UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended February 28, 2017

 

[  ] 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)

 

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 [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

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

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of April 12 , 2017 the registrant had 69,571,219 shares of common stock outstanding.

 

 

 

     
 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 3
   
Item 1. Consolidated Financial Statements (Unaudited) 3
Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations 4
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Item 4. Controls and Procedures 10
   
PART II – OTHER INFORMATION 11
   
Item 1. Legal Proceedings 11
Item 1A. Risk Factors 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Mine Safety Disclosures 11
Item 5. Other Information 11
Item 6. Exhibits 11

 

  2  
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

VALMIE RESOURCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2017

(Stated in US Dollars)

 

  Page
   
Consolidated Balance Sheets F-1
   
Consolidated Statements of Operations (unaudited) F-2
   
Consolidated Statements of Cash Flows (unaudited) F-3
   
Notes to the Consolidated Financial Statements (unaudited) F-4

 

  3  
 

 

Valmie Resources, Inc.

Consolidated Balance Sheets

(Stated in US Dollars)

 

    February 28, 2017     November 30, 2016  
    (Unaudited)        
ASSETS            
             
Current Assets                
Cash and cash equivalents (Note 4)   $ 37,230     $ 262,190  
Inventory (Note 5)     40,881       4,234  
Prepaid expenses     3,909       7,850  
Total Current Assets     82,020       274,274  
                 
Non-current Assets                
Equipment, net of accumulated depreciation (Note 6)     207,084       14,917  
Prototype development (at cost)     34,019       34,019  
Investment in joint venture (Note 7)     184,147       113,462  
Total Non-current Assets     425,250       162,398  
                 
Total Assets   $ 507,270     $ 436,672  
                 
LIABILITIES                
                 
Current Liabilities                
Accounts payable and accrued liabilities   $ 70,560     $ 19,732  
Due to related parties     -       8,000  
Liabilities to be settled with stock     158,000       158,000  
Total Current Liabilities     228,560       185,732  
                 
Total Liabilities     228,560       185,732  
                 

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  
69,037,885 common shares (November 30, 2016 – 68,017,491 common shares)     69,037       68,017  
                 
Additional paid-in capital     15,406,598       15,112,118  
Retained deficit     (15,198,925 )     (14,931,195 )
                 
Total Stockholders’ Equity (Deficiency)     278,710       250,940  
                 
Total Liabilities and Stockholders’ Equity   $ 507,270     $ 436,672  

 

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

 

  F- 1  
 

 

Valmie Resources, Inc.

Consolidated Statements of Operations

(Stated in US Dollars)

(Unaudited)

 

    Three Months Ended
February 28, 2017
    Three Months Ended
February 29, 2016
 
             
Revenue   $ -     $ -  
                 
Operating Expenses                
General and administrative     137,554       11,160  
Management fees (Note 10)     7,500       15,000  
Professional fees     66,364       50,349  
Transfer agent fees     1,997       1,100  
                 
Loss from Operations     (213,415 )     (77,609 )
                 
Other expenses                
Interest expense     -       (5,411 )
Equity loss in joint venture (Note 7)     (54,315 )     -  
      (54,315 )     (5,411 )
                 
Net Loss   $ (267,730 )   $ (83,020 )
                 
Basic and Diluted Loss per Common Share   $ (0.00 )   $ (0.00 )
                 

Weighted Average Number of Common Shares

Outstanding

    68,435,963       64,092,035  

 

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

 

  F- 2  
 

 

Valmie Resources, Inc.

Consolidated Statements of Cash Flows

(Stated in US Dollars)

(Unaudited)

 

    Three Months Ended
February 28, 2017
    Three Months Ended
February 29, 2016
 
             
Cash Flows from Operating Activities                
Net loss   $ (267,730 )   $ (83,020 )
Items not affecting cash                
Depreciation     5,692       -  
Equity loss in joint venture     54,315       -  
Changes in operating assets and liabilities                
Accounts payable and accrued liabilities     50,828       12,310  
Due to related party     (8,000 )     -  
Inventory     (36,647 )     -  
Prepaid expenses     3,941       -  
Interest accrual     -       5,266  
Net cash used in operations     (197,601 )     (65,444 )
                 
Cash Flows from Investing Activities                
Acquisition of equipment     (197,859 )     -  
Investment in joint venture     (125,000 )     -  
Increase in prototype development     -       (74 )
Net cash used in investing activities     (322,859 )     (74 )
                 
Cash Flows from Financing Activities                
Proceeds from promissory notes     -       67,500  
Proceeds from sale of common stock     295,500       -  
Net cash provided by financing activities     295,500       67,500  
                 
Change in cash and cash equivalents     (224,960 )     1,982  
                 
Cash and cash equivalents – beginning of period     262,190       22,876  
                 
Cash and cash equivalents – end of period   $ 37,230     $ 24,858  
                 
Supplementary Cash Flow Information                
Cash paid for                
Interest   $ -     $ -  
Income taxes   $ -     $ -  

 

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

 

  F- 3  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

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 a series of multi-rotor and fixed-wing unmanned aerial vehicles (each, a “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. Basis of Presentation

 

Unaudited Interim Financial Statements

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). They do not include all information and footnotes required by US GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended November 30, 2016, included in the Company’s Form 10-K filed with the SEC. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended February 28, 2017 are not necessarily indicative of the results that may be expected for the year ending November 30, 2017.

 

  F- 4  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

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.

 

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

 

    February 28, 2017     November 30, 2016  
             
Cash on deposit   $ 37,230     $ 262,190  
    $ 37,230     $ 262,190  

 

  F- 5  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

5. Inventory

 

Inventory consists of raw materials and finished goods.

 

February 28, 2017

     

 

November 30, 2016

 
                 
Raw materials   $ 37,446     $ 3,934  
Finished goods     3,435       300  
    $ 40,881     $ 4,234  

 

6. Equipment

 

    Machinery     Furniture and Fixtures     Total  
                   
Cost                        
                         
Balance, November 30, 2015   $ -     $ -     $ -  
Additions     15,300       -       15,300  
                         
Balance, November 30, 2016   $ 15,300     $ -     $ 15,300  
Additions     191,690       6,169       197,859  
                         
Balance, February 28, 2017   $ 206,990     $ 6,169     $ 213,159  
                         
Accumulated depreciation                        
                         
Balance, November 30, 2015   $ -     $ -     $ -  
Depreciation     383       -       383  
                         
Balance, November 30, 2016   $ 383     $ -     $ 383  
Depreciation     5,538       154       5,692  
                         
Balance, February 28, 2017   $ 5,921     $ 154     $ 6,075  
                         
Carrying amounts                        
As at November 30, 2015   $ -     $ -     $ -  
As at November 30, 2016   $ 14,917     $ -     $ 14,917  
As at February 28, 2017   $ 201,069     $ 6,015     $ 207,084  

 

  F- 6  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

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 $184,147 at February 28, 2017 (November 30, 2016 – $113,462) includes $362,000 in advances less the Company’s share of the cumulative net loss of AeroLift of $177,853 (November 30, 2016 – $123,538).

 

Summary of financial information of AeroLift

 

For the period ended,

 

    February 28, 2017     February 29, 2016  
             
General and administrative   $ 11,740     $ -  
Payroll     57,973       -  
Subcontractors     28,354       -  
Travel and promotion     10,563       -  
Net loss for the period   $ 108,630     $ -  

 

  F- 7  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

8. Capital Stock

 

Authorized Stock

 

The Company’s authorized capital consists 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- 8  
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

8. Capital Stock – Continued

 

Share Issuances

 

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 net proceeds of $98,500.

 

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 net proceeds of $98,500.

 

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 net proceeds of $98,500.

 

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 February 28, 2017, 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 (November 30, 2016 - $158,000).

 

As of February 28, 2017, the Company had 69,037,885 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, 2016     200,000     $ 1.00  
Granted     -     $ -  
Outstanding – November 30, 2016 and February 28, 2017     200,000     $ 1.00  
Exercisable – November 30, 2016 and February 28, 2017     50,000     $ 1.00  

 

The weighted average contractual life remaining on the outstanding options at February 28, 2017 is 2.61 years.

 

F- 9
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

8. Capital Stock – Continued

 

Stock Options – Continued

 

As at February 28, 2017, 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 February 28, 2017, the Company had no issued or outstanding warrants.

 

9. Related Party Transactions

 

During the period ended February 28, 2017, the Company paid $31,500 (2016 – $15,000) to its President, of which $7,500 was included in management fees and $24,000 was included in general and administrative expenses.

 

During the period ended February 28, 2017, the Company paid $18,000 (2016 – $4,500) to the President of Vertitek, of which $6,000 was included in professional fees and $12,000 was included in general and administrative fees. As at February 28, 2017, $Nil (November 30, 2016 – $8,000) was owed to the President of Vertitek.

 

F- 10
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

10. Promissory Notes

 

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.

 

During the year ended November 30, 2016, the Company entered into multiple promissory note agreements with an investor 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.

 

11. 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 February 28, 2017, the Company had working capital deficiency of $146,540 (November 30, 2016 – working capital of $88,542) and an accumulated deficit of $15,198,925 (November 30, 2016 – $14,931,195). 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- 12
 

 

Valmie Resources, Inc.

Notes to Consolidated Financial Statements

(Stated in US Dollars)

(Unaudited)

 

12. 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 February 28, 2017, $3,000 has been paid in relation to this obligation.

 

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

 

In October 2016, Vertitek entered into an office lease expiring October 2019, which calls for monthly payments of approximately $1,700.

 

In January 2017, the Company entered into an office lease expiring July 2020, which calls for monthly payments of approximately $3,370 from August 2017 to July 2018, approximately $3,460 from August 2018 to July 2019, and approximately $3,560 from August 2019 to July 2020.

 

Minimum annual payments for Vertitek, not including operating costs, pursuant to the lease are as follows:

 

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

 

Minimum annual payments for the Company, not including operating costs, pursuant to the lease are as follows:

 

2017   $ 13,469  
2018     40,792  
2019     41,947  
2020     28,478  
    $ 124,686  

 

13. Subsequent Events

 

On March 10, 2017, the Company issued 533,334 shares of common stock to an investor at a price of $0.1875 per share for gross proceeds of $100,000.

 

The Company has evaluated subsequent events from February 28, 2017, through the date these financial statements were issued and determined that there are no additional items to disclose.

 

F- 13
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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

 

Forward-Looking Statements

 

This quarterly 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 quarterly 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 quarterly 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.

 

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”).

 

We were formerly a mineral exploration company; however, in early December 2014, we changed our business focus to pursuing opportunities for the commercialization of leading edge products and services in the rapidly expanding technology industry, and in particular, developing or acquiring concepts with valid business models positioned to make a significant impact within the software, hardware, networking and semiconductor sectors.

 

On December 8, 2014, we appointed Gerald B. Hammack as our sole officer and director. 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.

 

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. Vertitek 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 unmanned aerial vehicles or UAVs (more commonly referred to as drones) include multi-rotor and fixed-wing models.

 

On March 31, 2015, the closing of the Share Exchange Agreement occurred, 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 technologies under development by Vertitek.

 

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On August 20, 2015, we entered into an equity investment agreement (the “Equity Investment Agreement”) with Tuverga Finance Ltd., a Cypriot corporation (“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. The aggregate number of shares issuable by us and purchasable by Tuverga under the Equity Investment Agreement is limited by the dollar amount sold 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.

 

In connection with the Equity Investment Agreement, we also entered into a registration rights agreement with Tuverga (the “Registration Rights Agreement”) pursuant to which we were obligated to file a registration statement with the SEC covering the shares of common stock underlying the Equity Investment Agreement. Under the Registration Rights Agreement, we are obligated to maintain the effectiveness of the registration statement until the earlier to occur of the date on which (a) Tuverga has sold all of the shares of our common stock registered thereunder or (b) we have no right to sell any additional shares to Tuverga under the Equity Investment Agreement.

 

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 our 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.

 

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 expects to sell to other drone operators both through traditional retail methods as well as from its own interactive e-commerce platform. As of February 28, 2017, no such sales had been completed.

 

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 $362,000 had been advanced as of February 28, 2017. 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 UAVs 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.

 

In late 2016, we executed 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.

 

To date, we have not generated any revenue through the sales of UAVs or the provision of software, hardware or cloud-based services, either through Vertitek, AeroLift 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.

 

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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.

 

Results of Operations

 

Revenues

 

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 revenue during the next 12 months continues to be uncertain.

 

Operating Expenses

 

During the three months ended February 28, 2017, we incurred $213,415 in operating expenses, including $137,554 in general and administrative expenses, $66,364 in professional fees, $7,500 in management fees and $1,997 in transfer agent fees. During the same period in fiscal 2016, we incurred $77,609 in operating expenses, including $11,160 in general and administrative expenses, $50,349 in professional fees, $15,000 in management fees and $1,100 in transfer agent fees. The $135,806 increase in our operating expenses between the two periods was therefore largely attributable to the increase in our general and administrative expenses, the most significant items of which were as follows:

 

Description   Amount ($)  
Payroll expenses (including wages and taxes)     46,893  
Advertising     31,903  
Office supplies and expenses     15,491  
Filing fees     13,415  
Rent     8,283  
Travel and entertainment     8,214  
Depreciation     5,692  
Professional development     4,760  

 

The $66,364 we spent on professional fees during the period consisted of $48,032 in unmanned aircraft systems consulting fees that we paid to Praxis Aerospace Concepts International, $15,352 in accounting and legal expenses and $2,800 in business development consulting fees.

 

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Other Expenses

 

During the three months ended February 28, 2017, we incurred other expenses of $54,315, all of which was attributable to equity loss associated with the AeroLift joint venture, whereas we only incurred $5,411 in other expenses during the same period in fiscal 2016, all of which was in the form of interest expense.

 

Net Loss

 

During the three months ended February 28, 2017, we incurred a loss from operations of $213,415, a net loss of $267,730, and a net loss per share of $0.00. During the same period in fiscal 2016, we incurred a net loss from operations of $77,609, a net loss of $83,020, and a net loss per share of $0.00.

 

Liquidity and Capital Resources

 

As of February 28, 2017, we had $37,230 in cash and cash equivalents, $82,020 in current assets, $507,270 in total assets, $228,560 in current and total liabilities, a working capital deficit of $146,540 and a retained deficit of $15,198,925.

 

During the three months ended February 28, 2017, we used $197,601 in net cash on operating activities due to a combination of our adjusted net loss and certain changes in our operating assets and liabilities, including a $50,838 increase in our accounts payable. During the same period in fiscal 2016, we used $65,444 in net cash on operating activities. The majority of our spending on operating activities for the three months ended February 28, 2017 and 2016 was attributable to our net loss as described above, as adjusted for depreciation and any equity loss on the AeroLift joint venture, and was associated with carrying out our reporting obligations under applicable securities laws and pursuing opportunities for the commercialization of products and services in the technology industry.

 

During the three months ended February 28, 2017, we used $322,859 in net cash on investing activities, including $197,859 on the acquisition of equipment and $125,000 on our investment in AeroLift. During the same period in fiscal 2016, we only used $74 in net cash on investing activities.

 

During the three months ended February 28, 2017, we received $295,500 from financing activities, all of which was in the form of proceeds from the sale of our common stock under the equity-line investment agreement with Tuverga. During the same period in fiscal 2016, we received $67,500 from financing activities, all of which was in the form of proceeds from promissory notes.

 

During the three months ended February 28, 2017, our cash position decreased by $224,960 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.

 

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.

 

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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.

 

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 are in the planning stages, which will showcase for potential customers the cost savings and safety benefits of using the services AeroLift offers.

 

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Continued Funding

 

We believe that the remaining funding available to us under our Equity Investment Agreement with Tuverga will be sufficient to cover our needs for the next 24 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 February 28, 2017, we had a working capital deficit of $146,540 and a retained deficit of $15,198,925. 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.

 

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 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

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Item 4. 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 quarterly 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 report applicable for the period covered by this quarterly report.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1. 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 1A. Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

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 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 *
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 *

 

* Filed herewith

 

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SIGNATURES

 

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

 

  VALMIE RESOURCES, INC.
  (Registrant)
   
Date: April 12, 2017 /s/ Gerald B. Hammack
  Gerald B. Hammack
  Chairman, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director

 

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