The interim financial statements included herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and the results of our operations for the interim periods presented. Because of the nature of our business, the results of operations for the quarterly period ended November 30, 2015 are not necessarily indicative of the results that may be expected for the full fiscal year.
Notes to the Financial Statements
for the six months ended November 30, 2015
1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Bakken Energy Corp. (formerly Orofino Gold Corp.), ("Bakken" or the “Company”) was organized under the laws of the State of Nevada on April 12, 2005. Bakken started operations on September 1, 2007 under the "Clean `N Shine" name operating as a full service automotive car wash, cleaning, detailing, and polishing business generating some revenues. With limited opportunities available the Company decided to look at mineral resources as an alternative business. On May 20, 2009, the Company completed a forward stock split of its common stock on a ratio of six shares for every one share of the Company. The record date of the forward stock split was May 15, 2009, the payment date of the forward split was May 19, 2009, and the ex-dividend date of the forward split was May 20, 2009. As a result of the forward split, the post forward split number off issued and outstanding shares was 60,000,000. On December 5, 2009, the Company passed a resolution to change its name from SNT Cleaning Inc. to Orofino Gold Corp. and on March 3, 2014 the Company passed a resolution to change its name to Bakken Energy Corp
The Company was an exploration stage gold mining company with its efforts focused on mineral concessions and development of existing high grade artisanal mining operations. The Company has achieved no operating revenues from mining operations to date. The Company is presently looking at oil and gas properties.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). A summary of the significant accounting policies are as follows:
Use of estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses for the periods presented. Actual results could differ from those estimates.
Comprehensive income
The Company has adopted ASC Topic 220, “Comprehensive Income.” Comprehensive income is comprised of net income (loss) and all changes to stockholders' equity (deficit), except those related to investments by stockholders, changes in paid-in capital and distribution to owners. In accordance with FASB ASC Topic 220 “Comprehensive Income,” comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception other comprehensive income has consisted of translation gains and losses.
7
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
2.
SIGNIFICANT ACCOUNTING POLICIES continued
Mineral properties
All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines or to develop mine areas substantially in advance of production are also capitalized once proven and probable reserves exist, and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time. Costs of abandoned projects, including related property and equipment costs, are charged to mining costs. To determine if these costs are in excess of their recoverable amount, periodic evaluations of the carrying value of capitalized costs and any related property and equipment costs are performed. These evaluations are based upon expected future cash flows and/or estimated salvage value.
Fair Value of Financial Instruments
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
The Company did not have any Level 2 or Level 3 assets or liabilities as of November 30, 2015.
The Company discloses the estimated fair values for all financial instruments for which it is practicable to estimate fair value. As of the date of the financial statements, the fair value short-term financial instruments including prepaid, and accounts payable and accrued expenses, approximates book value due to their short-term duration.
Basic and diluted loss per share
Basic net earnings (loss) per common share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents.
Income taxes
Income taxes are accounted for in accordance with the provisions of FASB ASC 740, 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 bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.
8
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
2.
SIGNIFICANT ACCOUNTING POLICIES continued
Foreign Currency Translation and Transactions
The Company's functional currency is US dollars. Foreign currency balances are translated into US dollars as follows: Monetary assets and liabilities are translated at the period-end exchange rate. Non-monetary assets are translated at the rate of exchange in effect at their acquisition, unless such assets are carried at market or nominal value, in which case they are translated at the period-end exchange rate. Revenue and expense items are translated at the average exchange rate for the period. Foreign exchange gains and losses in the period are included in operations. The assets and liabilities arising from these operations are translated at current exchange rates and related revenues and expenses at the exchange rates in effect at the time the revenue or expense is incurred. Resulting translation adjustments, if material, are accumulated as a separate component of accumulated other comprehensive income in the statement of stockholders 'deficit while foreign currency transaction gains and losses are included in operations.
The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes. Fees incurred in the placement of the convertible notes are deferred and recognized over the life of the debt agreement as an adjustment to interest expense using the interest method.
3.
GOING CONCERN
In the course of the Company’s exploration activities, the Company has sustained losses and expects such losses to continue unless and until the Company can achieve net operating revenues. Future issuances of the Company’s equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company currently has no revenue from operations and has incurred cumulative net losses of $4,066,197 since its inception. The Company’s financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. Realization values may be substantially different from carrying values as shown and the Company’s financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the amount and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
9
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
4.
MINERAL PROPERTIES
On April 6, 2010, the Company counter-signed an offer for joint venture-earn-in to option several mining concessions in the Department of Bolivar, Republic of Colombia. Pursuant to various stages of due diligence it was determined that the best way of obtaining title to the various target mineral properties was to enter into new agreements. On November 15, 2010 the Company entered into four agreements. The terms of the new agreements allowed for the Company to acquire an 80% interest in four mining concessions. The agreements were amended on April 18, 2011. However, the Company was unable to make the October 1, 2011 payment under the amended formula. On March 1, 2012 the Company amended the acquisition agreements again on a basis of reducing the number of properties from 4 to 2 and reducing the payment schedule. A summary of the terms and ongoing payment obligations are as follows:
Cash payments:
1.
$5,000 as an initial option payment.
2.
$100,000 on or before January 31, 2011 (paid);
3.
$150,000 on or before March 31, 2011 (amended), (paid), (previously February 28, 2011);
4.
$50,000 on April 18, 2011 (amended), (paid) (previously $800,000 on or before March 31, 2011)
5.
$450,000 every six months starting on July 1, 2012 (previously $900,000 every six months starting October 1, 2011, of which the Company may pay one-half of issuing restricted common shares to the vendor at a 10-day average trading price per amendment on April 18, 2011), (previously $800,000 every six months thereafter starting on June 1, 2011).
Share issuances:
1.
24 million shares on or before March 31, 2011 (issued in March 2011)
2.
10 million shares on or before March 31, 2012, (discontinued under March 1, 2012 amendment) and
3.
10 million shares on or before December 31, 2012 (discontinued under March 1, 2012 amendment).
The Company paid a total of $350,000 to independent third parties for consulting services in relation to the signing of the option agreements. The Company incurred a cost of $100,000 paid to a person in the United States for the initial introduction of the mineral concessions and $250,000 paid to some concession holders as the initial payments to pursue an option agreement.
The Company has decided not to pursue these properties and has written off the costs of acquisition of $60,000 for the year ended May 31, 2015.
In May of 2012 the Company entered into an agreement to develop a mining concession in Peru. The Company can earn a 30% interest by expenditures of $250,000 and a further 40% by expenditures of $1,250,000. within a period ending on December 31, 2014. The vendors have a 3% net smelter return. The Company has incurred expenditures of $75,000 at May 31, 2014
The Company has decided not to pursue these properties and has reversed accrued exploration costs of $75,000 as at May 31, 2015.
Pursuant to agreements reached with Nations Oil & Gas, LLC. ("Nations") to provide feed stock and assist in acquiring land for building of a terminal, Nations was issued 20,000,000 restricted shares of the Company for a total value of $10,000.
5.
LOANS PAYABLE
The Company has loans payable to various independent third parties on the basis of being unsecured, payable on demand and bearing interest at the rate of 10% per annum.
|
|
|
|
|
|
November 30, 2015
|
|
May 31, 2015
|
|
$
|
840,645
|
$
|
794,549
|
10
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
6.
CONVERTIBLE LOANS
The Company has concluded agreements to convert a portion of loans payable into 10% convertible promissory notes on the basis that the principal balance and unpaid interest at the rate of 15% per annum be convertible into shares of the Company's restricted common stock at a conversion price of $0.0075 per share for a total of $164,500, at a conversion price of $0.0025 per share for a total of $582,295 and at a conversion price of $0.0005 per share for a total of $148843. The holder is limited to convert no more than 4.99% of the issued and outstanding common stock at the time of conversion. All of the loans were for cash advances to the Company.
|
|
|
|
|
|
|
|
November 30, 2015
|
|
May 31, 2015
|
|
|
|
|
|
|
|
Balance, at beginning of period
Convertible debt additions
Accrued interest
|
$
|
846,175
|
|
792,638
|
|
|
-
|
|
-
|
|
|
49,463
|
|
97,787
|
|
|
|
895,638
|
|
885,425
|
|
Converted into shares
|
|
-
|
|
(39,250)
|
|
Balance, end of period
|
$
|
895,638
|
$
|
846,175
|
|
Weighted average conversion price
|
$
|
$0.0016
|
$
|
0.0016
|
|
Number of shares issuable
|
|
552,538,317
|
|
517,361,836
|
7.
CAPITAL STOCK
Common Stock
The company issued to the founders 10,000,000 common shares of stock for $1,000. On May 20, 2009, the Company completed a 6-for-1 forward stock split (the Forward Split”) of the Company’s common stock in the form of a stock dividend. All share and per share information has been retroactively adjusted to reflect the Forward Split. The par value of the Company’s common stock was unchanged by the Forward Split.
On October 14, 2010, the Company increased its total authorized shares of common stock from 75,000,000 to 250,000,000, par value $0.001 per share.
On June 10, 2010 the Company issued 600,000 restricted shares to two parties for services at a value of $0.13 per share.
On August 17, 2010 the Company issued 3,600,000 restricted shares at $0.01 each pursuant to an assignment of debt dated October 31, 2009.
On August 18, 2010 the Company issued 6,000,000 restricted shares at $0.01 each pursuant to the retirement of debt as at February 17, 2010.
On March 8, 2011 the Company issued 24,000,000 restricted shares at $0.015 each pursuant to the acquisition of mineral properties.
On March 8, 2011 the Company issued 46,450,000 restricted shares at $0.0075 each to fourteen parties pursuant to the exercise of convertible debt.
On March 28, 2011 the Company issued 5,000,000 warrants at $0.10 each for cash consideration of $500,000. The warrants may be exercised to purchase 5,000,000 shares at $1.00 each until December 31, 2012 or may be surrendered for the receipt of 2,500,000 restricted shares.
On August 23, 2011 the Company issued 550,000 restricted shares at $0.0075 each to two parties pursuant to the exercise of convertible debt.
On February 19, 2012 the Company issued 2,700,000 restricted shares at $0.0075 each to three parties pursuant to the exercise of convertible debt.
11
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
7.
CAPITAL STOCK continued
On July 6, 2012 the Company issued 13,500,000 restricted shares at $0.0075 each to four parties pursuant to the exercise of convertible debt.
On March 15, 2013 the Company issued 7,000,000 restricted shares at $0.0075 each to two parties pursuant to the exercise of convertible debt.
On March 18, 2013 the Company issued 8,500,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On March 19, 2013 the Company issued 8,000,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On March 20, 2013 the Company issued 8,000,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On March 21, 2013 the Company issued 9,000,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On March 22, 2013 the Company issued 10,000,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On March 25, 2013 the Company issued 9,000,000 restricted shares at $0.0075 each to two parties pursuant to the exercise of convertible debt.
On March 26, 2013 the Company issued 10,000,000 restricted shares at $0.0075 each to two parties pursuant to the exercise of convertible debt.
On March 27, 2013 the Company issued 11,000,000 restricted shares at $0.0075 each to three parties pursuant to the exercise of convertible debt.
On March 28, 2013 the Company issued 7,500,000 restricted shares at $0.0075 each to one party pursuant to the exercise of convertible debt.
On June 1, 2013 the Company issued 10,000,000 restricted shares at $0.0025 each to two parties pursuant to the exercise of convertible debt.
On June 17, 2013 the Company issued 1,000,000 restricted shares at $0.0025 each to one party pursuant to the exercise of convertible debt.
On August 17, 2013 the Company issued 5,000,000 restricted shares at $0.0025 each to one party pursuant to the exercise of convertible debt.
On January 24, 2014 the Company issued 13,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On February 24, 2014 the Company issued 18,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On February 27, 2014 the Company issued 11,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On March 5, 2014 the Company issued 13,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
12
Bakken Energy Corp. (formerly Orofino Gold Corp.)
Notes to the Financial Statements
for the six months ended November 30, 2015
7.
CAPITAL STOCK continued
On April 1, 2014 the Company issued 15,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On April 4, 2014 the Company issued 11,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On April 15, 2014 the Company issued 15,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On April 24, 2014 the Company issued 15,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On May 8, 2014 the Company issued 12,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On May 15, 2014 the Company issued 16,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On June 2, 2014 the Company issued 15,500,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On June 24, 2014 the Company issued 20,000,000 restricted shares at $0.0005 each to one party pursuant to the acquisition of resource property.
On June 24, 2014 the Company issued 14,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On June 2, 2014 the Company issued 13,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On June 2, 2014 the Company issued 20,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
On August 25, 2014 the Company issued 35,539,999 restricted shares at $0.0005 each to shareholders on record as of April 15, 2014 pursuant to a 10% stock dividend.
On September 29, 2014 the Company issued 16,000,000 restricted shares at $0.0005 each to one party pursuant to the exercise of convertible debt.
13