AFFILIATE TRANSACTIONS

12 Months Ended

Oct. 31, 2015

(5)	AFFILIATE TRANSACTIONS

In August 2009, the Company entered into an agreement with AXIS Consultants Pty Ltd (“AXIS”) to provide geological, management and administration services to the Company, (the “Service Agreement”). AXIS has some common management and is incorporated in Australia. Mr. Peter Lee is Chief Financial Officer and Company Secretary of AXIS and owes fiduciary duties to both parties. AXIS’s principal business is to provide geological, management and administration services to companies. We are one of seven companies that AXIS provides services to, namely, Merlin Diamonds Limited, Top End Minerals Limited, Northern Capital Resources Corp, Golden River Resources Corporation, Great Central Resources Corp, Aurum Inc., and Consolidated Gems Inc.

Each of the companies has some common Directors, officers and shareholders. In addition, each of the companies is substantially dependent upon AXIS for its senior management and certain mining and exploration staff. A number of arrangements and transactions have been entered into from time to time between such companies. It has been the intention of the companies and respective Boards of Directors that each of such arrangements or transactions should accommodate the respective interest of the relevant companies in a manner which is fair to all parties and equitable to the shareholders of each. Currently, there are no material arrangements or planned transactions between the Company and any of the other companies other than AXIS.

AXIS is paid by each company for the costs incurred by it in carrying out the administration function for each such company. Pursuant to the Service Agreement, AXIS performs such functions as payroll, maintaining employee records required by law and by usual accounting procedures, providing insurance, human resources, company secretarial, land management, certain exploration and mining support including provision of exploration managers and geologists, financial, accounting advice and services. AXIS also provides for the Company’s various services, including but not limited to the making available of office supplies, office facilities and any other services as may be required from time to time by the Company as and when requested by the Company.

We are required to reimburse AXIS for any direct costs incurred by AXIS for the Company. In addition, we are required to pay a proportion of AXIS’s overhead cost based on AXIS’s management estimate of our utilisation of the facilities and activities of AXIS plus a service fee of not more than 15% of the direct and overhead costs. Amounts invoiced by AXIS are required to be paid by us. We are also not permitted to obtain services from sources other than AXIS, and we are not permitted to perform or provide ourselves, the services contemplated by the Service Agreement, unless we first request AXIS to provide the service and AXIS fails to provide the service within one month.

The Service Agreement may be terminated by AXIS or ourselves upon 60 days prior notice. If the Service Agreement is terminated by AXIS, we would be required to independently provide, or to seek an alternative source of providing, the services currently provided by AXIS. There can be no assurance that we could independently provide or find a third party to provide these services on a cost-effective basis or that any transition from receiving services under the Service Agreement will not have a material adverse effect on us. Our inability to provide such services or to find a third party to provide such services may have a material adverse effect on our operations.

In accordance with the Service Agreement, AXIS provides the Company with the services of our Chief Executive Officer, Chief Financial Officer and clerical employees, as well as office facilities, equipment, administrative and clerical services. We pay AXIS for the actual costs of such facilities plus a maximum service fee of 15%. AXIS billed Aurum, Inc. as per the services agreement for 2015 of $56,226 (2014: $71,597).

During the year ended October 31, 2015, AXIS provided services in accordance with the services agreement and incurred direct costs on behalf of the Company of $56,226 (2014: $71,597), and advanced the Company $23,180 (2013: $170,091). For the year ended October 31, 2015, the foreign currency translation effect of the amount owed to AXIS was a gain of $1,224,634 (2014: $542,982). During fiscal 2015, the Company issued 30,000,000 shares of common stock to AXIS as repayment of a debt of $5,057,776. At October 31, 2015, the Company owed AXIS $834,327 (2014: $7,025,426). At October 31, 2015, the Company owed the Managing Director of its former Laos operations (“Manager”) $232,500 (2014: $232,500). The Company intends to repay these amounts with funds raised either via additional debt or equity offerings. AXIS and the Manager have advised they do not currently intend to require repayment of these advances prior to October 31, 2016, accordingly, the Company has decided to classify the amounts payable as non-current in the accompanying balance sheets.

Aurum, Inc. 10-K