10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended November 30, 2016

OR

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

For the transition period from __________ to _________

Commission File No. 000-55383

FAIRWIND ENERGY INC.

(Exact name of registrant as specified in its charter)

Nevada	46-2876282
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

32932 Pacific Coast Highway, #14-254

Dana Point, California 92629

(Address of principal executive offices, zip code)

(949) 933-5411

(Registrant’s telephone number, including area code)

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes o No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

As of January 19, 2017, there were 6,017,406 shares of common stock, $0.001 par value per share, outstanding.

FAIRWIND ENERGY INC.

(A Development Stage Company)

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2016

INDEX

Index		Page
Part I. Financial Information
Item 1.	Financial Statements	4
	Balance sheets at November 30, 2016 (Unaudited) and August 31, 2016.		5
	Statements of operations for the three months ended November 30, 2016 and 2015 (unaudited).		6
	Statements of cash flows for the three months ended November 30, 2016 and 2015 (unaudited).		7
	Notes to Financial Statements (unaudited).		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		14
Item 4.	Controls and Procedures.		14
Part II. Other Information
Item 1.	Legal Proceedings.		15
Item 1A.	Risk Factors		15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		15
Item 3.	Defaults Upon Senior Securities.		15
Item 4.	Mine Safety Disclosures.		15
Item 5.	Other Information.		15
Item 6.	Exhibits.		16
Signatures			17

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of FairWind Energy Inc., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of oil and gas prices, the possibility that equipment development efforts will not produces equipment that prospective customers want to purchase, the Company’s need for and ability to obtain additional financing, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

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PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS.

Fair Wind Energy, Inc.

November 30, 2016 and November 31, 2015

Index to the Financial Statements

Contents	Page(s)
Balance sheets at November 30, 2016 (Unaudited) and August 31, 2016	5
Statements of operations for the three months ended November 30, 2016 and 2015 (Unaudited)	6
Statements of cash flows for the three months ended November 30, 2016 and 2015 (Unaudited)	7
Notes to the financial statements (Unaudited)	8

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Fair Wind Energy, Inc.

Balance Sheets

	November 30, 2016			August 31, 2016
	(Unaudited)
Assets
Current Assets
Cash	$	15,115		$	619
Total current assets		15,115			619
Note Receivable
Note receivable		10,000			-
Computer Equipment
Computer equipment		1,328			1,328
Total property and equipment		1,328			1,328
Accumulated depreciation		(726	)		(660	)
Computer equipment, net		602			668
Total assets	$	25,717		$	1,287
Liabilities and Stockholders' (Deficit)
Current Liabilities
Derivative liability	$	155,335		$	-
Accounts payable		1,859			2,798
Accrued expenses		891			891
Total current liabilities		158,085			3,689
Long Term Liabilities
Convertible note payable, net		8,688			-
Convertible note payable, net - related party		6,933			-
Total long term liabilities		15,621			-
Commitments and Contingencies
Liabilities and Stockholders' (Deficit)
Preferred stock par value $0.001: 25,000,000 shares authorized; 0 issued or outstanding		-			-
Common stock par value $0.001: 50,000,000 shares authorized; 6,017,406 and 5,992,406 shares issued and outstanding, respectively		6,017			6,017
Additional paid-in capital		704,123			719,468
Accumulated deficit		(858,129	)		(727,887	)
Total stockholders' (Deficit)		(147,989	)		(2,402	)
Total liabilities and stockholders' (Deficit)	$	25,717		$	1,287

 

See accompanying notes to the unaudited financial statements.

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Fair Wind Energy, Inc.

Statements of Operations

	For the Three			For the Three
	Months Ended			Months Ended
	November 30, 2016			November 30, 2015
Revenue
Consulting services	$	-		$	15,000
Operating Expenses
Professional fees		63,805			4,063
Research and development		-			748
Salary and wages - officers		20,053			7,177
General and administrative expenses		7,922			3,361
Total operating expenses		91,780			15,349
Loss from Operations		(91,780	)		(349	)
Other (Income) Expense
Gain (loss) on fair value of derivative instruments		36,652			-
Amortization of derivative discount		1,811			-
Other (income) expense, net		38,463			-
Loss before Income Tax Provision		(130,243	)		(349	)
Income Tax Provision		-			-
Net Loss	$	(130,243	)	$	(349	)
Loss per share
- Basic	$	(0.02	)	$	(0.00	)
- Diluted	$	(0.02	)	$	(0.00	)
Weighted average common shares outstanding
- Basic		6,017,406			5,992,406
- Diluted		6,067,406			5,992,406

 

See accompanying notes to the unaudited financial statements. 

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Fair Wind Energy, Inc.

Statements of Cash Flows

	For the Three			For the Three
	Months Ended			Months Ended
	November 30, 2016			November 30, 2015
	(Unaudited)			(Unaudited)
Cash Flows from Operating Activities
Net loss	$	(130,243	)	$	(349	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liabilties		36,652			-
Depreciation expense		66			66
Amortization expense		-			63
Amortization of discount on derivative liabilities		1,811			-
Warrant expense		52,149			-
Contribution to capital		20,000			-
Changes in operating assets and liabilities:
Accounts payable		(939	)		-
Accrued expenses		-			(6,604	)
Net Cash Used in Operating Activities		(20,504	)		(6,824	)
Cash Flows from Investing Activities
Note receivable		(10,000	)
Net Cash Used in Investing Activities		(10,000	)		-
Cash Flows from Financing Activities
Proceeds from notes payable		45,000
Net Cash Provided by Financing Activities		45,000			-
Net Change in Cash		14,496			(6,824	)
Cash - beginning of reporting period		619			13,195
Cash - end of reporting period	$	15,115		$	6,371
Supplemental disclosure of cash flow information:
Interest paid	$	-		$	-
Income tax paid	$	-		$	-
Non Cash Financing and Investing Activities
Reclassification of tainted warrants to derivative liabilty	$	87,493		$	-
Recognition of derivative discount	$	31,190		$	-

 

See accompanying notes to the unaudited financial statements. 

7

FairWind Energy, Inc.

November 30, 2016

Notes to the Financial Statements

(Unaudited)

Note 1 - Organization and Operations

FairWind Energy, Inc.

FairWind Energy, Inc. (the "Company") was incorporated on April 18, 2013 under the laws of the State of Nevada. The Company engages in composite design, engineering and manufacturing to be used in solar/wind hybrid power systems, oil and gas industry pumping and civil engineering and infrastructure products.

Note 2 - Significant and Critical Accounting Policies and Practices

The management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company's financial condition and results and require management's most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company's significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of Presentation

The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and with the rules and regulations of the United States Securities and Exchange Commission ("SEC") to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements of the Company for the reporting period ended August 31, 2016 and notes thereto contained in the Company’s Annual Report on Form 10-K.

Derivative Liabilities

The Company evaluates its financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked- to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.

From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.

These derivative instruments did not trade in an active securities market. The Company used Black Scholes option pricing model to value derivative liabilities. This model used Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement.

 

8

Note 3 - Going Concern

The Company's financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit at November 30, 2016, a net loss, and net cash used in operating activities for the three months then ended. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The Company is attempting to commence operations and generate sufficient revenue; however, the Company's cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 - Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Related Parties	Relationship	Related Party Transactions	Business Purpose of transactions
Directors, officers and significant stockholders
Michael Winterhalter	Chairman, CEO, significant stockholder and director	(i) Office space at no cost	(i) Cost is nominal.
Eric Krogius	Director	None.	Not applicable.

Free Office Space

The Company has been provided office space by its Chief Executive Officer at no cost. Management determined that such cost is nominal and did not recognize the rent expense in its financial statement.

Convertible Note Payable

The Company issued a convertible promissory note on September 23, 2016 to William C. Winterhalter, Michael Winterhalter’s father, in the amount of $20,000. The interest rate is 8% and the maturity date is September 23, 2019 in which all outstanding principal together with interest on this note shall be due. The outstanding note and accrued interest convert at the option of the holder or the Company at the volume weighted average price of the common stock for the preceding 10 days (10-day VWAP).

Related party convertible note payable is presented net of a derivative discount of $13,067 on the accompanying balance sheets. The derivative liability related to related party convertible notes payable as of November 30, 2016 was $13,705 and is presented as part of “Derivative liability” on the accompanying balance sheets. The decrease in fair value of the derivative liability of the related party convertible note payable for the period ending November 30, 2016 was $227 and is included in “Gain (loss) on fair value of derivative instruments” on the accompanying statements of operations. Amortization of the discount on related party convertible note payable was $865 for the period ending November 30, 2016 and is included in “Amortization of derivative discount” in the accompanying statements of operations.

Note 5 - Equity

Consulting Agreement

On March 14, 2016, the Company entered into a consulting agreement with Steve Moore for consulting services related to develop business & advise management of technology, products and services used in the oil and gas exploration and production. This agreement combines commissions payable on gross profit, as well as a warrant of company stock. The cost of these benefits is estimated at $250,000 over 2 years. As of November 30, 2016, 125,000 warrants of company stock are outstanding under this agreement. Costs associated with the warrant issuances are included in "Professional fees" in the accompanying statements of operations in the amount of $52,149 for the three months ended November 30, 2016.

9

The fair market value of stock warrants is determined using the Black-Scholes valuation model, and the company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatility of the Company’s common stock; the expected term of warrants granted are based on the original contractual term; and the risk-free interest rate is based on the U.S. Treasury implied yield on zero-coupon issues (with a remaining term equal to the expected term of the warrant).

As of November 30, 2016, total unrecognized stock warrant cost related to unvested stock warrant awards remaining outstanding was $76,493 and is expected to be recognized through June 2017. As of November 30, 2016, 50,000 warrants were exercisable.

During the period ending November 30, 2016 $87,493 of previously recognized expense was reclassified from equity to a derivative liability related to outstanding fully-vested common stock warrants. The derivative liability related to tainted warrants as of November 30, 2016 was $124,952 and is presented as part of “Derivative liability” on the accompanying balance sheets. The increase in the fair value of the derivative liabilities generated by tainted warrants for the period ending November 30, 2016 was $37,459 and are included in “Gain (loss) on fair value of derivative instruments” in the accompanying statements of operations.

Waived Compensation

The Company and Michael Winterhalter collectively waived payment in the amount of $15,000 for the quarter ended November 30, 2016. Waived compensation expense is included in payroll expense in the accompanying Statements of Operations.

The Company and Eric Krogius collectively waived payment in the amount of $5,000 for the quarter ended November 30, 2016. Waived compensation expense is included in payroll expense in the accompanying Statements of Operations.

Note 6 - Notes Receivable and Convertible Note Payable

The Company issued a note receivable on September 28, 2016 in the amount of $10,000 to Black Diamond Bits, LLC. The interest rate is 8% and the principal and interest will be due in its entirety on January 1, 2017 for a total amount of $10,200. Subsequent to the balance sheet date, Black Diamond entered an agreement to sell their business. Payment from Black Diamond Bits, LLC. will be included in the net settlement of the acquisition, and is expected to be remitted in March when the sale is closed.

The Company issued a convertible promissory note on October 1, 2016 to Julie Cameron Down Revocable Trust in the amount of $25,000. The interest rate is 8% and the maturity date is September 30, 2019 in which all outstanding principal together with interest on this note shall be due. The outstanding note and accrued interest convert at the option of the holder or the Company at the volume weighted average price of the common stock for the preceding 10 days (10-day VWAP).

Convertible note payable is presented net of a derivative discount of $16,312 on the accompanying balance sheets. The derivative liability related to convertible notes payable as of November 30, 2016 was $16,678 and is presented as part of “Derivative liability” on the accompanying balance sheets. The decrease in fair value of the derivative liability of the convertible note payable for the period ending November 30, 2016 was $580 and is included in “Gain (loss) on fair value of derivative instruments” on the accompanying statements of operations. Amortization of the discount on convertible note payable was $946 for the period ending November 30, 2016 and is included in “Amortization of derivative discount” in the accompanying statements of operations.

Note 7 - Derivative Liabilities

The following table set forth by level, within the fair value hierarchy, the Company’s derivative liabilities at fair value as of November 30, 2016:

	Level 1		Level 2		Level 3		Total
Tainted Warrants	$	-	$	-	$	124,952	$	124,952
Related party convertible notes payable		-		-		13,705		13,705
Convertible notes payable		-		-		16,678		16,678
Total derivative liabilities at fair value	$	-	$	-	$	155,335	$	155,335

10

Level 3 Gains and Losses

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 derivative liabilities for the period ending November 30, 2016:

Balance, beginning of period	$	-
Realized gains (losses)		-
Unrealized (gains) losses relating to derivative liabilities		36,652
Reclassification of warrant expense from equity		87,493
Derivative liability incurred on related party convertible note payable issuance		13,932
Derivative liability incurred on convertible note issuance		17,258
Balance, end of period	$	155,335

11

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following information should be read in conjunction with (i) the financial statements of FairWind Energy Inc., a Nevada corporation (the “Company”), and development stage company, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the August 31, 2016 audited financial statements and related notes included in the Company’s Form 10-K, as amended (File No. 000-55383; the “Form 10-K”), as filed with the Securities and Exchange Commission on December 12, 2016. Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute “forward-looking” statements

OVERVIEW

The Company was incorporated in the State of Nevada on April 18, 2013 and established a fiscal year end of August 31. It is a development stage company.

Going Concern

To date the Company has little operations or revenues and consequently has incurred recurring losses from operations. No revenues are anticipated until we complete the financing we endeavor to obtain, as described in the Form 10-K, and implement our initial business plan. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern.

Our activities have been financed from the proceeds of share subscriptions. From our inception to November 30, 2016, we raised a total of $442,301 from private and public offerings of our common stock.

The Company plans to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through this or any other offerings.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results:

Basis of Accounting

The Company's financial statements are prepared using the accrual method of accounting and are presented in United States Dollars.

12

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with maturities of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Major repairs and betterments are capitalized and normal maintenance and repairs are charged to expense as incurred. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale of an asset, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

Fair Value of Financial Instruments

The fair value of cash and cash equivalents and accounts receivable and accounts payable approximates their carrying amount.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

PLAN OF OPERATION

We are a development stage corporation and have not yet generated or realized meaningful revenues from our business. We are involved in the design, engineering and manufacturing of composite products. The initial thrust of our business will be to supply products to the oil and gas industry. These products will include upstream production products such as sucker rods, fracking plugs, casings and other products where high temperature resistance, chemical resistance and a low weight to strength ratio products offer advantages to traditional materials (e.g., steel). If we are able to supply products to the oil and gas industry, then we plan to continue the development and sales of wind and solar hybrid energy systems. These systems also benefit from the use of higher performance materials (composites) and we will intend to incorporate them in product design and development.

Results of Operations

Three-Month Periods Ended November 30, 2016 and 2015

We recorded no revenues for the three months ended November 30, 2016, and revenues of $15,000 for the three months ended November 30, 2015, all of which were derived from consulting services.

For the three months ending November 30, 2016, we incurred total operating expenses of $98,780, consisting of professional fees of $63,805, salaries and wages to officers of the Company of $20,053, and general and administrative expenses of $7,922.

By comparison, for the three months ending November 30, 2016, we incurred total operating expenses of $15,349, consisting of professional fees of $4,063, research and development costs of $748, salaries and wages to officers of the Company of $7,177, and general and administrative expenses of $3,361.

13

Liquidity and Capital Resources

At November 30, 2016, we had a cash balance of $15,115, and our working capital balance is $(142,970). We do not have sufficient cash on hand to complete our plan of operation for the next 12 months. We will need to raise funds to complete our plan of operation and fund our ongoing operational expenses for the next 12 months. Additional funding will likely come from equity financing from the sale of our common stock currently being offered under the Form 10-K. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our development activities and ongoing operational expenses. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our development to complete our plan of operation and our business will fail.

Subsequent Events

None through date of this filing.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.

ITEM 4. CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of November 30, 2016.

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

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.

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ITEM 6. EXHIBITS.

(a) Exhibits required by Item 601 of Regulation SK.:

Number	Description
3.1.1	Articles of Incorporation (1)
3.1.2	Articles of Association for Xingcheng SK Composite Co., Ltd. (1)
3.2	Bylaws (1)
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	XBRL Instance Document
101.SCH *	XBRL Taxonomy Extension Schema Document
101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *	XBRL Taxonomy Extension Label Linkbase Document
101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document

_____________

(1) Incorporated by reference to the Registrant’s Form S-1 (File No. 333-194975), filed with the SEC on April 1, 2014.

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

16

SIGNATURES

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

	FAIRWIND ENERGY INC.
	(Name of Registrant)
Date: January 23, 2017	By:	/s/ Michael Winterhalter
	Name:	Michael Winterhalter
	Title:	President and Chief Executive Officer, Chief Financial Officer, and Treasurer (principal executive officer, principal accounting officer and principal financial officer)

17

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF FAIRWIND ENERGY INC.

I, Michael Winterhalter, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FairWind Energy Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 23, 2017	By:	/s/ Michael Winterhalter
		Michael Winterhalter
		President and Chief Executive Officer, Chief Financial Officer, and Treasurer (principal executive officer, principal accounting officer and principal financial officer)

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF FAIRWIND ENERGY INC.

I, Michael Winterhalter, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FairWind Energy Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 23, 2017	By:	/s/ Michael Winterhalter
		Michael Winterhalter
		President and Chief Executive Officer, Chief Financial Officer, and Treasurer (principal executive officer, principal accounting officer and principal financial officer)

EX-32.1

EXHIBIT 32.1

SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER OF FAIRWIND ENERGY INC.

In connection with the accompanying Quarterly Report on Form 10-Q of FairWind Energy Inc. for the quarter ended November 30, 2016, the undersigned, Michael Winterhalter, Secretary and Treasurer of FairWind Energy Inc., does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	such Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	the information contained in such Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 fairly presents, in all material respects, the financial condition and results of operations of FairWind Energy Inc.

Date: January 23, 2017	By:	/s/ Michael Winterhalter
		President and Chief Executive Officer, Chief Financial Officer, and Treasurer
		(principal executive officer, principal accounting officer and principal financial officer)

XML

Document and Entity Information - shares	3 Months Ended
	Nov. 30, 2016	Jan. 19, 2017
Document And Entity Information
Entity Registrant Name	FairWind Energy Inc.
Entity Central Index Key	0001603345
Document Type	10-Q
Document Period End Date	Nov. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Is Entity a Well-known Seasoned Issuer	No
Is Entity a Voluntary Filer	No
Is Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,017,406
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016

XML

Balance Sheets - USD ($)	Nov. 30, 2016	Aug. 31, 2016
Current Assets
Cash	$ 15,115	$ 619
Total current assets	15,115	619
Note Receivable
Note receivable	10,000
Computer Equipment
Computer equipment	1,328	1,328
Total property and equipment	1,328	1,328
Accumulated depreciation	(726)	(660)
Computer equipment, net	602	668
Total assets	25,717	1,287
Current Liabilities
Derivative liability	155,335
Accounts payable	1,859	2,798
Accrued expenses	891	891
Total current liabilities	158,085	3,689
Long Term Liabilities
Convertible note payable,net	8,688
Convertible note payable,net- related party	6,933
Total long term liabilities	15,621
Commitments and Contingent
Liabilities and Stockholders'(Deficit)
Preferred stock par value $0.001: 25,000,000 shares authorized; 0 issued or outstanding
Common stock par value $0.001: 50,000,000 shares authorized; 6,017,406 and 5,992,406 shares issued and outstanding, respectively	6,017	6,017
Additional paid-in capital	704,123	719,468
Accumulated deficit	(858,129)	(727,887)
Total stockholders'(Deficit)	(147,989)	(2,402)
Total liabilities and stockholders'(Deficit)	$ 25,717	$ 1,287

XML

Balance Sheets (Parenthetical) - shares	Nov. 30, 2016	Aug. 31, 2016
Liabilities and Stockholders' Equity (Deficit)
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, issued	5,992,406	6,017,406
Common stock, outstanding	5,992,406	6,017,406

XML

Statements of Operations - USD ($)	3 Months Ended
	Nov. 30, 2016	Nov. 30, 2015
Revenue
Consulting services		$ 15,000
Operating Expenses
Professional fees	63,805	4,063
Research and development		748
Salary and wages - officers	20,053	7,177
General and administrative expenses	7,922	3,361
Total operating expenses	91,780	15,349
Loss from Operations	91,780	349
Other (Income) Expense
Gain (loss) on fair value of derivative instruments	36,652
Amortization of derivative discount	1,811
Other (income) expense, net	38,463
Loss before Income Tax Provision	(130,243)	(349)
Income Tax Provision
Net Loss	$ (130,243)	$ (349)
Loss per share - Basic	$ (0.02)	$ (0.00)
Loss per share - Diluted	$ (0.02)	$ (0.00)
Weighted average common shares outstanding - Basic	6,017,406	5,992,406
Weighted average common shares outstanding - Diluted	6,067,406	5,992,406

XML

Statements of Cash Flows - USD ($)	3 Months Ended
	Nov. 30, 2016	Nov. 30, 2015
Cash Flows from Operating Activities
Net loss	$ (130,243)	$ (349)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liabilties	36,652
Depreciation expense	66	66
Amortization expense		63
Amortization of discount on derivative liabilities	1,811
Warrant expense	52,149
Contribution to capital	20,000
Changes in operating assets and liabilities:
Accounts payable	(939)
Accrued expenses		(6,604)
Net Cash Used in Operating Activities	(20,504)	(6,824)
Cash Flows from Investing Activities
Note receivable	(10,000)
Net Cash Used in Investing Activities	(10,000)
Cash Flows from Financing Activities
Proceeds from notes payable	45,000
Net Cash Provided by Financing Activities	45,000
Net Change in Cash	14,496	(6,824)
Cash - beginning of reporting period	619	13,195
Cash - end of reporting period	15,115	6,371
Supplemental disclosure of cash flow information:
Interest paid
Income tax paid

XML

Organization and Operations

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 1 - Organization and Operations

FairWind Energy, Inc.

FairWind Energy, Inc. (the "Company") was incorporated on April 18, 2013 under the laws of the State of Nevada. The Company engages in composite design, engineering and manufacturing to be used in solar/wind hybrid power systems, oil and gas industry pumping and civil engineering and infrastructure products.

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Significant and Critical Accounting Policies and Practices

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices

The management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company's financial condition and results and require management's most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company's significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of Presentation

The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and with the rules and regulations of the United States Securities and Exchange Commission ("SEC") to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements of the Company for the reporting period ended August 31, 2016 and notes thereto contained in the Company’s Annual Report on Form 10-K.

Derivative Liabilities

The Company evaluates its financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked- to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.

From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.

These derivative instruments did not trade in an active securities market. The Company used Black Scholes option pricing model to value derivative liabilities. This model used Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement.

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Going Concern

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 3 - Going Concern

The Company's financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit at November 30, 2016, a net loss, and net cash used in operating activities for the three months then ended. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The Company is attempting to commence operations and generate sufficient revenue; however, the Company's cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Related Party Transactions

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 4 - Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Related Parties	Relationship	Related Party Transactions	Business Purpose of transactions
Directors, officers and significant stockholders
Michael Winterhalter	Chairman, CEO, significant stockholder and director	(i) Office space at no cost	(i) Cost is nominal.
Eric Krogius	Director	None.	Not applicable.

Free Office Space

The Company has been provided office space by its Chief Executive Officer at no cost. Management determined that such cost is nominal and did not recognize the rent expense in its financial statement.

Convertible Note Payable

The Company issued a convertible promissory note on September 23, 2016 to William C. Winterhalter, Michael Winterhalter’s father, in the amount of $20,000. The interest rate is 8% and the maturity date is September 23, 2019 in which all outstanding principal together with interest on this note shall be due. The outstanding note and accrued interest convert at the option of the holder or the Company at the volume weighted average price of the common stock for the preceding 10 days (10-day VWAP).

Related party convertible note payable is presented net of a derivative discount of $13,067 on the accompanying balance sheets. The derivative liability related to related party convertible notes payable as of November 30, 2016 was $13,705 and is presented as part of “Derivative liability” on the accompanying balance sheets. The decrease in fair value of the derivative liability of the related party convertible note payable for the period ending November 30, 2016 was $227 and is included in “Gain (loss) on fair value of derivative instruments” on the accompanying statements of operations. Amortization of the discount on related party convertible note payable was $865 for the period ending November 30, 2016 and is included in “Amortization of derivative discount” in the accompanying statements of operations.

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Equity

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 5 - Stockholders' Equity

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Seventy-Five Million (75,000,000) shares of which Twenty Five Million (25,000,000) shares shall be Preferred Stock, par value $0.001 per share, and Fifty Million (50,000,000) shares shall be Common Stock, par value $0.001 per share.

Stock Options Plan

In February 2016, the Board of Directors approved the 2016 Stock Options Plan ("Plan") that provides for the granting of stock options to certain key employees. The Plan reserves 2,000,000 shares of common stock for this purpose. There is no provision for shares to be specifically granted to the CEO under his employment arrangement, either in the stock option plan or the employment agreement. Options under the Plan are to be granted at no less than fair market value of the shares at the date of grant. As of August 31, 2016 no options under this plan have been granted.

Consulting Agreement

On March 14, 2016, the Company entered into a consulting agreement with Steve Moore for consulting services related to develop business & advise management of technology, products and services used in the oil and gas exploration and production. This agreement combines commissions payable on gross profit, as well as a warrant of company common stock. The cost of these benefits, including commissions, is estimated at $250,000 over 2 years. No expense related to commissions was recorded during the year ended August 31, 2016 as the cost is contingent on future sales. As of August 31, 2016, 125,000 warrants of company stock are outstanding under this agreement. Costs associated with the warrant issuances are included in “Professional fees” in the accompanying statement of operations in the amount of $162,310. Of the 125,000 warrants issued, 50,000 are exercisable as of August 31, 2016.

The fair market value of stock warrants is determined using the Black-Scholes valuation model, and the company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatilities; the expected term of warrants granted are based on the original contractual term; and the risk-free interest rate is based on the U.S. Treasury implied yield on zero-coupon issues (with a remaining term equal to the expected term of the warrant).

As of August 31, 2016, total unrecognized stock warrant cost related to unvested stock warrant awards remaining outstanding was $72,391 and is expected to vest through June 2017.

Stock Issuance

On March 14, 2016, the Company approved the grant of 20,000 shares of its common stock to directors of the Company as a stock bonus. Costs associated with the grant of these shares are included in “Salary and wages – officers” in the accompanying statement of operations in the amount of $45,000 as determined by the fair value of the common stock at date of grant.

On March 14, 2016, the Company approved the grant of 5,000 shares of its common stock as payment for website design services. Costs associated with the grant of these shares are included in “General and administrative expenses” in the accompanying statement of operations in the amount of $11,250 as determined by the fair value of the common stock at date of grant.

Waived Compensation

The Employee waived compensation for the year ended August 31, 2016 that totaled $55,000 which is included in the accompanying Statements of Changes in Stockholders’ Equity (Deficit) as a contribution to capital. The Director waived compensation for the year ended August 31, 2016 that totaled $16,668 which is included in the accompanying Statements of Changes in Stockholders’ Equity (Deficit) as a contribution to capital.

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Notes Receivable and Convertible Note Payable

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 6 - Notes Receivable and Convertible Note Payable

The Company issued a note receivable on September 28, 2016 in the amount of $10,000 to Black Diamond Bits, LLC. The interest rate is 8% and the principal and interest will be due in its entirety on January 1, 2017 for a total amount of $10,200. Subsequent to the balance sheet date, Black Diamond entered an agreement to sell their business. Payment from Black Diamond Bits, LLC. will be included in the net settlement of the acquisition, and is expected to be remitted in March when the sale is closed.

The Company issued a convertible promissory note on October 1, 2016 to Julie Cameron Down Revocable Trust in the amount of $25,000. The interest rate is 8% and the maturity date is September 30, 2019 in which all outstanding principal together with interest on this note shall be due. The outstanding note and accrued interest convert at the option of the holder or the Company at the volume weighted average price of the common stock for the preceding 10 days (10-day VWAP).

Convertible note payable is presented net of a derivative discount of $16,312 on the accompanying balance sheets. The derivative liability related to convertible notes payable as of November 30, 2016 was $16,678 and is presented as part of “Derivative liability” on the accompanying balance sheets. The decrease in fair value of the derivative liability of the convertible note payable for the period ending November 30, 2016 was $580 and is included in “Gain (loss) on fair value of derivative instruments” on the accompanying statements of operations. Amortization of the discount on convertible note payable was $946 for the period ending November 30, 2016 and is included in “Amortization of derivative discount” in the accompanying statements of operations.

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Derivative Liabilities

3 Months Ended

Nov. 30, 2016

Notes to Financial Statements

Note 7 - Derivative Liabilities

The following table set forth by level, within the fair value hierarchy, the Company’s derivative liabilities at fair value as of November 30, 2016:

	Level 1		Level 2		Level 3		Total
Tainted Warrants	$	-	$	-	$	124,952	$	124,952
Related party convertible notes payable		-		-		13,705		13,705
Convertible notes payable		-		-		16,678		16,678
Total derivative liabilities at fair value	$	-	$	-	$	155,335	$	155,335

Level 3 Gains and Losses

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 derivative liabilities for the period ending November 30, 2016:

Balance, beginning of period	$	-
Realized gains (losses)		-
Unrealized (gains) losses relating to derivative liabilities		36,652
Reclassification of warrant expense from equity		87,493
Derivative liability incurred on related party convertible note payable issuance		13,932
Derivative liability incurred on convertible note issuance		17,258
Balance, end of period	$	155,335

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Significant and Critical Accounting Policies and Practices (Policies)

3 Months Ended

Nov. 30, 2016

Significant And Critical Accounting Policies And Practices Policies

Basis of Presentation

The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and with the rules and regulations of the United States Securities and Exchange Commission ("SEC") to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements of the Company for the reporting period ended August 31, 2016 and notes thereto contained in the Company’s Annual Report on Form 10-K.

Derivative Liabilities

The Company evaluates its financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked- to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.

From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.

These derivative instruments did not trade in an active securities market. The Company used Black Scholes option pricing model to value derivative liabilities. This model used Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement.

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Derivative Liabilities (Tables)

3 Months Ended

Nov. 30, 2016

Derivative Liabilities Tables

Derivative liabilities at fair value

The following table set forth by level, within the fair value hierarchy, the Company’s derivative liabilities at fair value as of November 30, 2016:

	Level 1		Level 2		Level 3		Total
Tainted Warrants	$	-	$	-	$	124,952	$	124,952
Related party convertible notes payable		-		-		13,705		13,705
Convertible notes payable		-		-		16,678		16,678
Total derivative liabilities at fair value	$	-	$	-	$	155,335	$	155,335

Summary of changes in the fair value

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 derivative liabilities for the period ending November 30, 2016:

Balance, beginning of period	$	-
Realized gains (losses)		-
Unrealized (gains) losses relating to derivative liabilities		36,652
Reclassification of warrant expense from equity		87,493
Derivative liability incurred on related party convertible note payable issuance		13,932
Derivative liability incurred on convertible note issuance		17,258
Balance, end of period	$	155,335

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Related Party Transactions (Details Narrative)	1 Months Ended	3 Months Ended
	Sep. 23, 2016 USD ($) d	Nov. 30, 2016 USD ($)	Nov. 30, 2015 USD ($)
Convertible note payable,net- related party		$ 13,705
Gain (loss) on fair value of derivative instruments		36,652
Amortization of derivative discount		1,811
Convertible Note Payable [Member]
Convertible promissory note	$ 20,000
Interest rate	8.00%
Maturity date	September 23, 2019
Number of days | d	10
Net of a derivative discount		13,067
Convertible note payable,net- related party		13,705
Gain (loss) on fair value of derivative instruments		227
Amortization of derivative discount		$ 865

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Equity (Details Narrative) - USD ($)	3 Months Ended
	Nov. 30, 2016	Mar. 14, 2016
Company and Eric Krogius [Member]
Waived payment	$ 5,000
Company and Michael Winterhalter [Member]
Waived payment	15,000
Consulting Agreement [Member]
Estimated benifit		$ 250,000
Warrant issuances cost	$ 52,149
Warrant outstanding	125,000
Warrant cost related to unvested stock	$ 76,493
Warrants exercisable	50,000
Vested common stock warrants	$ 87,493
Derivative liability	124,952
Increase in the fair value of the derivative liabilities	$ 37,459

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Notes Receivable and Convertible Note Payable (Details Narrative)	3 Months Ended
	Nov. 30, 2016 USD ($) d	Nov. 30, 2015 USD ($)
Convertible note payable,net- related party	$ 13,705
Gain (loss) on fair value of derivative instruments	36,652
Amortization of derivative discount	1,811
Black Diamond Bits, LLC [Member]
Convertible promissory note	$ 10,000
Interest rate	8.00%
Principal amount	$ 10,200
Number of days | d	10
Julie Cameron Down [Member]
Convertible promissory note	$ 25,000
Interest rate	8.00%
Number of days | d	10
Net of a derivative discount	$ 16,312
Convertible note payable,net- related party	16,678
Gain (loss) on fair value of derivative instruments	580
Amortization of derivative discount	$ 946

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Derivative Liabilities (Details) - USD ($)	Nov. 30, 2016	Aug. 31, 2016
Tainted Warrants	$ 124,952
Related party convertible notes payable	13,705
Convertible notes payable	16,678
Total derivative liabilities at fair value	155,335
Level 1 [Member]
Tainted Warrants
Related party convertible notes payable
Convertible notes payable
Total derivative liabilities at fair value
Level 2 [Member]
Tainted Warrants
Related party convertible notes payable
Convertible notes payable
Total derivative liabilities at fair value
Level 3 [Member]
Tainted Warrants	124,952
Related party convertible notes payable	13,705
Convertible notes payable	16,678
Total derivative liabilities at fair value	$ 155,335

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Derivative Liabilities (Details 1)	3 Months Ended
	Nov. 30, 2016 USD ($)
Derivative Liabilities Details 1
Balance, beginning of period
Realized gains (losses)
Unrealized (gains) losses relating to derivative liabilities	36,652
Reclassification of warrant expense from equity	87,493
Derivative liability incurred on related party convertible note payable issuance	13,932
Derivative liability incurred on convertible note issuance	17,258
Balance, end of period	$ 155,335