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 $ 2,119,054 , an accumulated deficit of $ 2,675,326 and net loss from operations since inception of $ 2,675,326 . 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.
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 (unaudited)
NOTE 4 – MINERAL PROPERTY (Continued)
Peruvian Mining Claims (Continued):
In consideration for the above concessions, the Company has issued 15,750,000 restricted common shares (Note 6) to Percana in two separate blocks; the first block consists of 6,300,000 common shares 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 9,450,000 shares 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. 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.
NOTE 5 – CONVERTIBLE NOTE
During the nine months ended May 31, 2016, the Company issued convertible notes with a principal balance of $215,000, with maturity dates ranging from February 29, 2016 to January 12, 2017, and an interest rate per annum ranging from 10% to 22%. The principal is convertible into common shares of the Company at a conversion rate equal to 50% – 60% of the lowest trading price of the Company’s common stock for the fifteen prior trading days, as defined in the agreements.
During the nine months ended May 31, 2016, 355,039 common shares were issued in relation to conversion options exercised during the period. Of these common shares, $117,449 related to principal of the convertible notes, $7,895 to accrued interest, and $11,100 to fees.
During the year ended August 31, 2015, the Company issued convertible notes with a principal balance of $306,875, with maturity dates ranging from November 6, 2015 to July 22, 2016, and an interest rate per annum ranging from 8% to 12%. The principal is convertible into common shares of the Company at a conversion rate equal to 55% – 60% of the lowest trading price of the Company’s common stock for the fifteen prior trading days, as defined in the agreements.
The Company is accounting for the conversion feature as a separate derivative liability under ASC 815. As such, the Company will carry the conversion feature liability at fair value on the balance sheet. The Company determined the fair value of the conversion feature as at the dates of issue and also as of the period ended May 31, 2016. To determine the put and call values, the Company used the Black-Scholes option valuation model using the following inputs:
May 31, 2016
August 31, 2015
Fair value of common stock
$0.08
$0.21 – $0.42
Exercise price
$0.04
$0.1350 – $0.2585
Contractual term
0.10 year – 0.62 year
9 months – 1 year
Volatility
682.3%
119.50% – 143.10%
Risk-free interest rate
0.68%
0.12% – 0.41%
F-9
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 (unaudited)
NOTE 5 – CONVERTIBLE NOTE (CONTINUED)
Volatility was determined using a peer group of public companies, and the Company used US treasuries with a similar contractual term to determine the risk-free interest rate.
On May 11, 2015, the Company exercised its option to redeem convertible notes with a principal balance of $47,250 within 180 days of their issuance, by opting to prepay the note at 150% of the principal amount plus accrued interest in the amount of $1,853. The Company recorded a loss on the repurchase of the convertible note in the amount of $20,664, which was credited to the additional paid in capital account.
During the nine months ended May 31, 2016, the Company recognized change in fair value of the derivative liability of $187,908 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.
When recording the conversion feature liability during the period, the Company recognized a 100% debt discount on the convertible notes payable of $215,000 and finance costs expense of $172,601 from amortization of debt discounts and excess of derivative liability over the face value of the note. The debt discount is being accreted to finance costs using the straight-line method over the contractual term of the debt. During the period ended May 31, 2016, the Company also recognized in the normal course accretion expense of $452,826.
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 May 31, 2016, 16,399,876 shares of common stock were issued and outstanding, and 100,000 shares of preferred stock were issued and outstanding.
In July 2014, the Company issued 63,000 common shares in connection with the acquisition of certain mining property to Percana. As a result of the share consolidation on April 25, 2016, the Company issued an additional 15,687,000 common shares to Percana on April 25, 2016, to bring their holdings up to their original position of 15,750,000 common shares. (Note 4)
During the year ended August 31, 2015, the Company issued 20,000 shares to 1 shareholder in connection with an asset acquisition agreement at fair value of $5,000. The Company also issued 1,400 common shares to 1 shareholder in connection with a six-month investor relations campaign at fair value of $175,000.
During the period ended May 31, 2016, the Company issued 355,039 common shares pursuant to the exercise of the option attached to outstanding convertible notes. (Note 5)
During the period ended August 31, 2015, the Company issued 100,000 preferred shares to 1 shareholder at fair value of $18,000, a related party of the Company, in connection with services rendered.
F-10
AIM EXPLORATION INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 (unaudited)
NOTE 7 – LOANS PAYABLE – RELATED PARTIES
During the period ended May 31, 2016 and 2015 , advances from a director of the Company were $550 and $Nil, respectively. The amounts are unsecured, non-interest bearing and are due on demand.
During the period ended May 31, 2016 and 2015 , advances from related parties were $49,240 and $166,128, respectively, and amounts advanced to one related party were $121,995 and $25,500, respectively. The amounts are unsecured, non-interest bearing and are due on demand.
During the period ended May 31, 2016 and 2015 , management fees totaling $162,000 and $Nil, respectively, were accrued as payable to two directors of the Company
NOTE 8 – RESTATEMENTS
During the period ended May 31, 2016, accounting errors were discovered that required a restatement of amounts previously reported, related to loan payable that was issued against a finder’s fee incurred. The loan payable was amended, and the terms revised to a convertible note payable. The loan payable and its subsequent amendment to a convertible note payable were not reported during the year ended August 31, 2015. This error resulted in changes to the convertible note, derivative liability, accretion expense, finder’s fee expense, interest expense, finance costs, and the change in fair value of derivative liability. As a result of correcting these errors, our net loss increased by $157,923 for the year ended August 31, 2015, and $18,484 for the three months ended November 30, 2015.
