting services.  The services were valued based on the fair market value of the common stock on the date of issuance.
 
 
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On 15 December 2011, the Company received $15,000 in exchange for 750,000 shares of common stock at $0.02 per share.  These shares were issued on 17 May 2012.

On 8 February 2012, the Company received $6,600 in exchange for 220,000 shares of common stock at $0.03 per share.  These shares were issued on 17 May 2012.

On 29 February 2012, the Company received $26,250 in exchange for 875,000 shares of common stock at $0.03 per share.  These shares were issued on 17 May 2012.

On 5 March 2012, the Company received $5,000 in exchange for 166,667 shares of common stock at $0.03 per share.  These shares were issued in August 2012.

On 13 April 2012, the Company received $9,000 in exchange for 300,000 shares of common stock at $0.03 per share.  These shares were issued in August 2012.

On 17 May 2012, the Company issued 2,000,000 shares of common stock in connection with its purchase of the Lac