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EXCEL - IDEA: XBRL DOCUMENT - Aurum, Inc.Financial_Report.xls
10-K - AURUM, INC. 10-K - Aurum, Inc.a50542700.htm
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v2.4.0.6
AFFILIATE TRANSACTIONS
12 Months Ended
Oct. 31, 2012
AFFILIATE TRANSACTIONS
(5)           AFFILIATE TRANSACTIONS
 
In August 2009, the Company entered into an agreement with AXIS Consultants Pty Ltd to provide geological, management and administration services to the Company. AXIS is affiliated through common management. The Company is one of ten affiliated companies under common management with AXIS. 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 administration staff. It has been the intention of the affiliated companies and respective Boards of Directors that each of such arrangements or transactions should accommodate the respective interest of the relevant affiliated 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 affiliated 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, legal, human resources, company secretarial, land management, certain exploration and mining support, financial, accounting advice and services.  AXIS procures items of equipment necessary in the conduct of the business of the Company.  AXIS also provides for the Company 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.
 
The Company is required to reimburse AXIS for any direct costs incurred by AXIS for the Company. In addition, the Company is 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.  The Company is also not permitted to obtain 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 us upon 60 days prior notice.  If the Service Agreement is terminated by AXIS, the Company 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 the Company 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.  The Company’s 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 the Company’s Chief Executive Officer, Chief Financial Officer, geologists 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%.
 
The payable to affiliates at October 31, 2012 in the amount of $6,630,197 (2011: $4,174,304) is primarily due to AXIS. During the year ended October 31, 2012, AXIS provided services in accordance with the services agreement and incurred direct costs on behalf of the Company of $253,294 (2011: $320,051), and advanced the Company $2,029,099 (2011: $2,774,981). During the year ended 31 October 2012, the Manager of the Laos operations advanced the Company $173,500. The Company intends to repay these amounts with funds raised either via additional debt or equity offerings. The affiliates have agreed not to require repayment of these advances prior to October 31, 2013, accordingly, the Company has decided to classify the amounts payable as non-current in the accompanying balance sheets.