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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended December 31,  2012
   
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

000-54521
Commission File Number
 
American Graphite Technologies Inc.
(Exact name of registrant as specified in its charter)
   
Nevada
27-2841739
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
3651 Lindell Rd., Ste D#422, Las Vegas, NV
89103
(Address of principal executive offices)
(Zip Code)
 
(702) 473-8227
(Registrant’s  telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 
Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
Yes [X ]  No []

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
[  ]
Accelerated filer
[  ]
       
Non-accelerated filer
[  ]
Smaller reporting company
[X]
(Do not check if a smaller reporting company)
     
 
 

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 
Yes [ ] No [X]

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

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 
Yes [  ]  No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

78,218,750 common shares outstanding as of February 7, 2013
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.)
 
 
2

 

TABLE OF CONTENTS

   
Page
 
PART I – Financial Information
 
Item 1.
  4
Item 2.
  5
Item 3.
  7
Item 4.
   7 
     
 
PART II – Other Information
 
Item 1.
  8
Item 1A.
  8
Item 2.
  8
Item 3.
  8
Item 4.
  8
Item 5.
  8
Item 6.
  9
    10
 
 
3

 
PART I – FINANCIAL INFORMATION
 
REPORTED IN UNITED STATES DOLLARS

ITEM 1.  FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  All such adjustments are of a normal recurring nature.  Operating results for the six month period ended December 31, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013.  For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012 as filed with the Securities and Exchange Commission on October 15, 2012.
 
 
 
4

 

AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
BALANCE SHEETS
(Unaudited)
 
       
       
   
December 31,
 2012
   
June 30,
 2012
 
Assets
           
CURRENT ASSETS
           
Cash
  $ 315,338     $ 30,042  
Prepaid expenses and advances
    122,038       2,413  
TOTAL CURRENT ASSETS
    437,376       32,455  
TOTAL ASSETS
  $ 437,376     $ 32,455  
  Liabilities                
LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
               
Accounts payable and accrued liabilities
  $ 17,601     $ 2,934  
Accounts payable – related party
    -       2,695  
Accrued interest
    -       110  
        Note payable
    -       40,000  
TOTAL CURRENT LIABILITIES
    17,601       45,739  
TOTAL LIABILITIES
    17,601       45,739  
                 
STOCKHOLDERS’ EQUITY(DEFICIT)
               
Capital stock
Authorized   -  200,000,000 shares of common stock, $0.001 par value
Issued and outstanding
78,218,750 and 77,437,500 shares of common stock, respectively
    78,219       77,438  
Additional paid in capital
    695,157       8,738  
Accumulated deficit during the exploration stage
    (353,601 )     (99,460 )
TOTAL STOCKHOLDERS’ EQUITY(DEFICIT)
    419,775       (13,284 )
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
  $ 437,376     $ 32,455  


The accompanying notes are an integral part of these financial statements.
 
 
F-1

 
 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
 
                           
Cumulative results
from Inception,
 
                           
June 1, 2010
 
   
Three Months Ended
   
Six Months Ended
   
Through
 
   
December 31, 2012
   
December 31, 2011
   
December 31, 2012
   
December 31, 2011
   
December 31, 2012
 
                               
REVENUE
  $ -     $ -     $ -     $ -     $ -  
                                         
OPERATING EXPENSES
                                       
     Office and general
    17,913       1,140       35,833       2,180       48,866  
     Stock based compensation
    46,800       -       78,000       -       78,000  
     Management fees
    12,500       -       20,000       -       25,000  
     Professional fees
    38,470       3,500       119,542       7,750       167,859  
OPERATING LOSS
    (115,683 )     (4,640 )     (253,375 )     (9,930 )     (319,725 )
                                         
                                         
OTHER EXPENSE
                                       
Interest Expense
    -       -       (766 )     -       (876 )
                                         
NET LOSS
  $ (115,683 )   $ (4,640 )   $ (254,141 )   $ (9,930 )   $ (320,601 )
                                         
NET LOSS PER COMMON SHARE - BASIC
  $ -     $ -     $ -     $ -          
                                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC
    78,218,750       12,259,500       77,934,273       12,180,522          

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

 
F-2

 
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
 
     
Six months ended December 31,
     Date of Inception
(June 1, 2010)
Through
 
   
2012
   
2011
   
December 31, 2012
 
OPERATING ACTIVITIES
                       
Net loss
 
$
(254,141)
   
$
(9,930)
   
$
(320,601)
 
Adjustments to reconcile net loss to net cash used by
                       
Stock-based compensation
   
78,000
     
-
     
78,000
 
Changes in operating assets and liabilities:
                       
   Interest
   
(110)
     
-
     
-
 
   Increase in accounts payable and accrued liabilities
   
14,667
     
1,675
     
17,601
 
   Decrease in accounts payable – related party
   
(2,695)
     
-
     
-
 
   Increase in prepaid expenses
   
(10,425)
     
-
     
(12,838)
 
NET CASH USED IN OPERATING ACTIVITIES
   
(174,704)
     
(8,255)
     
(237,838)
 
                         
FINANCING ACTIVITIES
                       
Proceeds from sale of common stock
   
500,000
     
5,190
     
517,190
 
Proceeds from note payable
   
-
     
-
     
40,000
 
Repayment of note payable
   
(40,000)
     
-
     
(40,000)
 
Due to related party
   
-
     
2,965
     
35,986
 
NET CASH PROVIDED BY FINANCING ACTIVITIES
   
460,000
     
8,155
     
553,176
 
                         
NET INCREASE (DECREASE) IN CASH
   
285,296
     
(100)
     
315,338
 
                         
CASH BEGINNING OF PERIOD
   
30,042
     
176
     
-
 
                         
CASH, END OF PERIOD
 
$
315,338
   
$
76
   
$
315,338
 
                         
 Supplemental cash flow information and noncash financing activities:
                       
   Cash paid for interest
 
$
876
   
$
-
   
$
-
 
   Cash paid for income taxes
 
$
-
   
$
-
   
$
-
 
                         
Non-cash transactions
                       
Stock based compensation
 
$
109,200
   
$
-
   
$
109,200
 
Forgiveness of shareholder loan
   
-
     
-
     
35,986
 
   
$
109,200
   
$
-
   
$
145,186
 

The accompanying notes are an integral part of these financial statements.
 
F-3

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

American Graphite Technologies Inc. (Formerly Green & Quality Home Life, Inc.) (the “Company”) is in the initial exploration stage and has incurred losses since inception totaling $320,601. The Company was incorporated on June 1, 2010 in the State of Nevada and established a fiscal year end at June 30. The Company is an exploration stage company as defined in FASB ASC 915.   We were originally organized to offer a portfolio of products and services to provide solutions for every family to automate domestic activities, making them less time consuming, easy to manage and leveraging the quality of life of every member of a family.

On May 23, 2012, Rick Walchuk, the sole director and officer of American Graphite Technologies Inc, acquired a total of 12,000,000 pre-forward split shares of the Company’s common stock from Fabio Alexandre Narita, the Company’s former director and officer, in a private transaction for an aggregate total of $350,000. The funds used for this share purchase were Mr. Walchuk’s personal funds. Mr. Walchuk’s 12,000,000 shares amounted to approximately 98% of the Company’s then currently issued and outstanding common stock.  This transaction effected a change in control of the Company.  With the change in control of the Company management determined to abandon the original business plan and has determined to enter into the business of exploration and development of mining projects and technology related to graphite and grapheme.  The Company currently has no projects and is in negotiations to acquire both mining concessions and technology.

As part of the sale of his shares Mr. Narita agreed to extinguish all debts owed to him by the Company.

Also on May 23, 2012, Fabio Alexandre Narita resigned as a director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of our Company. In connection with the resignation of Mr. Narita, Rick Walchuk was appointed President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer, Secretary and a director. Mr. Walchuk is now the sole member of our board of directors and also our sole officer.

On June 11, 2012, our Board of Directors unanimously approved the following items:

1. an amendment to our Articles of Incorporation to change our name to “American Graphite Technologies Inc.” (the “Name Change”);
 
2. an amendment to our Articles of Incorporation to increase our authorized capital from 75,000,000 to 200,000,000 shares of common stock, $0.001 par value (the “Increase in Authorized Capital”); and
 
3. an authorization to the Board of Directors to effect a forward split of the Company’s common stock, par value $0.001 per share at an exchange ratio of one hundred and twenty-five (125) for one (1) (the “Forward Split”) and to file such amendments as may be required with the requisite regulatory bodies to effect the Forward Split, so that every one (1) outstanding share of Common Stock before the Forward Split shall represent one hundred and twenty-five (125) shares of Common Stock after the Forward Split.

On June 11, 2012, our majority stockholder executed written consent in lieu of a special meeting approving the Amendments.

Pursuant to these actions to be undertaken by the Company, Mr. Walchuk returned a total of 11,640,000 pre-forward split shares of common stock which were cancelled by the Company and returned to treasury.

Effective July 18, 2012, in accordance with approval from the Financial Industry Regulatory Authority (“FINRA”), we changed our name from Green & Quality Home Life, Inc. to American Graphite Technologies Inc. and increased our authorized capital from 75,000,000 to 200,000,000 shares of common stock, par value of $0.001. In addition, our issued and outstanding shares of common stock increased from 619,500 to 77,437,500 shares of common stock, par value of $0.001 on the basis of a 125:1 forward split of our issued and outstanding shares of common stock. The forward split has been retroactively applied to all shares and per share figures in these financial statements.
 
F-4

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 1 – NATURE OF OPERTIONS AND BASIS OF PRESENTATION (continued)

The name change and forward split became effective with the Over-the-Counter Bulletin Board at the opening of trading on July 18, 2012.

Going concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have material assets aside from cash, nor does it have operations or a source of revenue sufficient to cover its operating costs.  While there are sufficient funds to carry out the current operations of the Company, with no revenue generating operations there remains substantial doubt about our ability to continue as a going concern. As at December 31, 2012, the Company has an accumulated deficit of $320,601. While we presently have cash on hand, the Company may be dependent upon the raising of additional capital through placement of our common stock in order to fully implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on attaining profitable operations, accordingly there remains substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Exploration stage
The Company's financial statements are presented as those of an Exploration stage enterprise. Activities during the Exploration stage primarily include implementation of the business plan, and obtaining additional debt and/or equity related financing.

Basis of Presentation
The financial statements present the balance sheets and statements of operations, stockholders' equity (deficit) and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.

Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

Use of Estimates and Assumptions
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.  Accounting guidance now codified as FASB ASC Topic 740-20, “Income Taxes –
 
F-5

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)
Intra-period Tax Allocation,” clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets.

Net Loss per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.

Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2012 and 2011. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.  Parties are also considered to be related if they are subject to common control or common significant influence.

Stock-based Compensation
Stock-based compensation is accounted for using the Equity-Based Payments to Non-Employees Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company determines the value of stock issued at the date of grant. It also determines at the date of grant, the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
 
F-6

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
Recent Accounting Pronouncements
The Company has evaluated the recent accounting pronouncements and believes that none of them will have a material effect on the company’s financial statements.

NOTE 3 – TECHNOLOGY LICENSING AGREEMENT

On December 3, 2012 we entered into and executed a non-exclusive technology License agreement for patent and trade secret technology in the field of graphene oxide or “Bucky” paper with Cheap Tubes, Inc.  Pursuant to the terms of the agreement, we acquired the rights to further develop, commercialize, market and distribute certain proprietary inventions and know-how related to the manufacturing processes for graphene products, including graphene paper, also known as Bucky Paper.  We agreed to fund commercial development activities based on the payment schedules defined below and we received a license for the rights on a nonexclusive basis for marketing products and/or services.   Pursuant to the terms of the agreement, we agreed to provide the following payments to Cheap Tubes:

A minimum of $250,000 over 18 months, payable as follows:
 
 
·
$10,000 on the execution of the agreement; (paid)
 
 
·
$40,000 per quarter on January 1, 2013, April 1, 2013, July 1, 2013 and October 1, 2013 and on January 1, 2014 and April 1, 2014.

Under the terms of the agreement, Cheap Tubes was to incorporate a new corporation (“Newco”) and assign all rights and obligations of the agreement with us as well as the patent agreement.  The newly formed corporation would then become the party to this agreement.   Until such time as Newco was formed all funds paid were to remain in an attorney escrow.  Further, in order to have funds released from escrow the parties must formulate and agree to a milestone schedule to be met by Cheaptubes or Newco as the case may be.   Each quarter the milestones from the prior quarter must be met as a pre-condition to the upcoming quarterly funding.   Under the agreement the Company was granted a non-exclusive license to market and distribute Bucky Paper using the patents, trade secrets and knowhow (the “Proprietary Rights”) throughout the world.   Newco or Cheap Tubes will manufacture the Bucky Paper products and we shall have no rights to sublicense the Proprietary Rights to a third party.  As the agreement is non-exclusive, Cheap Tubes will also have the right to market and distribute Bucky Paper products, subject to our ongoing fees, as described below.

As consideration for funding, Cheap Tubes will pay us 40% of the Net Cheap Tubes Sales Revenue for Bucky Paper until the amount we have received equals our capital investment regardless of whether we or Cheap Tubes are the ultimate vendors on the sale.  Thereafter, we will receive 30% of our capital investment until such time as we have received an amount equal to 20% of the $250,000 invested, 25% for the next five years and 20% for the remaining five years, at which time all obligations to us from Cheap Tubes or Newco shall cease.

Any new opportunities presented to us or Mike Foley (the shareholder of Cheap Tubes), Cheap Tubes or Newco shall be negotiated and if agreement is reached then shall be formalized in a mutually acceptable definitive agreement; with no obligation upon either party to enter into an agreement should they not be able to negotiate mutually acceptable terms.  However, it is the intent of the parties to work toward furthering the business of Cheap Tubes, Newco, our business and any new business that may present itself.
 
F-7

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 3 – TECHNOLOGY LICENSING AGREEMENT (continued)

On December 21, 2012, we received the required schedule under the Agreement.  On December 24, 2012, we received notification that of the incorporation of CTI Nanotechnologies LLC (“CTI”), and the assignment of the patents to CTI.  As per the terms of the Agreement, all conditions have been satisfied and therefore the funds have been released from escrow.   The Company will commence funding as required under the Agreement to further develop the technology.

During the period ended December 31, 2012, the Company paid cash in the amount of $10,000 pursuant to the agreement, and recorded the amount as prepaid advances on future revenue under the licensing agreement.

NOTE 4 – PREPAID EXPENSES AND ADVANCES

The following table provides detail of the Company’s prepaid expenses as of December 31, 2012 and June 30, 2012:

     
December 31, 2012
   
June 30, 2012
Prepaid legal fees
 
$
2,838
 
$
2,413
Advances related to technology licensing agreement – Note 3
   
10,000
   
-
Stock-based compensation – Note 7
   
109,200
   
-
   
$
122,038
 
$
2,413

NOTE 5 – FINANCING AGREEMENT

On August 29, 2012, we entered into an Equity Based Financing Agreement with one non-US investor pursuant to which, the investor will make available up to $2,500,000 by way of advances until August 29, 2013 (the “Completion Date”) in accordance with the terms of the agreement. The Completion Date may be extended for an additional term of up to twelve months at the option of our company or the investor upon written notice on or before the Completion Date in accordance with the notice provisions of the Financing Agreement. We will issue, within ten (10) Banking Days following the date of the receipt by our company of any advance under the agreement, shares of our common stock at a price equal to 80% of the average of the closing prices of our common stock for the preceding 5 Banking Days immediately preceding the date of the notice, as quoted on Yahoo Finance or other source of stock quotes as agreed to by the parties.

During the six month period ended December 31, 2012, the Company received $500,000 under the financing agreement by way of an equity private placement for 781,250 shares of common stock at $0.64 per share.

 
The shares were issued as follows:
Issue Date
 
Shares Issued
 
Value Per Share
 
Issuance Valuation
September  4, 2012
   
781,250
   
$
0.64
   
$
500,000
 

NOTE 6 – CAPITAL STOCK

Effective On July 18, 2012, in accordance with approval from the FINRA, we increased our authorized capital from 75,000,000 to 200,000,000 shares of common stock, par value of $0.001. In addition, our issued and outstanding shares of common stock increased from 619,500 to 77,437,500 shares of common stock, par value of $0.001 on the basis of a 125:1 forward split of our issued and outstanding shares of common stock. All references to shares and per share information in the financial statements and related notes have been adjusted to reflect the stock split on a retroactive basis.

On September 5, 2012, we issued 781,250 shares of our common stock at a price of $0.64 per share, pursuant to the closing of a private placement, for gross proceeds of $500,000. The private placement was undertaken pursuant to a financing agreement that we entered into on August 29, 2012 (see Note 3 above).

As of December 31, 2012, 78,218,750 common stock shares were issued and outstanding.

 
F-8

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 7 – STOCK OPTIONS

On July 30, 2012, the Company entered into two 12-month Consulting Services (the “Consulting Agreements”) with third parties. The Consulting Agreements require the consultants to provide to the Company, customized problem and opportunity research, new business or services development, strategy development and refinements, acquisition assistance, marketing and investor relation services and the Company is required to grant to each of the consultants a total of 150,000 stock options vesting immediately and exercisable at $0.25 per share.  The Company has therefore granted 300,000 stock options which have vested.

The following table summarizes information concerning stock options outstanding as of December 31, 2012:
   
Shares
   
Weighted Average
Grant Date
Fair Value
 
             
Unvested, at June 30, 2012
   
-
     
-
 
Granted
   
300,000
   
$
0.25
 
Vested
   
300,000
         
Forfeited
   
-
         
Unvested, at December 31, 2012
   
-
   
$
0.25
 

The Company recognized a stock-based compensation of $187,200 out of which $78,000 has been expensed in the current six month period ended December 31, 2012.  The remaining $109,200 is included on the balance sheets of the Company as prepaid expenses (Note 4).

Valuation Assumptions

The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends.

The following table presents the range of the weighted average fair value of options granted and the related assumptions used in the Black-Scholes model for stock option grants made during the six month period ended December 31, 2012:

   
Options Granted
   
2012
Fair value of options granted
 
$
0.85
 
Assumptions used:
       
Expected life (years) (a)
   
1.00
 
Risk free interest rate (b)
   
0.18
%
Volatility (c)
   
111
%
Dividend yield (d)
   
0.00
%

 
a)
Expected life: The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.
     
 
b)
Risk-free interest rate: The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options.
     

 
F-9

 
AMERICAN GRAPHITE TECHNOLOGIES INC.
(An Exploration Stage Company)
Notes to the Financial Statements
(UNAUDITED)

NOTE 7 – STOCK OPTIONS (continued)

 
c)
Volatility: The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the Company’s stock price calculated over a period of time representative of the expected life of the options.
     
 
d)
Dividend yield: The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the stock.

NOTE 8 – SHORT TERM LOAN

On June 20, 2012, the Company received funds from a third party in the amount of $40,000.

During the six month period ended December 31, 2012, the Company repaid in full in the amount of $40,876, which included the principal amount of $40,000 and accrued interest of $876, based on 10% per annum as agreed to between the Company and the lender.

NOTE 9 – RELATED PARTY TRANSACTIONS

On May 1, 2012, the Company entered a consulting agreement with Rick Walchuk, the Company’s sole officer and director for management services. The consulting agreement became effective as of May 1, 2012 and shall continue to May 1, 2015. Under the consulting agreement, the Company shall pay $2,500 a month for the first six months, $5,000 a month for the next six months and $7,500 for the balance of the agreement payable on the 1st of each month.  During the six month period ended December 31, 2012, Mr. Walchuk invoiced the company for the services in the amount of $20,000, which was paid in full.

NOTE 10 – SUBSEQUENT EVENTS

On January 2, 2013, the Company paid the $40,000 payment as required under the agreement with Cheap Tubes.

During January, 2013, we engaged the services of Geomap Exploration Inc. to identify and stake certain mineral claims in an area in Quebec, Canada that has existing exploration for graphite being undertaken by adjacent companies.

The staking has been completed and a total of 100 mineral claims have been staked for transfer to the Company.  The mineral claims encompass an area of approximately 5400 hectares (13,343 acres) in Quebec, Canada.

The mineral claims are 100% owned by the Company with no royalty or net smelter return requirements.

The costs for staking were approximately $5,500 and fees of approximately $17,000 for geological services rendered to stake the claims.
 
F-10

 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This current report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.

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

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended June 30, 2012, along with the accompanying notes.  As used in this quarterly report, the terms "we", "us", "our", and the "Company" means American Graphite Technologies Inc.

Liquidity & Capital Resources

We are an exploration stage company intending to be engaged in the exploration of mineral properties and the development of related technologies. To date, we have not generated any revenues.

Cash on hand at December 31, 2012 was $315,338 as compared to $30,042 as of June 30, 2012. We had a total of $122,038 in prepaid expenses as at December 31, 2012 compared to $2,413 as at June 30, 2012.   Prepaid expenses relate to the $10,000 paid against the licensing agreement with Cheap Tubes (Refer to Note 3 of the Financial Statements contained herein), $2,838 in legal fees and $109,200 paid in non-cash stock based compensation by the issuance of warrants under certain consulting contracts.

Our total liabilities at December 31, 2012 were $17,601 as compared to $45,739 as at June 30, 2012.  The reduction was mainly due to the repayment of a note payable during the period.    Our total assets were $437,376 as at December 31, 2012 as compared to $32,455 as at June 30, 2012. This significant change in assets was as a result of an equity funding in the amount of $500,000 under a financing agreement whereby the Company made raise up to $2,500,000 and pre-paid expenses in the amount of $122,038 as detailed above.

We currently have a licensing agreement whereby we are required to fund a total of $250,000 for technology development, of which as of the date of this filing we have funded a total of $50,000 and we have received certain non-exclusive marketing rights and will receive royalties based on the marketing of the technology both by ourselves and our licensor.  Further, we have recently staked 100 mining claims where we intend to explore for graphite during the calendar year 2013.

We anticipate that we will require a minimum of $900,000 to fund operations for the next twelve months, which should allow for the exploration and further acquisition of mineral properties and for the Company to seek acquisitions of technologies and
fund development of those technologies related to our planned business, including the remaining $200,000 required for technology development under our current licensing agreement.
 
5

 
The Company has been successful in raising $500,000 for operations which funds were raised by way of the issuance of 781,250 shares of our common stock at a price of $0.64 per share, pursuant to the closing of a private placement. The private placement is an advance pursuant to a financing agreement that we entered into on August 29, 2012 whereby the investor will make available up to $2,500,000 by way of advances until August 29, 2013 in accordance with the terms of the agreement.  Therefore we have $2,000,000 available for operations should they be required.

While we believe we have sufficient funding to meet our next twelve month obligations, our ability to meet our financial liabilities and commitments is primarily dependent upon the drawdowns pursuant to the above mentioned financing agreement, continued issuance of equity to new stockholders, the ability to borrow funds, and ultimately upon our ability to achieve and maintain profitable operations. There can be no assurance that funds will be available when draw down requests are made or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.

The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholder. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

We estimate that our expenses over the next 12 months will be approximately $900,000 as described in the table below.  These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

Description
Estimated Completion Date
Estimated Expenses
 ($)
Legal and accounting fees
12 months
50,000
Technology Expenditures
12 months
200,000
Management and operating costs
12 months
100,000
Salaries and consulting fees
12 months
60,000
Fixed asset purchases
12 months
10,000
General and administrative expenses
12 months
50,000
Allowance for Acquisitions and exploration expenses
12 months
430,000
Total
 
900,000

We intend to meet our cash requirements for the next 12 months by way of private placement draw downs under our financing agreement.  There is no assurance that the funds under that agreement will be available when required or that we will be successful in completing any other private placement or debt financings if required to do so.  However, there is no assurance that any such financing will be available or if available, on terms that will be acceptable to us.  While we currently have sufficient funds to fund our operations, including our initial technology funding, we may not raise sufficient funds to fully carry out our business plan.

Results of Operations

We have recently changed our business plan with the change in control of the Company. We do not have any revenues and have not had any revenue since inception on June 1, 2010.

Three Month Period Ended December 31, 2012 Compared to Three Month Period Ended December 31, 2011

We have a net loss of ($115,683) for the three months ended December 31, 2012 as compared to a net loss of ($4,640) for three months ended December 31, 2011. The majority of the loss for the three months ended December 31, 2012 comes from the recognition of a stock-based expense of $46,800 during the period as compare to no stock based expense for the comparable period ended December 31, 2011.  As well, office and general increased from $1,140 (2011) to $17,913 (2012), management fees increased from $nil (2011) to $12,500 (2012) and professional fees increased from $3,500 (2011) to $38,470 (2012) as the Company increased activities relating to the change in business and effecting its business plan.

Basic and diluted losses per share for the respective three month periods ended December 31, 2012 and December 31, 2011was ($0.00).
 
6

 
Six Month Period ended December 31, 2012 Compared to Six Month Period Ended December 31, 2011

We have a net loss of ($254,141) for the six months ended December 31, 2012 as compared to a net loss of ($9,930) for six months ended December 31, 2011. The majority of the loss for the six months ended December 31, 2012 comes from the recognition of a stock-based expense of $78,000 during the period as compare to no stock based expense for the comparable period ended December 31, 2011.  As well, office and general increased from $2,180 (2011) to $35,833 (2012), management fees increased from $nil (2011) to $20,000 (2012) and professional fees increased from $7,750 (2011) to $119,542 (2012) as the Company increased activities relating to the change in business and effecting its business plan.
 
From inception we have had a net loss of ($319,725).

Basic and diluted losses per share for the respective six month periods ended December 31, 2012 and December 31, 2011was ($0.00).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, Mr. Rick Walchuk, our Principal Executive Officer who is also our Principal Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of December 31, 2012, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer, concluded that our disclosure controls and procedures are not effective as of December 31, 2012 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.
 
In performing the above-referenced assessment, our management identified the following material weaknesses:

1) 
We currently do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over financial statements;

2) 
Inadequate staffing and supervision within our bookkeeping operations. We have one consultant involved in bookkeeping functions, who provides two staff members. The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;

3) 
Outsourcing of our accounting operations. Because there are no employees in our administration, we have outsourced all of our accounting functions to an independent firm. The employees of this firm are managed by supervisors within the firm and are not answerable to our management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;

4) 
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

5) 
Ineffective controls over period end financial disclosure and reporting processes.

We continue to review our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources and personnel to potentially mitigate these material weaknesses. Our present management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 
7

 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal controls over financial reporting that occurred during the three months ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
 
PART II – OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 1A.  RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

There were no unregistered securities to report which were sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

During January, 2013, we engaged the services of Geomap Exploration Inc. to identify and stake certain mineral claims in an area in Quebec, Canada that has existing exploration for graphite being undertaken by adjacent companies.  The staking has been completed and a total of 100 mineral claims have been staked for transfer to the Company. The mineral claims encompass an area of approximately 5400 hectares (13,343 acres) in Quebec, Canada.  They are located in the vicinity of an identified high grade graphite deposits, the Lac Gueret project belonging to Mason Graphite Corp., and new discoveries recently announced by Focus Graphite.  Geologically, the property has mineralization similar to other graphite deposits/discoveries in the area.  The mineral claims are in an area where the property has been designated by the Quebec Government for major economic, social and environmental development.  The mineral claims are 100% owned by the Company with no royalty or net smelter return requirements.  The Company intends to undertake exploration programs on the mineral claims during 2013.
 
8

 
ITEM 6.  EXHIBITS
 
Number
Description
 
3.1(a)
Articles of Incorporation.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on August 4, 2010.
3.1(b)
Certificate of Amendment to the Articles of Incorporation as filed with the State of Nevada on July 12, 2012.
Incorporated by reference to our Current Report on Form 8-K filed on July 13, 2012.
3.2
Bylaws.
Incorporated by reference to our Form S-1 registration statement filed with the Securities and Exchange Commission on August 4, 2010.
10.1
Release entered into by Fabio Alexandre Narita
Incorporated by reference to our Form 8-K filed with the SEC on May 29, 2012.
10.2
Share Purchase Agreement between Rick Walchuk and Fabio Alexandre Narita
Incorporated by reference to our Form 8-K filed with the SEC on May 29, 2012.
10.3
Subscription Agreement dated August 29, 2012.
Incorporated by reference to our Form 8-K filed with the SEC on September 11, 2012.
10.4
Form of Subscription Agreement
Incorporated by reference to our Form 8-K filed with the SEC on September 11, 2012.
10.5
Patent and Technology License Agreement between the Company and Cheap Tubes, Inc. dated December 3, 2012
Incorporated by reference to our Form 8-K filed with the SEC on December 18, 2012.
10.6
Schedule 2 to the Patent and Technology License Agreement between the Company and Cheap Tubes, Inc.
Incorporated by reference to our Form 8-K/A filed with the SEC on February 5, 2012.
10.7
Consulting agreement dated July 30, 2012
Incorporated by reference to our Form 8-K/A filed with the SEC on February 5, 2012.
10.8
Consulting agreement dated July 30, 2012
Incorporated by reference to our Form 8-K/A filed with the SEC on February 5, 2012.
10.9
Financing Agreement dated August 29, 2012
 
Incorporated by reference to our Form 8-K/A filed with the SEC on February 5, 2012.
10.10
Consulting Agreement between the Company and Rick Walchuk
Incorporated by reference to our Form 8-K/A filed with the SEC on February 5, 2012.
31.1
Section 302 Certification- Principal Executive Officer
Filed herewith
31.2
Section 302 Certification- Principal Financial Officer
Filed herewith
32.1
Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
101.INS
XBRL Instance Document
Filed herewith*
101.SCH
XBRL Taxonomy Extension Schema
Filed herewith*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Filed herewith*
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Filed herewith*
101.LAB
XBRL Taxonomy Extension Label Linkbase
Filed herewith*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed herewith*

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
 
9

 

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


   
AMERICAN GRAPHITE TECHNOLOGIES INC.
       
Date:
February 13, 2013
By:
/s/ Rick Walchuk
   
Name:
Rick Walchuk
   
Title:
Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and Director
 
 
10