UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended November 30, 2016

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission file number 333-180424

 

VALMIE RESOURCES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   45-3124748
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     

2603 Augusta Drive, Suite 840

Houston, TX

  77057
(Address of principal executive offices)   (Zip Code)

 

(713) 595-6675

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

None   N/A
Title of each class   Name of each exchange on which registered

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 [  ] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]

 

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

Yes [  ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $36,438,420, based on 66,239,630 shares of common stock and a closing price of $0.5501 per share on May 31, 2016

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 69,037,885 as of March 14, 2017

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None

 

 

 

     
     

 

FORWARD-LOOKING STATEMENTS

 

This annual report contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements”, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by any forward-looking statements due to a number of factors. These forward-looking statements are made as of the date of this annual report, and we assume no obligation to update such forward-looking statements.

 

The discussion of our financial condition and results of operations in this annual report is based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements, including the notes thereto, that appear elsewhere in this annual report. The discussion of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

 

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TABLE OF CONTENTS

 

PART I    
     
Item 1. Business 4
Item 1A. Risk Factors 11
Item 1B. Unresolved Staff Comments 11
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Mine Safety Disclosures 11
     
PART II    
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 12
Item 6. Selected Financial Data 13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 17
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 19
Item 9A. Controls and Procedures 19
Item 9B. Other Information 19
     
PART III    
     
Item 10. Directors, Executive Officers and Corporate Governance 20
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 23
Item 13. Certain Relationships and Related Transactions, and Director Independence 25
Item 14. Principal Accounting Fees and Services 26
     
PART IV    
     
Item 15. Exhibits, Financial Statement Schedules 27

 

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PART I

 

Item 1. Business

 

As used in this annual report, the terms “we”, “us” and “our” mean Valmie Resources, Inc. and all dollar amounts refer to U.S. dollars, unless otherwise indicated.

 

Overview

 

We were incorporated pursuant to the laws of the State of Nevada on August 26, 2011. We have one wholly owned subsidiary, Vertitek Inc., a Wyoming corporation (“Vertitek”), and a 50% interest in a joint venture entity, AeroLift eXpress, LLC, a Wyoming limited liability corporation (“AeroLift”). From our inception until the quarter ended August 31, 2014, we were a mineral exploration company exploring for precious metals, or gold and silver targets.  Our property, known as the Carico Lake Valley Property (the “Property”), was located in Lander County, Nevada.

 

On April 16, 2014, FEN Holdings & Investments Ltd., a company incorporated in the British Virgin Islands (“FEN”), became our majority stockholder by acquiring an aggregate of 237,360,000 shares, or approximately 80.1% of our then issued and outstanding common stock, from Khurram Shroff, our former sole officer and director.

 

In July 2014, the landowner notified us that our option to acquire an interest in the Property had been terminated and that the Property had been sold to a third party.  Our efforts from that date until the end of our fiscal year ended November 30, 2014, were primarily directed to identifying new development properties.

 

In early December 2014, FEN determined it was in the best interests of our shareholders to change our business focus from mining to pursuing opportunities for the commercialization of leading edge products and services in the rapidly expanding technology industry.  We therefore sought to develop or acquire concepts with valid business models positioned to make a significant impact within the four key technology “megasectors”: software, hardware, networking and semiconductors.

 

Business Strategy

 

The first major step in our shift to the technology sector was the appointment of Gerald B. Hammack as our sole officer and director on December 8, 2014.  Mr. Hammack has more than 30 years of experience in a variety of technology-related fields, including programming, digital telephony and database management, as well as substantial expertise in the setup and management of complex data processing systems.

 

Over the past several years, Mr. Hammack has been developing a series of software platforms and technologies designed to provide the near real-time data processing required by the ever-expanding use of commercial Unmanned Aerial Vehicles or UAVs (more commonly referred to as drones).  Towards the end of 2014 we rebranded Mr. Hammack’s development efforts to date as the AIMD (Automated Intelligence for Mobile Devices) data processing platform and adopted them as our own.  On July 15, 2015, we entered into an asset purchase agreement with Mr. Hammack pursuant to which we acquired all of the right, title and interest in and to the intellectual property relating to the AIMD platform in consideration for the issuance of $100,000 worth of our common stock to Mr. Hammack on that date at a deemed price of $0.47 per share. Since we did not acquire any patents from Mr. Hammack, we recognized an intangible asset value of $100,000 related to the acquisition, which was impaired and written-off as of November 30, 2015.

 

While in the process of launching the AIMD platform, we determined that it would be necessary to find a partner that had the technology and experience in the design and manufacture of UAVs in order to design and build a prototype unit to test and refine our product and service offerings. After extensive investigation we located a UAV manufacturer, Vertitek. Vertitek’s technologies are being designed to enable a sophisticated level of autonomy for UAVs and other autonomous mobilized devices, including precision guidance controls and advanced safety features. The company was established to provide unmanned vehicle software, hardware and cloud services for a wide range of commercial applications around the globe, and its under development commercial UAV’s include multi-rotor and fixed wing models.

 

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On January 27, 2015 we entered into a share exchange agreement (the “Share Exchange Agreement”) with Vertitek and the sole shareholder of Vertitek, Masamos Services Ltd., a Cypriot corporation (“Masamos”), to acquire 100% of the capital stock of Vertitek in exchange for the issuance of shares of our common stock to Masamos. On March 31, 2015, the closing of the Share Exchange Agreement occurred and we issued 1,000,000 shares of our common stock to Masamos in exchange for 100% of the issued and outstanding shares of Vertitek. As a result, Vertitek became our wholly owned subsidiary and we acquired all the assets of Vertitek including, but not limited to, all intellectual property, trade names, trade secrets, trademarks, personnel contracts, website domain and content, strategic partnerships, manuals, licenses and all other confidential information related to the V-1 drone system and other technologies under development by Vertitek.

 

In 2016, Vertitek formed the Vertitek Racing team in order to participate in the burgeoning drone racing industry. Vertitek maintains a team of sponsored pilots who fly in these events on behalf of Vertitek Racing, and has also designed a series of racing specific drone frames that it manufactures and sells to other drone operators both through traditional retail methods as well as from its own interactive e-commerce platform.

 

Although we acquired intellectual property both as a result of the Vertitek acquisition and from Mr. Hammack, we have not yet filed for any patent protection in relation to such intellectual property. We intend to protect our intellectual property rights, including trademark and servicemark opportunities, to the maximum extent possible in all jurisdictions in which we may operate. In the future, we anticipate protecting the trademark and service mark opportunities related to Vertitek, the V-Series drones and the AIMD platform.

 

On April 15, 2016, we entered into a joint venture agreement with James Stafford to form AeroLift (the “Joint Venture Agreement”). Pursuant to the Joint Venture Agreement, we currently own 50% of AeroLift and have committed funding up to $500,000 to launch the AeroLift business model, of which $237,000 had been advanced as of November 30, 2016.  AeroLift is led by a team of military trained pilots, mission commanders and specialists with more than 60 years of combined aviation experience, and it expects to utilize military grade UAV’s which have been specifically adapted for its applications in conjunction with the Vertitek design and manufacturing team. Together with state of the art ground control stations and flight control software, AeroLift intends to deliver cutting edge unmanned services to clients in a variety of challenging environments.

 

As of November 30, 2016, we had not generated any revenue through the sales of UAVs or the provision of software, hardware or cloud based services, either through Vertitek, AeorLift or otherwise.  Our operating divisions, Vertitek and AeroLift, are continuing to develop their product and service offerings while beginning to market those offerings to potential customers. The service offerings of AeroLift have a long sales cycle due in large part to the necessity of introducing new technologies and systems into industries that have shown historical resistance to change.

 

We have never declared bankruptcy, receivership or any similar proceedings nor have we had any material reclassifications, mergers, consolidations, or purchases or sales of a significant amount of assets not in the ordinary course of business.

 

Our principal executive office is located at 2603 Augusta Drive, Suite 840, Houston, TX 77057 and our telephone number is (713) 595-6675. Our website address is www.valmie.com.

 

Our Corporate History and Background

 

On December 3, 2013, the holders of a majority of our issued and outstanding common stock approved an amendment to our bylaws (the “Bylaw Amendment”) and an increase in our authorized capital from 100,000,000 shares of common stock, par value $0.001, to 750,000,000 shares of common stock, par value $0.001 (the “Authorized Capital Increase”). The purpose of the Bylaw Amendment was to update our bylaws and make them more comprehensive, while the purpose of the Authorized Capital Increase was to reorganize our capital structure in connection with the stock dividend described below. We formally effected the Authorized Capital Increase on December 4, 2013 by filing a Certificate of Amendment with the Nevada Secretary of State.

 

Also on December 3, 2013, our former sole director approved a stock dividend of 59 authorized but unissued shares of our common stock on each one (1) issued and outstanding share of our common stock. On December 13, 2013, we received approval from the Financial Industry Regulatory Authority (FINRA) to effect the stock dividend by way of a forward split, and on December 17, 2013, our shareholders of record on December 16, 2013 received the dividend. As a result of the stock dividend, our issued and outstanding common stock increased from 4,940,000 shares to 296,400,000 shares.

 

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On September 1, 2014, we entered into a consulting agreement with Constant Consulting Corp., a Wyoming corporation (“Constant”), pursuant to which Constant agreed to provide certain consulting services to us, including operational plan and business model structuring, identifying potential development partners, interfacing with third parties to ensure compliance with regulatory requirements, and interfacing with other vendors as requested, for a period of one year in exchange for the payment of $25,000 per month. On February 28, 2015, the parties agreed to terminate the monthly obligation to Constant and that any future work would be compensated on an hourly basis. Our agreement with Constant expired on August 31, 2015 and was not renewed. Other than with regard to the agreement, we are unaware of any relationship between Constant and any of our officers, directors or shareholders.

 

On December 10, 2014, the holders of a majority of our issued and outstanding common stock approved a set of amended and restated articles of incorporation that, among other things, increased our authorized capital to 760,000,000 shares, consisting of 750,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of “blank check” preferred stock, par value $0.001 (the “Blank Check Preferred Stock”). We formally effected the authorized capital increase and the creation of the Blank Check Preferred Stock by filing the amended and restated articles of incorporation accompanied by the required certificate with the Nevada Secretary of State on December 11, 2014.

 

On December 11, 2014, our sole director approved the designation of 2,000,000 shares of the B lank Check Preferred Stock as Series “A” preferred stock (the “Designation”). We formally effected the Designation by filing a Certificate of Designation with the Nevada Secretary of State on January 15, 2015.

 

The shares of Series “A” preferred stock carry certain rights and preferences. The Designation provides that the Series “A” Preferred Stock may be converted into shares of our common stock on a 10 for one (1) basis at any time after 18 months from the date of issuance, and that each share of Series “A” preferred stock has voting rights and carries a voting weight equal to 50 shares of common stock.

 

On January 16, 2015, FEN agreed to cancel an aggregate of 237,360,000 shares, or approximately 80.1% of our issued and outstanding common stock, in exchange for the issuance of the 2,000,000 shares of Series “A” preferred stock described above. As a result, the number of issued and outstanding shares of our common stock decreased from 296,400,000 to 59,040,000.

 

Between August 18, 2014 and March 20, 2015, we issued eight promissory notes to three investors (Shield Investments, Inc. a British Virgin Islands corporation (“Shield”), Tuverga Finance Ltd., a Cypriot corporation (“Tuverga”) and Fairwinds Consulting LLC, a Texas limited liability corporation) in the aggregate principal amount of $365,000 in exchange for advances to us in an identical amount. Each of the promissory notes bears simple interest at an annual rate of 15% and matures two years from the date of issuance. Seven of the eight promissory notes, in the aggregate principal amount of $350,000, were secured by all of the assets, properties, goods, inventory, equipment, furniture, fixtures, leases, supplies, records, money, documents, instruments, chattel paper, accounts, intellectual property rights (including but not limited to, copyrights, moral rights, patents, patent applications, trademarks, service marks, trade names, trade secrets) and other general intangibles, whether owned by us on the date of the applicable note or thereafter acquired, and all proceeds thereof.

 

On March 31, 2015, we completed the Vertitek acquisition and Vertitek became our wholly owned subsidiary.

 

On April 6, 2015, we entered into debt conversion agreements with Shield and Tuverga pursuant to which those investors converted an aggregate of $350,000 in debt into 3,500,000 shares of our common stock at a price of $0.10 per share. As part of those debt conversion agreements, Shield and Tuverga agreed to forgive any and all accrued interest and release their respective security interests in our assets, rights or other property.

 

Also on April 6, 2015, we entered into a debt conversion agreement with Dome Capital LLC, a Wyoming limited liability corporation, pursuant to which it converted an aggregate of $33,927 in debt into 339,270 shares of our common stock at a deemed price of $0.10 per share.

 

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On July 15, 2015, we entered into an asset purchase agreement with Gerald B. Hammack, our sole officer and director, pursuant to which we acquired all of the right, title and interest in and to the intellectual property relating to the AIMD platform from Mr. Hammack in consideration for the issuance of $100,000 worth of our common stock to Mr. Hammack on that date at a deemed price of $0.47 per share. The assets include, but are not limited to, all intellectual property, trade names, trade secrets, trademarks, personnel contracts, web site domains and content, strategic partnerships, publications, operating models, manuals, licenses, and all other confidential information relating to the AIMD platform concept. As a result, Mr. Hammack received an aggregate of 212,765 shares of our common stock.

 

Mr. Hammack determined the value of his intellectual property based on a good faith estimate of the cost to recreate such intellectual property. While the intellectual property acquired from Mr. Hammack does not include any patents or immediately patentable innovations, we did acquire the software foundation for our under construction AIMD platform. We believe the acquisition reduced our software development schedule by six to nine months.

 

During the year ended November 30, 2015, we issued six promissory notes to Crystal Resource Corp. in the aggregate principal amount of $102,500 in exchange for advances to us in an identical amount. During the year ended November 30, 2016, we issued multiple promissory notes to the same investor in the aggregate amount of $172,500, also in exchange for advances to us in an identical amount. Each of the promissory notes bears simple interest at an annual rate of 15%, matures two years from the date of issuance, and is secured by all of the assets, properties, goods, inventory, equipment, furniture, fixtures, leases, supplies, records, money, documents, instruments, chattel paper, accounts, intellectual property rights (including but not limited to, copyrights, moral rights, patents, patent applications, trademarks, service marks, trade names, trade secrets) and other general intangibles, whether owned by us on the date of the applicable note or thereafter acquired, and all proceeds thereof. 

 

On February 10, 2016, we were granted an exemption (No. 14749, Regulatory Docket No. FAA–2015–4694) from Section 333 of Public Law 112-95 by the Federal Aviation Administration (the “FAA”) to operate two models of the V-Series drones to perform aerial data collection, and in particular, to conduct aerial based agricultural applications, search and rescue operations, power-line inspections, pipe-line inspections, infrastructure surveying and aerial imaging. The exemption is subject to industry standard weight, speed and altitude limitations, as well as certain visual line of sight, visual observer, operating document, safety and pre-flight inspection measures, among others.

 

The exemption will terminate on February 28, 2018, and we do not anticipate being unable to comply with any conditions of the exemption during the term. As Vertitek completes new UAV hardware offerings, we will petition the FAA to add these new platforms to our existing exemption under Section 333.

 

On April 15, 2016, we entered into the Joint Venture Agreement with James Stafford to form AeroLift.

 

On April 27, 2016, $200,000 of the promissory notes described above was settled through the issuance of 2,000,000 shares of our common stock, and the associated accrued interest of $13,854 was waived.  During the year ended November 30, 2016, we repaid the remaining promissory notes in full in the aggregate amount of $75,000 and the associated accrued interest of $997 was waived. 

 

In late 2016, we entered into a purchase order with Alti UAS of South Africa regarding the manufacture and delivery of five customized VTOL (vertical takeoff and landing) UAV systems to be used by AeroLift in the provisioning of its services. These new systems will be customized and flight-tested by a team consisting of resources from us, Vertitek and AeroLift. Once certified for flight operations these Alti systems will allow AeroLift to provide a new level of services to interested parties.

 

In early 2017, Vertitek opened a new technology development and manufacturing facility in Lake Charles, Louisiana, at which Vertitek’s in-house staff has the capabilities to manufacture components for and assemble its UAV offerings.

 

The Tuverga Agreements

 

On August 20, 2015, we entered into an equity investment agreement (the “Equity Investment Agreement”) with Tuverga pursuant to which Tuverga is irrevocably committed to purchase up to $2.5 million of our common stock over the course of 24 months and may not assign or in any way transfer its rights to purchase such common stock or any interest therein. The aggregate number of shares issuable by us and purchasable by Tuverga under the Equity Investment Agreement is limited by the dollar amount sold, in this instance no more than $2.5 million, and will depend upon the trading price of our shares. When we sell shares to Tuverga, the per share purchase price that Tuverga will pay to us will be determined in accordance with a formula set forth in the Equity Investment Agreement. Generally, with respect to each sale, Tuverga will pay us a per share purchase price equal to fifty percent (50%) of the volume weighted average price of our common stock during the three (3) consecutive trading day period immediately preceding the date of delivery of our request for funds.

 

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In connection with the Equity Investment Agreement, we also entered into a registration rights agreement (the “Registration Rights Agreement”) with Tuverga. Pursuant to the Registration Rights Agreement, we were obligated to file a registration statement with the SEC covering the shares of common stock underlying the Equity Investment Agreement within 15 days after the execution of the agreement. In addition, we were obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the date the registration statement is filed and maintain the effectiveness of such registration statement until the earlier to occur of the date on which (a) Tuverga has sold all of the 10,000,000 shares of our common stock being registered thereunder or (b) we have no right to sell any additional shares to Tuverga under the Equity Investment Agreement.

 

Our Solutions

 

Our UAV solutions and those of Vertitek and AeroLift will consist of aerial data collection hardware, software and data storage solutions for commercial applications. We are currently developing our software and data storage solutions while we continue to test and refine our prototype hardware units.

 

AIMD Platform: Autonomous Intelligence for Mobilized Devices

 

We are creating a powerful and feature-rich system for connecting mobilized machines, drones and robots to enable communication, automation and visibility. We expect to be able to offer choices from dozens of industry applications that are experiencing a growing need for visibility to help maximize operational efficiencies, and have taken into consideration the need for a seamless point of integration, empowering the best-of-both-worlds – including hardware components and process information – to work better together. We developed the AIMD platform as the intersection point for real-time operational intelligence and effective work-flow that is accessible anywhere, anytime.

  

V-Series UAVs

 

Vertitek is designing and developing the extremely versatile V-Series UAVs. The V-Series includes both traditional multi-rotor and VTOL (vertical takeoff and landing) UAV systems. The previously developed V-1 and V-2 drone systems served as a test platform for new technologies and methodologies to be incorporated into the latest development prototypes. Vertitek’s design team is working closely with AeroLift and its flight operations specialists to ensure the large scale UAVs under development will meet the needs of potential end-users, including clients of AeroLift’s unique service offerings.

 

To date we have built and tested approximately 15 prototypes of the various V-Series UAVs.

 

Suppliers

 

Both our hardware and software solutions rely on certain outside suppliers for either operational components or software packages upon which our systems are constructed. At this time there are multiple suppliers for almost all of the components that are required in our business and we do not foresee a situation under which we would be unable to receive the items required from these suppliers. Vertitek Racing’s drone frames are manufactured in its facility using readily available carbon fiber material from a multitude of suppliers. Our V-Series UAV prototypes are constructed mostly from readily available components. When it becomes viable to manufacture one or more of the V-Series UAVs for commercial sale, we will require certain proprietary components such as flight controllers and network interfacers to be manufactured to our specifications. This will limit our supply network and could leave us vulnerable in the event of an issue with such supplier. Where appropriate we will try to diversify our supply network as much as possible to mitigate future supply risks.

 

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Business Plan Implementation Schedule

 

We have not established a schedule for the completion of specific tasks or milestones contained in our business plan. Virtually all aspects of our business plan are scalable in terms of size, quality, and effectiveness, and the timing of their execution must be concurrent or near concurrent and progressive over an eighteen-month period. We anticipate that we will require an additional $1,500,000 in order to deliver upon our business goals within a 24-month period. We believe that our existing Equity Investment Agreement with Tuverga will be sufficient to provide our capital needs over the next 12-18 months.

 

Sales and Marketing Strategy

 

We plan to begin generating revenue from sales related to drone services, either through one-time contracts or through longer-term monitoring and data processing agreements. We, along with our AeroLift joint venture, have begun discussions with industry sectors to determine the areas in which our services could have an immediate impact, thus generating the most interest from early adopters. While we plan to attend industry conferences and association meetings in order to introduce our services, we believe that personal relationships and introductions continue to be our best avenue to capture revenue in the near-term.

 

We anticipate that within 24 months, we will be actively marketing our V-Series UAVs for sale to commercial customers. In order to effectively sell the V-Series UAVs, we will need to engage a professional sales and marketing team with experience in business-to-business sales. We expect that as the UAV market matures over the coming years there will be opportunities for collaborations with other interested parties which could provide additional markets for our product and services.

 

Characteristics and Make-Up of Target Market

 

The UAV market is constantly changing, due in large part to the current regulatory challenges faced by the industry. It is impossible to predict exactly how new regulations will impact the market at this time.

 

We will be constantly reviewing our target markets to ensure the success of our business model.

 

As the UAV industry matures in the coming years, the demand for our solutions will only increase. Our early entry into the commercial UAV marketplace will provide an opportunity to become one of the major solution providers in our target markets.

 

Competition

 

The commercial UAV market is characterized by many participants that offer very similar products. Therefore, our strategy is to begin offering advanced solutions that combine our software and hardware offerings in such a way to bring clear value to our customers.

 

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Although this industry operates in a highly specialized niche, competition for business will be intense. We will face significant competition in the provision of both software solutions and hardware systems, from the following companies, among others:

 

Hardware Vendors

 

  Parrot Industries
     
  PrecisionHawk
     
  DJI Innovations

 

Software Solutions Providers

 

  PrecisionHawk
     
  AirWare
     
  DroneCode
     
  NV Drones

 

Intellectual Property

 

Our policy is to capitalize intellectual property related to the filing and acquisition of internally developed patents where appropriate.

 

Patent related expenses that are eligible for capitalization include:

 

  legal fees related to the preparation and filing of a patent application;
     
  legal fees related to the defense of a patent or patent application; and
     
  filing fees related to the filing of a patent application.

 

Intellectual property for internally developed patents will be capitalized only in the above circumstances and will be amortized over the life of the patent, beginning on the grant date.

 

We have not filed any patents related to our UAV technologies as of the date of this annual report; however, we anticipate that we will begin to complete such filings in the near future.

 

Research and Development

 

Our current research and development activities are solely focused on the continued development of the AIMD platform as well as our collaboration on the V-Series UAVs. We anticipate these efforts will lead to additional products being developed from the foundation of these two systems. If and when we are able to do this, engineering design development will be employed to aid in the development of these systems. At this time, however, we have no plans to pursue pure research and development activities at any point in the future.

 

Government Regulations

 

As a provider of technologies and services in the UAV industry we are likely to be subject to extensive regulation at both the federal and municipal levels. This will be especially true if we begin to offer operational services to our customers. We believe that increasing regulation in the drone space will be beneficial not only to our business, but to all commercial drone operators and solution providers. The barriers to entry created by such regulation will only help to differentiate the product and solutions being offered by professional companies versus those that are intended for the consumer marketplace.

 

The regulatory environment for commercial UAV use has not yet been codified in the United States. In addition to a few recent FAA exemptions, the key case, Huerta v. Pirker, has not brought definitive clarity, just more clearly defined positions on both sides of the dispute over the regulated or unregulated use of UAV’s for commercial purposes.

 

  10  
 

 

UAV regulations for the United States airspace are still a patchwork of confusing, often contradictory rulings, generally based on regulations, which, in some cases, were codified decades ago. Based on the existing exemptions, those entities and organizations that are anticipating to use UAV’s commercially will be required to receive pilot certifications, including medical certifications, which the FAA has attached to the few exemptions. Operators and pilots are likely to be distinguished. The FAA has recently determined that a drone registry will be implemented in order to more effectively track drones that stray into restricted airspace or are flown in violation of the law. We feel this registry is long overdue and will help to reduce the negative attention paid to the industry when hobbyist operators do not follow common sense guidelines for drone operations.

 

On the non-FAA side, there will be expanding barriers to entry into the UAV industry, especially if FAA regulations should surprise us with low thresholds for an entry into the commercial field. From homeland security to privacy, there are real and imaginary dangers associated with the expanding use of UAV’s in the United States. As U.S. domestic regulation continues to fall behind that of more forward thinking countries, it may become necessary for UAV companies to focus their efforts and resources outside the United States until such time as UAV regulations become more conducive to the game-changing solutions that can only be delivered by tomorrow’s advanced UAV systems and technologies.

 

Employees

 

As of the date of this annual report, we have eight full-time or part-time employees, including our sole executive officer and director and the employees of our subsidiaries. We currently rely on the efforts of Gerald B. Hammack, our sole executive officer and director, Sean Foster, the sole officer and director of Vertitek, and James Stafford, our partner in the AeroLift joint venture and AeroLift’s Managing Member and Chief Executive Officer, to manage our operations. Mr. Hammack dedicates approximately 40 hours per week to the management of our operations along with the oversight of our autonomous vehicle software and hardware development projects. Mr. Foster dedicates approximately 40 hours per week to the continued development of Vertitek’s autonomous vehicle prototypes, and Mr. Stafford dedicates approximately 40 hours per week to the management and marketing of AeroLift. From time to time, we also engage consultants to provide specialized technical and support services, both in the implementation of our corporate structure as well as the advancement of our products and services.

 

Item 1A. Risk Factors

 

Not required.

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

Item 2. Properties

 

Our principal executive office is located at 2603 Augusta Drive, Suite 840, Houston, TX 77057. We lease this space at a cost of $Nil per month until July 31, 2017 pursuant to a 42-month office lease agreement effective February 1, 2017. On August 1, 2017, our lease payments will increase to approximately $3,367 per month until July 31, 2018, at which time they will increase to approximately $3,464 per month for the following 12 months, and then to $3,560 for the remainder of the term. We believe that this space is generally suitable to meet our needs for the foreseeable future; however, we will continue to seek additional space as needed to satisfy our growth.

 

Item 3. Legal Proceedings

 

We do not know of any material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholders are an adverse party or have a material interest adverse to us.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

  11  
 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

General

 

As of the date of this annual report, we have 69,037,885 shares of common stock issued and outstanding.

 

Market Information

 

There is a limited public market for our common stock. Our common stock is quoted on the OTC Bulletin Board and OTC Pink marketplace under the symbol “VRMI”. Trading in stocks quoted on such markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.

 

OTC market securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC market securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC market issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

 

Our common stock became eligible for quotation on the OTC Bulletin Board and OTC Pink marketplace on December 6, 2012. The following quotations reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The high and low bid quotations of our common stock for the periods indicated below are as follows:

 

OTCBB / OTC Pink Marketplace  
Quarter Ended   High ($)     Low ($)  
November 30, 2016     1.69       0.865  
August 31, 2016     3.43       0.545  
May 31, 2016     0.75       0.20  
February 29, 2016     0.24       0.10  
November 30, 2015     0.33       0.122  
August 31, 2015     0.69       0.22  
May 31, 2015     6.00       0.41  
February 28, 2015     2.55       0.31  

 

Holders

 

As of the date of this annual report there are only two holders of record of our common stock, one of which is Cede & Co.

 

  12  
 

 

Dividends

 

On December 3, 2013, our former sole director approved a stock dividend of 59 authorized but unissued shares of our common stock on each one (1) issued and outstanding share of our common stock. On December 13, 2013, we received approval from the Financial Industry Regulatory Authority (FINRA) to effect the stock dividend by way of a forward split, and on December 17, 2013, our shareholders of record on December 16, 2013 received the dividend. As a result of the stock dividend, our issued and outstanding common stock increased from 4,940,000 shares to 296,400,000 shares.

 

Other than as described above, we have never paid dividends on our common stock.

 

Recent Sales of Unregistered Securities

 

None.

 

Purchases of Equity Securities by the Issuer and “Affiliated Purchasers”

 

We did not purchase any shares of our common stock or other securities during the year ended November 30, 2016.

 

Item 6. Selected Financial Data

 

Not required.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

 

The following discussion and analysis of our results of operations and financial condition has been derived from and should be read in conjunction with our financial statements, including the notes thereto, that appear elsewhere in this annual report.

 

Overview

 

We were incorporated pursuant to the laws of the State of Nevada on August 26, 2011. We have not yet generated any revenue from operations.

 

Results of Operations

 

Revenue

 

We have not generated any revenue since our inception. We anticipate that we will incur substantial losses for the foreseeable future and our ability to generate any revenues during the next 12 months continues to be uncertain.

 

Expenses

 

During the year ended November 30, 2016, we incurred $590,151 in operating expenses, including $325,926 in general and administrative expenses, $130,411 in professional fees, $75,000 in management fees, $51,272 in stock-based compensation and $7,542 in transfer agent fees. During the year ended November 30, 2015, we incurred $3,210,470 in operating expenses, including $2,877,144 in impairment losses, $237,605 in professional fees, $52,000 in management fees, $38,143 in general and administrative expenses and $5,578 in transfer agent fees. The $2,620,319 or 82% decrease in our operating expenses between the two years was primarily attributable to the impairment losses we incurred related to intangible assets acquired during the prior year. During the year ended November 30, 2016, our management fees and general and administrative expenses also increased due to the general increase in our operations subsequent to the acquisition of Vertitek, as offset to some extent by a decrease in our professional fees.

 

  13  
 

 

During the year ended November 30, 2016, we also incurred $403,300 in other expenses, including a $266,146 loss on the settlement of debt and $123,538 joint venture equity loss. During the year ended November 30, 2015, we incurred $10,403,232 in other expenses, substantially all of which was attributable to losses associated with convertible notes that we settled during the year.

 

Net Loss

 

During the year ended November 30, 2016, we incurred a loss from operations of $590,151, a net loss of $993,451, and a loss per share of $0.02. During the prior year, we incurred a loss from operations $3,210,470, a net loss of $13,613,702, and a loss per share of $0.15. The substantial decrease in our net loss between the two years was entirely attributable to the reductions in our loss from operations and other expenses as described above.

 

Liquidity and Capital Resources

 

As of November 30, 2016, we had $262,190 in cash and cash equivalents, $274,274 in current assets, $436,672 in total assets, $185,732 in current and total liabilities, a working capital surplus of $88,542 and a retained deficit of $14,931,195.

 

During the year ended November 30, 2016, we used $425,694 in net cash on operating activities and our accounts payable and accrued liabilities decreased by $41,463. During the year ended November 30, 2015, we used $355,090 in net cash on operating activities and our accounts payable and accrued liabilities decreased by $22,055. The majority of our spending on operating activities for the years ended November 30, 2016 and 2015 was attributable to our net loss as described above, as adjusted for certain non-cash items (loss on the settlement of debt, joint venture equity loss and stock-based compensation (2016 only), impairment loss (2015 only)) and changes in our accounts payable and accrued liabilities, and was associated with carrying out our reporting obligations under applicable securities laws and refining our business focus.

 

During the year ended November 30, 2016, we used $253,587 in net cash on investing activities, substantially all of which was in the form of investment in our AeroLift joint venture. During the year ended November 30, 2015, we used $52,099 in net cash on investing activities, substantially all of which was in the form of advances to Vertitek and prototype development costs.

 

During the year ended November 30, 2016, we received $918,595 from financing activities, the majority of which ($840,990) was in the form of proceeds from the sale of our common stock under the equity-line investment agreement with Tuverga. During the year ended November 30, 2015, we received $417,500 from financing activities, all of which was in the form of proceeds from promissory notes.

 

During the year ended November 30, 2016, our cash position increased by $239,314 due to a combination of our operating, investing and financing activities.

 

Our plans for the next 12 months are uncertain due to our current financial condition; however, we intend to raise additional funds through public or private placement offerings, including our equity investment agreement with Tuverga. If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us. In the absence of such financing, we may be forced to cease or significantly curtail our operations.

 

  14  
 

 

Plan of Operations

 

We will need to raise additional capital to carry out our business plan. We have a 24-month plan during which we intend to implement business development and marketing initiatives in order to create a vertically integrated UAV goods and services provider that covers all operational areas from technology development to the end user experience.

 

We believe we must raise approximately $1,900,000 to pay for expenses associated with the development and commercialization of the products and services being offered by us, Vertitek and AeroLift. Of this, we plan to use $1,150,000 to finance our general and administrative expenses as well as acquire new equipment and systems, which we in turn plan to lease to our subsidiaries; $250,000 to develop Vertitek and its latest offering, Vertitek Racing; and $500,000 to help launch AeroLift.

 

Valmie

 

Description   Estimated Amount ($)  
General and administrative expenses (including management fees and professional fees)     500,000  
Acquisition of equipment and UAV systems     400,000  
Software application and development     250,000  
Total     1,150,000  

 

During the next 24 months, we will continue to focus on integrating and leveraging our operating subsidiaries, Vertitek and AeroLift, to develop and expand our position within the commercial UAV industry. We plan to seek acquisition opportunities or joint venture partners that will allow us to enter under-developed or under-served segments of the market, and intend to form a leasing entity through which we will acquire the systems and technologies required by our operating subsidiaries and lease them at commercially reasonable rates. Using this leasing system, we will be able to maintain control of our capital assets and allow our subsidiaries to focus solely on revenue generating activities and serving the needs of their customers.

 

Vertitek

 

Description   Estimated Amount ($)  
General and administrative expenses     100,000  
Hardware/software engineering and development     75,000  
Development of Vertitek Racing     50,000  
Tooling and inventory     25,000  
Total     250,000  

 

As Vertitek continues to develop its product line of customized drone platforms and systems, it will expand its service offerings to include specialized engineering and development support for us, AeroLift and any other entities in which we may acquire an interest. The Vertitek Racing team and its competition schedule will allow engineers to use real world testing and results to continue the development of Vertitek’s offerings.

 

  15  
 

 

AeroLift

 

Description   Estimated Amount ($)  
General and administrative expenses     300,000  
Live demonstrations and sales-related activities     75,000  
Lease payments on UAV systems and technology     50,000  
Hardware/software engineering and development     50,000  
Sales literature, displays and convention expenses     25,000  
Total     500,000  

 

We anticipate that the next 24 months will be an exciting time for AeroLift as it continues to work towards providing both time-critical UAV delivery services and actionable intelligence delivered through military grade UAV systems not currently available to the general public. A series of full-scale public and private demonstrations have begun and are scheduled to continue during the current quarter, which will showcase for potential customers the cost savings and safety benefits of using the services AeroLift offers.

 

Continued Funding

 

We believe that the remaining funding available to us under our Equity Investment Agreement with Tuverga Finance Ltd. (“Tuverga”) will be sufficient to cover our needs for at least the next 12 months. In the event that we require additional financing, such as for the acquisition of UAV systems, we will likely approach Tuverga to participate in a separate transaction related solely to the acquisition of those assets. We believe Tuverga would be willing to participate under commercially reasonable terms.

 

If we are unable to agree to terms with Tuverga, we intend to pursue capital through public or private financing as well as borrowings and other sources, such as loans from our existing shareholders in order to finance our business activities. We cannot guarantee that additional funding will be available on favourable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.

 

Going Concern

 

Our financial statements have been prepared on a going concern basis, which contemplates, among other things, that we will continue to realize our assets and satisfy our liabilities in the normal course of business. As at November 30, 2016, we had a working capital surplus of $88,702 and a retained deficit of $14,931,195. We intend to fund our operations through equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital and other cash requirements for the next 12 months.

 

Our ability to continue in existence is dependent upon, among other things, obtaining additional financing to continue our operations and the operations of both Vertitek and AeroLift. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

  16  
 

 

Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect our financial statements and future operations.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. We had $262,190 in cash and cash equivalents at November 30, 2016 (2015 – $22,876).

 

Capitalized Prototype Development Costs

 

Prototype development costs are costs associated with the development of software and hardware related to advance drone fleet technology and are stated at historical cost. Prototype development costs consist of salaries and costs of raw material in development. Until the prototype is substantially completed and ready for its intended use, no depreciation expenses will be incurred. We currently have no depreciation policy with respect to prototype development costs.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

Not required.

 

  17  
 

 

Item 8. Financial Statements and Supplementary Data

 

Valmie Resources, Inc.

Index to Consolidated Financial Statements

November 30, 2016

(Stated in US Dollars)

 

  Index
   
Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets F-2
   
Consolidated Statements of Operations F-3
   
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) F-4
   
Consolidated Statements of Cash Flows F-5
   
Notes to the Consolidated Financial Statements F-6

 

  18  
 

 

Heaton & Company, PLLC

 

    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   

 

To The Board of Directors and Stockholders of

Valmie Resources, Inc.

 

We have audited the accompanying balance sheets of Valmie Resources, Inc. (the Company) as of November 30, 2016 and 2015, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Valmie Resources, Inc. as of November 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has had recurring losses and has not generated revenues to cover operating expenses. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Heaton & Company, PLLC

Farmington, Utah

March 9, 2017

240 N. East Promontory

Suite 200

Farmington, Utah 84025

(T) 801.218.3523

 

heatoncpas.com

 

 

     F- 1
     

 

Valmie Resources, Inc.

Consolidated Balance Sheets

(Stated in US Dollars)

 

    November 30, 2016     November 30, 2015  
ASSETS                
                 
Current Assets                
Cash and cash equivalents (Note 4)   $ 262,190     $ 22,876  
Inventory (Note 5)     4,234       -  
Prepaid expenses     7,850       350  
Total Current Assets     274,274       23,226  
                 
Non-current Assets                
Equipment, net of accumulated depreciation (Note 6)     14,917       -  
Prototype development (at cost)     34,019       32,732  
Investment in joint venture (Note 7)     113,462       -  
Total Non-current Assets     162,398       32,732  
                 
Total Assets   $ 436,672     $ 55,958  
                 
LIABILITIES                
                 
Current Liabilities                
Accounts payable and accrued liabilities   $ 19,732     $ 61,195  
Due to related parties     8,000       -  
Liabilities to be settled with stock     158,000       -  
Promissory note (Note 11)     -       17,897  
Total Current Liabilities     185,732       79,092  
                 
Promissory Notes (Note 11)     -       104,737  
                 
Total Liabilities     185,732       183,829  
                 
Commitments and contingencies                
                 
STOCKHOLDERS’ EQUITY (DEFICIENCY)                
                 
Capital stock (Note 8)                
Authorized:                
10,000,000 preferred shares, $0.001 per share                
750,000,000 common shares, $0.001 par value                
Issued and outstanding:                
2,000,000 convertible preferred shares-Series A     2,000       2,000  
68,017,491 common shares (2015 – 64,092,035 common shares)     68,017       64,092  
                 
Additional paid-in capital     15,112,118       13,743,781  
Retained deficit     (14,931,195 )     (13,937,744 )
                 
Total Stockholders’ Equity (Deficiency)     250,940       (127,871 )
                 
Total Liabilities and Stockholders’ Equity   $ 436,672     $ 55,958  

 

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

 

     F- 2
     

 

Valmie Resources, Inc.

Consolidated Statements of Operations

(Stated in US Dollars)

 

    Year Ended
November 30, 2016
    Year Ended
November 30, 2015
 
             
Revenue   $ -     $ -  
                 
Operating Expenses                
General and administrative     325,926       38,143  
Management fees (Note 10)     75,000       52,000  
Professional fees     130,411       237,605  
Stock-based compensation     51,272       -  
Transfer agent fees     7,542       5,578  
Impairment loss     -       2,877,144  
                 
Loss from Operations     (590,151 )     (3,210,470 )
                 
Other expenses                
Interest expense     (13,616 )     1,190  
Equity loss in joint venture (Note 7)     (123,538 )     -  
Loss on settlement of debt     (266,146 )     (10,404,422 )
      (403,300 )     (10,403,232 )
                 
Net Loss   $ (993,451 )   $ (13,613,702 )
                 
Basic and Diluted Loss per Common Share   $ (0.02 )   $ (0.15 )
                 

Weighted Average Number of Common Shares

Outstanding

    65,854,080       90,336,662  

 

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

 

     F- 3
     

 

Valmie Resources, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

(Stated in US Dollars)

 

    Common Stock     Preferred Stock     Additional           Stockholders’  
    Number of Shares     Amount     Number of Shares     Amount     Paid-in Capital     Retained Deficit     Equity
(Deficiency)
 
                                           
Balance – November 30, 2014     296,400,000     $ 296,400       -     $ -     $ (155,657 )   $ (324,042 )   $ (183,299 )
                                                         
Exchange of common stock for preferred stock     (237,360,000 )     (237,360 )     2,000,000       2,000       235,360       -       -  
Debt settlement     3,839,270       3,839       -       -       10,784,510       -       10,788,349  
Acquisition of subsidiary     1,000,000       1,000       -       -       2,769,000       -       2,770,000  
Forgiveness of debt – related party     -       -       -       -       10,781       -       10,781  
Acquisition of intangible assets     212,765       213       -       -       99,787       -       100,000  
Loss for the year     -       -       -       -       -       (13,613,702 )     (13,613,702 )
                                                         
Balance – November 30, 2015     64,092,035     $ 64,092       2,000,000     $ 2,000     $ 13,743,781     $ (13,937,744 )   $ (127,871 )
                                                         
Debt settlement     2,000,000       2,000       -       -       478,000       -       480,000  
Private placement     1,925,456       1,925       -       -       839,065       -       840,990  
Share based compensation     -       -       -       -       51,272       -       51,272  
Loss for the year     -       -       -       -       -       (993,451 )     (993,451 )
                                                         
Balance – November 30, 2016     68,017,491     $ 68,017       2,000,000     $ 2,000     $ 15,112,118     $ (14,931,195 )   $ 250,940  

 

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

 

     F- 4
     

 

Valmie Resources, Inc.

Consolidated Statements of Cash Flows

(Stated in US Dollars)

 

    Year Ended
November 30, 2016
    Year Ended
November 30, 2015
 
             
Cash Flows from Operating Activities                
Net loss   $ (993,451 )   $ (13,613,702 )
Items not affecting cash                
Loss on settlement of debt by issuing common stock     266,145       10,404,422  
Impairment loss     -       2,877,144  
Depreciation     383       -  
Stock-based compensation     51,272       -  
Equity loss in joint venture     123,538       -  
Changes in operating assets and liabilities                
Accounts payable and accrued liabilities     (41,463 )     (22,055 )
Due to related party     8,000       -  
Inventory     (4,234 )     -  
Prepaid expenses     (7,500 )     (350 )
Liabilities to be settled with stock     158,000          
Interest accrual     13,616       (549 )
Net cash used in operations     (425,694 )     (355,090 )
                 
Cash Flows from Investing Activities                
Advances to Vertitek Inc.     -       (25,500 )
Acquisition of equipment     (15,300 )     -  
Cash acquired on the acquisition of Vertitek Inc.     -       6,133  
Investment in joint venture     (237,000 )     -  
Increase in prototype development     (1,287 )     (32,732 )
Net cash used in investing activities     (253,587 )     (52,099 )
                 
Cash Flows from Financing Activities                
Proceeds from promissory notes     172,500       417,500  
Repayment of promissory notes     (94,895 )     -  
Proceeds from sale of common stock     840,990       -  
Net cash provided by financing activities     918,595       417,500  
                 
Change in cash and cash equivalents     239,314       10,311  
                 
Cash and cash equivalents – beginning of year     22,876       12,565  
                 
Cash and cash equivalents – end of year   $ 262,190     $ 22,876  
                 
Supplementary Cash Flow Information                
Cash paid for                
Interest   $ -     $ -  
Income taxes   $ -     $ -  
                 
Supplementary Disclosure of Non-Cash Investing and Financing Activity                
Issuance of common stock for subsidiary   $ -     $ 2,770,000  
Issuance of common stock for settlement of promissory notes   $ 200,000     $ 383,927  
Issuance of common stock for intangible asset   $ -     $ 100,000  

 

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

 

     F- 5
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

1. Organization

 

Valmie Resources, Inc. (the “Company”) was incorporated on August 26, 2011, in the State of Nevada, U.S.A. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”), and the Company’s fiscal year end is November 30.

 

In early December 2014, the Company changed its business focus from mining to pursuing opportunities for the commercialization of leading edge products and services in the rapidly expanding technology industry.

 

On March, 31, 2015, the Company acquired a 100% interest in Vertitek Inc., a Wyoming corporation (“Vertitek”). Vertitek was established to provide unmanned vehicle software, hardware and cloud services for a wide range of commercial applications around the globe. Vertitek is in the process of developing the V-1 Drone SM , a cutting edge multi-rotor UAV designed specifically to meet the requirements of a growing commercial user base.

 

On April 15, 2016, the Company entered into a Joint Venture Agreement to form AeroLift eXpress LLC (“AeroLift”). The Company owns 50% of AeroLift and has committed funding up to $500,000 to launch the AeroLift business model.

 

2. Significant Accounting Policies

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the consolidated financial statements and future operations of the Company.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $262,190 in cash and cash equivalents at November 30, 2016 (2015 – $22,876).

 

     F- 6
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

2. Significant Accounting Policies – Continued

 

Inventory

 

Inventory is stated at the lower of cost or market or net realizable value. The cost of inventory is based on the average cost principle.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

 

Net Income or (Loss) per Share of Common Stock

 

The Company has adopted FASC Topic No. 260, “Earnings Per Share” (“EPS”), which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the consolidated financial statements, basic earnings (loss) per share is computed by dividing net income/loss by the weighted average number of shares of common stock outstanding during the period.

 

Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares, common stock equivalents potentially dilutive securities during the period.

 

The Company had 200,000 potential common equivalents consisting of the incremental common shares issuable upon the exercise of stock options.

 

The dilutive effect of outstanding stock options is not reflected in diluted earnings per share because we incurred net losses for the years ended November 30, 2016 and 2015, and the effect of including these potential common shares in the diluted earnings per share calculations would be anti-dilutive and are therefore not included in the calculations.

 

Foreign Currency Translations

 

The Company’s functional and reporting currency is the U.S. dollar. All transactions initiated in other currencies are translated into U.S. dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the U.S. dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.

 

No significant realized exchange gain or losses were recorded as at November 30, 2016 and 2015.

 

Comprehensive Income (Loss)

 

FASC Topic No. 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. As at November 30, 2016 and 2015, the Company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss as at November 30, 2016 and 2015.

 

     F- 7
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

2. Significant Accounting Policies – Continued

 

Risks and Uncertainties

 

The Company’s operations in the technology industry are subject to significant risks and uncertainties including financial, operational, technological, and other risks associated with operating a technology development business.

 

Capitalized Prototype Development Costs

 

Prototype development costs are costs associated with the development of software and hardware related to advance drone fleet technology and are stated at historical cost. Prototype development costs consist of salaries and costs of raw material in development. Until the prototype is substantially completed and ready for its intended use, no depreciation expenses will be incurred. The Company currently has no depreciation policy with respect to prototype development costs.

 

Equipment

 

Equipment is stated at cost less accumulated depreciation. Depreciation is generally calculated annually on a declining-balance basis at the following rates:

 

- Machinery and equipment - 20%

 

Intangible Assets

 

Intangible assets with indefinite lives are not amortized, but are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable.

 

Through the acquisition of Vertitek (see Note 3), the Company acquired the V-1 Drone SM and other technologies that constitute the definition of indefinite-lived intangible assets. The Company performs annual impairment tests of the intangible assets during the fourth quarter of each fiscal year and assesses qualitative factors to determine the likelihood of impairment. The Company’s qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory environment, industry and market conditions, financial performance versus budget and any other events or circumstances specific to the technologies. If it is more likely than not that the fair value of the technologies is greater than the carrying value, no further testing is required. Otherwise, the Company will apply the quantitative impairment test method.

 

The key assumptions used in estimating the recoverable amounts of the technologies include:

 

i) the market penetration leading to revenue growth;

 

ii) the profit margin;

 

iii) the duration and profile of the build-up period;

 

iv) the estimated start-up costs and losses incurred during the build-up period; and

 

v) the discount rate.

 

Fair value less costs of disposal is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. In order to determine the fair value less costs of disposal, the Company uses either a market or income approach. Under a market approach, the Company measures what an independent third party would pay to purchase the technologies by looking to actual market transactions for similar assets. Under an income approach, the fair value is determined to be the sum of the projected discounted cash flows over a discrete period of time in addition to the terminal value.

 

     F- 8
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

2. Significant Accounting Policies – Continued

 

Intangible Assets – Continued

 

The value in use amount is the present value of the future cash flows expected to be derived from the asset. The determination of this amount includes projections of cash inflows from the continuing use of the asset and cash outflows that are required to generate the associated cash inflows. These cash inflows are discounted at an appropriate discount rate.The Company determined that the value associated with the technologies under the market approach was indeterminable. Given that the Company has no tentative plans to use the acquired technologies and does not expect any sales or cash inflows associated with the technologies, the entire value of the technologies was fully impaired during the year ending November 30, 2015.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements that are listed below did not, and are not currently expected to, have a material effect on the Company’s consolidated financial statements, but will be implemented in the Company’s future financial reporting when applicable.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02—Leases. The FASB amended lease accounting requirements to begin recording assets and liabilities arising from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. This new guidance will be effective for the Company beginning on December 1, 2020 using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. Currently, the Company’s operations do not include significant leases. The Company is evaluating the potential future impact ASU 2016-02 will have on its consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01—Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value, and as such these investments may be measured at cost. Given that the Company currently does not hold any equity investments, it does not expect the impact of ASU 2016-01 on its consolidated financial statements to be significant.

 

     F- 9
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

3. Acquisition of Vertitek Inc.

 

On March 31, 2015, the Company issued 1,000,000 shares of common stock in exchange for 100% of the issued and outstanding shares of Vertitek. Vertitek was previously named Landstar Leasing, Inc. (“Landstar”) and was incorporated pursuant to the Wyoming Business Corporation Act on February 19, 2014. On November 19, 2014, Landstar changed its name to Vertitek Inc. As a result of the acquisition, Vertitek became a wholly owned subsidiary of the Company.

 

In December 2014, the Company changed its business focus from mining to opportunities in the technology industry. The acquisition of Vertitek enables the Company to pursue its new business focus as Vertitek has focused on the development of unmanned vehicle software, hardware and cloud services for a wide range of commercial applications around the globe. Vertitek is in the process of developing the V-1 Drone SM , a cutting edge multi-rotor unmanned aerial vehicle (“UAV”) designed specifically to meet the requirements of a growing commercial user base.

 

The acquisition was accounted for as an asset acquisition in accordance with US GAAP as Vertitek did not meet the definition of a business. Vertitek did not consist of sufficient processes (systems, standards, protocols, conventions or rules) that would be able to be applied to those inputs and have the ability to create outputs as required by Accounting Standards Codification 805.

 

In exchange for common stock of $2,770,000, the Company acquired $18,355 of financial assets, $2,777,145 of intangible assets related to intellectual property and $25,500 of financial liabilities. The total value of the intangible assets related to intellectual property ($2,777,145) was impaired and written-off as of November 30, 2015.

 

4. Cash and Cash Equivalents

 

    November 30, 2016     November 30, 2015  
             
Cash on deposit   $ 262,190     $ 22,876  
    $ 262,190     $ 22,876  

 

     F- 10
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

5. Inventory

 

Inventory consists of raw materials and finished goods.

 

    2016     2015  
             
Raw materials   $ 3,934     $ -  
Finished goods     300       -  
    $ 4,234     $ -  

 

6. Equipment

 

    Machinery  
       
Cost        
         
Balance, November 30, 2015   $ -  
Additions     15,300  
         
Balance, November 30, 2016   $ 15,300  
         
Accumulated depreciation        
         
Balance, November 30, 2015   $ -  
Depreciation     383  
         
Balance, November 30, 2016   $ 383  
         
Carrying amounts        
As at November 30, 2015   $ -  
As at November 30, 2016   $ 14,917  

 

     F- 11
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

7. Investment in Partnership

 

On April 15, 2016, the Company and its partner, James Stafford, a Texas resident (“Stafford”) (collectively the “Members”), organized a joint venture entity, AeroLift Express LLC (“AeroLift”), to develop and launch integrated service and solution offerings utilizing the latest advancements in the UAV industry.

 

The material terms of the joint venture agreement between the Members are as follows:

 

  The Company will contribute to AeroLift startup financing in periodic amounts, the total of which will not exceed $500,000. Such financing will be made available to AeroLift in monthly installments of $25,000 for the first 3 months from the date of execution of the joint venture agreement (paid).
     
  AeroLift will set aside a reserve fund, for operations, payroll, expansion, and employee bonuses from AeroLift’s after-tax profit. The ratio of the reserve fund to AeroLift’s after-tax profit will not be lower than 10% and may be a higher percentage with unanimous approval of the Members. The distributed profit, which is the profit after above funds have been allocated, will be distributed to Members, in proportion to their member interests.

 

The carrying value of $113,462 at November 30, 2016 (2015 – $Nil) includes $237,000 in advances less the Company’s share of the cumulative net loss of AeroLift of $123,538 (2015 – $Nil).

 

Summary of financial information of AeroLift

 

For the year ended November 30,

 

  2016     2015  
             
General and administrative   $ 47,163     $ -  
Payroll     72,396       -  
Professional     3,208       -  
Subcontractors     75,907       -  
Travel and promotion     48,402       -  
Net loss for the year   $ 247,076     $ -  

 

     F- 12
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

8. Capital Stock

 

Authorized Stock

 

At inception, the Company authorized 100,000,000 shares of common stock with a par value of $0.001 per share. Each share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

On December 3, 2013, the holders of a majority of the Company’s issued and outstanding common stock approved an increase in its authorized capital from 100,000,000 shares of common stock, par value $0.001, to 750,000,000 shares of common stock, par value $0.001 (the “Authorized Capital Increase”). The Company formally effected the Authorized Capital Increase on December 4, 2013 by filing a Certificate of Amendment with the Nevada Secretary of State.

 

Also on December 3, 2013, our former sole director approved a stock dividend of 59 authorized but unissued shares of our common stock on each one (1) issued and outstanding share of our common stock. On December 13, 2013, we received approval from the Financial Industry Regulatory Authority (FINRA) to effect the stock dividend by way of a forward split, and on December 17, 2013, our shareholders of record on December 16, 2013 received the dividend. As a result of the stock dividend, our issued and outstanding common stock increased from 4,940,000 shares to 296,400,000 shares.

 

The split is reflected retroactively in the consolidated financial statements.

 

On December 10, 2014, the holders of a majority of the Company’s issued and outstanding common stock approved a set of amended and restated articles of incorporation that, among other things, increased the Company’s authorized capital to 760,000,000 shares, consisting of 750,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of “blank check” preferred stock, par value $0.001.

 

On December 11, 2014, the Company’s sole director approved the designation of 2,000,000 shares of the Company’s authorized but unissued “blank check” preferred stock, par value $0.001, as Series “A” preferred stock. The shares of Series “A” preferred stock carry certain rights and preferences and may be converted into shares of the Company’s common stock on a 10 for one (1) basis at any time after 18 months from the date of issuance, and that each share of Series “A” preferred stock has voting rights and carries a voting weight equal to 50 shares of common stock.

 

The preferred stock ranks senior to (a) any other series of preferred stock of the Company currently existing or hereafter created (b) the common stock of the Company, now existing or hereafter issued and (c) any other class of securities of the Company, in each case with respect to dividend distributions and distributions of assets upon the liquidation, dissolution or winding up of the Company whether voluntary or involuntary.

 

The Company formally effected the designation by filing a Certificate of Designation with the Nevada Secretary of State on January 15, 2015.

 

     F- 13
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

8. Capital Stock – Continued

 

Share Issuances

 

On January 16, 2015, the owner of an aggregate of 237,360,000 shares of the Company’s common stock agreed to cancel those shares in exchange for the issuance of the 2,000,000 shares of Series “A” preferred stock. As a result, the number of issued and outstanding shares of the Company’s common stock decreased from 296,400,000 to 59,040,000.

 

On April 6, 2015, the Company issued 3,500,000 shares of common stock at a price of $0.10 per share in settlement of promissory notes totaling $350,000, including $300,000 in proceeds received during the fiscal year. The stock was valued at the $2.81 trading price per share, resulting in a loss on the settlement of debt in the amount of $9,485,000.

 

On April 6, 2015, the Company issued 339,270 shares of common stock at a price of $0.10 per share in settlement of related party loans totaling $33,927. The stock was valued at the $2.81 trading price per share, resulting in a loss on the settlement of debt in the amount of $919,422.

 

On April 6, 2015, the Company issued 1,000,000 shares of common stock at a price of $2.77 per share for the acquisition of Vertitek. The stock was valued at $2.77 per share on the effective date of the acquisition of Vertitek, March 31, 2015.

 

On July 21, 2015, the Company issued 212,765 shares of common stock at a price of $0.47 per share for the purchase of all of the rights, title and interest in and to certain intellectual property from the Company’s President.

 

On April 26, 2016, the Company issued 2,000,000 shares of common stock at a price of $0.10 per share in settlement of promissory notes totaling $200,000. The stock was valued at the $0.24 trading price per share, resulting in a loss on the settlement of debt in the amount of $280,000.

 

On May 9, 2016, the Company issued 360,360 shares of common stock to an investor at a price of $0.14 per share for proceeds of $50,000.

 

On June 20, 2016, the Company issued 317,360 shares of common stock to an investor at a price of $0.32 per share for proceeds of $100,000.

 

On June 29, 2016, the Company issued 155,738 shares of common stock to an investor at a price of $0.64 per share for net proceeds of $98,495.

 

On July 14, 2016, the Company issued 127,114 shares of common stock to an investor at a price of $0.79 per share for net proceeds of $98,495.

 

On August 25, 2016, the Company issued 210,704 shares of common stock to an investor at a price of $0.47 per share for net proceeds of $98,500.

 

On September 21, 2016, the Company issued 217,297 shares of common stock to an investor at a price of $0.46 per share for net proceeds of $98,500.

 

On October 24, 2016, the Company issued 140,846 shares of common stock to an investor at a price of $0.71 per share for net proceeds of $98,500.

 

On November 28, 2016, the Company issued 396,037 shares of common stock to an investor at a price of $0.51 per share for net proceeds of $198,500.

 

     F- 14
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

8. Capital Stock – Continued

 

Share Issuances – Continued

 

On September 15, 2016, the Company granted 100,000 stock options to the Chief Executive Officer of AeroLift pursuant to an executive employment agreement. On November 1, 2016 the Company granted 100,000 stock options to the President of Vertitek pursuant to a separate executive employment agreement. Each executive employment agreement also called for the issuance of 100,000 shares of the Company’s common stock on the date of execution. As at November 30, 2016, the Company had not yet issued the shares of stock and the amounts are recorded in the balance sheet as liabilities to be settled with stock in the amount of $158,000.

 

As of November 30, 2016, the Company had 68,017,491 issued and outstanding shares of common stock and 2,000,000 issued and outstanding shares of Series “A” preferred stock.

 

Stock Options

 

The Company has granted options pursuant to the executive employment agreements described above. The vesting terms of the options are as follows:

 

  25% immediately upon the execution date;
     
  25% upon the completion of design and production of optionees’ first service UAV or first proof of concept flight;
     
  25% upon the execution of a revenue generating contract for optionees’ services;
     
  25% upon the receipt of the first revenues generated by the optionees pursuant to a profitable contract.

 

A summary of the Company’s stock options is as follows:

 

    Number of stock options     Weighted average exercise price  
             
Balance – November 30, 2015     -     $ -  
Granted     200,000     $ 1.00  
Outstanding – November 30, 2016     200,000     $ 1.00  
Exercisable – November 30, 2016     50,000     $ 1.00  

 

The weighted average contractual life remaining on the outstanding options at November 30, 2016 is 2.86 years.

 

The following average assumptions were used for the Black-Scholes valuation of the stock options:

 

    2016   2015  
Risk-free interest rate   0.93%     -  
Expected life of option   3 years     -  
Expected dividend yield   0%     -  
Expected stock price volatility   303.73%     -  

 

     F- 15
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

8. Capital Stock – Continued

 

Stock Options – Continued

 

As at November 30, 2016, the stock options outstanding were as follows:

 

Outstanding options     Exercise price     Expiry date
             
  100,000     $ 1.00     September 15, 2019
  100,000     $ 1.00     November 1, 2019
  200,000              

 

At November 30, 2016, the Company had no issued or outstanding warrants.

 

9. Mineral Property Costs

 

Lander County, Nevada Claims

 

On September 30, 2011, the Company entered into an option agreement that would provide for the purchase of a 100% interest in the Carico Lake Valley Property (the “Property”). The Property is located in the State of Nevada.

 

To complete the option, the agreement requires the Company to make the following payments and incur the following amounts on exploration and development:

 

a) $15,000 cash on September 30, 2011 (paid);
   
b) an additional $30,000 cash on September 30, 2013 (not paid);
   
c) an additional $60,000 cash on September 30, 2013 (not paid);
   
d) an additional $120,000 cash on September 30, 2014 (not paid); and
   
e) incur a minimum of $125,000 ($12,654 was incurred as of February 29, 2016) on exploration and development work by December 31, 2013 and every subsequent year thereafter, through 2014.

 

The entity that owns the Property made the 2014 payments due to the Bureau of Land Management, Nevada (“BLM”) and Lander County. The payments ($6,406) are reflected in accounts payable and accrued liabilities and the annual exploration and development work.

 

The Company was responsible for any and all property payments due to any government authority on the property during the term of the option agreement (BLM: $3,920 yr., Lander County: $294 yr.).

 

The entity that owns the Property terminated the option agreement with the Company on July 28, 2014 and the above mentioned reimbursement of $6,406 remains outstanding. The Company has no further rights to the Property.

 

     F- 16
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

10. Related Party Transactions

 

On July 15, 2015, the Company entered into an asset purchase agreement with its current President pursuant to which the Company acquired all of the right, title and interest in and to certain intellectual property from the President in consideration for the issuance of $100,000 worth of common stock on that date at a deemed price of $0.47 per share. As a result, the Company issued 212,765 shares of common stock to the President. The entire $100,000 of intellectual property was impaired and written-off as of November 30, 2015.

 

During the year ended November 30, 2016, the Company paid management fees of $75,000 (2015 – $47,000) to its current President and $Nil (2015 – $5,000) to a former director, and converted $Nil (2015 – $33,927) in debt owed to a former director into common stock resulting in a loss on the settlement of debt in the amount of $Nil (2015 – $919,422). The Company had $Nil (2015 – $10,782) in debt forgiven by its majority shareholder.

 

During the year ended November 30, 2016, the Company paid professional fees of $22,500 (2015 – $13,500) to the President of Vertitek. As at November 30, 2016, $8,000 (2015 – $Nil) was owed to the President of Vertitek. During the year ended November 30, 2016, the Company recorded stock-based compensation related to stock options granted to the President of Vertitek in the amount of $25,537 (2015 – $Nil).

 

During the year ended November 30, 2016, the Company recorded stock-based compensation related to stock options granted to the Chief Executive Officer of AeroLift in the amount of $25,735 (2015 – $Nil).

 

11. Promissory Notes

 

On August 18, 2014, the Company entered into a promissory note agreement with Investor A for an aggregate amount of $50,000 plus simple interest at an annual interest rate of 15%, repayable on August 18, 2016. On April 6, 2015, the promissory note was settled through the issuance of 500,000 shares of common stock. The Company recognized a loss of $1,355,000 in connection with the debt settlement.

 

On October 7, 2014, the Company entered into another promissory note agreement with Investor A for an aggregate amount of $25,000 plus simple interest at an annual interest rate of 15%, repayable on October 7, 2016. On April 6, 2015, the promissory note was settled through the issuance of 250,000 shares of common stock. The Company recognized a loss of $677,500 in connection with the debt settlement.

 

On October 22, 2014, the Company entered into a promissory note agreement with Investor B for an aggregate amount of $15,000 plus simple interest at an annual interest rate of 15%, repayable on October 22, 2016. On October 19, 2016, the principal amount of $15,000 and the accrued interest of $4,895 ($2,897 as at November 30, 2015) were repaid.

 

On November 23, 2014, the Company entered into a promissory note agreement with Investor C for an aggregate amount of $75,000 plus simple interest at an annual interest rate of 15%, repayable on November 23, 2016. On April 6, 2015, the promissory note was settled through the issuance of 750,000 shares of common stock. The Company recognized a loss of $2,032,500 in connection with the debt settlement.

 

On December 29, 2014, the Company entered into another promissory note agreement with Investor A for an aggregate amount of $75,000 plus simple interest at an annual interest rate of 15%, repayable on December 29, 2016. On April 6, 2015, the promissory note was settled through the issuance of 750,000 shares of common stock. The Company recognized a loss of $2,032,500 in connection with the debt settlement.

 

     F- 17
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

11. Promissory Notes – Continued

 

On January 26, 2015, the Company entered into another promissory note agreement with Investor A for an aggregate amount of $50,000 plus simple interest at an annual interest rate of 15%, repayable on January 26, 2017. On April 6, 2015, the promissory note was settled through the issuance of 500,000 shares of common stock. The Company recognized a loss of $1,355,000 in connection with the debt settlement.

 

On February 27, 2015, the Company entered into another promissory note agreement with Investor A for an aggregate amount of $25,000 plus simple interest at an annual interest rate of 15%, repayable on February 27, 2017. On April 6, 2015, the promissory note was settled through the issuance of 250,000 shares of common stock. The Company recognized a loss of $677,500 in connection with the debt settlement.

 

On March 20, 2015, the Company entered into another promissory note agreement with Investor A for an aggregate amount of $50,000 plus simple interest at an annual interest rate of 15%, repayable on March 20, 2017. On April 6, 2015, the promissory note was settled through the issuance of 500,000 shares of common stock. The Company recognized a loss of $1,355,000 in connection with the debt settlement.

 

During the year ended November 30, 2016, the Company entered into multiple promissory note agreements with Investor D for an aggregate amount of $172,500 ($102,500 in aggregate during the year ended November 30, 2015). The promissory notes mature two years from the date of the inception of the notes and bear simple interest at an annual interest rate of 15%. The notes are secured by all of the assets, properties, goods, inventory, equipment, furniture, fixtures, leases, supplies, records, money, documents, instruments, chattel paper, accounts, intellectual property rights (including but not limited to, copyrights, moral rights, patents, patent applications, trademarks, service marks, trade names, trade secrets) and other general intangibles, whether owned by Company on the date of the note or hereafter acquired, and all proceeds thereof. On April 27, 2016, $200,000 of the promissory notes was settled through the issuance of 2,000,000 shares of common stock, and the associated accrued interest of $13,854 was waived. The Company recognized a loss of $266,146 in connection with the debt settlement. During the year ended November 30, 2016, the Company repaid the remaining promissory notes in full for an aggregate amount of $75,000 and the associated accrued interest of $997 was waived.

 

12. Going Concern and Liquidity Considerations

 

The consolidated 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 satisfaction of liabilities in the normal course of business. As at November 30, 2016, the Company had working capital of $88,542 (2015 – working capital deficiency of $55,866) and an accumulated deficit of $14,931,195 (2015 – $13,937,744). The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next 12 months.

 

The ability of the Company to continue in existence is dependent upon, among other things, obtaining additional financing to continue operations and the operations of both Vertitek and Aerolift.

 

In response, management intends to raise additional funds through public or private placement offerings.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

     F- 18
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

13. Provision for Income Taxes

 

The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the consolidated financial statements under FASC 718-740-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.

 

Deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated during the period from August 26, 2011 (date of inception) through November 30, 2016 of $1,208,673 will begin to expire in 2031. Accordingly, deferred tax assets of approximately $423,036 were offset by the valuation allowance.

 

The Company follows the provisions of uncertain tax positions as addressed in FASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.

 

The Company has no tax position at November 30, 2016 or 2015 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at November 30, 2016 and 2015. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended exploration stage activities. The tax years for November 30, 2016, 2015, 2014 and 2013 are still open for examination by the Internal Revenue Service (IRS).

 

Year ended November 30, 2016   Amount     Tax Effect (35%)  
             
Net operating losses (including interest income)   $ 552,495     $ 193,373  
                 
Valuation allowance   $ (552,495 )   $ (193,373 )
                 
Net deferred tax asset (liability)   $ -     $ -  

 

Year ended November 30, 2015   Amount     Tax Effect (35%)  
             
Net operating losses (including interest income)   $ 332,136     $ 116,248  
                 
Valuation allowance   $ (332,136 )   $ (116,248 )
                 
Net deferred tax asset (liability)   $ -     $ -  

 

     F- 19
     

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

 

14. Commitments

 

Pursuant to a letter of intent dated July 7, 2015, the Company is obligated to pay one vendor $5,000 for costs incurred to construct a prototype and testing of such prototype. As at November 30, 2016, $3,000 has been paid in relation to this obligation.

 

In August 2016, Aerolift entered into an office leasing expiring July 2017, which calls for monthly payments of approximately $2,800.

 

In October 2016, Vertitek entered into an office leasing expiring October 2019, which calls for monthly payments of approximately $1,700. Minimum annual lease payments for Vertitek, not including operating costs, pursuant to the lease agreement are as follows:

 

2017   $ 20,400  
2018     20,400  
2019     17,000  
    $ 57,800  

 

15. Subsequent Events

 

On December 22, 2016, the Company issued 299,671 shares of common stock to an investor at a price of $0.33 per share for gross proceeds of $100,000.

 

On January 23, 2017, the Company issued 359,842 shares of common stock to an investor at a price of $0.28 per share for gross proceeds of $100,000.

 

On February 16, 2017, the Company issued 360,881 shares of common stock to an investor at a price of $0.28 per share for gross proceeds of $100,000.

 

     F- 20
     

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

 

As of the end of the period covered by this report, management, with the participation of our Chief Executive and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, management concluded that our disclosure controls and procedures were not effective as of the date of filing this annual report applicable for the period covered by this report.

 

Internal Control over Financial Reporting

 

Management’s Report on Internal Control over Financial Reporting

 

Our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) is a process that, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, was designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management; and (iii) provide reasonable assurance regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that our controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting. As of November 30, 2016, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting using criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, management concluded that our internal control over financial reporting as of November 30, 2016 was not effective, since there were deficiencies that constitute, both individually and in the aggregate, a material weakness. These deficiencies include the fact that we traditionally have had no independent directors and do not have a system in place to review and monitor internal control over financial reporting.

 

Management is currently evaluating remediation plans for the deficiencies and will implement changes as time and financial resources allow.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

  19  
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Directors and Executive Officers

 

Our bylaws allow the number of directors to be fixed by our Board of Directors. Our Board of Directors has fixed the number of directors at one.

 

As of the date of this annual report, the name, age and positions of our sole executive officer and director are as follows:

 

Name   Age   Position
Gerald B. Hammack   54   Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director

 

Mr. Hammack will serve as our director until our next shareholder meeting or until his successor is elected who accepts the position. Officers hold their positions at the will of the Board of Directors. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

 

Gerald B. Hammack – Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director

 

Mr. Hammack has been our Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director since December 8, 2014. He has more than 30 years of experience in a variety of technology-related fields, including programming, digital telephony, database management as well as substantial expertise in the setup and management of complex data processing systems. From 2008 to the present, he has acted as the Managing Director of Wizard Technical Services, a boutique firm located in Cushing, Texas, focused on the development of customized technology solutions for a diverse client base, including the development and management of a cloud-based Internet telephony solution for a niche telephony service provider as well as offsite management and oversight of legacy hardware and software systems.

 

Prior to 2008, Mr. Hammack served as the Director of Technical Services for the Orleans Parish Criminal Sheriff’s Office (OPCSO) in New Orleans, Louisiana. While holding the rank of Captain, Mr. Hammack’s experience and dedication were instrumental in restarting OPCSO’s operations after the devastation of Hurricane Katrina.

 

Mr. Hammack has not been a director of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of the Exchange Act, or any company registered as an investment company under the Investment Company Act of 1940, during the past five years.

 

Significant Employees

 

Other than Mr. Hammack and Sean Foster, the sole officer and director of Vertitek, we do not expect any other individuals to make a significant contribution to our business at this time.

 

  20  
 

 

Family Relationships

 

There are no family relationships among our sole director, sole executive officer or persons nominated or chosen by us to become directors or executive officers.

 

Legal Proceedings

 

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past 10 years:

 

  any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
     
  any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
     
  being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated;
     
  being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any law or regulation prohibiting mail or wire fraud or fraud in connection with any business activity;
     
  being the subject of, or a party to, any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation or any law or regulation respecting financial institutions or insurance companies; or
     
  being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any stock, commodities or derivatives exchange or other self-regulatory organization.

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Code of Ethics

 

We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, because we have not yet finalized the content of such a code. Companies whose equity securities are listed for trading on the OTC market are not currently required to implement a code of ethics.

 

Audit Committee

 

On September 30, 2013, we established an audit committee and appointed our former sole executive officer and director as the sole member of the committee. He has since been replaced by our current sole executive officer and director, Gerald B. Hammack. Mr. Hammack is not an independent member of the committee pursuant to NASDAQ Listing Rule 5605(a)(2) since he is our sole executive officer. The Board of Directors adopted a charter for the audit committee on September 30, 2013, a copy of which was included as Exhibit 99.1 to our annual report for the fiscal year ended November 30, 2013, filed with the SEC on March 14, 2014.

 

  21  
 

 

The audit committee is responsible for reviewing both our interim and annual financial statements. For the purposes of performing their duties, the members of the audit committee have the right, at all times, to inspect all our books and financial records and discuss with management and our auditors any accounts, records and matters relating to our financial statements. The audit committee is required to meet periodically with management and annually with our auditors.

 

Our Board of Directors has determined that we do not presently need an audit committee financial expert on our Board of Directors carrying out the duties of the audit committee. Our Board of Directors has determined that the cost of hiring a financial expert to act as one of our directors and to be a member of the audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert on the Board.

 

We do not have any independent directors and have not voluntarily implemented various corporate governance measures, in the absence of which, stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

 

Item 11. Executive Compensation

 

Summary Compensation Table

 

The following table sets forth information with respect to the compensation awarded or paid to our current and former sole officers and directors for all services rendered in all capacities to us. We do not have any other executive officers and no other individual received total compensation from us in excess of $100,000 during those years. Pursuant to Item 402(a)(5) of Regulation S-K we have omitted certain columns from the table since there was no compensation awarded to, earned by or paid to these individuals required to be reported in such columns in either year.

 

Name and Principal
Position
  Year Ended
November 30,
    Salary
($)
    Total
($)
 
Gerald B. Hammack, Chief Executive Officer (1)   2016       75,000       75,000  
    2015       47,000       47,000  
Timothy Franklin, former Chief Executive Officer (2)   2016       N/A       N/A  
    2015       5,000       5,000  

 

(1) Gerald B. Hammack has been our Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director since December 8, 2014.
   
(2) Timothy Franklin was our President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director from April 16, 2014 until December 8, 2014.

 

  22  
 

 

Outstanding Equity Awards at Fiscal Year-End

 

During the year ended November 30, 2016, we granted options to purchase 100,000 shares of our common stock to each of James Stafford, our joint venture partner in AeroLift and AeroLift’s Managing Member and Chief Executive Officer, and Sean Foster, the sole officer and director of Vertitek, at a price of $1.00 per share until September 15, 2019 and November 1, 2019, respectively. The options vest in tranches of 25,000 for each individual, with the first 25,000 vesting immediately upon grant and the balance vesting according upon the achievement of certain performance goals.

 

Neither Mr. Foster nor Mr. Stafford acts as our principal executive officer or other executive officer, or is an individual for whom we are required to provide disclosure under Item 4.02(m)(2) of Regulation S-K.

 

Other than as described above, we do not have any outstanding equity awards.

 

Executive Employment Agreements

 

On September 15, 2016, AeroLift entered into an executive employment agreement with James Stafford, its Managing Member and Chief Executive Officer, pursuant to which Mr. Stafford agreed to serve in those roles for a two-year term in exchange for a base salary of $10,000 per month, 100,000 restricted shares of our common stock, and options to purchase 100,000 shares of our common stock at a price of $1.00 per share for a period of three years. The agreement will automatically renew for successive two-year periods unless otherwise cancelled by the parties thereto.

 

On October 21, 2016, Vertitek entered into an executive employment agreement with Sean Foster, its sole officer and director, pursuant to which Mr. Foster agreed to serve as Vertitek’s President and Chief Executive Officer for a one-year term beginning on November 1, 2016 in exchange for a base salary of $6,000 per month, 100,000 restricted shares of our common stock, and options to purchase 100,000 shares of our common stock at a price of $1.00 per share for a period of three years. The agreement will automatically renew for successive one-year periods unless otherwise cancelled by the parties thereto.

 

Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted from time to time at the discretion of the Board of Directors or a committee thereof. We have no plans or arrangements in respect of remuneration received or that may be received by our sole executive officer to compensate him in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

 

Director Compensation

 

We do not pay our directors any fees for attendance at Board meetings or similar remuneration or reimburse them for any out-of-pocket expenses incurred by them in connection with our business.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth certain information regarding our common stock beneficially owned as of the date of this annual report for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each of our officers and directors and (iii) our officers and directors as a group. A person is considered to beneficially own any shares over which such person, directly or indirectly, exercises sole or shared voting or investment power, or over which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our officers and directors is exercised solely by the beneficial owner thereof.

 

  23  
 

 

For the purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of our common stock that such person has the right to acquire within 60 days. For the purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Title of Class   Name of Beneficial Owner (1)   Amount and Nature of Beneficial Ownership     Percent of Class (2)  
Common Stock   Gerald B. Hammack (3)     212,765       (4 )
Common Stock   Timothy Franklin (5)     -       -  
All Officers and Directors as a Group     212,765       (4 )
Preferred Stock   FEN Holdings & Investments Limited (6)
10 route de l’Aeroport
Geneva, Switzerland CH-1215
    2,000,000 (7)     100  

 

(1) We are unaware of any shareholder who directly, or indirectly, controls or is the beneficial owner of more than 5% of our common stock.
   
(2) Based on 69,037,885 shares of our common stock and 2,000,000 shares of our Series “A” preferred stock issued and outstanding as of the date of this annual report.
   
(3) Gerald B. Hammack has been our Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director since December 8, 2014.
   
(4) Less than 1%.
   
(5) Timothy Franklin was our President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director from April 16, 2014 until December 8, 2014. To our knowledge, Mr. Franklin is not a current shareholder or beneficial owner of any shares of our stock.
   
(6) Juergen Krause exercises sole voting and investment power over the securities held by FEN Holdings & Investments Limited.
   
(7)

These shares are convertible at any time into an aggregate of 20,000,000 shares of our common stock at a ratio of 10 shares of common stock for each one (1) share of preferred stock, equal to 22.4% of our issued and outstanding common stock immediately following such conversion.

 

Changes in Control

 

As of the date of this annual report, we are not aware of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in our control.

 

  24  
 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of the date of this annual report, we do not have any compensation plans under which our equity securities are authorized for issuance. We intend to adopt an equity compensation plan in which our directors, officers, employees and consultants will be eligible to participate. However, no formal steps have been taken as of the date of this annual report to adopt such a plan.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

On January 27, 2015, we entered into the Share Exchange Agreement with Vertitek and the sole shareholder of Vertitek, Masamos, to acquire 100% of the capital stock of Vertitek in exchange for the issuance of shares of our common stock to Masamos. On March 31, 2015, the closing of the Share Exchange Agreement occurred and we issued 1,000,000 shares of our common stock to Masamos in exchange for 100% of the issued and outstanding shares of Vertitek. As a result, Vertitek became our wholly owned subsidiary.

 

On July 15, 2015, we entered into an asset purchase agreement with our sole officer and director, Gerald B. Hammack, pursuant to which we acquired all of the right, title and interest in and to certain intellectual property related to the AIMD platform in consideration for the issuance of $100,000 worth of common stock to Mr. Hammack on that date at a deemed price of $0.47 per share. As a result, Mr. Hammack received an aggregate of 212,765 shares of our common stock. The entire $100,000 of intellectual property was impaired and written-off as of November 30, 2015.

 

During the year ended November 30, 2016, we paid management fees of $75,000 (2015 – $47,000) to Mr. Hammack, and $Nil (2015 – $5,000) to Timothy Franklin, our former sole officer and director, and converted $Nil (2015 – $33,927) in debt previously owed to Khurram Shroff, our former sole officer and director, into common stock resulting in a loss on the settlement of debt in the amount of $Nil (2015 – $919,422. Mr. Shroff assigned that debt to an unrelated third party prior to its conversion.

 

During the year ended November 30, 2016, we had $Nil (2015 – $10,781) in debt forgiven by FEN, our majority stockholder.

 

During the year ended November 30, 2016, we paid professional fees of $22,500 (2015 – $13,500) to the President of Vertitek. As at November 30, 2016, $8,000 (2015 – $Nil) was owed to the President of Vertitek. During the year ended November 30, 2016, we recorded stock based compensation related to stock options granted to the President of Vertitek in the amount of $25,537 (2015 – $Nil).

 

During the year ended November 30, 2016, we recorded stock-based compensation related to stock options granted to the Chief Executive Officer of AeroLift in the amount of $25,735 (2015 – $Nil).

 

Other than as described above, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of those persons wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last two fiscal years.

 

Director Independence

 

Because our common stock is not currently listed on a national securities exchange, we currently use the definition in NASDAQ Listing Rule 5605(a)(2) for determining director independence, which provides that an “independent director” is a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three years was, an employee of the company;

 

  25  
 

 

  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
     
  a family member of the director is, or at any time during the past three years was, an executive officer of the company;
     
  the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
     
  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
     
  the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

We have determined that our sole director does not meet this definition of independence due to the fact that he is also our sole executive officer.

 

We do not currently have a separately designated nominating or compensation committee.

 

Item 14. Principal Accountant Fees and Services

 

Audit and Non-Audit Fees

 

The following table sets forth the fees for professional audit services and the fees billed for other services rendered by our auditor, Heaton & Company PLLC, in connection with the audit of our financial statements for the years ended November 30, 2016 and 2015, as well as reviews of our interim financial statements, services provided in connection with our statutory and regulatory filings or engagements, and any other fees billed for services rendered by our auditors during those years.

 

    Year Ended
November 30, 2016
($)
    Year Ended
November 30, 2015
($)
 
Audit fees     12,500       14,300  
Audit-related fees     -       -  
Tax fees     -       600  
All other fees     -       -  
Total     12,500       14,900  

 

In the above table, “audit fees” are fees billed by our auditors for services provided in auditing our annual financial statements. “Audit-related fees” are fees not included in audit fees that are billed by our auditors for assurance and related services that are reasonably related to the performance of the audit review of our financial statements. “Tax fees” are fees billed by our auditors for professional services rendered for tax compliance, advice and planning. “All other fees” are fees billed by our auditors for products and services not included in the foregoing categories.

 

Policy on Pre-Approval

 

Since our inception, our Board of Directors, performing the duties of the audit committee, has reviewed all audit and non-audit related fees at least annually. The Board, acting as the audit committee, pre-approved all audit related services for the year ended November 30, 2016.

 

  26  
 

 

PART IV

 

Item 15. Exhibits

 

The following documents are filed as part of this annual report.

 

Exhibit

Number

  Exhibit Description
     
31.1   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Presentation Linkbase

 

  27  
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

Dated: March 14, 2017 VALMIE RESOURCES, INC.
     
  By: /s/ Gerald B. Hammack
    Gerald B. Hammack
    Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE   TITLE   DATE
         
/s/ Gerald B. Hammack   Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director   March 14, 2017
Gerald B. Hammack        

 

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