UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





X
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2014





o
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: 000-53232





Axiom Oil and Gas Corp.


(Exact name of small business issuer as specified in its charter)





Nevada
27-0686445(State or other jurisdictionof incorporation or organization)
(I.R.S. EmployerIdentification No.)





1846 E. Innovation Park Dr. Oro Valley, AZ 85755(Address of principal executive offices)





(303) 872-7814(Issuer’s Telephone Number)








Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.  X Yes  oNo





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).     X Yes  oNo





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
o

Accelerated filer
oNon-accelerated filer
o
(Do not check if a smaller reporting company)
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 X   No





As of July 14, 2014, there were 11,252,774 shares of the issuer’s $.001 par value common stock issued and outstanding.




















PART I – FINANCIAL INFORMATION








ITEM 1.   FINANCIAL STATEMENTS





The accompanying unaudited interim financial statements of Axiom Oil and Gas Corp. (“Axiom”) as of May 31, 2014, and for the three and nine months ended May 31, 2014 and 2013 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statement presentation and in accordance with the instructions to Form 10-Q and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited  financial statements and notes thereto contained in Axiom’s Form 10-K filing with the SEC for the year ended August 31, 2013.  In the opinion of management, the financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods. The results of operations for the nine months ended May 31, 2014 are not necessarily indicative of the results that may be expected for the full year.








1





INDEX TO  FINANCIAL STATEMENTS





F-1
Balance Sheets as of May 31, 2014 (unaudited) and August 31, 2013.





F-2
Statements of Operations for the three and nine months ended May 31, 2014 and 2013 and the period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014 (unaudited).F-3
Statement of Changes in Stockholders’ Deficiency for the period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014 (unaudited).





F-6
Statements of Cash Flows for the nine months ended May 31, 2014 and 2013 and the period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014 (unaudited).





F-8
Notes to Financial Statements (unaudited).





2


AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Balance Sheets
 
 May 31,


August 31,2014


2013(Unaudited)ASSETSCurrent assetsCash

$
188


$
362Total current assets


188



362Other


1,400



1,400Total assets

$
1,588


$
1,762LIABILITIES AND STOCKHOLDERS’ DEFICIENCYCurrent liabilitiesAccounts payable and accrued expenses

$
478,130


$
510,539Notes payable


142,000



67,000Convertible debentures


105,000



30,000Total liabilities


725,130



607,539Commitments and contingencies


--



--Stockholders’ deficiencyPreferred stock, $0.001 par value, 10,000,000 sharesauthorized, none issued


--



--Common stock, $0.001 par value, 300,000,000shares authorized, 11,252,774 and 9,912,761 sharesissued and outstanding at May 31, 2014and August 31, 2013, respectively


11,253



9,913Additional paid-in capital


14,003,407



13,495,337Deficit accumulated from prior operations


(121,862
)


(121,862
)Deficit accumulated during the exploration stage


(14,616,340
)


(13,989,165
)Total stockholders’ deficiency


(723,542
)


(605,777
)Total liabilities and stockholders’ deficiency

$
1,588


$
1,762
 
 See accompanying notes to financial statements.
  F-1
  AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Statements of Operations
 (Unaudited)
 
 Period FromInception ofExplorationStage(September 1,For the Three Months Ended


For the Nine Months Ended


2010) throughMay 31,


May 31,


May 31,2014


2013


2014


2013


2014ExpensesCompensation

$
69,175


$
22,500


$
225,448


$
67,500


$
5,583,317General and administrative


46,330



39,974



459,603



125,076



2,130,781Exploration


--



--



--



--



351,683Impairment of goodwill


--



--



--



--



525,477Loss before other income (expenses)


(115,505
)


(62,474
)


(685,051
)


(192,576
)


(8,591,258
)Other income (expenses)Interest expense


(7,912
)


(1,122
)


(19,604
)


(2,730
)


(27,963
)Forgiveness of debt income


--



--



77,480



--



77,480Foreign currency gain (loss)


--



--



--



--



(80,958
)Gain on sale of subsidiary


--



--



--



--



160,681Finance costs, share-based


--



--



--



--



(6,154,322
)Total other income (expenses)


(7,912
)


(1,122
)


57,876



(2,730
)


(6,025,082
)Net loss

$
(123,417
)

$
(63,596
)

$
(627,175
)

$
(195,306
)

$
(14,616,340
)Basic and diluted loss per share

$
(0.01
)

$
(0.01
)

$
(0.06
)

$
(0.02
)Weighted average number of commonshares outstanding – basic and diluted


11,252,774



9,912,761



10,822,442



9,889,464
 
 See accompanying notes to financial statements.
 
 
  F-2
  AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 
 Statement of Changes in Stockholders’ Deficiency
 Period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014
 (Unaudited)
 
 
 
 DeficitAccumulated


Deficit


AccumulatedAdditional


Other


Accumulated


During the


TotalCommon Stock


Paid-in


Comprehensive


From Prior


Exploration


Stockholders'Shares


Amount


Capital


Income


Operations


Stage


DeficiencyBalance forward from prior operations, August 31, 2010


979,336


$
979


$
115,010


$
--


$
(121,862
)

$
--


$
(5,873
)Common stock issued for compensation at $6.25 per share


6,000



6



37,494



--



--



--



37,500Forgiveness of related party loan payable


--



--



2,250



--



--



--



2,250Stock based compensation for options issued to employeesand directors


--



--



3,253,705



--



--



--



3,253,705Common stock issued for compensation at $18.75per share


4,000



4



74,996



--



--



--



75,000Common stock issued for the acquisition of AxiomMexico at $6.25 per share


80,000



80



499,920



--



--



--



500,000Related party rent expense


--



--



3,000



--



--



--



3,000Common stock issued for cash at $6.25 per share


172,960



173



1,080,827



--



--



--



1,081,000Offering costs


--



--



(96,850
)


--



--



--



(96,850
)Common stock issued for services at $48.75 per share


10,000



10



487,490



--



--



--



487,500Foreign currency translation


--



--



--



17,945



--



--



17,945Net loss for the year ended August 31, 2011


--



--



--



--



--



(5,411,267
)


(5,411,267
)Balance August 31, 2011 - Forward


1,252,296


$
1,252


$
5,457,842


$
17,945


$
(121,862
)

$
(5,411,267
)

$
(56,090
)
 
 
 See accompanying notes to financial statements.
  F-3
  AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 
 Statement of Changes in Stockholders’ Deficiency
 Period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014
 (Unaudited)
 
 
 DeficitAccumulated


Deficit


AccumulatedAdditional


Other


Accumulated


During the


TotalCommon Stock


Paid-in


Comprehensive


From Prior


Exploration


Stockholders'Shares


Amount


Capital


Income


Operations


Stage


DeficiencyBalance August 31, 2011 - Forwarded


1,252,296


$
1,252


$
5,457,842


$
17,945


$
(121,862
)

$
(5,411,267
)

$
(56,090
)Stock based compensation for options issued to employeesand directors


--



--



1,070,337



--



--



--



1,070,337Common stock issued for compensation at $25.25 per share


6,000



6



151,494



--



--



--



151,500Common stock issued for cash at $6.25 per share


45,745



46



285,858



--



--



--



285,904Common stock issued for accrued compensation andexpenses


8,488,720



8,489



6,358,051



--



--



--



6,366,540Common stock issued for cash at $0.625 per share


16,000



16



9,984



--



--



--



10,000Offering costs


--



--



(1,000
)


--



--



--



(1,000
)Foreign currency translation


--



--



--



(17,945
)


--



--



(17,945
)Net loss for the year ended August 31, 2012


--



--



--



--



--



(8,276,490
)


(8,276,490
)Balance August 31, 2012


9,808,761



9,809



13,332,566



--



(121,862
)


(13,687,757
)


(467,244
)Common stock issued for cash at $0.625 per share


54,000



54



33,696



--



--



--



33,750Offering costs


--



--



(3,375
)


--



--



--



(3,375
)Common stock issued for accrued compensationand expenses


50,000



50



132,450



--



--



--



132,500Net loss for the year ended August 31, 2013


--



--



--



--



--



(301,408
)


(301,408
)Balance - August 31, 2013 - Forward


9,912,761


$
9,913


$
13,495,337


$
--


$
(121,862
)

$
(13,989,165
)

$
(605,777
)
 
 See accompanying notes to financial statements.
  F-4
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 
 Statement of Changes in Stockholders’ Deficiency
 Period from Inception of Exploration Stage (September 1, 2010) through May 31, 2014
 (Unaudited)
 
 
 
 DeficitAccumulated


Deficit


AccumulatedAdditional


Other


Accumulated


During the


TotalCommon Stock


Paid-in


Comprehensive


From Prior


Exploration


Stockholders'Shares


Amount


Capital


Income


Operations


Stage


DeficiencyBalance - August 31, 2013 - Forwarded


9,912,761


$
9,913


$
13,495,337


$
--


$
(121,862
)

$
(13,989,165
)

$
(605,777
)Common stock issued for rounding of shares in reverse stocksplit


13



--



--



--



--



--



--Common stock issued for consulting compensation at $0.20per share


700,000



700



139,300



--



--



--



140,000Common stock issued for debt settlement at $0.20 per share


200,000



200



39,800



--



--



--



40,000Common stock issued for debt settlement at $0.25 per share


140,000



140



34,860



--



--



--



35,000Common stock issued for consulting compensation for $200,valued at $0.51 per share


300,000



300



152,700



--



--



--



153,000Stock based compensation for options issued to employeesand directors


--



--



137,948



--



--



--



137,948Stock option issued for debt settlement


--



--



3,462



--



--



--



3,462Net loss for the nine months May 31, 2014


--



--



--



--



--



(627,175
)


(627,175
)Balance – May 31, 2014


11,252,774


$
11,253


$
14,003,407


$
--


$
(121,862
)

$
(14,616,340
)

$
(723,542
)
 
 
 See accompanying notes to financial statements.
 
 
  F-5
  AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Statements of Cash Flows
 (Unaudited)
 
 Period fromInception ofExploration Stage(September 1,For the Nine Months Ended


2010) throughMay 31,


May 31,2014


2013


2014Cash flows from operating activitiesNet loss

$
(627,175
)

$
(195,306
)

$
(14,616,340
)Adjustments to reconcile net loss tonet cash used in operating activities:Stock-based compensation


430,748



--



5,506,290Forgiveness of debt income


(77,480
)


--



(77,480
)Stock-based finance costs


--



--



6,154,322Depreciation expense


--



--



3,937Foreign currency loss


--



--



80,958Impairment of goodwill


--



--



525,477Related party rent expense


--



--



3,000Gain on sale of subsidiary


--



--



(160,681
)Changes in assets and liabilities:Net VAT receivable


--



--



(87,751
)Prepaid expenses and other current assets


--



4,482



981Other


--



--



(1,254
)Accounts payable and accrued expenses


193,533



143,226



1,226,565Net cash used in operating activities


(80,374
)


(47,598
)


(1,441,976
)Cash flows from investing activitiesAcquisition of equipment


--



--



(7,454
)Cash received in acquisition


--



--



3,435Net cash used in investing activities


--



--



(4,019
)Cash flows from financing activitiesProceeds from issuance of convertible debentures


75,000



--



105,000Proceeds from issuance of common stock


200



33,750



1,410,854Offering costs


--



(3,375
)


(101,225
)Proceeds (payments) related parties - net


--



--



(18,680
)Proceeds from notes payable


5,000



12,000



47,000Net cash provided by financing activities


80,200



42,375



1,442,949Adjustment for change in exchange rate


--



--



3,081Net decrease in cash


(174
)


(5,223
)


35Cash balance, beginning of periods


362



5,352



153Cash balance, end of periods

$
188


$
129


$
188
 
 
 See accompanying notes to financial statements.
  F-6
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Statements of Cash Flows
 (Unaudited)
 
  For the Nine Months Ended,

May 31,


Period from

Inception of

Exploration Stage

(September 1,

2010) through

May 31,2014


2013


2014Supplementary information:Cash paid for:Interest

$
--


$
--


$
--Income taxes

$
--


$
--


$
--Supplemental disclosures of cash flow information:Non-cash investing activities:Issuance of common shares to acquire Axiom MexicoCash

$
--


$
--


$
3,435Net VAT receivable


--



--



9,667Prepaid expenses and other current assets


--



--



1,169Security deposit


--



--



990Furniture and equipment


--



--



7,476Accounts payable and accrued expenses


--



--



(625
)Related party payables


--



--



(47,589
)Net liabilities acquired

$
--


$
--


$
(25,477
)Sale of investments in Axiom MexicoOther current assets

$
--


$
--


$
188Net VAT receivable


--



--



97,488Property and equipment


--



--



9,548Other


--



--



844Accounts payable and accrued expenses


--



--



(157,246
)Related party payables


--



--



(28,909
)Accumulated other comprehensive income


--



--



(82,594
)Gain on sale of subsidiary

$
-


$
--


$
(160,681
)Non-cash financing activities:Common stock issued for debt settlement

$
75,000


$
--


$
75,000Notes payable issued for debt settlement

$
70,000


$
--


$
70,000Stock option issued for debt settlement

$
3,462


$
--


$
3,462Forgiveness related party payables

$
--


$
--


$
2,250Common stock and note payable issued foraccrued compensation and expenses

$
--


$
157,500


$
369,718
 
 
 See accompanying notes to financial statements.


F-7
  AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
  
 Note 1
Nature of Business and Basis of Financial Statement Presentation
 
 Axiom Oil and Gas Corp. (“Axiom”, the “Company”, “we”, “our” or “us”) is in the business of acquiring and exploring oil and gas properties primarily in the United States. The Company was incorporated in Nevada on February 13, 2007 under the name TC Power Management Corp. and was originally formed for the purpose of providing consulting services to private and public entities seeking assessment, development and implementation of energy generating solutions. Effective September 1, 2010, the Company changed its business strategy to the business of acquiring and exploring mineral properties. Accordingly, as of September 1, 2010, the Company is considered to be an exploration stage company.  On May 10, 2011, the Company filed a Certificate of Amendment to its Articles of Incorporation changing its name to Axiom Gold and Silver Corporation.  In addition, the Amendment increased the number of authorized shares of common stock from 100,000,000 to 300,000,000 and authorized the issuance of 10,000,000 preferred shares, the terms of which may be determined by the Board of Directors without the vote of shareholders. Effective November 1, 2010, the Company enacted a four-for-one (4:1) forward stock split. On August 27, 2013, the Company filed a Certificate of Amendment to its Articles of Incorporation and effective October 10, 2013 (i) changed its name to Axiom Oil and Gas Corp. to reflect its new business strategy of acquiring and exploring oil and gas properties; and  (ii) enacted a one-for-twenty-five (1:25) reverse stock split.  The Company remains an exploration stage company.  All share and per share data in these financial statements have been adjusted retroactively to reflect the stock splits.
 
 On January 13, 2011, the Company entered into a material definitive agreement with Axiom Minerals de Mexico S.A. de C.V (“Axiom Mexico”) whereby through its wholly owned Mexican subsidiary, Axiom Acquisition Corp, acquired all of the issued and outstanding shares of Axiom Mexico, by the issuance of  eighty thousand (80,000) of its common shares.  The shares were issued to the shareholders of Axiom Mexico on a pro rata basis as to their ownership of Axiom Mexico.  Axiom Acquisition Corp. merged with and into Axiom Mexico and the separate corporate existence of Axiom Acquisition Corp. ceased.  Axiom Mexico, as the surviving corporation in the merger and a wholly-owned subsidiary of the Company continues its existence under its current name and continues to be governed by the laws of the state of Chihuahua, Mexico.This acquisition was accounted for as a basic business combination with the Company as the acquirer of Axiom Mexico.
 
 Effective May 31, 2012, the Company sold all the outstanding shares of Axiom Mexico to an unrelated entity for total consideration of $100.  The Company recognized a gain of $160,681 on the sale.  As a result of the sale, effective that date, all the assets and liabilities of Axiom Mexico were no longer reported in the balance sheet.
 
  F-8
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 Note 1
Nature of Business and Basis of Financial Statement Presentation (Continued)
 
 The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statement presentation and in accordance with the instructions to Form 10-Q.  Accordingly, they do not include all the information and notes necessary for complete financial statement presentation.  In the opinion of management, the financial statements contain all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position as of May 31, 2014 and the results of operations for the three and nine months ended May 31, 2014 and 2013, and the cash flows for the nine months ended May 31, 2014 and 2013, as well as the period from inception of exploration stage (September 1, 2010) through May 31, 2014. Interim results are not necessarily indicative of the results to be expected for a full year. Reference is made to the financial statements of the Company contained in its Annual Report on Form 10-K for the year ended August 31, 2013.
 
 Note 2
Going Concern
  The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no established source of revenue, and has accumulated significant losses and an accumulated deficit during its exploration stage. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 Management's plans with respect to alleviating the adverse financial conditions that caused substantial doubt about the Company’s ability to continue as a going concern are as follows:
  In order to implement its business plan, the Company needs to raise additional capital through equity or debt financings or through loans from shareholders or others. The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional capital and eventually attain profitable operations. There can be no assurance that the Company will be able to raise additional capital or execute its business strategy.
  F-9
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
  Note 3
Summary of Significant Accounting Policies
  Other significant accounting policies are set forth in Note 3 of the audited consolidated financial statements included in the Company’s 2013 annual report on Form 10-K
  Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
 
 Exploration Stage Company – As of September 1, 2010, the Company became an “exploration stage company” as defined in the Securities and Exchange Commission Industry Guide 7, and is subject to compliance with ASC Topic 915 “Development Stage Entities”.  For the period from February 13, 2007 (Inception) to August 31, 2010, the Company was a “development stage company” in accordance with ASC Topic 915.  Deficits accumulated prior to becoming an “exploration stage company” have been separately presented in the accompanying balance sheets and statement of changes in stockholders’ deficiency.  To date, the Company’s planned principal operations have not fully commenced.
 
 Equity-Based Compensation - The Company accounts for equity based compensation transactions with employees under the provisions of ASC Topic No. 718, “Compensation: Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of common stock issued for compensation is measured at the market price on the date of grant.  The fair value of the Company’s equity instruments, other than common stock, is estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.
 
 The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to pay cash for the goods or services instead of paying with or using the equity instrument.
  F-10
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
  Note 3
Summary of Significant Accounting Policies (Continued)
  Earnings (Loss) Per Share– Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflects the amount of earnings for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as common shares that could result from the potential exercise or conversion of securities into common stock.
 
 Recently Issued Accounting Pronouncements – In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (ASU 2014-10). ASU 2014-10 removes all incremental financial reporting requirements regarding development-stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, ASU 2014-10 adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned operations could provide information about risks and uncertainties related to the company’s current activities. ASU 2014-10 also removes an exception provided to development-stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity. Effective with the first quarter of our fiscal year ended August 31, 2016, the presentation and disclosure requirements of Topic 915 will no longer be required. The revisions to Consolidation (Topic 810) are effective the first quarter of our fiscal year ended August 31, 2017. Early adoption is permitted. We have not determined the potential effects on our financial statements.
 
 In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition”, and most industry-specific guidance. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The amendments in ASU 2014-09 will be applied using one of two retrospective methods. The effective date will be the first quarter of our fiscal year ended August 31, 2018. We have not determined the potential effects on our financial statements.
 
 There are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or operating results.
 
 Subsequent Events – In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events after the balance sheet date.
 
  .
  F-11
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 Note 4
Related Party Transactions
  Accounting and tax services are provided by an accounting firm in which our Chief Financial Officer (“CFO”) provides consulting services. Accounting and tax fees amounted to $15,000 and $30,000 for the three and nine months ended May 31, 2014, the $30,000 being owed as of May 31, 2014. In February 2014, a payable of $70,000 from prior services rendered was settled through the issuance of a $35,000 8% note payable and 140,000 shares of Company common stock valued at $35,000.
  The Company is obligated to its Chairman (see Note 9), who is also the majority stockholder of the Company, for accrued and unpaid compensation and reimbursable expenses as of May 31, 2014 and August 31, 2013 in the amounts of approximately $211,000 and $120,000, respectively.  Compensation and expenses amounted to approximately $34,000 and $114,000 for the three and nine months ended May 31, 2014 and $27,000 and $99,000 for the three and nine months ended May 31, 2013, respectively.
  On April 11, 2014, we borrowed $5,000 from our chairman for working capital purposes (see Note 5).
  Note 5
Notes Payable
  On November 9, 2010, we borrowed $10,000 from an unrelated party for working capital purposes. The note is unsecured and was due November 9, 2011 with 8% interest per annum.
  In April 2011, we borrowed $20,000 from an unrelated party for working capital purposes.  The note is unsecured and payable on demand with 8% interest per annum.
  On December 7, 2012, we borrowed $10,000 from an unrelated party for working capital purposes.  The note is unsecured, non-interest bearing and payable on demand.
  On December 13, 2012, we incurred a $25,000 note payable to our former Chief Executive Officer (“CEO”) as part of a mutual release and settlement agreement for accrued and unpaid compensation and reimbursable expenses owed him.  The note is unsecured and payable on demand with 7% interest per annum.
  On January 7, 2013, we borrowed $2,000 from an unrelated party for working capital purposes.  The note is unsecured and payable on demand with 15% interest per annum.
  On October 30, 2013, we incurred a $35,000 note payable in conjunction with a settlement of an outstanding payable.  The note is unsecured and was due on January 31, 2014 with interest at 8% per annum.
  On February 4, 2014, we incurred a $35,000 note payable in conjunction with a settlement of an outstanding payable.  The note is unsecured and was due on April 30, 2014 with interest at 8% per annum.
 
   F-12
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 
 Note 5
Notes Payable (Continued)
  On April 11, 2014, we borrowed $5,000 from our Chairman for working capital purposes.  The note is unsecured and is payable on demand with interest at 12% per annum.
  Interest expense in the three and nine months ended May 31, 2014 is $2,619 and $5,936 and in the three and nine months ended May 31, 2013 is $1,122 and $2,730, respectively.
  Note 6
Convertible Debentures
 
 On July 5, 2013, the Board of Directors authorized the issuance of 20% Convertible Redeemable Debentures ("Convertible Debentures") in an aggregate principal amount not exceeding US $250,000.  The debentures mature between June 30, 2014 and July 30, 2014 and accrue interest at 20% per annum from the day of initial issuance.  As defined in the debenture agreement, the Convertible Debentures, at the option of the holder at any time commencing on December 31, 2013 until maturity, are convertible into shares of common stock of the Company, at a price of $0.25 per share on a post consolidated basis (as to be determined).
 
 On July 9, 2013, we issued a Convertible Debenture to a non-US resident accredited investor pursuant to Regulation S in the amount of $25,000.
 
 On August 15, 2013, we issued a Convertible Debenture to a non-US resident accredited investor pursuant to Regulation S in the amount of $5,000.
 
 In September, 2013, we issued Convertible Debentures to two non-US resident accredited investors pursuant to Regulation S in the aggregate amount of $35,000.
 
 In October, 2013, we issued Convertible Debentures to two non-US resident accredited investors pursuant to Regulation S in the aggregate amount of $15,000.
 
 On December 10, 2013, we issued a Convertible Debenture to a non-US resident accredited investor pursuant to Regulation S in the amount of $20,000.
 
 On January 13, 2014, we issued a Convertible Debenture to a non-US resident accredited investor pursuant to Regulation S in the amount of $5,000.
 
 Interest expense amounted to $5,293 and $13,668 in the three and nine months ended May 31, 2014, respectively.
 
 
  F-13
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
  Note 7
Stockholders’ Deficiency
  The Company is authorized to issue 300,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001.  Our Board of Directors has the authority to set the terms of any class of preferred shares through an issuance of a certificate of designation without receiving further shareholder approval.  We have reserved 3,000,000 and 280,000 common shares for issuance under our 2013 and 2010 Stock Option Plans.  In the period ended August 31, 2007, the Company sold 800,000 shares of common stock for cash of $500. In the year ended August 31, 2008, the Company sold 179,336 shares of its common stock for cash of $112,085. There were no equity transactions in the years ended August 31, 2010 and 2009. Effective November 1, 2010, the Company enacted a four-for-one (4:1) forward stock split. Effective October 10, 2013, the Company enacted a one-for-twenty-five (1:25) reverse stock split. All share and per share data in these financial statements have been adjusted retroactively to reflect the stock splits.
 
 Pursuant to a compensation agreement with a former Director, effective October 4, 2011 and 2010, the Company granted a stock award in the amount of 6,000 shares of Company common stock, an aggregate of 12,000 shares valued at $189,000.
 
 Pursuant to the acquisition agreement with Axiom Mexico on January 13, 2011, the Company issued eighty thousand (80,000) of its common shares to the shareholders of Axiom Mexico. The shares were valued at $500,000 ($6.25 per share) which represents the fair value on that date.
 
 Pursuant to a compensation agreement with our Director – Business Development (current Chairman), effective January 20, 2011, the Company granted a stock option award for the purchase of 12,000 shares of Company common stock at an exercise price of $6.25 per share. The fair value of our common stock at date of grant was $17.50.  The fair value of the option, $186,197, was calculated using the Black-Scholes pricing model. The option vested as follows: 6,000 shares immediately and 6,000 shares on January 20, 2012; and is exercisable for five years from the date of issuance. The fair value of the option was charged to operations as share-based expense over the vesting period.
 
 Pursuant to a compensation agreement with a former CEO, effective January 24, 2011, the Company issued 4,000 shares of common stock valued at $75,000 ($18.75 per share).
 
 In January and February 2011, the Company sold 13,200 shares of common stock at $6.25 per share for gross proceeds of $82,500 to five non-US accredited investors pursuant to Regulation S.  The Company incurred offering costs of $2,500 pursuant to an escrow agreement.
  F-14
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
  Note 7
Stockholders’ Deficiency (Continued)
  In April and May 2011, the Company sold 64,000 shares of common stock at $6.25 per share for gross proceeds of $400,000 to three non-US accredited investors pursuant to Regulations S and one US accredited investor pursuant to Regulation D.
 
 In June and July 2011, we sold 95,760 shares of common stock at $6.25 per share for gross proceeds of $598,500 to six non-US accredited investors pursuant to Regulations S and three US accredited investors pursuant to Regulation D. In addition, we incurred offering costs of $94,350 (10% of gross proceeds) on all sales pursuant to Regulation S.
 
 In July 2011, we issued 10,000 shares of common stock for investor relations services.  The shares were valued at $487,500, the fair value at date of grant, and such amount was charged to operations as share-based expense at that date.
 
 In December 2011, we received gross proceeds of $285,904 from the sale of 45,745 shares of common stock at $6.25 per share to one non-U.S. investor pursuant to Regulation S.
 
 Effective August 16, 2012, our current Chairman converted $212,218 of accrued and unpaid compensation and reimbursable expenses owed him into 8,488,720 shares of common stock at $0.025 per share. The fair value of the stock on that date was $0.75 per share and we incurred a charge for share based finance costs of $6,154,322 in the year ended August 31, 2012.
  In August 2012, we initiated an offering of up to a total of 480,000 shares of common stock and 48,000 warrants to purchase shares of common stock (collectively the “Units”).  The Units are being offered at US $0.625 per Unit for an aggregate purchase price of US $300,000.  The warrants are exercisable for a two year period at US $0.875 per share. Offering costs are 10% of the gross proceeds received plus warrants equal to 10% of the warrant equity for sales to non-US investors pursuant to Regulation S. There are no offering costs for sales to US investors pursuant to Regulation D.
 
  F-15
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 Note 7
Stockholders’ Deficiency (Continued)
  In August 2012, we received gross proceeds of $10,000 from the sale of 16,000 Units at $0.625 per Unit which included 16,000 shares of common stock and warrants to purchase 1,600 shares of common stock at $0.875 per share to a non-US accredited investor pursuant to Regulation S.  We incurred offering costs of $1,000 (10% of gross proceeds) plus warrants to purchase 1,143 shares of common stock at $0.875 per share.
 
 In September 2012, we received gross proceeds of $33,750 from the sale of 54,000 Units at $0.625 per Unit which included 54,000 shares of common stock and warrants to purchase 5,400 shares of common stock at $0.875 per share to three non-US accredited investors pursuant to Regulation S.  We incurred offering costs of $3,375 plus warrants to purchase 3,857 shares of common stock at $0.875 per share.
 
 In December 2012, our former CEO converted $157,500 of accrued and unpaid compensation and reimbursable expenses owed him into 50,000 shares of Company common stock valued at $132,500 and a $25,000 promissory note.
 
 Effective October 16, 2013, we issued a consultant a total of 700,000 shares of Company common stock valued at $140,000, $0.20 per share being the fair value on the effective date, as compensation under the related agreement.
 
 Effective October 30, 2013, we settled an outstanding payable in the amount of approximately $124,000 through the issuance of an 8% promissory note in the amount of $35,000 due January 31, 2014 and 200,000 shares of our common stock with an agreed upon value of $0.01 per share. The fair value of the common stock on the effective date is $0.20 per share and the $40,000 value of the shares offset the payable balance. The remainder of the payable balance of $48,844 is recorded as forgiveness of debt income in the nine months ended May 31, 2014.
 
 Effective October 31, 2013, we granted our Chairman (see Note 9) a stock option award for the purchase of 500,000 shares of Company common stock at an exercise price of $0.25 per share. The fair value of our common stock at date of grant was $0.20.  The fair value of the option, $52,392, was calculated using the Black-Scholes pricing model. The option vests over an 18 month period as follows: 200,000 shares immediately and 100,000 shares each on May 1, 2014, November 1, 2014 and May 1, 2015; and is exercisable for five years from the date of issuance. The fair value of the option is charged to operations as share-based expense over the vesting period. The expense recorded in the three and nine months ended May 31, 2014 is $7,859 and $41,623, respectively.
 
 
  F-16
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 Note 7
Stockholders’ Deficiency (Continued)
  Effective October 31, 2013, we granted a stock option award for the purchase of 33,000 shares of Company common stock at an exercise price of $0.25 per share to a former director in settlement of $8,348 owed for past services. The fair value of our common stock at date of grant was $0.20.  The fair value of the option, $3,462, was calculated using the Black-Scholes pricing model. The option is fully vested and is exercisable for five years from the date of issuance. The fair value of the option offset the payable balance and the remainder of $4,886 is recorded as forgiveness of debt income in the nine months ended May 31, 2014.
 
 Effective November 1, 2013, we granted a stock option award for the purchase of 300,000 shares of Company common stock at an exercise price of $0.25 per share to our CFO. The fair value of our common stock at date of grant was $0.20.  The fair value of the option, $31,468, was calculated using the Black-Scholes pricing model. The option vests over an 18 month period as follows: 150,000 shares immediately and 50,000 shares each on May 1, 2014, November 1, 2014 and May 1, 2015; and is exercisable for five years from the date of issuance. The fair value of the option is charged to operations as share-based expense over the vesting period. The expense recorded in the three and nine months ended May 31, 2014 is $4,721 and $25,001, respectively.
 
 Effective November 1, 2013, we granted a stock option award for the purchase of 150,000 shares of Company common stock at an exercise price of $0.25 per share to a Director. The fair value of our common stock at date of grant was $0.20.  The fair value of the option, $15,734, was calculated using the Black-Scholes pricing model. The option vests over an 18 month period as follows: 75,000 shares immediately and 25,000 shares each on May 1, 2014, November 1, 2014 and May 1, 2015; and is exercisable for five years from the date of issuance. The fair value of the option is charged to operations as share-based expense over the vesting period. The expense recorded in the three and nine months ended May 31, 2014 is $2,360 and $12,501, respectively.
 
 Effective January 29, 2014, we granted a stock option award for the purchase of 300,000 shares of Company common stock at an exercise price of $0.45 per share to our current CEO (see Note 9). The fair value of our common stock at date of grant was $0.51.  The fair value of the option, $91,275, was calculated using the Black-Scholes pricing model. The option vests over an 18 month period as follows: 150,000 shares immediately and 50,000 shares each on August 1, 2014, February 1, 2015 and August 1, 2015; and is exercisable for five years from the date of issuance. The fair value of the option is charged to operations as share-based expense over the vesting period. The expense recorded in the three and nine months ended May 31, 2014 is $16,735 and $58,823, respectively.
 
  F-17
  
 
 
 
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 Note 7
Stockholders’ Deficiency (Continued)
  Effective February 4, 2014, we settled an outstanding payable in the amount of approximately $70,000 through the issuance of an 8% promissory note in the amount of $35,000 due April 30, 2014 and 140,000 shares of our common stock with an agreed upon value of $0.01 per share. The common stock was valued at $0.25 per share, $35,000, representing the fair value of the remaining payable balance, which was more reliably measurable.
 
 On February 17, 2014, we entered into a consulting agreement for business advisory and other related services. The agreement is for a term of six months with compensation of $2,000 per month. Pursuant to the agreement we also issued the consultant a total of 300,000 shares of Company common stock for $200. The stock is valued at $153,000, $0.51 per share being the fair value on the effective date of the agreement, and we recorded stock-based compensation of $152,800 in the nine months ended May 31, 2014.
 
 
  F-18
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 Note 7
Stockholders’ Deficiency (Continued)
  Warrant activity for the nine months ended May 31, 2014 and the year ended August 31, 2013 is as follows:
 
 May 31, 2014(Unaudited)Shares


Weighted- Average Exercise Price


Weighted-

Average Remaining Contractual Term


Aggregate

Intrinsic

ValueOutstanding at beginningof period


12,000


$
0.875Granted/Sold


--



--Expired/Cancelled


--



--Forfeited


--



--Exercised


--



--Outstanding and exercisable atMay 31, 2014


12,000


$
0.875


0.30 Years


$
--
 
 
 August 31, 2013Shares


Weighted- Average Exercise Price


Weighted-

Average Remaining Contractual Term


Aggregate

Intrinsic

ValueOutstanding at beginningof period


2,743


$
0.875Granted/Sold


9,257


$
0.875Expired/Cancelled


--



--Forfeited


--



--Exercised


--



--Outstanding and exercisable atAugust 31, 2013


12,000


$
0.875


1.04 Years


$
--
  F-19
  
 
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 Note 7
Stockholders’ Deficiency (Continued)
  The fair value of the warrants, an aggregate $1,848 for the year ended August 31, 2013 is estimated on the date of grant using the Black-Scholes pricing model.
 
 The following weighted-average assumptions were made in estimating fair value of the warrants and options:
 
 Year Ended

August 31,


Nine Months Ended

May 31,2013


2014


2013Dividend Yield


--
%


--
%


--
%Risk-Free Interest Rate


0.27
%


1.38
%


0.27
%Expected Life

2.0 Years


5.0 Years


2.0 YearsExpected Volatility


57.49
%


68.68
%


57.49
%
 
 2013 Stock Option Plan
 On October 24, 2013, the Board of Directors authorized the implementation of the 2013 Employee and Consultant Stock Option Plan (the "2013 Option Plan"). The 2013 Option Plan is intended to provide an incentive to our executive personnel, directors, key employees or consultants who are responsible for or contribute to our management, growth and/or profitability. The purpose of granting options to such persons under the Plan is to attract them to consider employment with, or service to, us, to encourage their continued employment or service, and to give them incentive to provide their best efforts to us for purposes of enhancing shareholder value. A total of up to 3,000,000 shares of our common stock have been reserved for the 2013 Option Plan. The options can be issued at a strike price set at up to a 10% discount to market.  As of May 31, 2014, 1,717,000 shares of common stock are available for issuance under the 2013 Option Plan.
 
 2010 Stock Option Plan
 The 2010 Stock Option Plan ("2010 Plan"), adopted by the Board of Directors on January 31, 2011, is intended to provide an incentive to our executive officers, directors, employees, independent contractors or agents who are responsible for or contribute to our management, growth and/or profitability. The purpose of granting options to such persons under the 2010 Plan is to attract them to consider employment with, or service to, us, to encourage their continued employment or service, and to give them incentive to provide their best efforts to us for purposes of enhancing shareholder value.
 
 A total of up to 280,000 shares of our common stock have been reserved for the implementation of the 2010 Plan, either through the issuance of options to eligible persons in the form of incentive stock options or non-statutory options which are subject to restricted property treatment under Section 83 of the Internal Revenue Code. Whenever practical, the 2010 Plan is to be administered by a committee of not less than two members of the Board of Directors appointed by the full Board, and the 2010 Plan has a term of ten years, unless sooner terminated by the Board. As of May 31, 2014, 268,000 shares of common stock are available for issuance under the 2010 Plan.
  F-20
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 
 Note 7
Stockholders’ Deficiency (Continued)
  The following tables summarize options transactions under the 2013 and 2010 Stock Option Plans for the periods.
  For the Nine Months EndedMay 31, 2014

(Unaudited)Shares


Weighted- Average Exercise Price


Weighted-

Average Remaining Contractual Term


Aggregate

Intrinsic

ValueOutstanding at beginningof period


12,000


$
6.25Granted/Sold


1,283,000


$
0.30Expired/Cancelled


--



--Forfeited


--



--Exercised


--



--Outstanding at May 31, 2014


1,295,000


$
0.35


4.45 Years


$
196,600Exercisable at May 31, 2014


795,000


$
0.38


4.43 Years


$
126,600
 
 For the Year EndedAugust 31, 2013Shares


Weighted- Average Exercise Price


Weighted-

Average Remaining Contractual Term


Aggregate

Intrinsic

ValueOutstanding at beginningof period


12,000


$
6.25Granted/Sold


--



--Expired/Cancelled


--



--Forfeited


--



--Exercised


--



--Outstanding at August 31, 2013


12,000


$
6.25


2.39 Years


$
--Exercisable at August 31, 2013


12,000


$
6.25


2.39 Years


$
--
 
  F-21
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
 
 Note 7
Stockholders’ Deficiency (Continued)
  The weighted-average grant-date fair value of options granted during the nine months ended May 31, 2014 was $0.15.  No options were exercised during the period.
 
 Summary of non-vested options as of and for the nine months ended May 31, 2014 is as follows:
 
 Weighted-AverageGrant-DateNon-Vested Options

Shares


Fair ValueNon-vested at beginning of period


--


$
--Granted


1,283,000


$
0.15Vested


(783,000
)

$
0.14Forfeited


--


$
--Non-vested at May 31, 2014 (Unaudited)


500,000


$
0.16
 
 Note 8
Income Taxes
  Net deferred tax assets and liabilities consist of the following components:
  May 31,


August 31,2014


2013(Unaudited)Deferred tax assets:Pre-operating costs

$
172,430


$
183,207Equity-based payments


238,141



71,872Net operating loss carryforward


502,692



398,545Valuation allowance


(913,263
)


(653,624
)Net deferred tax assets

$
--


$
--
  The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the three and nine months ended May 31, 2014 and 2013 due to changes in the valuation allowance.
  Based upon historical net losses and the Company being in the exploration stage, management believes that it is not more likely than not that the deferred tax assets will be realized and has provided a valuation allowance of 100% of the deferred tax asset.  The valuation allowance increased by approximately $260,000 and $115,000 in the nine months ended May 31, 2014 and the year ended August 31, 2013, respectively.
  
 F-22
 
 
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 (Unaudited)
 
 Note 9
Commitments
 
 Compensation Agreements
 
 On January 14, 2011 we entered into an agreement with Robert Knight pursuant to which in return for serving as Director – Business Development (a non-executive position), Mr. Knight received $7,500 per month and options to purchase 12,000 shares of our common stock exercisable at $6.25 per share. The options vested over a one year period and expire 5 years from the date of the grant. The initial term of the agreement was for a one year period.  On May 18, 2012, upon the resignations of certain officers and directors, the Company appointed Mr. Knight, CEO, CFO, Secretary and a Director. Compensation remains at $7,500 per month on a month to month basis.
 
 On January 29, 2014, Mr. Knight resigned as President and CEO of the Company and we appointed Michael Altman as President, CEO and a Director. Mr. Knight remains as Chairman of the Board of the Company. Mr. Altman receives compensation of $5,000 per month and received a stock option to acquire 300,000 shares of our common stock exercisable at a price of $0.45 per share.  The option vests over an 18 month period and expires 5 years from the date of grant.
 
 Pursuant to compensation agreements, subject to the exceptions and limitations provided therein, the Company has agreed to hold harmless and indemnify the officers and directors to the fullest extent permitted by law against any and all liabilities and expenses in connection with any proceeding to which such director or officer was, is or becomes a party, arising out of his services as an officer, director, employee, agent or fiduciary of the Company or its subsidiaries.
 
 Lease Agreements
 
 In February 2011, we entered into a one year lease for administrative office space in Oro Valley, Arizona. The lease was effective through February 29, 2012 at a cost of $900 per month.  Currently we lease the facility on a month to month basis at a cost of $125 per month.
 
 Rent expense for the three and nine months ended May 31, 2014 amounted to $300 and $1,100 and for the three and nine months ended May 31, 2013 amounted to $400 and $1,400, respectively.
  F-23
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
  
 Note 9
Commitments (Continued)
 
 Other
 
 Effective October 17, 2013, we entered into a definitive agreement with American Midwest Oil and Gas Corp. ("AMOG") to participate, through a joint venture, in the exploration and development of certain oil and gas wells located in Montana that are currently held by AMOG. This is a related party transaction as our majority shareholder and sole director and officer, at that date, and our current Chairman is also a shareholder of AMOG.
 
 On October 25, 2013, we entered into a Farmout Agreement with AMOG to replace the agreement of October 17, 2013.  This is a related party transaction as our majority shareholder and sole director and officer, at that date, and our current Chairman is also a shareholder of AMOG. The Farmout Agreement gives us the right to drill a well, and potentially additional wells, on the land underlying leases held by AMOG as defined in the agreement.
 
 On March 18, 2014, we entered into a Lease Purchase Agreement with Alberta Oil and Gas LP to purchase its interests in certain oil and gas leases and the leasehold estates created thereby located in Toole County, Montana totaling approximately 14,600 mineral acres (approximately 11,300 net acres). Alberta Oil and Gas LP and AMOG are 50/50 partners in these leases. The purchase price for the lease purchase is $3,600,000 Canadian dollars (“CAD”) (approximately $3,321,000 US dollars), of which, $50,000 CAD ($46,000 US) is to be paid in cash, $1,437,537 CAD ($1,326,000 US) is to be in the form of the assumption of a note (original face value of $1,500,000 CAD) secured against the leases and the remainder to be paid in the form of 7,200,000 shares of our common stock.  The purchase price may be reduced if prior to the closing of the purchase it is determined that the seller does not have a defensible title to all of the leases.  The closing of the purchase was to take place on May 30, 2014, provided that prior to that time we have cash assets of $1,000,000. On April 2, 2014, we amended the Lease Purchase Agreement with Alberta Oil and Gas LP by reducing the number of shares of our common stock to be issued to 7,000,000. This is a related party transaction as our Chairman and our CEO have an equity interest in each of the partners of Alberta Oil and Gas LP. Closing of this transaction has been extended by mutual agreement to July 31, 2014.
 
  F-24
  
 AXIOM OIL AND GAS CORP.
 (An Exploration Stage Company)
 Notes to Financial Statements
 (Unaudited)
 
  Note 9
Commitments (Continued)
 
 On April 2, 2014, we entered into agreements with each of the 5 shareholders of AMOG and a separate agreement with AMOG, whereby we are purchasing all of the issued and outstanding shares of AMOG. This agreement replaces our Farmout Agreement entered into on October 25, 2013.  AMOG is the owner and operator (with its 50/50 partner Alberta Oil and Gas LP) of certain oil and gas leases and the leasehold estates created thereby located in Toole County, Montana totaling approximately 14,600 mineral acres (approximately 11,300 net mineral acres) as well as an interest in 2 recently drilled oil wells and 2 producing gas wells. The purchase price for the shares of AMOG is $3,480,000 and will be paid by the issuance of 7,400,000 shares of our common stock and payment of $150,000 for a licensing fee for the 3D seismic, to be paid from production and/or through the raising of drilling funds. This is a related party transaction as our Chairman has an equity interest in AMOG. The closing of the purchase was to take place May 29, 2014.  This transaction has not closed, but negotiations continue between the parties to resolve the outstanding issues for the completion of this acquisition.
 
 Note 10
Forgiveness of Debt Income
 
 In the nine months ended May 31, 2014, we settled approximately $156,000 in payables through the issuance of notes payable ($35,000), common stock ($40,000) and a stock option ($3,462) resulting in $77,480 in forgiveness of debt income (See Notes 5 and 7).
 
 Note 11
Subsequent Event
 
 On June 18, 2014, we entered into an agreement with Alberta Oil and Gas LP to amend the Lease Purchase Agreement by confirming the transfer of the working interests in the two producing gas wells and the two newly drilled oil wells.
  F-25
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Critical Accounting Policies and Estimates.Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.





Equity-Based Compensation - We account for equity based compensation transactions with employees under the provisions of ASC Topic No. 718, “Compensation: Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of common stock issued for compensation is measured at the market price on the date of grant.  The fair value of our equity instruments, other than common stock, is estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award, and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.





We account for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if we were to pay cash for the goods or services instead of paying with or using the equity instrument.




Other accounting policies are described in the notes to the financial statements included in this Quarterly Report and our Annual Report for the year ended August 31, 2013.  The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended August 31, 2013.








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Overview





Overview.We were incorporated in the State of Nevada on February 13, 2007, under the name TC Power Management Corp. We are in the exploration stage of our business and have not generated any revenues.  We abandoned our previous business of providing consulting services to private and public entities seeking assessment, development, and implementation of energy generating solutions. We changed our planned business activities to the exploration and development of precious metals properties.  On January 13, 2011, we entered into a material definitive agreement to acquire all of the shares of Axiom Minerals de Mexico S.A. de C.V (“Axiom Mexico”) and on May 10, 2011 we changed our name to Axiom Gold and Silver Corporation.  There were no material relationships between Axiom Gold and Silver, its officers and director or its affiliates and any of the shareholders of Axiom Mexico, other than in respect to the material definitive agreement and the pooling agreement.  The agreement called for Axiom Gold and Silver, through its wholly owned Mexican subsidiary, Axiom Acquisition Corp, to acquire all of the issued and outstanding shares of Axiom Mexico, by the issuance of eighty thousand (80,000) common shares of Axiom Gold and Silver.  The shares were issued to the shareholders of Axiom Mexico on a pro rata basis as to their ownership of Axiom Mexico.  Axiom Acquisition Corp. merged with and into Axiom Mexico and the separate corporate existence of Axiom Acquisition Corp. ceased to exist.  On May 31, 2012 we sold all of our interest in Axiom Mexico to an unrelated third party for $100 releasing us from any liabilities in Axiom Mexico.





On August 20, 2012, we entered into an option agreement to acquire 13 Fico claims located near Mt. Morrison in the Yukon Territory (the “Fico Claims”) for an aggregate amount of two hundred and fifty thousand Canadian Dollars ($250,000 CAD) as follows: (a) $15,000 CAD payable six months after the signing of the agreement, February 20, 2013; (b) $25,000 CAD payable twelve months after signing, August 20, 2013; (c) $60,000 CAD payable twenty-four months after signing, August 20, 2014; (d) $150,000 CAD payable thirty-six months after signing, August 20, 2015. We agreed to make the minimum work commitments on the Fico Claims as follows: (a) $100,000 CAD each in the first and second year of the agreement; (b) $250,000 CAD in the third year of the agreement. The option agreement is subject to a 2% net smelter return royalty. In February 2013 we abandoned the Fico claims.





We now plan to focus our business strategy on the exploration and development of oil and gas leases, mainly in the United States of America.  On October 10, 2013 we changed our name to Axiom Oil and Gas Corp.





On October 25, 2013, we entered into a Farmout Agreement with American Midwest Oil and Gas Corp. (“AMOG”). This is a related party transaction as our majority shareholder and one of our directors, Robert Knight is also a shareholder of AMOG.





AMOG has leases (the “Leases”) to explore and develop approximately 14,600 mineral acres of land located in Toole County, Montana, of which AMOG’s (and its 50/50 partner Alberta Oil and Gas LP) net acres amount to approximately 11,300 acres. The Farmout Agreement has been terminated and in lieu thereof, on March 18, 2014, we entered into a Lease Purchase Agreement with Alberta Oil and Gas LP to purchase its’ interest in the Leases.  The purchase price for the interest in the Leases is $3,600,000 Canadian dollars, of which $50,000 CDN is to be paid in cash, $1,437,537 CDN is to be in the form of the assumption of a note (original face value of $1,500,000 CDN) secured against the Leases and the remainder to be paid in the form of 7,200,000 shares of our common stock.  The purchase price may be reduced if prior to the closing of the purchase it is determined that the seller does not have a defensible title to all of the leases.  The closing of the purchase was to take place on May 30, 2014, provided that prior to that time we have cash assets of $1,000,000. On April 2, 2014,we amended the Lease Purchase Agreement with Alberta Oil and Gas LP, by reducing the number of shares of our common stock to be issued to 7,000,000. This is a related party transaction as our Chairman and our Chief Executive Officer have an equity interest in each of the partners of Alberta Oil and Gas LP. Closing of this transaction has been extended by mutual agreement to July 31, 2014.





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On April 2, 2014, we entered into agreements with each of the 5 shareholders of AMOG and a separate agreement with AMOG, whereby we are purchasing all of the issued and outstanding shares of AMOG. AMOG is the owner and operator of certain oil and gas leases and the leasehold estates created thereby located in Toole County, Montana totalling approximately 14,600 mineral acres of which AMOG’s (and its 50/50 partner, Alberta Oil and Gas LP) net acres amount to approximately 11,300 net mineral acres, as well as an interest in 2 recently drilled oil wells and 2 producing gas wells. The purchase price for the shares of AMOG is $3,480,000 and will be paid by the issuance of 7,400,000 shares of our common stock and payment of $150,000 for a licensing fee for the 3D seismic, to be paid from production and/or through the raising of drilling funds. This is a related party transaction as our Chairman has an equity interest in AMOG. The closing of the purchase was to take place May 29, 2014. This transaction has not closed, but negotiations continue between the parties to resolve the outstanding issues for the completion of this acquisition.





Subsequent Events





On June 18, 2014, we entered into an agreement with Alberta Oil and Gas LP to amend the Lease Purchase Agreement by confirming the transfer of the working interests in the two producing gas wells and the two newly drilled oil wells.





Our plan of operation is forward looking, and we may never begin operations.





Plan of Operations





Since the sale of Axiom Mexico and the abandonment of the Fico claims, our current business plan is to acquire oil and gas leases located in the United States of America.





Our proposed principal product is the production of hydrocarbons.  In order to commence the exploration and development of oil and gas leases, we will need to accomplish the following milestones:




1.
Acquire and Begin Exploration of Oil and Gas Leases. We will need to raise additional funds or issue shares to pay for the cost of acquisition and exploration of any oil and gas leases.




2.
Hire Qualified Staff. We will need to hire qualified people to execute our business plan to explore for hydrocarbons. We will need to raise additional funds to attract qualified people to our Company.  We currently have three employees, and we do not intend to hire additional employees at this time.





If the necessary funds are raised to drill a well in Toole County we will work closely with American Midwest Oil and Gas Corp. to identify the location of the first well.  American Midwest Oil and Gas is the operator, so they will contract all of the necessary contractors to drill and complete a well.  Our function, initially, will be to provide capital for the project.





Competition





We compete with other oil and gas companies in connection with the acquisition of oil and gas leases and in connection with the recruitment and retention of qualified employees.  Many of these companies are much larger than us, have greater financial resources and have been in the oil and gas business much longer than we have.  As such, these competitors may be in a better position through size, finances and experience to acquire suitable exploration properties.  We may not be able to compete against these companies in acquiring new leases and/or qualified people to work on any of our leases.





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There is significant competition for the limited number of oil and gas lease opportunities available and, as a result, we may be unable to continue to acquire attractive oil and gas leases on terms we consider acceptable.





Given the size of the world market for oil and gas relative to individual producers and consumers of oil and gas, we believe that no single company has sufficient market influence to significantly affect the price or supply of oil and gas in the world market.





Governmental Regulations - Environmental and Occupational Health and Safety Matters





General





Our operations are subject to stringent and complex federal, regional, state and local laws and regulations governing occupational health and safety, the discharge of materials into the environment or otherwise relating to environmental protection. Compliance with these laws and regulations may require the acquisition of permits before drilling or other related activity commences, restrict the type, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling and production activities on certain lands lying within wilderness, wetlands and other protected areas, impose specific health and safety criteria addressing worker protection, and impose substantial liabilities for pollution arising from drilling and production operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance of injunctions that may limit or prohibit some or all of our operations.





These laws and regulations may also restrict the rate of oil and natural gas production below the rate that would otherwise be possible. The regulatory burden on the oil and natural gas industry increases the cost of doing business in the industry and consequently affects profitability. Additionally, the trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment, and, any changes in environmental laws and regulations that result in more stringent and costly well construction, drilling, waste management or completion activities or waste handling, storage, transport, disposal or remediation requirements could have a material adverse effect on our business. While we believe that we are in substantial compliance with current applicable federal and state environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on our operations or financial condition, there is no assurance that we will be able to remain in compliance in the future with such existing or any new laws and regulations or that such future compliance will not have a material adverse effect on our business and operating results.





The following is a summary of the more significant existing environmental laws to which our business operations are subject and with which compliance may have a material adverse effect on our capital expenditures, earnings or competitive position.





Hazardous Substances and Wastes





The Comprehensive Environmental Response, Compensation, and Liability Act, as amended (“CERCLA”), also known as the “Superfund” law and analogous state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred, and companies that disposed or arranged for the disposal of hazardous substances released at the site. Under CERCLA, these persons may be subject to joint and several, strict liabilities for remediation cost at the site, natural resource damages and for the costs of certain health studies. Additionally, it is not uncommon for neighboring landowners and other third parties to file tort claims for personal injury and property damage allegedly caused by hazardous substances released into the environment. We generate materials in the course of our operations that are regulated as hazardous substances.





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We also may incur liability under the Resource Conservation and Recovery Act, as amended (“RCRA”), and comparable state statutes that impose stringent requirements related to the handling and disposal of non-hazardous and hazardous wastes. There exists an exclusion under RCRA from the definition of hazardous wastes for drilling fluids, produced waters and certain other wastes generated in the exploration, development or production of oil and natural gas, efforts have been made from time to time to remove this exclusion such that those wastes would be regulated under the more rigorous RCRA hazardous waste standards. A loss of this RCRA exclusion could result in increased costs to us and the oil and gas industry in general to manage and dispose of generated wastes.





We intend to own or lease properties that have been used for oil and natural gas exploration and production for many years. Although we believe that we will utilize operating and waste disposal practices that are standard in the industry at the time, hazardous substances, wastes and petroleum hydrocarbons may be released on or under the properties owned or leased by us, or on or under other locations where such substances have been taken for recycling or disposal. In addition, some properties may be operated by third parties whose treatment and disposal of hazardous substances, wastes and petroleum hydrocarbons are not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial plugging or pit closure operations to prevent future contamination.





Water Discharges and Subsurface Injections





The Federal Water Pollution Control Act, as amended, (“Clean Water Act”), and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into state and federal waters. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the U.S. Environmental Protection Agency (“EPA”) or an analogous state agency. Spill prevention, control and countermeasure (“SPCC”) plan requirements imposed under the Clean Water Act require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak. In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. The Clean Water Act also prohibits the discharge of dredge and fill material in regulated waters, including wetlands, unless authorized by permit. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. In addition, the Oil Pollution Act of 1990, as amended (“OPA”), imposes a variety of requirements related to the prevention of oil spills into navigable waters as well as liabilities for oil cleanup costs, natural resource damages and a variety of public and private damages that may result from such oil spills.





The disposal of oil and natural gas wastes into underground injection wells are subject to the federal Safe Drinking Water Act, as amended (“SDWA”), and analogous state laws. Under Part C of the SDWA, the EPA established the Underground Injection Control Program, which establishes requirements for permitting, testing, monitoring, recordkeeping and reporting of injection well activities as well as a prohibition against the migration of fluid containing any contaminants into underground sources of drinking water. State programs may have analogous permitting and operational requirements. Any leakage from the subsurface portions of the injection wells may cause degradation of freshwater, potentially resulting in cancellation of operations of a well, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource, and imposition of liability by third parties for property damages and personal injury.





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Hydraulic Fracturing





Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense subsurface rock formations. The hydraulic fracturing process involves the injection of water, sand, and chemicals under pressure into targeted subsurface formations to fracture the surrounding rock and stimulate production. We would expect to use hydraulic fracturing techniques in our drilling and completion programs. Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but the EPA has asserted federal regulatory authority pursuant to the SDWA over certain hydraulic fracturing activities involving the use of diesel fuels and has published draft permitting guidance addressing the performance of such activities using diesel fuels. In November 2011, the EPA announced its intent to develop and issue regulations under the Toxic Substances Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing and the agency currently plans to issue a Notice of Proposed Rulemaking in the Semi-annual Regulatory Agenda published on July 3, 2013, on such disclosure regulations. In addition, Congress has from time to time considered legislation to provide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. At the state level, some states have adopted, and other states are considering adopting legal requirements that could impose more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities. Local government also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular. We believe that we follow applicable standard industry practices and legal requirements for groundwater protection in any hydraulic fracturing activities we may undertake. Nevertheless, if new or more stringent federal, state, or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we may operate, we could incur potentially significant added costs to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be precluded from drilling wells.





In addition, certain governmental reviews have been conducted or are underway that focus on environmental aspects of hydraulic fracturing practices. The White House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices. The EPA has commenced a study of the potential environmental effects of hydraulic fracturing on drinking water and groundwater, with a draft report drawing conclusions about the potential impacts of hydraulic fracturing on drinking water resources expected to be available for public comment and peer review in 2014. Moreover, the EPA has announced that it will develop effluent limitations for the treatment and discharge of wastewater resulting from hydraulic fracturing activities in 2014. These studies, depending on their degree of pursuit and any meaningful results obtained, could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory mechanisms.





Air Emissions





The Federal Clean Air Act, as amended (“CAA”), and comparable state laws, regulate emissions of various air pollutants from many sources in the United States, including crude oil and natural gas production activities through air emissions standards, construction and operating programs and the imposition of other compliance requirements. These laws and any implementing regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with stringent air permit requirements, or utilize specific equipment or technologies to control emissions of certain pollutants. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the Clean Air Act and associated state laws and regulations. Over the next several years, we may be required to incur certain capital expenditures for air





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pollution control equipment or other air emissions-related issues. For example, in 2012, the EPA published final rules under the CAA that subject oil and natural gas production, processing, transmission and storage operations to regulation under the New Source Performance Standards (“NSPS”) and National Emission Standards for Hazardous Air Pollutants (“NESHAP”) programs. With regards to production activities, these final rules require, among other things, the reduction of volatile organic compound emissions from three subcategories of fractured and refractured gas wells for which well completion operations are conducted: wildcat (exploratory) and delineation gas wells; low reservoir pressure non-wildcat and non-delineation gas wells; and all “other” fractured and refractured gas wells. All three subcategories of wells must route flow back emissions to a gathering line or be captured and combusted using a combustion device such as a flare. However, the “other” wells must use reduced emission completions, also known as “green completions,” with or without combustion devices, after January 1, 2015. These regulations also establish specific new requirements regarding emissions from production-related wet seal and reciprocating compressors and from pneumatic controllers and storage vessels. Compliance with these requirements could increase our costs of development and production, which costs could be significant.





Climate Change





Based on findings by the EPA in December 2009 that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”) present an endangerment to public health and the environment because emissions of such gases are contributing to the warming of the earth’s atmosphere and other climatic changes, the EPA has adopted regulations under existing provisions of the CAA that, among things, establish pre-construction and operating permit reviews for certain large stationary sources that are potential major sources of GHG emissions. This rule could adversely affect our operations and restrict or delay our ability to obtain air permits for new or modified sources that exceed GHG emission threshold levels. The EPA also adopted rules requiring the monitoring and reporting of GHG emissions from specified sources in the United States on an annual basis, including, among others, certain onshore and offshore oil and natural gas production facilities, which include certain of our operations. We are monitoring GHG emissions from our operations in accordance with the GHG emissions reporting rule and believe that our monitoring activities are in substantial compliance with applicable reporting obligations.





Congress has from time to time considered legislation to reduce emissions of GHGs but it has not adopted such legislation in recent years. A number of state and regional efforts have emerged that seek to reduce GHG emissions by means of cap and trade programs that often require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. Any such future laws and regulations that require reporting of GHGs or otherwise limit emissions of GHGs from our equipment and operations could require us to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas that we produce. Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to occur, they could have an adverse effect on our exploration and production interests and operations.








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Endangered Species





The Federal Endangered Species Act, as amended (“ESA”), and analogous state laws restrict activities that could have an adverse effect on threatened or endangered species or their habitats. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. Some of our future operations may be located in or near areas that are designated as habitat for endangered or threatened species. In these areas, we may be obligated to develop and implement plans to avoid potential adverse impacts to protected species, and we may be prohibited from conducting operations in certain locations or during certain seasons, such as breeding and nesting seasons, when our operations could have an adverse effect on the species. It is also possible that a federal or state agency could order a complete halt to our activities in certain locations if it is determined that such activities may have a serious adverse effect on a protected species. Moreover, as a result of a settlement approved by the U.S. District Court for the District of Columbia in September 2011, the U.S. Fish and Wildlife Service is required to make a determination on listing of numerous species as endangered or threatened under the ESA before the completion of the agency’s 2017 fiscal year. The presence of protected species or the designation of previously unidentified endangered or threatened species could impair our ability to timely complete well drilling and development and could cause us to incur additional costs or become subject to operating restrictions or bans in the affected areas.





Employee Health and Safety





We are also subject to the requirements of the Federal Occupational Safety and Health Act, as amended, (“OSHA”), and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard, the Emergency Planning and Community Right-to-Know Act, as amended, and implementing regulations and similar state statutes and regulations require that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local governmental authorities and citizens. We believe that we are in substantial compliance with all applicable laws relating to worker health and safety.





Other Laws and Regulations





State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. In addition, there are state statutes, rules and regulations governing conservation matters, including the unitization or pooling of oil and natural gas properties, establishment of maximum rates of production from oil and natural gas wells and the spacing, plugging and abandonment of such wells. Such statutes and regulations may limit the rate at which oil and natural gas could otherwise be produced from our properties and may restrict the number of wells that may be drilled on a particular lease or in a particular field.





Employees





We currently have three employees working for us, our CEO and our CFO and one of our directors.





All oil and gas exploration and operations will be contracted out to third parties.  In the event that our exploration projects are successful and warrant putting any of our leases into production, such operations may also be contracted out to third parties.  We rely on management to handle all matters related to business development and business operations.





For the three months and nine months ended May 31, 2014, as compared to the three months and nine months ended May 31, 2013.





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Results of Operations





Revenues. Since inception, we have yet to generate any revenues from our business operations.  Our ability to generate revenues has been significantly hindered by our lack of capital. We hope to generate revenues as we implement our business plan.





Operating Expenses.For the nine months ended May 31, 2014, our total operating expense was $685,051, which includes $430,748 in stock based compensation, as compared to total operating expenses of $192,576 for the nine months ended May 31, 2013. For the three month period ended May 31, 2014 our total operating expense was $115,505, which includes $31,675 in stock based compensation, as compared to total operating expense of $62,474 for the three month period ended May 31, 2013. Our total operating expenses consist primarily of legal expenses, accounting expenses and stock based compensation related to being a public company.





We expect that we will continue to incur significant legal and accounting expenses related to being a public company.





Other Income (Expenses).For the nine months ended May 31, 2014, we have other income of $57,876, which consists of $77,480 of forgiveness of debt income net of $19,604 of interest expense, as compared to $2,730 of interest expense for the nine months ended May 31, 2013. For the three months ended May 31, 2014 and 2013, we incurred interest expense of $7,912 and $1,122, respectively.





Net Loss.For the nine months ended May 31, 2014, our net loss was $627,175, as compared to the nine months ended May 31, 2013, in which our net loss was $195,306.  We expect to continue to incur net losses for the foreseeable future and until we generate significant revenues.  For the three month period ended May 31, 2014 our net loss was $123,417, as compared to our net loss of $63,596 for the three month period ended May 31, 2013.





Liquidity and Capital Resources





We had cash of $188 as of May 31, 2014 and total assets of $1,588 as of that date. At August 31, 2013, we had cash of $362 and total assets of $1,762. We are seeking to raise additional funds to meet our working capital needs principally through the sales of our securities.  As of the date of this report, during fiscal 2014 we have received additional financing of $75,000 through the issuance of convertible debentures.  Additional funding has not been secured and no assurance may be given that we will be able to raise additional funds.





As of May 31, 2014, our total liabilities were $725,130 comprised of $478,130 in accounts payable and accrued expenses (including, $211,000 owed to our Chairman for accrued compensation and expenses), $137,000 in notes payable to non-affiliates, $5,000 in notes payable to our Chairman and $105,000 in convertible debentures. As of August 31, 2013, our total liabilities were $607,539, comprised of $510,539 in accounts payable and accrued expenses (including $120,000 owed to our Chairman for accrued compensation and expenses), $67,000 in notes payable to non-affiliates and $30,000 in convertible debentures.








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As of May 31, 2014 and August 31, 2013, we had outstanding promissory notes in the amount of $142,000 (including $5,000 owed to our Chairman) and $67,000, respectively.  Interest on these notes range from -0-% to 15%. As of May 31, 2014 and August 31, 2013, notes in the amount of $80,000 and $10,000, respectively, are past due. We have not repaid these notes and no demand for payment has been made to date.  The notes are from unrelated parties (except for the $5,000 owed to our Chairman) and are unsecured.





On July 5, 2013, the Board of Directors authorized the issuance of 20% Convertible Redeemable Debentures ("Convertible Debentures") in an aggregate principal amount not exceeding US $250,000.  The debentures mature between June 30, 2014 and July 30, 2014 and accrue interest at 20% per annum from the day of initial issuance.  As defined in the debenture agreement, the Convertible Debentures, at the option of the holder at any time commencing on December 31, 2013 until maturity, are convertible into shares of common stock of the Company, at a price of $0.25 per share on a post consolidated basis (as to be determined). As of May 31, 2014 and August 31, 2013, $105,000 and $30,000 of Convertible Debentures are outstanding.





At inception, we sold 800,000 shares of common stock to our officers and director for $500 in cash. In 2008, we sold an additional 179,336 shares of common stock through our public offering for proceeds of $112,085. We have used the proceeds from the cash raised in that offering to pay the legal and accounting costs of being a public company. For the year ended August 31, 2011, we sold 172,960 shares of common stock through our public offering for gross proceeds of $1,081,000.  We recorded $96,850 of costs related to the offering.  We used the proceeds from this offering for general working capital to pay the costs of operations.





In December 2011, we received gross proceeds of $285,904 from the sale of 45,745 shares of common stock at $6.25 per share to one non-U.S. investor pursuant to Regulation S.





Effective August 16, 2012, our current Chairman converted $212,218 of accrued and unpaid compensation and reimbursable expenses owed him into 8,488,720 shares of common stock at $0.75 per share. We incurred a charge for share based finance costs of $6,154,322 in the year ended August 31, 2012.





In August 2012, we received gross proceeds of $10,000 from the sale of 16,000 Units at $0.625 per Unit which included 16,000 shares of common stock and warrants to purchase 1,600 shares of common stock at $0.875 per share to a non-US accredited investor pursuant to Regulation S.  We incurred offering costs of $1,000 (10% of gross proceeds) plus warrants to purchase 1,143 shares of common stock at $0.875 per share.





In September 2012, we received gross proceeds of $33,750 from the sale of 54,000 Units at $0.625 per Unit which included 54,000 shares of common stock and warrants to purchase 5,400 shares of common stock at $0.875 per share to three non-US accredited investors pursuant to Regulation S.  We incurred offering costs of $3,375 (10% of gross proceeds) plus warrants to purchase 3,857 shares of common stock at $0.875 per share.





In December 2012, our former CEO converted $157,500 of accrued and unpaid compensation and reimbursable expenses owed him into 50,000 shares of Company common stock valued at $132,500 and a $25,000 promissory note.





In July and August 2013, we received $30,000 through the sale of convertible debentures to two non-US accredited investors pursuant to Regulation S.  The debentures are due and payable between June 30, 2014 and July 30, 2014 and carry an interest rate of 20% per annum and are convertible at $.25 per share any time after December 31, 2013 on a post consolidated basis.








12








In September 2013, we received $35,000 through the sale of convertible debentures to two non-US accredited investors pursuant to Regulation S.  The debentures are due and payable between June 30, 2014 and July 30, 2014, and carry an interest rate of 20% per annum and are convertible at $.25 per share any time after December 31, 2013 on a post consolidated basis.





In October, 2013, we received $15,000 through the sale of convertible debentures to two non-US resident accredited investors pursuant to Regulation S. The debentures are due and payable June 30, 2014 and carry an interest rate of 20% per annum and are convertible at $.25 per share any time after December 31, 2013 on a post consolidated basis.





Effective October 16, 2013, we entered into a consulting agreement for assistance in certain business and corporate matters, such as strategic and business plans, expansion of the Company's shareholder base and financing alternatives. The term of the agreement is for a period of 90 days from the effective date. We issued the consultant a total of 700,000 shares of Company common stock valued at $140,000, the fair value on the effective date, as compensation under the agreement.





On October 30, 2013, we settled an outstanding payable in the amount of approximately $124,000 through the issuance of an 8% promissory note in the amount of $35,000 due January 31, 2014 and 200,000 shares of our common stock with an agreed upon value of $0.01 per share.





In December 2013, we received $20,000 through the sale of a convertible debenture to a non-US accredited investor pursuant to Regulation S.  The debenture is due and payable June 30, 2014 and carries an interest rate of 20% per annum and is convertible at $.25 per share any time after December 31, 2013 on a post consolidated basis.





In January 2014, we received $5,000 through the sale of a convertible debenture to a non-US accredited investor pursuant to Regulation S.  The debenture is due and payable June 30, 2014 and carries an interest rate of 20% per annum and is convertible at $.25 per share at any time after issuance on a post consolidated basis.





Effective February 4, 2014, we settled an outstanding payable in the amount of approximately $70,000 through the issuance of an 8% promissory note in the amount of $35,000 due April 30, 2014 and 140,000 shares of our common stock with an agreed upon value of $0.01 per share. The common stock was valued at $0.25 per share, $35,000, representing the fair value of the remaining payable balance, which was more reliably measurable.





On February 17, 2014, we entered into a consulting agreement for business advisory and other related services. The agreement is for a term of six months with compensation of $2,000 per month. Pursuant to the agreement we also issued the consultant a total of 300,000 shares of Company common stock for $200. The stock is valued at $153,000, $0.51 per share being the fair value on the effective date of the agreement.





During fiscal 2014, we expect that our business plan for exploration of oil and gas will be a significant cost to us and to complete that plan we will need to raise substantial funds.  Furthermore, if we find additional leases for acquisitions that may also require significant capital, not only for the actual acquisition but also for any exploration work that may need to be completed.  As well, the legal and accounting costs of being a public company will continue to impact our liquidity and we will need to obtain funds to pay those expenses. Other than the anticipated exploration costs, acquisition costs, increases in legal and accounting costs due to the reporting requirements of being a reporting company, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.





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In the opinion of management, available funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors. In order to implement our business plan in the manner we envision, we will need to raise additional capital.  We cannot guaranty that we will be able to raise additional funds. Moreover, in the event that we can raise additional funds, we cannot guaranty that additional funding will be available on favorable terms. In the event that we experience a shortfall in our capital, we hope that our officers, directors and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months.  At this time, though, we do not have any arrangement with any of our officers, directors or shareholders to provide any funding for the Company.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements.





Item 3. Quantitative and Qualitative Disclosures about Market Risk





Not applicable.





Item 4. Controls and Procedures





Evaluation of Disclosure Controls and Procedures.Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, in accordance with Exchange Act Rules 13a-15F and 15d-15F, we carried out an evaluation, under the supervision and with the participation of Michael Altman, our Chief Executive Officer and Frank Lamendola our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon and as of the date of that evaluation, Mr. Altman and Mr. Lamendola concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported as and when required.  The reason we believe our disclosure controls and procedures are not effective is because:





1.
No independent directors;


2.
No segregation of duties;


3.
No audit committee; and


4.
Ineffective controls over financial reporting.





Changes in internal controls.There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this 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.





None.





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





31.1
Certification of Principal Executive Officer  pursuant to Rule 13a-15(a) and 15d-15(e) of the Securities Exchange Act of 193431.2
Certification of Chief Financial Officer and Acting Principal Accounting Officer pursuant to Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 193432.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of Chief Financial Officer and Acting Principal Accounting Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002











15








SIGNATURES





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





Axiom Oil and Gas Corp.





By: /s/ Michael Altman


Michael Altman


Its: President, Chief Executive Officer, Director (Principal Executive Officer).


Date:  July 14, 2014





By: /s/ Frank Lamendola


Frank Lamendola


Its: Chief Financial Officer, Director (Principal Accounting Officer)


Date:  July 14, 2014