AIM EXPLORATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
6
months
ended
February
28,
2017
|
6
months
ended
February
29,
2016
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net
Loss
|
$
(1,414,555
)
|
$
(616,570
)
|
|
Accretion
related to convertible note
|
45,001
|
324,356
|
|
Finance
costs and derivative expense
|
38,958
|
202,609
|
|
Change
in fair value of derivative liability
|
(9,783
)
|
(229,436
)
|
|
Related
party – loss on repayment of debt
|
660,000
|
-
|
|
Shares
issued for services
|
535,832
|
31,500
|
|
Adjustments to
reconcile Net Loss to net cash used in
operating
activities:
|
|
|
|
Prepaid deposits
and services
|
2,077
|
(2,189
)
|
|
Accounts
Payable
|
72,291
|
69,473
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(70,179
)
|
(220,257
)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
Convertible
debt
|
-
|
215,000
|
|
Loans
payable
|
29,000
|
-
|
|
Loans from related
party
|
41,819
|
2,906
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
70,819
|
217,906
|
|
|
|
|
|
NET
(DECREASE) INCREASE IN CASH
|
640
|
(2,351
)
|
|
|
|
|
|
CASH,
BEGINNING OF PERIOD
|
417
|
2,349
|
|
|
|
|
|
CASH,
END OF PERIOD
|
$
1,057
|
$
(2
)
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF
PRESENTATION
Aim Exploration, Inc. (“Company”) is an exploration
stage company as defined by FASB ASC 915. The Company was organized
to engage in mineral exploration and has incurred losses totaling
$4,311,858 since inception. The Company was incorporated on
February 18, 2010 in the State of Nevada and established a fiscal
year end at August 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The
condensed consolidated financial statements present the condensed
consolidated balance sheets, condensed consolidated statements of
operations and condensed consolidated 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.
Principles of Consolidation
The
condensed consolidated statements incorporate the financial
statements of the Company and its wholly-owned subsidiary, Aim
Exploration SA, of Peru. All significant intercompany accounts and
transactions have been eliminated in consolidation.
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. There were no cash
equivalents at February 28, 2017 and 2016.
Functional Currency
The financial statements are presented in United States dollars,
which is also the functional currency of the Company. The
functional currency of its subsidiary is the Peruvian Nuevos
Sol.
Advertising
Advertising
costs are expensed as incurred. As of February 28, 2017, no
advertising costs have been incurred.
Property
The
Company does not own or rent any property. The Company’s
office space is being provided by the president at no charge to the
Company.
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 follows the liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax balances. Deferred tax assets
and liabilities are measured using enacted or substantially enacted
tax rates expected to apply to the taxable income in the years in
which those differences are expected to be recovered or settled.
Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the date
of enactment or substantive enactment.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
Fair Value of Financial Instruments
The Company has adopted Accounting Standards Codification subtopic
820-10, Fair Value Measurements and Disclosures ("ASC 820-10"). ASC
820-10 defines fair value, establishes a framework for measuring
fair value and enhances fair value measurement disclosure The
adoption of ASC 820-10 requires that the Company disclose assets
and liabilities that are recognized and measured at fair value on a
non-recurring basis, presented in a three-tier fair value
hierarchy, as follows:
- Level
1. Observable inputs such as quoted prices in active
markets;
- Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
- Level
3. Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
The following presents the gross value of assets that were measured
and recognized at fair value:
- Level
1: $1,057
- Level
2: none
- Level
3: none
The Company adopted ASC 825-10, Financial Instruments, which
permits entities to choose to measure many financial instruments
and certain other items at fair value. The adoption of this
standard did not have an impact on the Company's financial
position, results of operations or cash flows. The carrying value
of cash and cash equivalents, accounts payable and accrued
expenses, as reflected in the balance sheets, approximate fair
value because of the short-term maturity of these
instruments.
Derivative Liability
The conversion features embedded in the outstanding convertible
notes payable are separately accounted for as a derivative
liability in accordance with ASC 815-15, Embedded Derivative. This
is because the number of shares that may be acquired upon
conversion is indeterminable as the conversion rates are expressed
as a percentage discount to the current fair market value of common
stock at the time of conversion. Derivative liabilities are valued
when the host instruments (convertible notes) are initially issued
and are also revalued at each reporting date, with the change in
the respective fair values being recorded as a gain or loss to the
derivative liability.
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.
Impairment of Long-Lived Assets
In accordance with ASC 360, Property Plant and Equipment, the
Company tests long-lived assets or asset groups for recoverability
when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could
trigger a review include, but are not limited to: significant
decreases in the market price of the asset; significant adverse
changes in the business climate or legal factors; accumulation of
costs significantly in excess of the amount originally expected for
the acquisition or construction of the asset; current period cash
flow or operating losses combined with a history of losses or a
forecast of continuing losses associated with the use of the asset;
and current expectation that the asset will more likely than not be
sold or disposed significantly before the end of its estimated
useful life. Recoverability is assessed based on the carrying
amount of the asset and its fair value which is generally
determined based on the sum of the undiscounted cash flows expected
to result from the use and the eventual disposal of the asset, as
well as specific appraisal in certain instances. An impairment loss
is recognized when the carrying amount is not recoverable and
exceeds fair value.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Mineral Property Costs
Mineral property exploration costs are expensed as incurred until
such time as economic reserves are quantified. To date, the Company
has not established any proven or probable reserves on its mineral
properties. The Company has capitalized $804,656 of mineral
property acquisition costs reflecting its investment in its
properties.
Stock-based Compensation
The Company adopted FASB guidance on stock based compensation upon
inception at February 18, 2010. ASC 718-10-30-2 requires all
share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based
on their fair values. The Company has not had any stock and stock
options issued for services and compensation for the period from
inception (February 18, 2010) through February 28,
2017.
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU
2014-08,
Presentation
of Financial Statements (Topic 205) and Property, Plant, and
Equipment (Topic 360): Reporting Discontinued Operations and
Disclosures of Disposals of Components of an
Entity
. The amendments in the
ASU change the criteria for reporting discontinued operations while
enhancing disclosures in this area. It also addresses sources of
confusion and inconsistent application related to financial
reporting of discontinued operations guidance in U.S. GAAP. Under
the new guidance, only disposals representing a strategic shift in
operations should be presented as discontinued operations. In
addition, the new guidance requires expanded disclosures about
discontinued operations that will provide financial statement users
with more information about the assets, liabilities, income, and
expenses of discontinued operations. The amendments in the ASU are
effective in the first quarter of 2015 for public organizations
with calendar year ends. Early adoption is
permitted.
In May 2014, the FASB issued ASU No.
2014-09,
Revenue from Contracts with
Customers.
This new
standard will replace most existing revenue recognition guidance in
U.S. GAAP. The core principle of the ASU is that an entity should
recognize revenue for the transfer of goods or services equal to
the amount it expects to receive for those goods and services. The
ASU requires additional disclosure about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and estimates, and
changes in those estimates. The ASU will be effective for the
Company beginning
January 1,
2017
, and allows for both
retrospective and modified- retrospective methods of adoption. The
Company is in the process of determining the method of adoption it
will elect and is currently assessing the impact of this ASU on its
consolidated financial statements and footnote
disclosures.
In August 2014, the FASB issued ASU
2014-15,
Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going
Concern
. The amendment in the
ASU provides guidance on determining when and how to disclose
going-concern uncertainties in the financial statements. The new
standard requires management to perform interim and annual
assessments of an entity’s ability to continue as a going
concern within one year of the date the financial statements are
issued. An entity must provide certain disclosures if conditions or
events raise substantial doubt about the entity’s ability to
continue as a going concern. The amendments in this Update are
effective for annual periods and interim periods within those
annual periods beginning after
December 15, 2016
. Earlier adoption is permitted. The Company does
not expect the adoption to have a significant impact on its
consolidated financial statements.
In August, 2015, the FASB issued ASU No.
2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective
Date.
The amendment in
this ASU defers the effective date of ASU No. 2014-09 for all
entities for one year. Public business entities, certain
not-for-profit entities, and certain employee benefit plans should
apply the guidance in ASU 2014-09 to annual reporting periods
beginning
December 15, 2017, including
interim reporting periods within that reporting
period. Earlier application is permitted only as of annual
reporting periods beginning after
December 31, 2016
, including interim reporting periods with that
reporting period.
In September, 2015, the FASB issued ASU No.
2015-16,
Business Combinations (Topic
805).
Topic 805 requires that
an acquirer retrospectively adjust provisional amounts recognized
in a business combination, during the measurement period. To
simplify the accounting for adjustments made to provisional
amounts, the amendments in the Update require that the acquirer
recognize adjustments to provisional amounts that are identified
during the measurement period in the reporting period in which the
adjustment amount is determined. The acquirer is required to also
record, in the same
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements (Continued)
period’s financial statements, the effect on earnings of
changes in depreciation, amortization, or other income effects, if
any, as a result of the change to the provisional amounts,
calculated as if the accounting had been completed at the
acquisition date. In addition an entity is required to
present separately on the face of the income statement or disclose
in the notes to the financial statements the portion of the amount
recorded in current-period earnings by line item that would have
been recorded in previous reporting periods if the adjustment to
the provisional amounts had been recognized as of the acquisition
date.
The adoption of ASU
2015-016 is not expected to have a material effect on the
Company’s financial statements.
Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the American Institute
of Certified Public Accountants, and the United States Securities
and Exchange Commission did not or are not believed by management
to have a material impact on the Company’s present or future
consolidated financial statements.
NOTE 3 – 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 has a working capital deficit of
$
2,129,104
, an accumulated
deficit of $
4,311,858
and net
loss from operations since inception of $
4,311,858
. The Company does not have a
source of revenue sufficient to cover its operation costs giving
substantial doubt for it to continue as a going concern. The
Company will be dependent upon the raising of additional capital
through placement of our common stock in order to implement its
business plan, or merging 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 Company is
funding its initial operations by way of issuing common
shares.
The
officers and directors have committed to advancing certain
operating costs of the Company, including Legal, Audit, Transfer
Agency and Edgarizing costs.
NOTE 4 – MINERAL PROPERTY
Peruvian Mining Claims:
On June 23, 2014, Aim Exploration, Inc. entered into a Mining
Concession Asset Acquisition Agreement (the
“Agreement”) with Percana Mining Corp.
(“Percana”). Pursuant to the Agreement, the Company
acquired three separate mining concessions. Two of the concession
titles are unencumbered and comprise 40% of the mining concessions.
These two concessions are known as El Tunel Del Tiempo 1 code
11060780 and El Tunel Del Tiempo 2 code 11060781, and the
registered ownership of these two concessions have been transferred
to the Company. The third concession property known as Agujeros
Negros MA-AG comprising the remaining 60% has not yet been
transferred to the Company, however the Company has entered into a
Contract of Mining Assignment and Option to Purchase the concession
for a five year term. This contract provides AIM with full rights
and authorities over the concession.
In consideration for the above concessions, the Company has issued
63,000 restricted common shares (15,750,000 restricted common
shares pre-consolidation) (Note 6) to Percana in two separate
blocks; the first block consists of 25,200 common shares (6,300,000
common shares pre-consolidation) which are to be held in escrow
until either the Company raises $1,000,000 or when Percana waives
this requirement. The second block consists of 37,800 common shares
(9,450,000 common shares pre-consolidation) which are to be held in
escrow until such time as the Company is satisfied at its
discretion that any arbitration issues have been resolved with the
third concession, at which time the shares may be released out of
escrow at the option of Percana. The fair value of these shares is
$326,969 which was based on fair market value. On April 25, 2016,
the Company entered into an amendment to its Agreement with Percana
and issued an additional 15,687,000 common shares to Percana to
bring its post-consolidation shareholdings back to 15,750,000
common shares. The fair value of these additional shares is
$15,687. An additional 220,000,000 common shares were issued on
September 14, 2016, pursuant to this amended agreement. The fair
values of these shares is $462,000. Furthermore, under the terms of
the amended Agreement, the Company agreed to issue additional
common shares to Percana at any time common shares are issued to
any director and/or controlling shareholder of the Company, the
number of common shares issued to Percana to be equal to those
issued to the director and/or controlling shareholder.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 4 – MINERAL PROPERTY (CONTINUED)
Peruvian Mining Claims (Continued):
These Mining Concessions were acquired based on the assumption the
properties are rich in high grade Anthracite Coal, currently there
are 20 small tunnels on the property already producing anthracite
coal which was being mined by illegal miners. Testing of the coal
samples was performed indicating the presence of high-grade
anthracite coal. Prior to acquisition AIM reviewed a non-compliant
technical report prepared by Engineers/Geologists together with
hiring a US based firm Gustavson Associates to visit the property
and review the reports. The firm provided AIM with a report, which
included recommendation for further exploration.
One of the Company’s director is also a director of
Percana.
NOTE 5 – CONVERTIBLE NOTE
During
the six months ended February 28, 2017, 9,891,175 common shares
were issued in relation to conversion options exercised during the
period, which reduced the convertible debt by $8,730. Of this
amount, $7,650 related to principal of the convertible notes and
$1,080 related to accrued interest.
An
additional 400,000 common shares were issued in relation to related
party conversion options exercised during the period, which reduced
the related party convertible debt by $54,000.
An
embedded derivative has been bifurcated and accounted for
separately from the debt host. Accordingly, the Company recorded
the estimated derivative as a liability upon issuance of the
convertible notes. The derivative liability was recorded by
reducing the carrying value of the convertible notes. The fair
value of the embedded derivative fluctuates with the fair value of
the Company’s common stock, which is calculated each quarter
using the Black-Scholes valuation model. During the six months
ended February 28, 2017, the Company recognized change in fair
value of the derivative liability of $9,783 related to the change
in fair value of the conversion feature. The change in fair value
of the conversion feature was recorded through operating
results.
During
the six months ended February 28, 2017, the Company repaid notes
with a principal balance of $18,302 plus accrued interest in the
amount of $3,014. The Company recorded a gain on the repayment of
the convertible note in the amount of $33,283, which was credited
to the additional paid in capital account. During the same period,
convertible notes with a principal balance of $100,975 plus accrued
interest in the amount of $14,567 were assumed by related
parties.
The
following convertible notes were outstanding as at February 28,
2017 and August 31, 2016:
|
|
|
|
|
Note
balance
|
$
313,537
|
$
440,464
|
|
Debt
discounts
|
–
|
(45,001
)
|
|
Accrued
interest
|
46,248
|
37,983
|
|
|
$
359,785
|
$
433,446
|
The
following convertible notes to related parties were outstanding as
at February 28, 2017 and August 31, 2016:
|
|
|
|
|
Note
balance
|
$
216,975
|
$
170,000
|
|
Accrued
interest
|
47,863
|
21,264
|
|
|
$
264,838
|
$
191,264
|
The
convertible note debt discount is being accreted to finance costs
using the straight-line method over the contractual term of the
debt. During the period ended February 28, 2017, the Company
recognized in the normal course accretion expense of
$45,001.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 6 – CAPITAL STOCK
On
April 25, 2016, the Company consolidated its share capital on a
250:1 basis. All common shares and per share amounts have been
restated to reflect this share consolidation.
The
Company has authorized 250,000,000 shares of common stock with a
par value of $0.001 per share and 1,000,000 shares of preferred
stock with a par value of $0.001 per share.
At
February 28, 2017, 686,728,348 shares of common stock were issued
and outstanding, and 100,000 shares of preferred stock were issued
and outstanding.
Six months ended February 28, 2017
On
September 14, 2016, the Company issued an additional 220,000,000 to
Percana to bring their post-consolidation shareholdings to
235,750,000 common shares. The value of these additional shares is
$462,000 which is based on fair market value. These shares were
issued in connection with the acquisition of certain mining
property. (Note 4)
During
the six months ended February 28, 2017, the Company issued
9,891,175 common shares pursuant to the exercise of the option
attached to outstanding convertible notes and 400,000 common shares
pursuant to the exercise of the option attached to outstanding
related party convertible notes. (Note 5)
During
the six months ended February 28, 2017, the Company issued
25,000,000 common shares in connection with services rendered. Such
services had a fair value of $75,000.
During
the six months ended February 28, 2017, the Company issued
219,444,444 common shares in connection with director’s
compensation. Such services had a fair value of $395,000. Of this
amount $323,000 was expensed during the current period and $72,000
reduced an amount due to a related party.
During
the six months ended February 28, 2017, the Company issued
189,600,000 common shares in connection with paying down $189,600
of debt to a related party.
Year ended August 31, 2016
On
April 25, 2016, the Company issued an additional 15,687,000 to
Percana to bring their post-consolidation shareholdings back up to
15,750,000 common shares. The value of these additional shares is
$15,687. These shares were issued in connection with the
acquisition of certain mining property. (Note 4)
During
the year ended August 31, 2016, the Company issued 1,862,835 common
shares pursuant to the exercise of the option attached to
outstanding convertible notes. (Note 5)
During
the year ended August 31, 2016, the Company issued 1,286,494 common
shares in connection with services rendered. Such services had a
fair value of $126,590.
During
the year ended August 31, 2016, the Company issued 3,200,000 common
shares in connection with paying down $3,200 of debt to two related
parties.
NOTE 7 – LOAN PAYABLE - RELATED PARTIES
During the period ended
February 28, 2017
and 2016, advances from a director of the Company
were $38,297 and $550, respectively. The amounts are unsecured,
non-interest bearing and are due on demand. During the same period,
the Company made repayments of $86,500 to a director. Common shares
were issued to repay $72,000 of this amount. (Note
6)
During the period ended
February 28, 2017
and 2016, the Company made repayments to related
parties, issuing 189,600,000 common shares of the Company with a
fair value of $221,440.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
February 28, 2017 (unaudited)
NOTE 7 – LOAN PAYABLE - RELATED PARTIES –
CONTINUED
During the period ended
February 28, 2017
and 2016, management fees totaling $90,000 and
$108,000, respectively, where accrued as payable to directors of
the Company.
During the period ended February 28, 2017, the Company issued
219,444,444 common shares to directors in compensation for services
totaling $460,833.
As at February 28, 2017, the Company owed related party loans of
$451,224 and related party convertible notes, net of unamortized
discount, of $264,838.