The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Unaudited Consolidated Financial Statements
April 30, 2018
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
iMine Corporation (the “Company”) is a Nevada corporation incorporated on October 26, 2010 under the name Oconn Industries. The Company’s name was changed to Oconn Industries Corp. on February 16, 2012, to Diamante Minerals, Inc. on April 1, 2014 and to iMine Corporation on March 20, 2018. The change of name to iMine Corporation was effected through the merger of the Company’s wholly-owned subsidiary, iMine Corporation, into the Company. The Company has one subsidiary, iMine Corporation, an Indiana corporation.
The Company plans to engage in the business of selling the computer equipment that is used for mining cryptocurrency. The Company intends to purchase the equipment and test the equipment by mining cryptocurrency prior to selling the equipment. Prior to March 2018, the Company was engaged in development of mining assets. The Company is no longer engaged in the development of mining assets.
The Company has not generated any revenue to date. For the period from inception on October 26, 2010 to April 30, 2018, the Company has accumulated losses of $10,730,010.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Interim Information:
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended July 31, 2017 have been omitted. These financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended July 31, 2017 included within the Company’s Annual Report on Form 10-K.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
Use of Estimates:
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses, including the valuation of non-cash transactions. Actual results may differ from these estimates.
Revenue Recognition
: In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a converged standard, Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 addresses the recognition of revenue based upon the payment and performance obligations of the seller and buyer. The Company will adopt Topic 606 on August 1, 2018. Since the Company has not generated any revenue in the past, the adoption of Topic 606 will not require any adjustment resulting from the adoption of Topic 606.
NOTE 3 – PREPAID ITEMS
Prepaid inventory represents payments made toward the purchase of inventory, consisting of equipment, which has not been delivered at April 30, 2018. The Company plans to test this equipment by mining cryptocurrency prior to selling the equipment.
Prepaid expenses at July 31, 2017 represent prepaid fees. There were no prepaid fees as at April 30, 2018.
NOTE 4 - RELATED PARTY TRANSACTIONS
On March 16, 2018, the former chief executive officer and sole director and the former chief financial officer resigned from their respective positions. In connection with their resignations, on March 22, 2018, the Company entered into release agreements pursuant to which the Company agreed to issue 1,500,000 shares of common stock to the former chief executive officer valued at $84,000, and to pay $25,000 to the former chief financial officer in full satisfaction of any obligations, including obligations under their employment agreements and deferred stock agreements, the Company has to them. As a result of the release agreements, a total of $145,271 which was due to the former chief financial officer, at July 31, 2017 was satisfied by the payment to the former chief financial officer of $25,000; a total of $538,156 which was due to the former chief executive officer, as at July 31, 2017 was satisfied with the issuance of the stock to the former chief executive officer and was recorded as a reecovery of management fees.
On March 19, 2018, the Company entered into a one-year employment agreement with the newly elected chief executive officer, who is also the sole director, pursuant to which the Company issued to him 17,500,000 shares of common stock, valued at $980,000, and agreed to pay him $164,706 to cover the federal income tax on the value of the stock and the tax payment. The shares are fully vested. At April 30, 2018, $164,706 is reflected as an amount due to related party.
Prior to the change in management, the Company shared office space with other companies that were related parties. Two of these companies were significant stockholders of the Company, one of which shared the services of the chief financial officer and the other is a publicly-traded company which shared the services of the chief executive officer and the chief financial officer. Geological consulting fees were also paid to the company of the former chief executive officer.
The following table sets forth amounts paid to related parties during the three and nine months ended April 30, 2018 and 2017.
|
|
Three months ended
April 30,
|
|
|
Nine months ended
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Administrative fees
|
|
$
|
135
|
|
|
$
|
339
|
|
|
$
|
895
|
|
|
$
|
934
|
|
Consulting fees
|
|
|
-
|
|
|
|
1,793
|
|
|
|
-
|
|
|
|
1,793
|
|
Shared office and administrative costs
|
|
|
910
|
|
|
|
2,455
|
|
|
|
6,835
|
|
|
|
7,333
|
|
Executive compensation
|
|
|
1,163,206
|
|
|
|
-
|
|
|
|
1,163,206
|
|
|
|
-
|
|
|
|
$
|
1,164,251
|
|
|
$
|
4,587
|
|
|
$
|
1,170,936
|
|
|
$
|
10,060
|
|
The following table sets forth the amounts due to related parties at April 30, 2018 and July 31, 2017:
|
|
April 30,
2018
|
|
|
July 31,
2017
|
|
Due to chief executive officer pursuant to employment consulting agreement
|
|
$
|
164,706
|
|
|
$
|
-
|
|
Due to chief executive officer (included in accounts payable)
|
|
|
1,500
|
|
|
|
-
|
|
Due to other related parties (included in accounts payable)
|
|
|
-
|
|
|
|
2,538
|
|
|
|
$
|
166,206
|
|
|
$
|
2,538
|
|
NOTE 5 - COMMON STOCK
On March 19, 2018, the Company issued (a) 17,500,000 shares, with a fair market value at issuance of $980,000, to the current chief executive officer pursuant to his employment agreement and (b) 7,500,000 shares, with a fair market value at issuance of $420,000, to a consultant pursuant to a consulting agreement.
Pursuant to a release agreement with the Company’s former chief executive officer, the Company issued 1,500,000 shares of common stock on April 12, 2018, with a fair market value of $84,000.
NOTE 6 – CONVERTIBLE NOTES
On March 20, 2018, the Company entered into a note purchase agreement with a non-affiliated party pursuant to which the purchaser would lend the Company a total of $500,000, for which the Company would issue two-year 5% convertible notes. The notes are convertible into common stock of the Company at $0.02 per share. The Company agreed to grant the lender a security interest in equipment which is purchased from the proceeds of the notes. As of April 30, 2018, the Company had received $350,000 pursuant to the note purchase agreement and issued its convertible notes in the principal amount of $350,000.
Interest of 5% is payable annually until the settlement date. No interest has been paid during the nine months ended April 30, 2018.
The net proceeds received from the issue of the convertible notes have been allocated to additional paid in capital in full, representing the intrinsic value of the conversion option to convert the liability into equity of the Company, as follows:
Nominal value of the convertible promissory notes issued
|
|
$
|
350,000
|
|
Beneficial conversion feature allocated to additional paid in capital
|
|
|
(350,000
|
)
|
Liability component as at date of issue
|
|
|
-
|
|
Accrued interest and accretion to April 30, 2018
|
|
|
24,063
|
|
Liability component as at April 30, 2018
|
|
$
|
24,063
|
|
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On October 16, 2014, the Company and the former chief executive officer entered into a three-year employment agreement pursuant. On July 12, 2015, the Company and the former chief financial officer entered into a three-year employment agreement. The employment agreements provide for the issuance of deferred stock units. As of August 1, 2017, the former chief executive officer and the former chief financial officer waived a portion of the deferred stock units had been issued to them, and no further deferred stock units were issued under these plans. Pursuant to the release agreements following the resignations of the former chief executive officer and chief financial officer, the Company issued to the former chief executive officer 1,500,000 shares of common stock and paid the former chief financial officer $25,000. As a result of the release agreements, the Company has no further obligation to the former chief executive officer or former chief financial officer with respect to the deferred stock grants and any deferred stock grants issued to issuable have been terminated.
During the nine month period ended April 30, 2018, the Company recorded a net recovery of $658,427 in management fees as a result of the waivers, release and the change in market price of the Company.
NOTE 8 – FORMER BUSINESS ACTIVITY
The Company continues to own a 2.4% minority interest in Mineracao Batovi, which was purchased for $30,000 and is part of the Company’s prior business. The asset is valued at $0 as at July 31, 2017 and April 30, 2018 and the Company has no obligations or liabilities with respect to Mineracao Batovi.
NOTE 9 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the period ended April 30, 2018, the Company incurred a loss of $1,214,694 As at April 30, 2018, the Company had an accumulated deficit of $10,730,010 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending July 31, 2018.
The ability of the Company to begin operations in its new field of selling computer equipment for the mining of cryptocurrency and the mining of cryptocurrency in the testing of such equipment is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. The Company has not generated any revenue from this business through April 30, 2018, and the Company cannot give any assurance as to its ability to operate profitably.
These factors, among others, 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.
NOTE 10 – SUBSEQUENT EVENT
Subsequent to April 30, 2018, the Company issued its convertible notes in the principal amount of $150,000 pursuant to the note purchase agreement described in Note 6, for which it received $150,000.