Filed pursuant
to Rule 424(b)(3)
Registration
No. 333-226325
PROSPECTUS
25,000,000 Shares
iMine Corporation
OTCQB trading symbol:
JRVS
This prospectus relates to
the public offering of an aggregate of 25,000,000 shares of common
stock which may be sold from time to time by the selling
stockholder named in this prospectus.
The selling stockholder has
not engaged any underwriter in connection with the sale of his
shares of common stock. The shares offered by this prospectus may
be sold by the selling stockholder from time to time in the open
market, through privately negotiated transactions or a combination
of these methods, at market prices prevailing at the time of sale
or at negotiated prices.
We will not receive any
proceeds from the sale by the selling stockholder of their shares
of common stock. We will pay the cost of the preparation of this
prospectus, which is estimated at $35,000.
On September 6, 2018,
the last reported sales price reported by the OTC Markets was
$0.18.
Investing in shares of
our common stock involves a high degree of risk. You should
purchase our common stock only if you can afford to lose your
entire investment. See “Risk Factors,” which begins on page
5.
Neither the Securities
and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this Prospectus
is September 6, 2018
TABLE OF CONTENTS
You may only rely on the
information contained in this prospectus. We have not authorized
anyone to provide you with different information. This prospectus
does not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the common stock offered by this
prospectus. This prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any common stock in any
circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made in
connection with this prospectus shall, under any circumstances,
create any implication that there has been no change in our affairs
since the date of this prospectus or that the information contained
by reference to this prospectus is correct as of any time after its
date.
PROSPECTUS SUMMARY
This summary highlights information
contained elsewhere in this prospectus. This summary does not
contain all the information you should consider before investing in
the securities. However, you should read the entire prospectus
carefully, including the “Risk Factors,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” and
our financial statements, including the notes thereto, appearing
elsewhere in this prospectus.
Our Business
We are in the process of developing the
business of selling computer equipment which can be used for the
mining of cryptocurrency. The industry commonly refers to this
computer equipment as “mining rigs.” We plan to develop and sell
graphic processing unit (GPU)-based mining rigs based on our
specifications. In July 2018, we introduced our first
cryptocurrency miner, the Ai-1, which we designed and had
manufactured to our specifications by GIGAIPC Co., Ltd., a
Taiwan-based subsidiary of Gigabyte Technology Co., Ltd., a
Taiwan-based company engaged in the production, processing and
sales of information technology products. GPUs are logic chips that
can be used to mine cryptocurrencies. The Ai-1 features advanced
technologies that are designed to provide cryptocurrency mining
companies with what we believe provides superior performance,
including:
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Ai-1 is equipped with a high performance GPU
designed for cryptocurrency mining, the Ai-1 is designed to be
compatible with most of the popular cryptocurrency algorithms
including Ethash (Ethereum, Ethereum Classic), Equihash (Bitcoin
Gold, ZCash), CryptoNightV7 (Monero), and Lyra2Rev2
(Vertcoin). |
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Ai-1 comes standard with a professional
closed-system chassis and ten cooling fans to keep the GPUs
operating at the optimal temperature and drive down
air-conditioning cost. |
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Ai-1 requires minimum assembly and comes
pre-installed with EthOS, an operating system specialized in
mining. |
We have ordered 43 units from GIGAIPC. Three
of these units have been tested by GIGAIPC and the remaining units
are scheduled for testing. The testing includes generating
cryptocurrency, which GIGAIPC sold for its account.
The Cryptocurrency Industry
Cryptocurrency is a digital or virtual
currency that uses cryptography for security. The first popular
cryptocurrency was Bitcoin, which was launched in 2009. As of May
2018, there were reportedly more than 17 million bitcoins in
circulation with a total market value of over $140 billion.
Bitcoin’s success has spawned a number of competing
cryptocurrencies. Cryptocurrencies are based on a public ledger
known as blockchain, which stores all past transactions. When a new
transaction is initiated, a cryptocurrency miner needs to ensure
that the information is accurate and add the transaction to the
blockchain. Cryptocurrency miners receive a small amount of
cryptocurrency as a reward for the service provided.
Cryptocurrencies earned through mining can subsequently be sold on
open exchanges and converted into fiat currency. Fiat currency is
any money which is declared by a government to be legal tender,
including state-issued currency.
Blockchain technology has revolutionized the
way that currencies are structured and created. The Ether currency
is created by running hashing algorithms in a process called
mining. Mining cryptocurrencies requires a computer to continuously
run a cryptographic hash function, which is a way to reduce an
arbitrarily large amount of data (in this case a block on the
blockchain) to a datum of a fixed size (a string of so many numbers
and letters). GPUs are logic chips that can be used to mine
cryptocurrencies and are designed to solve complex 3D imaging
algorithms in order to generate the particular cryptocurrency it is
mining. GPUs have the ability to be able to mine multiple types of
cryptocurrencies, unlike application specific integrated circuits,
known as ASIC, which are designed specifically for mining
Bitcoin.
The Securities and Exchange Commission has
issued warnings concerning cryptocurrencies and initial coin
offering. Although claims have been made that cryptocurrencies are
not securities, and therefore not subject to regulation by the SEC
and the equivalent regulatory bodies of other countries, whether
that claim proves correct with respect to any digital asset that is
labeled as a cryptocurrency will depend on the characteristics and
use of that particular asset. The SEC is focusing on
cryptocurrencies and initial coin offerings.
Our Former Business
Prior to the March 2018, we were seeking to
acquire and explore mineral properties. However, we were not
successful in that business, which never generated any revenue, and
we have discontinued that business. Our mineral operations, which
are reflected on our financial statements which are included in
this prospectus, is a discontinued operation. When the present
management acquired control in March 2018, we anticipated that we
would engage in cryptocurrency mining. We have changed our focus
and we are now designing and planning to market cryptocurrency
mining rigs.
Organization
We are a Nevada corporation incorporated on
October 19, 2019 under the name Oconn Industries. On February 16,
2012, we changed our corporate name to Oconn Industries Corp., and
on April 1, 2014 we changed our corporate name to Diamante
Minerals, Inc. On March 20, 2018, we changed our corporate name to
iMine Corporation.
Our address is 8520 Allison Pointe Blvd Ste.
223 #87928, Indianapolis, Indiana 46250, telephone (877) 464-6388.
Our corporate website is www.iminecorp.com. Information on our
website or any other website does not constitute a part of this
prospectus.
References to “we,” “us,” “our” and word of
like import refer to iMine Corporation and its subsidiary.
Issuance of Securities to Selling
Stockholder
On March 20, 2018, we entered
into a loan and security agreement with Jose Maria Eduardo Gonzalez
Romero, who is the selling stockholder. Pursuant to the agreement,
Mr. Romero made loans to us of $500,000 during the period from
March through June 2018, for which we issued to him our 5% two-year
convertible secured promissory notes. The notes mature two years
from the dates of the loan and are convertible into common stock at
a conversion price of $0.02 per share. To the extent that the
proceeds of the notes are used to purchase equipment for mining
cryptocurrencies, we agreed to give Mr. Romero a security interest
in the equipment. The notes provide that they cannot be converted
to the extent that, after giving effect to conversion, the holder
of the notes and his affiliates would beneficially own 4.99% of our
common stock. See “Selling Stockholder” and “Method of
Distribution.”
The Offering
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Common Stock Offered:
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25,000,000 shares
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Outstanding Shares of Common Stock:
Outstanding Shares as Adjusted:
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78,542,286 shares
103,542,286 1 shares
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Use of Proceeds:
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We will not receive any proceeds
from the sale of the shares by the selling stockholder.
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1 As adjusted to reflect the
issuance of 25,000,000 shares of common stock upon conversion of
the notes held by the selling stockholder based on full conversion
of the notes. Because of the conversion terms, the notes are not
immediately convertible in full.
SUMMARY FINANCIAL
INFORMATION
The following information as
of July 31, 2017 and 2016 and for years in then ended have been
derived from our audited financial statements which appear
elsewhere in this prospectus. The information at April 30, 2018 and
for the nine months ended April 30, 2018 and 2017 has been derived
from our unaudited financial statements which appear elsewhere in
this prospectus. Our financial statements through March 16, 2018,
when we had a change in management, reflect the operation of our
former business, which was seeking to acquire and explore mineral
properties. We are no longer engaged in that business.
Statement of Operations
Information:
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Nine Months Ended April
30,
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Year Ended July
31,
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2018
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2017
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2017
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2016
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Revenues
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$ |
-- |
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$ |
-- |
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$ |
-- |
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$ |
-- |
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Operating expenses
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1,214,694 |
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(155,613 |
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53,802 |
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778,653 |
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Write off of acquisition
costs and investment
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-- |
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-- |
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(8,022,222 |
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-- |
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Net income (loss)
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(1,214,694 |
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155,613 |
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(8,074,759 |
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(993,653 |
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Loss per share (basic and
diluted)
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$ |
(0.02 |
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$ |
0.00 |
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$ |
(0.16 |
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$ |
(0.02 |
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Weighted average shares of
common stock outstanding (basic)
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56,084,411 |
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52,042,286 |
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52,042,286 |
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52,042,286 |
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Weighted average shares of
common stock outstanding (diluted)
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56,084,411 |
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54,402,713 |
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52,042,286 |
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52,042,286 |
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Balance Sheet
Information:
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April 30,
2018
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July 31,
2017
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Current assets
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$ |
385,043 |
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$ |
198,640 |
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Working capital (deficiency)
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110,301 |
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(509,005 |
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Accumulated deficit
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(10,730,010 |
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(9,515,316 |
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Stockholders’ equity (deficiency)
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110,301 |
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(509,005 |
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RISK FACTORS
An investment in our
common stock involves a high degree of risk. You should carefully
consider the risks described below together with all of the other
information included in this prospectus before making an investment
decision with regard to our securities. The statements contained in
this prospectus include forward-looking statements that are subject
to risks and uncertainties that could cause actual results to
differ materially from those set forth in or implied by
forward-looking statements. The risks set forth below are not the
only risks facing us. Additional risks and uncertainties may exist
that could also adversely affect our business, prospects or
operations. If any of the following risks actually occurs, our
business, financial condition or results of operations could be
harmed. In that case, the trading price of our common stock could
decline, and you may lose all or a significant part of your
investment.
Risks Concerning our
Business
We require funding for us
to conduct our business.
We require significant funding
for our operations. As of April 30, 2018, we had not generated any
revenue from the sale of our mining rigs. At April 30, 2018, we had
prepaid inventory of $331,600, representing inventory which had
been paid for but had not yet been delivered. We financed the
purchase of inventory from the sale of convertible notes in the
total amount of $500,000, which were issued during the period from
March through June 2018. We will require funds for the purchase of
inventory, the establishment of a marketing organization and
payment of our normal operations in the normal course of business,
including our expenses relating to our status as a public company.
We have no agreements or understandings with respect to any
potential financing, and our failure to obtain necessary financing
could impair our ability to operate profitable.
As a start-up company, you
have no way to evaluate our ability to operate profitably, and we
cannot assure you that we can or will operate
profitably.
We are just commencing our
operations. Because we have no history of operations in this design
and sale of mining rigs for the cryptocurrency and our financial
statements do not reflect our current business, you will have no
way to evaluate our ability to generate revenue and profits. We are
subject to risks common to start-up enterprises, including, among
other factors, undercapitalization, cash shortages, limitations
with respect to personnel, financial and other resources and lack
of revenues. There is no assurance that we will be successful in
achieving profitability and the likelihood of our success must be
considered in light of our early stage of operations. There can be
no assurance that we will be able to operate profitably or generate
positive cash flow.
Our auditors’ report
includes a going concern paragraph.
Our financial statements include
a going-concern qualification. As of April 30, 2018 and July 31,
2017, we had accumulated deficits of approximately $10.7 million
and $9.5 million, respectively. Our ability to operate profitable
is dependent upon, among other things, obtaining additional
financing for our operations and development of our business plan.
Management intends to raise additional funds through private
financing. These factors, among others, raise substantial doubt
about our 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 and do not reflect our
proposed cryptocurrency operations.
Because we are dependent
upon one equipment supplier, the failure or inability of this
supplier to deliver the mining equipment could affect our
operations.
We are presently purchasing
cryptocurrency mining equipment from one supplier, GIGAIPC. In the
event that GIGAIPC is unable to deliver the mining equipment based
on our requirement, whether because of a shortage of GPU processors
or because it, for other reason, cannot meet our requirements, we
may have difficulty purchasing mining equipment from other
suppliers in a timely manner, which could affect our ability to
market and sell our equipment and therefore our ability to generate
revenue and cash flow.
We are dependent upon
our chief executive officer.
We are dependent upon Daniel
Tsai, our chief executive and financial officer and sole director,
who is presently our only employee. Although Mr. Tsai has a
one-year employment agreement commencing March 19, 2018, which
requires him to devote such time as he deems necessary to our
business, the employment agreement does not guarantee that he will
continue with us. The loss of Mr. Tsai would materially impair our
ability to conduct our business.
If we are unable to
attract, train and retain technical and financial personnel, our
business may be materially and adversely affected.
Our future success depends,
to a significant extent, on our ability to attract, train and
retain key management, technical and financial personnel.
Recruiting and retaining capable personnel, particularly those with
expertise in cryptocurrency mining are vital to our success. There
is substantial competition for qualified personnel, and, to the
extent that cryptocurrency becomes more popular, this competition
will increase. We cannot assure you we will be able to attract or
retain the technical and financial personnel we require. If we are
unable to attract and retain qualified employees, our business may
be materially and adversely affected.
We face competition in
marketing equipment to the cryptocurrency industry.
In marketing mining rigs to
the cryptocurrency industry, we compete with a number of domestic
and foreign companies that are well known in the industry and are
better capitalized than we are. Further, because we do not provide
any warranty other than the warranty of the manufacturers of the
various components, we may be at a competitive disadvantage. We
cannot assure you that we will be able to compete successfully with
these companies, and our failure to develop a market for our
product would impair our ability to continue in business.
Our failure to offer
customers a financing alternative may impair our ability to sell
our mining rigs.
We do not offer any
financing arrangements to potential customers looking to purchase
our mining rigs. Our failure or inability to offer customers a
financing option may impair our ability to market our mining rigs
successfully.
Because our mining
rigs are designed for the cryptocurrency market, any decline in the
market for our products.
Our mining rigs are designed
for only one purpose - the mining of cryptocurrency. Any
significant decline in the market for mining rigs generally or our
mining rigs specifically could impair our ability to generate
revenue and operate profitably. The recent decline in the value of
cryptocurrencies may affect the market for cryptocurrency mining
equipment.
We may not be able to
protect any intellectual property which we may develop.
We do not have any patents.
To the extent that we develop proprietary intellectual property
relating to our mining rigs, we may not be able to protect our
intellectual property. Although the equipment we plan to sell was
designed by us using computer equipment manufactured by our
suppliers, we cannot assure you that the equipment we sell will not
infringe upon the intellectual property rights of others. Any claim
of violation of a third party’s intellectual property, whether or
not we ultimately prevail, could be very costly and could impair
our operations.
Risks Concerning the
Cryptocurrency Industry
Our business is dependent
upon the acceptance and growth of cryptocurrencies
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Although we do not expect to be
engaged in the mining of cryptocurrencies, our computers are
designed for use in the mining of cryptocurrencies and our business
is dependent upon the increased growth of cryptocurrencies. As
relatively new products and technologies, cryptocurrencies have not
been widely accepted as a means for payment of goods and services
by major retail and commercial outlets. A significant portion of
the demand for cryptocurrencies is generated by speculators and
investors seeking to profit from short-terms fluctuations in the
price of cryptocurrencies. The growth of this industry in general
is subject to a high degree of uncertainty. Factors affecting the
further development of this industry, include, but are not limited
to:
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continued worldwide growth in the adoption and use
of digital currencies; |
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government and quasi-government regulation of
cryptocurrencies and other digital assets and their use, or
restrictions on, or regulation of, access to and operation of the
digital asset systems; |
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changes in consumer demographics and public tastes
and preferences; |
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the maintenance and development of the open-source
software protocol for the mining and transfer of
cryptocurrencies; |
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the availability and popularity of other forms or
methods of buying and selling goods and services, including new
means of using fiat currencies; |
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regulatory or other issues relating to the
cryptocurrency exchanges; |
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concerns about the security of cryptocurrencies
and fraud; |
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the difficulty in recovering stolen
cryptocurrency, whether such theft is though hacking a wallet or a
network or physical robbery; |
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general economic conditions and the tax and
regulatory environment relating to digital assets; and |
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a negative consumer perception of
cryptocurrencies. |
Our ability to operate
profitably may be affected by fluctuations in the market price of
cryptocurrency.
Our ability to operate
profitably will be affected by the value of the cryptocurrencies.
The market price and fluctuations in the market price of
cryptocurrency may affect the willingness of potential miners to
purchase mining equipment or to enter the business of
cryptocurrency mining. Factors that may affect the price of
cryptocurrency and consequently the market for mining rigs include:
the total number of outstanding units of cryptocurrency, the demand
for cryptocurrency; the global supply and demand for the
cryptocurrency; investors’ expectations with respect to the rate of
inflation or deflation of cryptocurrency and fiat currency;
interest rates; currency exchange rates, including the rates at
which any cryptocurrency may be exchanged for fiat currencies; the
ability to exchange cryptocurrency for fiat currency; the liquidity
of the exchanges on which the cryptocurrency can be purchased, sold
or exchanged for fiat currency; interruptions in service from or
failures of exchanges; cyber theft of cryptocurrency from online
wallet providers, scams involving cryptocurrency, or news of such
theft from such providers or from individuals’ wallets; investment
and trading activities of large investors; monetary policies of
governments, trade restrictions, currency devaluations and
revaluations; regulatory measures, if any, that restrict the use of
cryptocurrency as a form of payment or the trading or exchanging of
cryptocurrency for fiat currency or the exchanges on which
cryptocurrencies are traded; the availability and popularity of
businesses that provide cryptocurrency-related services; the
maintenance and development of the open-source software protocol of
the mining and trading in cryptocurrencies; increased competition
from other forms of cryptocurrency or payments services; global or
regional political, economic or financial events and situations;
expectations among cryptocurrency participants that the value of
cryptocurrency will soon change; fees associated with processing a
cryptocurrency transaction, as well as a discomfort with
cryptocurrency not related to any specific factor.
If miners cease or reduce
operations or delay recording transactions, the market for the
mining rigs may be adversely affected.
If miners cease expending
processing power to solve blocks, confirmations of transactions on
the blockchain could be slowed. A reduction in the processing power
expended by miners could reduce the market for the cryptocurrency
mining rigs, and, consequently the market for and price of our
equipment.
Any failure to keep pace
with technological changes relating to blockchain products, may
impair our ability to sell our cryptocurrency mining
rigs.
The market for products based
used with blockchain technology, such as cryptocurrencies, is
characterized by rapid technological change, frequent product and
service innovation and evolving industry standards. The success of
our business depends on several factors, including our ability to
develop next generation equipment to meet the anticipated needs of
the users of blockchain technology. Failure in this regard may
significantly impair our competitiveness and financial results.
Further, our business plan is based on GPU-generated
cryptocurrencies. To the extent that other technologies evolve to
replace GPU-based mining result is a decline in the market for our
mining rigs, we may incur a competitive disadvantage and we may
incur significant costs in re-engineering our equipment to meet the
most current developments. In the event that we develop new
equipment based on anticipated technological developments and the
market prefers a different technology developed by our competitors,
our ability to sell our product may be impaired. Furthermore,
uncertainties about the timing and nature of new technologies, or
modifications to existing technologies, could increase our research
and development expenses.
Regulatory changes or
actions may restrict the use of cryptocurrencies in a manner that
adversely affects our business.
As cryptocurrencies have grown
in both popularity and market size, governments around the world
have reacted differently to cryptocurrencies with certain
governments deeming them illegal while others have allowed their
use and trade. On-going and future regulatory actions may alter,
perhaps to a materially adverse extent, our ability to continue to
operate. The effect of any future regulatory change on the market
for our products is impossible to predict, but such change could be
substantial and adverse to us.
Risks Concerning our
Common Stock
Because our common stock is a penny
stock, you may have difficulty selling our common stock in the
secondary trading market.
Our common stock is a penny stock, as
defined by the SEC regulations, and therefore is subject to the
rules adopted by the SEC regulating broker-dealer practices in
connection with transactions in penny stocks. The SEC rules may
have the effect of reducing trading activity in our common stock by
making it more difficult for investors to purchase and sell their
shares. The SEC’s rules require a broker or dealer proposing to
effect a transaction in a penny stock to deliver the customer a
risk disclosure document that provides certain information
prescribed by the SEC, including, but not limited to, the nature
and level of risks in the penny stock market. The broker or dealer
must also disclose the aggregate amount of any compensation
received or receivable by him in connection with such transaction
prior to consummating the transaction. In addition, the SEC’s rules
also require a broker or dealer to make a special written
determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the
transaction before completion of the transaction. The existence of
the SEC’s rules may result in a lower trading volume of our common
stock and lower trading prices. Further, some broker-dealers will
not process transactions in penny stocks.
Our lack of internal controls over
financial reporting may affect the market for and price of our
common stock.
Our disclosure controls and our internal
controls over financial reporting are not effective. We do not have
the financial resources or personnel to develop or implement
systems that would provide us with the necessary information on a
timely basis so as to be able to implement financial controls. Our
financial condition together with the fact that we presently have
one part-time employee, who is both our chief executive officer and
chief financial officer, makes it difficult for us to implement a
system of internal controls over financial reporting, and we cannot
assure you that we will be able to develop and implement the
necessary controls. The absence of internal controls over financial
reporting may inhibit investors from purchasing our shares and may
make it more difficult for us to raise debt or equity
financing.
Our lack of a full-time chief
financial officer could affect our ability to develop financial
controls, which could affect the market price for our common
stock.
We do not have a full-time chief financial
officer. At present, our chief executive officer, who does not have
an accounting background, is also acting as our chief financial
officer. We do not anticipate that we will be able to hire a
qualified chief financial officer unless our financial condition
improves significantly. The lack of an experienced chief financial
officer, together with our lack of internal controls, may impair
our ability to raise money through a debt or equity financing as
well as the market for and the market price of our common
stock.
We do not have any independent
directors.
At present, we do not have any independent
directors. Our sole director is Daniel Tsai, who is our chief
executive officer and chief financial officer. Because we have no
independent director, we do not have any checks and balances on Mr.
Tsai, which may make it difficult for us to develop internal
controls and to raise money in the financial markets.
Our stock price may be volatile and
your investment in our common stock could suffer a decline in
value.
The dollar volume trading in our stock is
low and we cannot assure you that any significant market will
develop. As a result, any reported prices may not reflect the price
at which you would be able to sell shares if you want to sell any
shares you own or buy shares if you wish to buy share. Further,
stocks with a low trading volume may be more subject to
manipulation than a stock that has a significant public float. The
price of our stock may fluctuate significantly in response to a
number of factors, many of which are beyond our control. These
factors include, but are not limited to, the following, in addition
to the risks described above and general market and economic
conditions:
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our low stock price, which may result in a modest
dollar purchase or sale of our common stock having a
disproportionately large effect on the stock price; |
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the market’s perception as to our ability to
generate positive cash flow or earnings; |
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changes in our or securities analysts’ estimate of
our financial performance; |
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our ability or perceived ability to obtain
necessary financing for our operations; |
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the perception of the market for our
cryptocurrency and our ability to generate revenue and cash flow
from the mining and sale of cryptocurrency; |
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the risks concerning cryptocurrency; |
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the anticipated or actual results of our
operations; |
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changes in market valuations of other companies in
the cryptocurrency industry; |
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litigation or changes in regulations affecting
cryptocurrencies; |
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concern about our lack of internal controls; |
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any discrepancy between anticipated or projected
results and actual results of our operations; |
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actions by third parties to either sell or
purchase stock in quantities which would have a significant effect
on our stock price; and |
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other factors not within our control. |
Raising funds by issuing equity or
convertible debt securities could dilute the net tangible book
value of the common stock and impose restrictions on our working
capital.
If we were to raise additional capital by
issuing equity securities, either alone or in connection with a
non-equity financing, the net tangible book value of the then
outstanding common stock could decline. If the additional equity
securities were issued at a per share price less than the market
price, which is customary in the private placement of equity
securities, the holders of the outstanding shares would suffer a
dilution, which could be significant. We may have difficulty in
raising funds through the sale of debt securities because of both
our financial position, the lack of any collateral on which a
lender may place a value, and the absence of any history of revenue
or operations. If we are able to raise funds from the sale of debt
securities, the lenders may impose restrictions on our operations
and may impair our working capital as we service any such debt
obligations.
We do not intend to pay any cash
dividends in the foreseeable future.
We have not paid any cash dividends on our
common stock and do not intend to pay cash dividends on our common
stock in the foreseeable future.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contain “forward-looking
statements,” within the meaning of the Private Securities
Litigation Reform Act of 1995, all of which are subject to risks
and uncertainties. Forward-looking statements can be identified by
the use of words such as “expects,” “plans,” “will,” “forecasts,”
“projects,” “intends,” “estimates,” and other words of similar
meaning. One can identify them by the fact that they do not relate
strictly to historical or current facts. These statements are
likely to address our growth strategy, financial results and
product and development programs. One must carefully consider any
such statement and should understand that many factors could cause
actual results to differ from our forward looking statements. These
factors may include inaccurate assumptions and a broad variety of
other risks and uncertainties, including some that are known and
some that are not. No forward looking statement can be guaranteed
and actual future results may vary materially.
These risks and uncertainties, many of which
are beyond our control, include, and are not limited to:
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Our ability to market our mining rigs; |
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The market for cryptocurrency mining rigs; |
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Our ability to obtain the necessary financing for
us to develop our business; |
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Changes in national, regional and local government
regulations, taxation, controls and political and economic
developments that affect or prohibit the market and marketability
of cryptocurrencies which in turn affects the market for our
products; |
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Changes in the algorithms for cryptocurrencies
which may affect the market for our mining rigs; |
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Our ability to market products with the most
current technological developments desired by the market; |
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Our ability to obtain and maintain any permits
necessary for our business; |
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Our ability to identify, hire and retain qualified
executive, administrative, research and development, and other
personnel; |
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Our ability to protect any intellectual property
we may develop; |
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The costs associated with defending and resolving
potential legal claims, even if such claims are without merit; |
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The development of a significant market for our
common stock; |
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Actions by third parties to either sell or
purchase our common stock in quantities that would have a
significant effect on our stock price; |
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Risks generally associated with both the
cryptocurrency industry and the sale of mining rigs to the
cryptocurrency industry; |
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Current and future economic and political
conditions; |
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The impact of changes in accounting rules on our
financial statements; |
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Other assumptions described in this prospectus;
and |
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Other matters that are not within our
control. |
Information regarding
market and industry statistics contained in this prospectus is
included based on information available to us that we believe is
accurate. It is generally based on industry and other publications
that are not produced for purposes of securities offerings or
economic analysis. We have not reviewed or included data from all
sources. Forecasts and other forward-looking information obtained
from these sources are subject to the same qualifications and the
additional uncertainties accompanying any estimates of future
market size, revenue and market acceptance of products and
services. We do not assume any obligation to update any
forward-looking statement. As a result, you should not place undue
reliance on these forward-looking statements.
The forward-looking
statements in this prospectus speak only as of the date of this
prospectus and you should not to place undue reliance on any
forward-looking statements. Forward-looking statements are subject
to certain events, risks, and uncertainties that may be outside of
our control. When considering forward-looking statements, you
should carefully review the risks, uncertainties and other
cautionary statements in this prospectus as they identify certain
important factors that could cause actual results to differ
materially from those expressed in or implied by the
forward-looking statements. These factors include, among others,
the risks described under in this prospectus, including those
described under “Business,” “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” as well as in other reports and documents we file with
the SEC. We undertake no obligation to revise or publicly release
the results of any revision to these forward-looking statements,
except as required by law. Given these risks and uncertainties, you
are cautioned not to place undue reliance on such forward-looking
statements.
USE OF PROCEEDS
We will not receive any proceeds from the
sale by the selling stockholder of their common stock.
SELLING
STOCKHOLDER
The following table sets forth the name of
the selling stockholder, the number of shares of common stock owned
beneficially by the selling stockholder as of July 23, 2018, and
the number of shares of our common stock that may be offered by the
selling stockholder pursuant to this prospectus. The table and the
other information contained under the captions “Selling
Stockholder” and “Plan of Distribution” has been prepared based
upon information furnished to us by or on behalf of the selling
stockholder. The following table sets forth, as to the selling
stockholder, the number of shares beneficially owned, the number of
share being sold, the number of shares beneficially owned upon
completion of the offering and the percentage beneficial ownership
upon completion of the offering.
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After Sale of Shares in Offering
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Name
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Shares
Beneficially
Owned
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Shares Being
Sold
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Shares
Beneficially
Owned
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Percent of
Outstanding
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Jose Maria Eduardo Gonzalez Romero
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25,000,0001 |
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25,000,000 |
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0 |
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0 |
% |
_____________
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This number reflects the total number of shares of
common stock issuable upon conversion of the convertible notes held
by Mr. Romero. The notes cannot be converted to the extent that,
upon conversion, Mr. Romero and his affiliates would own more than
4.99% of our common stock. Based on the 78,452,286 shares of common
stock outstanding on the date of this prospectus, the note can
presently be converted into 4,125,103 shares of common stock, which
is the number of shares beneficially owned by Mr. Romero pursuant
to Rule 13d-3 under the Securities Exchange Act. If and when Mr.
Romero sells shares issued upon conversion of his notes, he may
convert the note from time to time, as long as no conversion brings
his ownership, together with that of his affiliates, to more than
4.99% of our outstanding common stock after giving effect to the
conversion. |
The selling stockholder does not have, and
within the past three years has not had, any position, office or
material relationship with us or with any of our predecessors or
affiliates.
Pursuant to a loan and security agreement
dated March 20, 2018, Mr. Romero made loans to us totaling $500,000
in March through June 2018, for which we issued our 5% two-year
convertible secured promissory notes in the total principal amount
of $500,000. The notes are convertible into common stock at a
conversion price of $0.02 per share. The proceeds of the notes are
being used to inventory and for working capital and other corporate
purposes, and, to the extent that the proceeds of the loan are
being used to purchase inventory, we agreed to grant him a security
interest in the purchased equipment. The notes provide that they
cannot be converted to the extent that, after giving effect to
conversion, the holder and his affiliates would beneficially own
4.99% of our common stock. The notes give the holder the right, on
61 days’ notice, to increase or decrease the percentage; provided,
that in no event can the percentage exceed 9.99%.
PLAN OF
DISTRIBUTION
The selling stockholder and any of his
pledgees, donees, assignees and successors-in-interest may, from
time to time, sell any or all of their shares of common stock on
any stock exchange, market or trading facility on which the shares
are traded or in private transactions or by gift. These sales may
be made at fixed or negotiated prices that may or may not be
related to the market price at the time. Subject to the foregoing,
the selling stockholder may use any one or more of the following
methods when selling or otherwise transferring shares:
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ordinary brokerage transactions and transactions
in which the broker-dealer solicits purchasers; |
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block trades in which a broker-dealer will attempt
to sell the shares as agent but may purchase a position and resell
a portion of the block as principal to facilitate the
transaction; |
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sales to a broker-dealer as principal and the
resale by the broker-dealer of the shares for its account; |
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an exchange distribution in accordance with the
rules of the applicable exchange if we are listed on an exchange at
the time of sale; |
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privately negotiated transactions, including
gifts; |
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covering short sales made after the date of this
prospectus; |
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pursuant to an arrangement or agreement with a
broker-dealer to sell a specified number of such shares at a
stipulated price per share; |
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a combination of any such methods of sale;
and |
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any other method of sale permitted pursuant to
applicable law. |
To the extent permitted
under Rule 144, the selling stockholder may also sell the shares
owned by him pursuant to Rule 144. As of the date of this
prospectus, holders of our common stock cannot use Rule 144 for the
sale of restricted securities because we are classified as a shell
company. However, we will cease to be a shell company when we
commence our business activities. Even if we are no longer a shell
company, Rule 144 contains restrictions on the use of Rule 144.
Broker-dealers engaged by the selling
stockholder may arrange for other brokers dealers to participate in
sales. Broker-dealers may receive commissions or discounts from the
selling stockholder (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these
commissions and discounts to exceed what is customary in the types
of transactions involved. The selling stockholder is not an
affiliate of any broker-dealer.
The selling stockholder may from time to
time pledge or grant a security interest in some or all of the
shares owned by him and, if the selling stockholder defaults in the
performance of the secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to
time under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of
the Securities Act of 1933 amending the list of selling stockholder
to include the pledgee, transferee or other successors in interest
as selling stockholder under this prospectus.
In connection with the sale of our common
stock or interests therein, the selling stockholder may enter into
hedging transactions with broker-dealers or other financial
institutions which may in turn engage in short sales of our common
stock in the course of hedging the positions they assume. The
selling stockholder may, after the date of this prospectus, also
sell shares of our common stock short and deliver these securities
to close out their short positions, or loan or pledge their common
stock to broker-dealers that in turn may sell these securities. The
selling stockholder may also enter into option or other
transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of
shares offered by this prospectus, which shares such broker-dealer
or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The selling stockholder also may transfer
the shares of common stock in other circumstances, in which case
the transferees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.
The selling stockholder and any
broker-dealers or agents that are involved in selling the shares
may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, they
will be subject to the prospectus delivery requirements of the
Securities Act, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them
may be deemed to be underwriting commissions or discounts under the
Securities Act, and federal securities laws, including Regulation
M, may restrict the timing of purchases and sales of our common
stock by the selling stockholder and any other persons who are
involved in the distribution of the shares of common stock pursuant
to this prospectus. The selling stockholder has informed us that he
does not have any agreement or understanding, directly or
indirectly, with any person to distribute the common stock.
We may be required to amend or supplement
this prospectus in the event that (a) a selling stockholder
transfers securities under conditions which require the purchaser
or transferee to be named in the prospectus as a selling
stockholder, in which case we will be required to amend or
supplement this prospectus to name the selling stockholder, or (b)
any one or more selling stockholder sells stock to an underwriter,
in which case we will be required to amend or supplement this
prospectus to name the underwriter and the method of sale.
We are paying all fees and expenses incident
to the registration of the shares. We have agreed to indemnify the
selling stockholder against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is listed
on the OTCQB market and has been traded under symbol JRVS since May
4, 2018. From April 2014 until May 3, 2018, our common stock was
traded under the symbol DIMN. The market for our common stock is
limited and can be volatile. The following table sets forth the
high and low bid prices relating to our common stock on the OTCQB
on a quarterly basis for the periods indicated, as reported by the
OTC Markets Group website. The quotations reflect interdealer
prices, without retail markup, markdown or commission, and may not
represent actual transactions.
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Quarter Ended
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High Bid
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Low Bid
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July 31, 2018
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$
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0.11
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$
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0.185
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April 30, 2018
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$ |
0.15 |
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$ |
0.045 |
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January 31, 2018
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$ |
0.065 |
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$ |
0.022 |
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October 31, 2017
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$ |
0.13 |
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$ |
0.03 |
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July 31, 2017
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$ |
0.15 |
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$ |
0.221 |
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April 30, 2017
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$ |
0.209 |
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$ |
0.08 |
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January 31, 2017
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$ |
0.21 |
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$ |
0.10 |
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October 31, 2016
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$ |
0.51 |
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$ |
0.158 |
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July 31, 2016
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$ |
0.46 |
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$ |
0.17 |
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April 30, 2016
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$ |
0.55 |
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$ |
0.18 |
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January 31, 2016
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$ |
0.8499 |
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$ |
0.3651 |
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October 31, 2015
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$ |
0.64 |
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$ |
0.2501 |
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On September 6, 2018, the
last reported price for the common stock, as reported on the OTC
Markets website, was $0.18.
Stockholders
As of July 20, 2018 we had 28 stockholders
of record of our common stock.
Transfer Agent
The transfer agent for the common stock is
Globex Transfer, LLC, 780 Deltona Blvd., Suite 202, Deltona, FL
32725, telephone (813) 344-4490.
Dividend Policy
We have not paid dividends and we do not
anticipate paying dividends in the near future.
BUSINESS
Our Business
We are in the process of developing the
business of selling computer equipment which can be used for the
mining of cryptocurrency. The mining of cryptocurrency involves the
use of a powerful computer to run apps that solve complicated
mathematical problems with the result that the operator, or miner,
generates cryptocurrency. The industry commonly refers to this
computer equipment as “mining rigs.” We plan to develop and sell
graphic processing unit (GPU)-based mining rigs based on our
specifications. In July 2018, we introduced our first
cryptocurrency miner, the Ai-1 which we designed and had
manufactured to our specifications by GIGAIPC. Our mining rigs are
GPU based, which can be used to generate a wide variety of
cryptocurrencies, as contrasted with application specific
integrated circuits, known as ASIC, which are designed specifically
for mining Bitcoin. Our mining rigs use multiple GPU processors to
provide the cryptocurrency miners with what we believe is maximum
output.
The Ai-1 features advanced technologies that
are designed to provide cryptocurrency mining companies with what
we believe provides superior performance, including:
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Ai-1 is equipped with a high performance GPU
designed for cryptocurrency mining, the Ai-1 is designed to be
compatible with most of the popular cryptocurrency algorithms
including Ethash (Ethereum, Ethereum Classic), Equihash (Bitcoin
Gold, ZCash), CryptoNightV7 (Monero), and Lyra2Rev2
(Vertcoin). |
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Ai-1 comes standard with a professional
closed-system chassis and ten cooling fans to keep the GPUs
operating at the optimal temperature and drive down
air-conditioning cost. |
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Ai-1 requires minimum assembly and comes
pre-installed with EthOS, an operating system specialized in
mining. |
We have ordered 43 units from GIGAIPC. Three
of these units have been tested by GIGAIPC and the remaining units
are scheduled for testing. The testing includes generating
cryptocurrency, which GIGAIPC sells for its account. We anticipate
that GIGAIPC will test all mining rigs that we purchase from
GIGAIPC.
The Cryptocurrency Industry
Cryptocurrency is a digital or virtual
currency that uses cryptography for security. The first popular
cryptocurrency was Bitcoin, which was launched in 2009. As of May
2018, there were reportedly more than 17 million bitcoins in
circulation with a total market value of over $140 billion.
Bitcoin’s success has spawned a number of competing
cryptocurrencies. Cryptocurrencies are based on a public ledger
known as blockchain, which stores all past transactions. When a new
transaction is initiated, a cryptocurrency miner needs to ensure
that the information is accurate and add the transaction to the
blockchain. Cryptocurrency miners receive a small amount of
cryptocurrency as a reward for the service provided.
Cryptocurrencies earned through mining can subsequently be sold on
open exchanges and converted into fiat currency. Fiat currency is
any money which is declared by a government to be legal tender,
including state-issued currency.
Blockchain technology has revolutionized the
way that currencies are structured and created. The Ether currency
is created by running hashing algorithms in a process called
mining. Mining cryptocurrencies requires a computer to continuously
run a cryptographic hash function, which is a way to reduce an
arbitrarily large amount of data (in this case a block on the
blockchain) to a datum of a fixed size (a string of so many numbers
and letters). GPUs are logic chips that can be used to mine
cryptocurrencies and are designed to solve complex 3D imaging
algorithms in order to generate the particular cryptocurrency it is
mining. GPUs have the ability to be able to mine multiple types of
cryptocurrencies, unlike application specific integrated circuits,
known as ASIC, which are designed specifically for mining
Bitcoin.
The Securities and Exchange Commission has
issued warnings concerning cryptocurrencies and initial coin
offering. Although claims have been made that cryptocurrencies are
not securities, and therefore not subject to regulation by the SEC
and the equivalent regulatory bodies of other countries, whether
that claim proves correct with respect to any digital asset that is
labeled as a cryptocurrency will depend on the characteristics and
use of that particular asset. The SEC is focusing on
cryptocurrencies and initial coin offerings.
Our Former Business
Prior to the March 2018, we were seeking to
acquire and explore mineral properties. However, we were not
successful in that business, which never generated any revenue, and
we have discontinued that business. When the present management
acquired control in March 2018, we anticipated that we would engage
in cryptocurrency mining. We have changed our focus and we are now
designing and planning to market cryptocurrency mining rigs.
Organization
We are a Nevada corporation incorporated on
October 19, 2019 under the name Oconn Industries. On February 16,
2012, we changed our corporate name to Oconn Industries Corp., and
on April 1, 2014 we changed our corporate name to Diamante
Minerals, Inc. On March 20, 2018, we changed our corporate name to
iMine Corporation.
Our address is 8520 Allison Pointe Blvd Ste.
223 #87928, Indianapolis, Indiana 46250, telephone (877) 464-6388.
Our corporate website is www.iminecorp.com. Information on our
website or any other website does not constitute a part of this
prospectus.
Source of Supply
Our Ai-1 mining rigs are
manufactured by GIGAIPC to our specification pursuant to purchase
orders which we placed with GIGAIPC. As part of the manufacturing
process, GIGAIPC tests the equipment by generating cryptocurrency
using our mining rigs to confirm that the mining rig will generate
cryptocurrency. GIGAIPC retains any cryptocurrency which it
generated in the testing process, and we have no interest in the
cryptocurrency. When we order the equipment we specify the
configuration the components. As of July 20, 2018, GIGAIPC has
tested three of the 43 mining rigs that we orders and we expect
delivery of those three units during August 2018. We anticipate
that the balance of our order will be delivered by the end of
September 2018, although we cannot assure you that such schedule
will be met.
We do not presently have a supply agreement
with GIGAIPC. On July 13, 2018, we entered into a five-year
strategic relationship agreement with GIGAIPC. Pursuant to the
agreement, during the five-year term, GIGAIPC will not sell
cryptocurrency mining rigs except to us and our designees, and we
will only purchase mining rigs from GIGAIPC.
Marketing
Through July 20, 2015, we have not sold any
mining rigs. We are in the process of introducing our Ai-1 mining
rig to the cryptocurrency market. We anticipate that we will
introduce our Ai-1 mining rig though a campaign that includes
attendance at trade shows and other marketing activities directed
at the cryptocurrency mining market.
Our marketing effort will be conducted
primarily by our chief executive officer, Daniel Tsai. We do not
presently have any sale or marketing employees. We will need hire
additional marketing and service personnel if we are successful in
our initial marketing effort.
On July 19, 2018, we entered into a
nonexclusive distribution agreement with Sunwai Technology for the
Republic of China (Taiwan). The agreement does not have any minimum
purchase requirements, but it requires Sunwai to conduct an
aggressive marketing program, consistent with prudent business
practice.
Our mining rigs sell in the range of $8,000
to $11,000, depending on the configuration. The prices of mining
rigs reflect the changes in the cryptocurrency market. We do not
anticipate that we will arrange financing for any of our sales and
that our customers will pay the purchase price upon delivery. We
may in the future seek to develop a relationship with a leasing
company that would provide financing to customer who wish to pay on
installment basis; but we have not entered into any negotiations
with respect to such an agreement and we cannot assure you that we
will be able to offer financing to customers. The lack of a
financing alternative may impair our ability to sell our
products.
We do not provide service or
warranties, and we do not have an agreement with GIGAIPC relating
to warranties or extended warranties. Our equipment is assembled by
GIGAIPC to our specifications and includes components which may be
provided by different manufacturers, including GIGAIPC and its
parent company. Each part has its own manufacturer’s warranty,
which can range from three months to one year. We pass on to
customers the warranties from the manufacturer, principally
GIGAIPC, and customers will deal directly with the manufacturer. To
the extent that the equipment contains components from different
manufacturers, the customer needs to identify the component that
the customer believes is not functioning properly, determine the
manufacturer of the component and deal with the warranty processing
department of the component manufacturer in order to resolve the
problem.
Government Regulations
We are subject to government regulations
that are applicable to businesses generally, including those
relating to workers’ health and safety, wage and hour and labor
practices and anti-discrimination laws and regulations.
Research and Development
We have not engaged in any research and
development activities.
Intellectual Property Rights
We do not have any patent, copyright or
trade mark rights, although we consider the design of our mining
rigs to be our trade secret. However, we cannot assure you that we
will be able to protect our trade secrets.
Competition
In marketing our mining rigs, we compete
with a number of domestic and foreign companies that are actively
marketing mining rigs to the cryptocurrency industry, SharkMining,
MiningStore, MiningCave, MinShop and PandaMiner. These companies
are larger, better known and better capitalize than we are and the
generally offer a range of products to cryptocurrency miners. Our
competitors not only sell the equipment but also market the concept
of cryptocurrency mining and provide information to help a user get
started in the cryptocurrency mining business. Some of our
competitors also have personnel to provide chat advice through the
website, which our website does not have.
We believe that competition is based on both
price, cost of operation, including electricity cost, and features.
Because one of the major costs in cryptocurrency mining is
electricity, since the mining rigs may be in operation on a 24/7
basis and they consume substantial amounts of electricity, to the
extent that a mining rig can reduce electricity costs it would be
attractive to users. To the extent that our competitors can
generate interest in cryptocurrency mining, they may have a
marketing advantage in selling products to new cryptocurrency
miners.
Property
We do not own or lease any
real property.
Employees
We have one employee, our
chief executive officer and chief financial officer, Daniel
Tsai.
MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL
CONDITION
AND RESULTS OF
OPERATIONS
Overview
Prior to March 16, 2018, we
were engaged in the development of mining assets. We never
generated any revenue from this business and as of April 30, 2018,
all of the assets associated with the mining business have been
fully reserved against and have no value.
On March 16, 2018, we had a
change in management, with the resignation of our sole director and
chief executive officer and our chief financial officer, and the
appointment of a new director and chief executive officer, who is
our sole executive officer. With the change of management, we
changed our business. We are now in the process of developing the
business of designing and selling computer equipment which can be
used for the mining of cryptocurrency. Through the date of this
prospectus, we have not generated any revenue from the sale of our
mining rigs and we cannot assure you that we will be successful in
the development of this business. Through April 30, 2018, our
business activity has been limited to ordering the computer
equipment for inventory and developing our business plan.
In order to move forward
with our new business, we will need to raise a significant amount
of funds. We have no assurance that financing will be available to
us on acceptable terms. If financing is not available on
satisfactory terms, we may be unable to continue, develop or expand
our operations. Equity financing would result in additional
dilution to existing stockholders.
During the period from March
through June 2018, we raised $500,000 from the sale of our
convertible notes in the principal amount of $500,000. The proceeds
of these notes were used to purchase our inventory and for working
capital purposes, including expenses relating to our status as a
public company.
The terms of our employment agreements with
our former chief executive officer, Chad Ulansky, and our former
chief financial officer, Jennifer Irons, have had a significant
effect upon the results of our operations during the nine months
ended April 30, 2018 and 2017 and the years ended July 31, 2017 and
2016. Pursuant to our employment agreements with each of Mr.
Ulansky and Ms. Irons, we structured individual deferred share unit
plans for their benefit. Each deferred share unit plan provides
that, at our election, Mr. Ulansky or Ms. Irons (as the case may
be) may receive all of his or her employment compensation due in
the financial quarter in the form of deferred share units. Any such
deferred stock units are to be credited to accounts maintained for
each of Mr. Ulansky and Ms. Irons by us on a quarterly basis. The
number of deferred stock units to be credited in a financial
quarter is determined by dividing the compensation earned in such
financial quarter by the fair market value. Upon termination of
employment with us, other than as a result of death, each of Mr.
Ulansky and Ms. Irons (as the case may be) may elect to receive one
share of our Company’s common stock in respect of each whole
deferred stock unit credited to his or her account or cash equal to
the fair market value of such share. Subsequent to the July 31,
2017 year end, Mr. Ulansky and Ms. Irons agreed to waive the
deferred stock units that had been issued to them under their
deferred share unit plans. As a result of the grant of the deferred
stock units, we recognize compensation equal to the compensation
earned by Mr. Ulansky and Ms. Irons pursuant to their employment
agreements. In addition, there is a management fee or management
fee recovery based on changes in the market price of our common
stock. If the price of our stock declines, there is a recovery of
the management fee equal to the change in value of the stock
underlying the deferred stock units, and if the price of our common
stock increases there is a management fee equal to the increase in
value. In connection with their resignation in March 2018, Mr.
Ulansky and Ms. Irons released us from any obligation we have to
them, including payments due under their employment agreements.
When Mr. Ulansky and Ms. Irons waived their rights to the deferred
stock units, the value of the waived deferred stock units is
treated as a management fee recovery.
Nine months ended April 30, 2018 and
2017
We have generated no
revenues since inception.
For the three months ended
April 30, 2018, we generated a loss of $1,797,291, or $0.03 per
share (basic and diluted) as compared with net income of $52,169,
or $0.00 per share (basic and diluted) for the three months ended
April 30, 2017. The principal expenses for the three months ended
April 30, 2018 were general and administrative expenses of
$262,085, which related to executive compensation, including the
cash compensation payable to our new chief executive officer and a
consultant, and stock-based expenses of $1,484,000 representing the
fair market value of common stock issued to the chief executive
officer, a consultant and the former chief executive officer. For
the three months ended April 30, 2018, we incurred a management fee
recovery of $19,572, representing the value of the cancellation of
deferred stock units to our former chief executive officer and
chief financial officer, and in the comparable period of 2017, we
had a recovery of $68,051, resulting from the change in market
value of deferred stock units in that period. We generate income
for the three months ended April 30, 2017 as a result of the
recovery of the management fees. We also incurred professional fees
of $46,715 for the three months ended April 30, 2018 and $39,075
for the three months ended April 30, 2017 and we recognized a
recovery of tax filing penalties of $30,000 in the three months
ended April 30, 2017.
For the nine months ended
April 30, 2018, we generated a loss of $1,214,694, or ($0.02) per
share (basic and diluted) as compared with net income of $155,613,
or $0.00 per share (basic) and $0.01 (diluted) for the nine months
ended April 30, 2017. The principal expenses for the nine months
ended April 30, 2018 were general and administrative expenses of
$277,302, representing cash compensation payable to our
newly-elected chief executive officer and a consultant and
stock-based expenses of $1,484,000, representing the fair market
value of common stock issued to the newly elected chief executive
officer, our former chief executive officer and a consultant. We
recognized a management fee recovery of $658,427 for the nine
months ended April 30, 2018 and $254,543 for the nine months ended
April 30, 2017; the recovery during the current period resulting
from the waiver by the former chief executive officer and the chief
financial officer of deferred stock units and subsequent fulfilment
of these obligations through their respective release agreements.
The recovery in the comparative period is due to the change in
market price of the shares, upon which the deferred share units
were measured. The income for the nine months ended April 30, 2017
results from the recovery of the management fees. We also incurred
professional fees of $87,756 for the nine months ended April 30,
2018 and $110,379 for the nine months ended April 30, 2017 and we
recognized a recovery of tax filing penalties of $30,000 in the
nine months ended April 30, 2017. The nine months ended April 30,
2018 also include accrued interest on the convertible loans of
$24,063. During the nine months ended April 30, 2017, we incurred
additional legal costs related to the loan to Blendcore, as well as
additional legal and accounting costs for the filing of a
registration statement under the Securities Act.
Years Ended July 31, 2017 and
2016
We did not generate any
revenues during the years ended July 31, 2017 and July 31, 2016
.
For the year ended July 31,
2017, total operating expenses were $53,802, comprised of general
and administrative expenses of $27,107, management fee recovery of
$73,570, professional fees in the amount of $130,265 and recovery
of tax filing penalties of $30,000. For the year ended July 31,
2016, total operating expenses were $778,653, comprised of general
and administrative expenses of $35,857, management fees of
$602,241, professional fees of $110,555 and tax filing penalties of
$30,000.
For the year ended July 31,
2017, we had a net loss of $8,074,759, as compared to a net loss
for the year ended July 31, 2016 of $993,653.
Liquidity and Capital Resources
The following table summarizes our changes
in working capital from July 31, 2017 to April 30, 2018:
|
|
|
April 30,
2018
|
|
|
July 31,
2017
|
|
|
Change
|
|
|
% Change
|
|
|
Current assets
|
|
$ |
385,043 |
|
|
$ |
198,640 |
|
|
$ |
186,403 |
|
|
|
93.8 |
% |
|
Current liabilities
|
|
|
274,063 |
|
|
|
707,645 |
|
|
|
(433,582 |
) |
|
|
(61.3 |
)% |
|
Working capital
|
|
$ |
110,301 |
|
|
$ |
(509,005 |
) |
|
$ |
619,306 |
|
|
|
|
|
The following tables
summarize our cash flows the nine months ended April 30, 2018 and
2017 and the years ended July 31, 2017 and 2016.
|
|
|
Nine Months Ended April
30,
|
|
|
Year Ended July
31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
Cash flows used in operating
activities
|
|
$ |
(493,747 |
) |
|
$ |
(172,809 |
) |
|
$ |
(163,470 |
) |
|
$ |
(128.726 |
) |
|
Cash flows used in investing
activities
|
|
|
-- |
|
|
|
(30,000 |
|
|
|
-- |
|
|
|
(215,000 |
) |
|
Cash flows provided by
financing activities
|
|
|
350,000 |
|
|
|
-- |
|
|
|
(30,000 |
) |
|
|
-- |
|
|
Net change in cash during
the period
|
|
$ |
(143,747 |
) |
|
$ |
(202,809 |
) |
|
$ |
193,470 |
|
|
|
(343,726 |
) |
Going Concern
Our auditors have issued a going concern
opinion on our audited financial statements for the year ended July
31, 2017. As at April 30, 2018, we had not generated any revenue.
During the period ended April 30, 2018, we incurred a loss of
$1,214,694, and at April 30, 2018, we had an accumulated deficit of
$10,730,010. We require significant funding for our operations, and
we cannot assure you that we will be able to obtain necessary
financing on reasonable, if any, terms. Equity financing would
result in additional dilution to existing stockholders. We
currently have no agreements or arrangements to obtain funds
through bank loans, lines of credit or any other sources. There is
no assurance we will ever be successful doing so.
Our ability to begin operations in its new
field of selling computer equipment for the mining of
cryptocurrency is dependent upon, among other things, obtaining
additional financing to continue operations, and development of our
business plan. We have not generated any revenue from this business
through April 30, 2018, and we cannot give any assurance as to our
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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to
investors.
Critical Accounting Policies
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. We will adopt
Topic 606 on August 1, 2018. Since we have not generated any
revenue in the past, the adoption of Topic 606 will not require any
adjustment resulting from the adoption of Topic 606.
MANAGEMENT
Executive Officers and Directors
|
Name
|
|
Age
|
|
Position(s)
|
|
Daniel Tsai
|
|
39
|
|
Chief executive officer,
chief financial officer, president, secretary and director
|
Mr. Tsai has been our chief
executive officer, chief financial officer, president, secretary
and a director since March 16, 2018. He has been a consultant to
privately-owned cryptocurrency mining operations based in various
countries since 2013, and he has been involved in blockchain
cryptocurrency-based mining since late 2009. In 2004, he founded
and, from 2004 until 2009, he operated a China-based
virtual-currency “play-money workshop” for massively multiplayer
online role-playing games. The company’s business model was to have
its employees play massively multiplayer online games to acquire
in-game currencies while later selling the in-game currencies for
real-world currencies. Mr. Tsai has extensive experience in
cryptocurrency mining, mining pools and mining hardware equipment
and design. We believe that Mr. Tsai’s experience in the
cryptocurrency field is important for us to engage in that
industry.
Code of Ethics
We have adopted a code of
ethics that applies to our principal executive officers, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions.
Committees of the Board
of Directors
We do not have any
committees of our board of directors.
Compliance with Section
16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires
our executive officers and directors of the Company and persons who
beneficially own more than 10% of our equity securities to file
reports of ownership and changes in their ownership with the SEC.
Based solely on our review of copies of such reports and
representations from the reporting persons, we believe that during
the fiscal year ended July 31, 2017, the reporting persons were
compliant with their respective obligations under section 16(a) of
the Exchange Act.
Executive Compensation
The following summary
compensation table sets forth information concerning compensation
for services rendered in all capacities during the years ended July
September 30, 2017 and 2016, earned by or paid to our executive
officers.
|
Name and
Principal
Position
|
|
Year
|
|
Salary
|
|
|
Bonus Awards
|
|
|
Stock Awards
|
|
|
Options/ Warrant
Awards
(1)
|
|
|
Non-Equity
Plan
Compensation
|
|
|
Nonqualified Deferred
Earnings
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Chad Ulansky, CEO, CFO and
President (1)
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(71,237
|
)
|
|
|
-
|
|
|
$
|
(71,237
|
) |
|
|
2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
460,144
|
|
|
|
|
|
|
|
460,144
|
|
|
Jennifer Irons, CFO (2)
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,334
|
) |
|
|
-
|
|
|
|
(2,334
|
) |
|
|
2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142,098
|
|
|
|
-
|
|
|
|
142,098
|
|
__________
|
(1)
|
Mr. Ulansky received
compensation comprised of a deferred share unit plan, described
under “Employment Agreements.” Compensation for 2017 shows the net
recovery recorded by us. Mr. Ulansky resigned on March 16,
2018.
|
|
(2)
|
Ms. Irons received
compensation comprised of a deferred share unit plan as described
under “Employment Agreements.” Compensation for 2017 shows the net
recovery recorded by us. Ms. Irons resigned on March 16, 2018.
|
Employment
Agreements
Effective as of October 16,
2014, we entered into an employment agreement with Mr. Ulansky
pursuant to which we employed Mr. Ulansky as our chief executive
officer for three years. As compensation for his services, Mr.
Ulansky received an annual base salary of $400,000 for the first
year, $450,000 for the second year and $500,000 for the third year.
The employment agreement automatically renews on each anniversary
of the Agreement for one additional year term unless either party
elects not to terminate the agreement.
Effective as of July 12,
2015, we entered into an employment agreement with Ms. Irons
pursuant to which we employed Ms. Irons as our chief financial
officer for three years. As compensation for her services, Ms.
Irons received an annual base salary of $125,000 for the first
year, $137,500 for the second year and $150,000 for the third
year.
Pursuant to our employment
agreements with each of Mr. Ulansky and Ms. Irons, we structured
individual deferred share unit plans for their benefit effective as
of the effective dates of their respective employment agreements.
The deferred share unit plans provide that, at our sole election,
Mr. Ulansky or Ms. Irons may receive all of his or her employment
compensation in the form of deferred share units. The number of
deferred stock units to be credited in a financial quarter is
determined by dividing the compensation earned in the financial
quarter by the fair market value of the common stock, calculated as
defined in the agreements. Upon termination of employment, other
than as a result of death, each of Mr. Ulansky and Ms. Irons may
elect to receive one share of common stock in respect of each whole
deferred stock unit credited to his or her account or cash equal to
the fair market value of such share. In the event of the death of
Mr. Ulansky or Ms. Irons, we are required to pay to his or her
legal representative an amount in cash equal to the fair market
value of the shares to which he or she would have otherwise been
entitled to receive in respect of the deferred stock units credited
to his or her account.
Subsequent to the July 31,
2017 year end, Mr. Ulansky and Ms. Irons agreed to waive a portion
of the deferred stock units that have been issued to them under
their respective deferred share unit plans.
Mr. Ulansky and Ms. Irons
resigned from their positions on March 16, 2018. In connection with
their resignations, we entered into release agreements with them
pursuant to which we issued 1,500,000 shares of common stock,
valued at $84,000, to Mr. Ulansky and paid $25,000 to Ms. Irons in
full satisfaction of any obligations, including obligations under
employment agreements and deferred stock agreements, we had to
them.
On March 19, 2018, we
entered into a one-year employment agreement with Mr. Tsai,
pursuant to which we issued to Mr. Tsai 17,500,000 shares of common
stock, valued at $980,000, and agreed to pay Mr. Tsai $164,706 to
cover the federal income tax on the value of the stock and the tax
payment. The shares are fully vested.
Pension Benefits
We currently have no plans
that provide for payments or other benefits at, following, or in
connection with retirement of our officers.
Outstanding Equity Awards
at Fiscal Year-End
There are no outstanding
equity awards at July 31, 2017.
PRINCIPAL
STOCKHOLDERS
The following table provides
information as to shares of common stock beneficially owned as of
August 31, 2018, by:
|
|
· |
Each director; |
|
|
|
|
|
|
· |
Each current officer named in the summary
compensation table; |
|
|
|
|
|
|
· |
Each person owning of record or known by us, based
on information provided to us by the persons named below, at least
5% of our common stock; and |
|
|
|
|
|
|
· |
All directors and officers as a group |
For purposes of the
following table, “beneficial ownership” means the sole or shared
power to vote, or to direct the voting of, a security, or sole or
shared investment power with respect to a security, or any
combination thereof, and the right to acquire such power (for
example, through the exercise of warrants granted by us) within 60
days of August 31, 2018
|
Name and Address of
Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
% of
Class
|
|
|
Daniel Tsai
8520 Allison Pointe Blvd
Ste. 223 #87928, Indianapolis, Indiana 46250
|
|
|
17,500,000 |
|
|
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Iconic Private Equity
Partners 1
8th Floor, Asia Standard
Tower, Nos. 59-65 Queen's Road Central, Hong Kong
|
|
|
8,333,333 |
|
|
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Chad Ulansky
2
1302 Green Bay Rd, West
Kelowna, BC, Canada V4T 2B6
|
|
|
6,180,000 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Element 29 Ventures Ltd.
2
203-1634 Harvey Avenue,
Kelowna, BC, Canada VIY 6G2
|
|
|
4,680,000 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
The Panama Fund SA
3
World Trade Center, Piso 7,
Oficina 703, Panama City, Panama
|
|
|
4,900,000 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
All officers and directors
as a group (one individual)
|
|
|
17,500,000 |
|
|
|
22.3 |
% |
________
| 1 |
Elliot Choi, as the sole equity owner of Iconic
Private Equity Partners, has the sole right to vote and dispose of
the shares owned by Iconic Private Equity Partners. |
| 2 |
The shares beneficially owned by Mr. Ulansky
include the 4,680,000 shares owned by Element 29 Ventures and the
1,500,000 shares owned by Mr. Ulansky. Mr. Ulansky, as president of
Element 29 Venture, has the sole right to vote and dispose of the
shares owned by Element 29 Ventures. |
| 3 |
Marco Williams De Souza and Rodolfo Wright of
Williams & Associates (the practicing legal license company
administering The Panama Fund) have voting and dispositive power
over the shares held by The Panama Fund. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended July
31, 2017, Element 29 Ventures, of which Mr. Ulansky is president,
paid $3,167 in cash expenses and vehicle rental on our behalf,
which amounts were fully repaid by us in February, April and June
2017.
In connection with their
resignations as officers and, in Mr. Ulansky case, director, we
entered into release agreements with them pursuant to which we
issued 1,500,000 shares of common stock, valued at $84,000, to Mr.
Ulansky and paid $25,000 to Ms. Irons in full satisfaction of any
obligations, including obligations under employment agreements and
deferred stock agreements, we had to them.
Included in accounts payable
and accrued liabilities is $2,538 at July 31, 2017 due to companies
with common management. Prior to March 16, 2018, we shared office
space with other companies in order to take advantage of cost
sharing opportunities and management services. Two of these
companies are: Kel-Ex Developments Ltd., a significant stockholder,
which shared the services of our chief financial officer; and
Metalex Ventures Ltd., a publicly traded company which shares the
services of our chief executive officer and chief financial
officer. During the nine months ended April 30, 2018, the related
parties invoiced us for a total of $6,755 and during the year ended
July 31, 2017, the related parties invoiced us for a total of
$14,455.
On March 19, 2018, we
entered into a one-year consulting agreement with Iconic Private
Equity Partners pursuant to which we issued 7,500,000 shares of
common stock, valued at $420,000, and agreed to pay $70,588 to
Iconic Private Equity Partners.
Director
Independence
We have no independent
directors.
CHANGE IN
INDEPENDENT ACCOUNTANTS
On July 5, 2018, our sole director dismissed
Davidson & Company LLP Professional Accountants (“Davidson”) as
our independent registered public accounting firm and approved the
engagement of KCCW Accounting Corp. (“KCCW”) as our independent
registered public accounting firm.
Davidson issued an auditor’s report for the
fiscal years ended July 31, 2017 and 2016, which did not contain
any adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting
principles, except that such report contained an explanatory
paragraph in respect to uncertainty as to the Registrant's ability
to continue as a going concern.
During the period of Davidson’s engagement
and any subsequent interim periods through the date of such
dismissal, there were no disagreements with Davidson on any matter
of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Davidson would have caused them
to make reference thereto in connection with their report on the
financial statements for the years ended July 31, 2017 and 2016.
Further, during such period, there were no reportable events of the
type described in Item 304(a)(1)(v) of Regulation S-K.
During the two fiscal years prior to KCCW’s
engagement by us and any subsequent interim period prior to its
engagement, we did not consult with KCCW with respect to any of (i)
the application of accounting principles to a specified
transaction, either completed or proposed; (ii) the type of audit
opinion that might be rendered on our financial statements; or
(iii) any matter that was either the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or an event of the
type described in Item 304(a)(1)(v) of Regulation S-K.
DESCRIPTION OF
CAPITAL STOCK
Our authorized capital stock consists of
300,000,000 shares of common stock, par value $0.001 per share.
Holders of our common stock are entitled to equal voting rights,
consisting of one vote per share on all matters submitted to a
stockholder vote. Holders of common stock do not have cumulative
voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of
the directors. The presence, in person or by proxy duly authorized,
of the holders of a majority of the outstanding shares of stock
entitled to vote are necessary to constitute a quorum at any
meeting of our stockholders. A vote by the holders of a majority of
our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an
amendment to our articles of incorporation. In the event of
liquidation, dissolution or winding up of our company, either
voluntarily or involuntarily, each outstanding share of the common
stock is entitled to share equally in our assets.
Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no
redemption provisions applicable to our common stock. They are
entitled to receive dividends when and as declared by our board of
directors, out of funds legally available therefore. We have not
paid cash dividends in the past and do not expect to pay any within
the foreseeable future.
Nevada Law Provisions Relating to Certain
Transactions
Sections 78.378 through 78.3793 of the
Nevada Revised Statutes contains voting limitations on certain
acquisitions of control shares. Sections 78.411 through 78.444
contain restrictions of combinations with interested stockholders.
The Nevada law defines an interested stockholder as a beneficial
owner (directly or indirectly) of 10% or more of the voting power
of the outstanding shares of the corporation. In addition,
combinations with an interested stockholder remain prohibited for
three years after the person became an interested stockholder
unless (i) the transaction is approved by the board of directors or
the holders of a majority of the outstanding shares not
beneficially owned by the interested party, or (ii) the interested
stockholder satisfies certain fair value requirements.
Limitation on liability of officers and
directors
Officers and directors shall
have no personal liability to the corporation of its stock holders
for damages for breach of fiduciary duty as an officer or director.
This provision does not eliminate or limit the liability of an
officer or director for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or the payment of
distributions in violation of the NRS 78.300.
Indemnification
Nevada law permits broad provisions for
indemnification of officers and directors. Our bylaws have the
following indemnification provisions:
Our directors shall cause us to indemnify a
director or former director and they may cause us to indemnify a
director or former director of a corporation of which we are or
were a stockholder and the heirs and personal representatives of
any such person against all costs, charges and expenses, including
an amount paid to settle an action or satisfy a judgment, actually
and reasonably incurred by him including an amount paid to settle
an action or satisfy a judgment in a criminal or administrative
action or proceeding to which he is made a party by reason of his
or her being or having been our director or a director of such
other corporation, including an action brought by us or such
corporation. Each director on being elected or appointed is deemed
to have contracted with us on the terms of this indemnity.
Our directors may cause us to indemnify an
officer, employee or agent of us or of a corporation of which we
are or were a stockholder (notwithstanding that he is also a
director), and his or her heirs and personal representatives
against all costs, charges and expenses incurred by him or them and
resulting from his or her acting as an officer, employee or agent
of us or such other corporation. In addition, we shall indemnify
the secretary or an assistant secretary (if he is not a full-time
employee and notwithstanding that he is also a director), and his
heirs and legal representatives against all costs, charges and
expenses incurred by him or them and arising out of the functions
assigned to the secretary and each such secretary and assistant
secretary, on being appointed is deemed to have contracted with us
on the terms of the foregoing indemnity.
Our directors may cause us to purchase and
maintain insurance for the benefit of a person who is or was
serving as a director, officer, employee or agent of us or of a
corporation of which we are or were a stockholder and his heirs or
personal representatives against a liability incurred by him as a
director, officer, employee or agent.
SEC Policy on Indemnification for
Securities Act liabilities
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted
to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of
the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is
therefore unenforceable.
Penny-Stock Rules
The SEC has adopted regulations which
generally define a “penny stock” to be any equity security that has
a market price (as defined) of less than $5.00 per share, subject
to certain exceptions, and is not listed on the a registered stock
exchange or has net tangible assets in excess of $2,000,000, if the
issuer has been in continuous operation for at least three years,
or $5,000,000, if the issuer has been in continuous operation for
less than three years, or has average revenue of at least
$6,000,000 for the last three years.
As a result, our common stock may be subject
to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those
with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and
have received the purchaser’s written consent to the transaction
prior to the purchase. Additionally, for any transaction involving
a penny stock, unless exempt, the rules require the delivery, prior
to the transaction, of a risk disclosure document mandated by the
SEC relating to the penny stock market. The broker-dealer must also
disclose the commission payable to both the broker-dealer and the
registered representative, current quotations for the securities
and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market. Finally, monthly statements must
be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks. Consequently, the “penny stock” rules may restrict the
ability of broker-dealers to sell our securities and may affect
your ability to sell our securities in the secondary market and the
price at which you can sell our common stock.
According to the SEC, the market for penny
stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include:
|
|
· |
Control of the market for the security by one or a
few broker-dealers that are often related to the promoter or
issuer; |
|
|
|
|
|
|
· |
Control of the market for the security by one or a
few broker-dealers that are often related to the promoter or
issuer; |
|
|
|
|
|
|
· |
Manipulation of prices through prearranged
matching of purchases and sales and false and misleading press
releases; |
|
|
· |
“Boiler room” practices involving high pressure
sales tactics and unrealistic price projections by inexperienced
sales persons; |
|
|
|
|
|
|
· |
Excessive and undisclosed bid-ask differentials
and markups by selling broker-dealers; and |
|
|
|
|
|
|
· |
The wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to
a desired level, along with the inevitable collapse of those prices
with consequent losses to investors. |
Purchasers of penny stocks
may have certain legal remedies available to them in the event the
obligations of the broker-dealer from whom the penny stock was
purchased violates or fails to comply with the above obligations or
in the event that other state or federal securities laws are
violated in connection with the purchase and sale of such
securities. Such rights include the right to rescind the purchase
of such securities and recover the purchase price paid for
them.
If our stock is a “penny stock” we do not
have the safe harbor protection under federal securities laws with
respect to forward-looking statement.
Transfer Agent
The transfer agent for our
common stock is Globex Transfer, LLC, 780 Deltona Blvd., Suite 202,
Deltona, FL 32725, telephone (813) 344-4490. .
LEGAL MATTERS
The validity of the common stock offered
hereby will be passed upon for us by Ellenoff Grossman & Schole
LLP, New York, New York.
EXPERTS
Our financial statements included in this
prospectus as of July 31, 2017 and 2016 and for the years then
ended have been included in reliance on the reports of Davidson
& Company, LLP, an independent registered public accounting
firm, given on the authority of such firm as experts in accounting
and auditing.
WHERE YOU CAN
FIND MORE INFORMATION
We have filed with the Securities and
Exchange Commission a registration statement on Form S-1 under the
Securities Act of 1933 with respect to the common stock offered by
this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the
exhibits to the registration statement. For further information
with respect to our company and our common stock offered hereby,
reference is made to the registration statement and the exhibits
filed as part of the registration statement. We file periodic
reports with the Securities and Exchange Commission, including
annual reports which include our audited financial statements and
quarterly reports although we are not currently required to make
such filings pursuant to the Securities Exchange Act. We also plan
to include our SEC filings on our website. The registration
statement, including exhibits thereto, and all of our periodic
reports may be inspected without charge at the Securities and
Exchange Commission’s principal office in Washington, DC, and
copies of all or any part thereof may be obtained from the Public
Reference Section of the Securities and Exchange Commission, 100 F
Street, NE, Washington, DC 20549. You may obtain additional
information regarding the operation of the Public Reference Section
by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission also
maintains a website which provides online access to reports,
registration statements and other information regarding registrants
that file electronically with the Securities and Exchange
Commission at the address: http://www.sec.gov .
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT
REGIST ERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Directors of
Diamante Minerals, Inc.
We have audited the
accompanying financial statements of Diamante Minerals, Inc. (the
“Company”), which comprise the balance sheets of Diamante Minerals,
Inc. as of July 31, 2017 and 2016, and the related statements of
operations, changes in stockholders’ equity (deficiency), and cash
flows for the years ended July 31, 2017 and 2016. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the
financial statements referred to above present fairly, in all
material respects, the financial position of Diamante Minerals,
Inc. as of July 31, 2017 and 2016, and the results of its
operations and its cash flows for the years ended July 31, 2017 and
2016 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial
statements have been prepared assuming that Diamante Minerals, Inc.
will continue as a going concern. As discussed in Note 9 to the
financial statements, the Diamante Minerals, Inc. has suffered
recurring losses from operations and has a net capital deficiency.
These matters, along with the other matters set forth in Note 9,
indicate the existence of material uncertainties that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 9. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ DAVIDSON & COMPANY LLP
|
Vancouver, Canada
|
Chartered Professional
Accountants
|
|
|
|
October 30, 2017
|
|
DIAMANTE MINERALS,
INC.
Balance Sheets
(Expressed in US Dollars)
|
As at
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$ |
197,190 |
|
|
$ |
390,660 |
|
|
Prepaid expense
|
|
|
1,450 |
|
|
|
260 |
|
|
Total Current Assets
|
|
|
198,640 |
|
|
|
390,920 |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid Investment (Note
3)
|
|
|
- |
|
|
|
7,992,000 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
198,640 |
|
|
$ |
8,382,920 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$ |
24,218 |
|
|
$ |
60,169 |
|
|
Due to related
party (Note 4)
|
|
|
683,427 |
|
|
|
756,997 |
|
|
Total Current
Liabilities
|
|
|
707,645 |
|
|
|
817,166 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
(DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
Capital Stock, par
value $0.001, 300,000,000 shares authorized, 52,042,286 (July 31,
2016-52,042,286) shares issued and outstanding, respectively (Note
5)
|
|
|
52,042 |
|
|
|
52,042 |
|
|
Additional paid-in capital (Note
5)
|
|
|
8,954,269 |
|
|
|
8,954,269 |
|
|
Accumulated deficit
|
|
|
(9,515,316 |
) |
|
|
(1,440,557 |
) |
|
Total
Stockholders’ Equity (Deficiency)
|
|
|
(509,005 |
) |
|
|
7,565,754 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|
$ |
198,640 |
|
|
$ |
8,382,920 |
|
Commitments and contingencies (Note 6)
The accompanying notes are an
integral part of these audited financial statements.
DIAMANTE MINERALS,
INC.
Statements of Operations
(Expressed in US Dollars)
|
|
|
Year
ended
|
|
|
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
27,107 |
|
|
$
|
35,857 |
|
|
Management fees (recovery)
|
|
|
(73,570 |
) |
|
|
602,241 |
|
|
Professional fees
|
|
|
130,265 |
|
|
|
110,555 |
|
|
(Recovery of) tax filing
penalties (Note 7)
|
|
|
(30,000 |
) |
|
|
30,000 |
|
|
TOTAL OPERATING EXPENSES
|
|
|
53,802 |
|
|
|
778,653 |
|
|
LOSS FROM OPERATIONS
|
|
|
(53,802 |
) |
|
|
(778,653 |
) |
|
OTHER INCOME AND LOSS
|
|
|
|
|
|
|
|
|
|
Write off of acquisition costs
and investment (Note 3)
|
|
|
(8,022,000 |
) |
|
|
- |
|
|
Derivative - change in fair
value (Note 8)
|
|
|
- |
|
|
|
(215,000 |
) |
|
Interest income
|
|
|
1,043 |
|
|
|
- |
|
|
TOTAL OTHER INCOME AND LOSS
|
|
|
(8,020,957 |
) |
|
|
(215,000 |
) |
|
LOSS BEFORE INCOME TAXES
|
|
|
(8,074,759 |
) |
|
|
(993,653 |
) |
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
LOSS FOR THE YEAR
|
|
$ |
(8,074,759 |
) |
|
$ |
(993,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per
Common Share
|
|
$ |
(0.16 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Weighted
Average Common Shares Outstanding
|
|
|
52,042,286 |
|
|
|
52,042,286 |
|
The accompanying notes are an
integral part of these audited financial statements.
DIAMANTE MINERALS,
INC.
Statements of Changes in Stockholders’ Equity
(Deficiency)
(Expressed in US Dollars)
|
|
|
Number
of
Common
Shares
|
|
|
Capital
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders'
Equity
(Deficiency )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31,
2015
|
|
|
52,042,286 |
|
|
$ |
52,042 |
|
|
$ |
14,145,391 |
|
|
$ |
(5,638,026 |
) |
|
$ |
8,559,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves transferred on expired
share-based expenses (Note 5)
|
|
|
- |
|
|
|
- |
|
|
|
(5,191,122 |
) |
|
|
5,191,122 |
|
|
|
- |
|
|
Loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(993,653 |
) |
|
|
(993,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31,
2016
|
|
|
52,042,286 |
|
|
|
52,042 |
|
|
|
8,954,269 |
|
|
|
(1,440,557 |
) |
|
|
7,565,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,074,759 |
) |
|
|
(8,074,759 |
) |
|
Balance at July 31,
2017
|
|
|
52,042,286 |
|
|
$ |
52,042 |
|
|
$ |
8,954,269 |
|
|
$ |
(9,515,316 |
) |
|
$ |
(509,005 |
) |
The accompanying notes are an
integral part of these audited financial statements.
DIAMANTE MINERALS,
INC.
Statements of Cash Flows
(Expressed in US Dollars)
|
|
|
Year
Ended
|
|
|
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Loss for the year
|
|
$ |
(8,074,759 |
) |
|
$ |
(993,653 |
) |
|
Adjustments to reconcile loss to
net cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
Write off of acquisition
costs
|
|
|
7,992,000 |
|
|
|
- |
|
|
Write off of minority equity
interest
|
|
|
30,000 |
|
|
|
- |
|
|
Derivative - change in fair
value
|
|
|
- |
|
|
|
215,000 |
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
Increase in prepaid
expenses
|
|
|
(1,190 |
) |
|
|
(260 |
) |
|
Increase (decrease) in accounts
payable and accrued liabilities
|
|
|
(35,951 |
) |
|
|
47,946 |
|
|
Increase (decrease) in due to
related parties
|
|
|
(73,570 |
) |
|
|
602,241 |
|
|
Net cash used in operating
activities
|
|
|
(163,470 |
) |
|
|
(128,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase of minority equity
investment
|
|
|
(30,000 |
) |
|
|
- |
|
|
Loan receivable funds
advanced
|
|
|
- |
|
|
|
(215,000 |
) |
|
Net cash used in investing
activities
|
|
|
(30,000 |
) |
|
|
(215,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(193,470 |
) |
|
|
(343,726 |
) |
|
Cash, beginning of
year
|
|
|
390,660 |
|
|
|
734,386 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of year
|
|
$ |
197,190 |
|
|
$ |
390,660 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and
investing activities
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Supplement Cash Flow
Disclosures:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these audited financial
statements.
DIAMANTE MINERALS,
INC.
Notes to Audited Financial
Statements
July 31, 2017 and 2016
(Expressed in US Dollars)
NOTE 1 - ORGANIZATION AND
BUSINESS OPERATIONS
Diamante Minerals, Inc.
(“the Company”) was incorporated under the laws of the State of
Nevada, U.S. on October 26, 2010. The Company is in the business of
acquiring and exploring mineral properties.
The Company has not
generated any revenue to date. For the period from inception on
October 26, 2010 to July 31, 2017, the Company has accumulated
losses of $9,515,316.
NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements and related
disclosures have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Financial Statements have been prepared using the accrual basis of
accounting in accordance with Generally Accepted Accounting
Principles ("GAAP") of the United States.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. The Company's periodic filings
with the SEC include, where applicable, disclosures of estimates,
assumptions, uncertainties and markets that could affect the
financial statements and future operations of the Company.
Fiscal Period
The Company's fiscal year end is July
31.
Fair value of financial
instruments
The Company measures the fair value of
financial assets and liabilities based on US GAAP guidance which
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
The Company classifies financial assets and
liabilities as held-for-trading, available-for-sale,
held-to-maturity, loans and receivables or other financial
liabilities depending on their nature. Financial assets and
financial liabilities are recognized at fair value on their initial
recognition, except for those arising from certain related party
transactions which are accounted for at the transferor’s carrying
amount or exchange amount.
Financial assets and liabilities classified
as held-for-trading are measured at fair value, with gains and
losses recognized in net income. Financial assets classified as
held-to-maturity, loans and receivables, and financial liabilities
other than those classified as held-for-trading are measured at
amortized cost, using the effective interest method of
amortization. Financial assets classified as available-for-sale are
measured at fair value, with unrealized gains and losses being
recognized as other comprehensive income until realized, or if an
unrealized loss is considered other than temporary, the unrealized
loss is recorded in income.
Financial instruments, including accounts
payable and accrued liabilities are carried at amortized cost,
which management believes approximates fair value due to the short
term nature of these instruments.
The following table presents information
about the assets that are measured at fair value on a recurring
basis as at July 31, 2017, and indicates the fair value hierarchy
of the valuation techniques the Company utilized to determine such
fair value. In general, fair values determined by Level 1 inputs
utilize quoted prices (unadjusted) in active markets for identical
assets. Fair values determined by Level 2 inputs utilize data
points that are observable such as quoted prices, interest rates
and yield curves. Fair values determined by Level 3 inputs are
unobservable data points for the asset or liability, and included
situations where there is little, if any, market activity for the
asset:
|
|
|
|
|
|
Quoted Prices
in
|
|
|
Significant
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
Active
Markets
|
|
|
Observable
Inputs
|
|
|
Unobservable
Inputs
|
|
|
|
|
July 31,
2017
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
197,190 |
|
|
$ |
197,190 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Derivative asset
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total
|
|
$ |
197,190 |
|
|
$ |
197,190 |
|
|
$ |
- |
|
|
$ |
- |
|
While it currently has $nil value, the
Company’s derivative asset (note 8) represents a Level 3 asset.
Share-based
expenses
ASC 718 “Compensation -
Stock Compensation” prescribes accounting and reporting standards
for all share-based payment transactions in which employee services
are acquired. Transactions include incurring liabilities, or
issuing or offering to issue shares, options, and other equity
instruments such as employee stock ownership plans and stock
appreciation rights. Share-based payments to employees, including
grants of employee stock options, are recognized as compensation
expense in the financial statements based on their fair values.
That expense is recognized over the period during which an employee
is required to provide services in exchange for the award, known as
the requisite service period (usually the vesting period). If
options expire unexercised, any amounts vested and previously
recorded are reclassified to deficit.
The Company accounts for
stock-based compensation issued to non-employees and consultants in
accordance with the provisions of ASC 505-50, “Equity - Based
Payments to Non-Employees.” Measurement of share-based payment
transactions with non-employees is based on the fair value of
whichever is more reliably measurable: (a) the goods or services
received; or (b) the equity instruments issued. The fair value of
the share-based payment transaction is determined at the earlier of
performance commitment date or performance completion date.
Income Taxes
The Company provides for income taxes under
ASC 740, Accounting for Income Taxes. ASC 740 requires the use of
an asset and liability approach in accounting for income taxes.
Deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences
are expected to reverse.
ASC 740 requires the reduction of deferred
tax assets by a valuation allowance if, based on the weight of
available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
Concentrations of Credit Risk
The Company's financial instruments that are
exposed to concentrations of credit risk primarily consist of its
cash and related party payables it will likely incur in the near
future. The Company places its cash with financial institutions of
high credit worthiness. At times, its cash balance with a
particular financial institution may exceed any applicable
government insurance limits. The Company's management plans to
assess the financial strength and credit worthiness of any parties
to which it extends funds, and as such, it believes that any
associated credit risk exposures are limited.
Net Loss Per Share of Capital
Stock
In the accompanying financial statements,
basic earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of capital stock
outstanding during the period.
Recent Accounting Pronouncements
In November 2015, FASB issued Accounting
Standards Update (ASU) No, 201517 Income Taxes - Balance Sheet
Classification of Deferred Taxes. To simplify the presentation of
deferred income taxes, the amendments in this update require that
deferred tax liabilities and assets be classified as noncurrent in
a classified statement of financial position. The current
requirement that deferred tax liabilities and assets of a
tax-paying component of an entity be offset and presented as a
single amount is not affected by the amendments in the update. This
update is effective for fiscal years and interim periods within
those fiscal years, beginning after December 15, 2016. Early
application is permitted. Management has reviewed the ASU and
believes there will be no significant impact on the Company's
financial statements.
In January 2016, FASB issued Accounting
Standards Update (ASU) No. 201601 Financial Instruments -
Recognition and Measurement of Financial Assets and Financial
Liabilities. The amendments in this Update make targeted
improvements to generally accepted accounting principles (GAAP) as
follows:
|
|
· |
Require equity investments (except those accounted
for under the equity method of accounting or those that result in
consolidation of the investee) to be measured at fair value with
changes in fair value recognized in net income. However, an entity
may choose to measure equity investments that do not have readily
determinable fair values at cost minus impairment, if any, plus or
minus changes resulting from observable price changes in orderly
transactions for the identical or a similar investment of the same
issuer. |
|
|
· |
Simplify the impairment assessment of equity
investments without readily determinable fair values by requiring a
qualitative assessment to identify impairment. When a qualitative
assessment indicates that impairment exists, an entity is required
to measure the investment at fair value. |
|
|
· |
Eliminate the requirement to disclose the fair
value of financial instruments measured at amortized cost for
entities that are not public business entities. |
|
|
· |
Eliminate the requirement for public business
entities to disclose the method(s) and significant assumptions used
to estimate the fair value that is required to be disclosed for
financial instruments measured at amortized cost on the balance
sheet. |
|
|
· |
Require public business entities to use the exit
price notion when measuring the fair value of financial instruments
for disclosure purposes. |
|
|
· |
Require an entity to present separately in other
comprehensive income the portion of the total change in the fair
value of a liability resulting from a change in the
instrument-specific credit risk when the entity has elected to
measure the liability at fair value in accordance with the fair
value option for financial instruments. |
|
|
· |
Require separate presentation of financial assets
and financial liabilities by measurement category and form of
financial asset (that is, securities or loans and receivables) on
the balance sheet or the accompanying notes to the financial
statements. |
|
|
· |
Clarify that an entity should evaluate the need
for a valuation allowance on a deferred tax asset related to
available-for-sale securities in combination with the entity’s
other deferred tax assets. |
This update is effective for
fiscal years and interim periods within those fiscal years,
beginning after December 15, 2017. Early application is permitted.
Management has reviewed the ASU and believes there will be no
significant impact on the Company's financial statements.
In February 2016, FASB
issued Accounting Standards Update (ASU) No. 201602 Leases. The
main difference of the update is the recognition of lease assets
and lease liabilities by lessees for those leases classified as
operating leases under previous GAAP. Under this update, lessees
will now be required to recognize the assets and liabilities
arising from leases on the balance sheet. The economics of leases
can vary for a lessee and those economics should be reflected in
the financial statements; as such a distinction between finance
leases and operating leases has been retained. The classification
criteria for distinguishing between finance leases and operating
leases are substantially similar to the classification criteria for
distinguishing between capital leases and operating leases in the
previous leases guidance. This update is effective for fiscal years
and interim periods within those fiscal years, beginning after
December 15, 2018. Early application is permitted. Management has
reviewed the ASU and believes there will be no significant impact
on the Company's financial statements.
In March 2016, FASB issued
Accounting Standards Update (ASU) No. 201609 Stock Based
Compensation - Improvements to Employee Share-Based Payment
Accounting. Under this standard, all excess tax benefits and tax
deficiencies (including tax benefits of dividends on share-based
payment awards) should be recognized as income tax expense or
benefit in the income statements. The tax effects of exercised or
vested awards should be treated as discrete items in the reporting
period in which they occur. An entity should also recognize excess
tax benefits regardless of whether the benefit reduces taxes
payable in the current period. This update is effective for fiscal
years and interim periods within those fiscal years, beginning
after December 15, 2016. Early application is permitted. Management
has reviewed the ASU and believes there will be no significant
impact on the Company's financial statements.
In August 2016, FASB issued
Accounting Standards Updated (ASU) No. 201615 Statement of Cash
Flows - Classification of Certain Cash Receipts and Cash Payments.
This updated addresses eight specific cash flows issues with the
objective of reducing the existing diversity in practice.
|
|
· |
Debt prepayment or debt extinguishment costs |
|
|
· |
Settlement of zero-coupon debt instruments or
other debt instruments with coupon interest rates that are
insignificant in relation to the effective interest rate of the
borrowing |
|
|
· |
Contingent consideration payments made after a
business combination |
|
|
· |
Proceeds from the settlement of insurance
claims |
|
|
· |
Proceeds from the settlement of corporate-owned
life insurance policies, including bank-owned life insurance
policies |
|
|
· |
Distributions received from equity method
investees |
|
|
· |
Beneficial interests in securitization
transactions |
|
|
· |
Separate identifiable cash flows and application
of the predominance principle |
This update is effective for
fiscal years and interim periods within those fiscal years,
beginning after December 15, 2017. Early application is
permitted.
In May 2017, FASB issued Accounting
Standards Update (ASU) No. 201709 Compensation - Stock
compensation. The Board is issuing this Update to provide clarity
and reduce both (1) diversity in practice and (2) cost and
complexity when applying the guidance in Topic 718,
Compensation-Stock Compensation, to a change to the terms or
conditions of a share-based payment award. The amendments in this
Update provide guidance about which changes to the terms or
conditions of a share-based payment award require an entity to
apply modification accounting. The amendment is effective for
annual periods beginning after December 15, 2017 and interim
periods within those annual periods. Early adoption is permitted.
The Company has not yet adopted this ASU. Management has reviewed
the ASU and believes there will be no significant impact on the
Company's financial statements.
NOTE 3 - BATOVI
DIAMOND PROJECT
On November 20, 2014, the
Company entered into a formal joint venture agreement (“the Joint
Venture”) with Mineracao Batovi Ltda. (“Mineracao Batovi”), a
private Brazilian mineral exploration company which at that time
held 21 federal exploration licenses comprising the Batovi Diamond
Project located north of Paranatinga in the State of Mato Grosso,
Brazil. This was superseded by an amended and restated joint
venture agreement (the “Amended and Restated Joint Venture
Agreement”) with Mineracao Batovi and Dr. Charles Fipke, the
shareholder of Mineracao Batovi, dated January 25, 2017 which
provided the Company with the right to acquire up to a 49% interest
in Mineracao Batovi. As per the Amended and Restated Joint Venture
Agreement, the Company was required to contribute $1,000,000 in
cash to Mineracao Batovi on or before June 30, 2017, in order to
earn a 17.6% interest in Mineracao Batovi, this being in addition
to the Company’s existing 2.4% equity interest which was acquired
during the year ended July 31, 2017 from a former shareholder for
$30,000.
On November 20, 2014, the
Company issued 2,700,000 fully paid and non-assessable common
shares valued at $7,992,000 to Kel-Ex Developments Ltd. (“Kel-Ex”)
with a fair market value of $2.96 per share in connection with
Kel-Ex’s involvement with the Batovi Diamond Project.
As at the July 31, 2017 year
end, the agreement has expired, without the Company making any cash
contributions to Mineracao Batovi. As such, the previously
capitalized acquisition costs for the Brazil project of $7,992,000
have been written off.
The Company continues to own
a 2.4% minority interest in Mineracao Batovi, which was purchased
for $30,000. At present, it is not yet determinable as to whether
or not Mineracao Batovi retains the claims of the Batovi project.
Due to this uncertainly, and to the fact that Mineracao Batovi’s
only asset of value is these claims, an impairment equal to the
original investment purchase of $30,000 has been recorded in the
year ended July 31, 2017.
NOTE 4 - RELATED PARTY
TRANSACTIONS
During the year ended July
31, 2017, the Company’s director invoiced $3,716 (year ended July
31, 2016 - $2,177) to the Company to cover the Company’s operating
expenses. The balance was repaid in full in fiscal 2017.
The Company shares office
space with other companies in order to take advantage of cost
sharing opportunities and management services. Two of these
companies are: Kel-Ex, a privately-held British Columbia
corporation that is under common control with Mineracao Batovi and
is also significant shareholder of the Company; and Metalex
Ventures Ltd. (“Metalex”), a publicly traded company. Kel-Ex shares
the services of the Company’s Chief Financial Officer and Metalex
shares the services of the Company’s Chief Executive Officer and
the Company’s Chief Financial Officer. During the year ended July
31, 2017, the related parties invoiced the Company for the
following services and amounts:
|
|
|
Year ended
|
|
|
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
|
|
|
|
|
|
|
|
Administrative fees (10%)
|
|
$ |
1,237 |
|
|
$ |
1,444 |
|
|
Geological consulting fees
|
|
|
310 |
|
|
|
1,261 |
|
|
Shared office and administrative
costs
|
|
|
9,192 |
|
|
|
9,237 |
|
|
Shared project expenditures
|
|
|
3,716 |
|
|
|
3,316 |
|
|
Total related party expenditures
included in General and administrative expenses
|
|
$ |
14,455 |
|
|
$ |
15,258 |
|
|
|
|
Year ended
|
|
|
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
|
|
|
|
|
|
|
|
Element 29 Ventures Ltd.
|
|
$ |
3,716 |
|
|
$ |
2,177 |
|
|
Kel-Ex Developments Ltd.
|
|
|
6,103 |
|
|
|
8,664 |
|
|
Metalex Ventures Ltd.
|
|
|
4,636 |
|
|
|
4,417 |
|
|
|
|
$ |
14,455 |
|
|
$ |
15,258 |
|
As at July 31, 2017, the
following balances have been included within accounts payable:
|
|
|
As at
|
|
|
|
|
July 31,
2017
|
|
|
July 31,
2016
|
|
|
Kel-Ex Developments Ltd.
|
|
$ |
1,931 |
|
|
$ |
5,341 |
|
|
Metalex Ventures Ltd.
|
|
|
607 |
|
|
|
1,359 |
|
|
|
|
$ |
2,538 |
|
|
$ |
6,700 |
|
As at July 31, 2017,
$538,156 in management fees earned by the Chief Executive Officer
pursuant to the CEO Employment Agreement was included as due to a
related party (2016 - $609,392); $145,271 in management fees earned
by the Chief Financial Officer pursuant to the CFO agreement was
included as due to a related party (2016 - $147,605).
NOTE 5 - CAPITAL
STOCK
Authorized Stock
The Company has authorized
300,000,000 shares of common shares with a par value of $0.001 per
share. Each common share entitles the holder to one vote, in person
or proxy, on any matter on which action of the stockholders of the
corporation is sought.
Share Issuance
There were 52,042,286 shares
of common stock issued and outstanding as at July 31, 2016 and July
31, 2017.
On January 27, 2017, the Company filed a
registration statement with the Securities and Exchange Commission
(“SEC”) on Form S-1 under the Securities Act of 1933, as amended,
to register the offer and sale of up to 10,000,000 common shares of
the Company at a price of $0.1695 per share. The Company planned to
use the proceeds from this offering to fund the acquisition of the
17.6% equity interest in Mineracao Batovi, provide working capital
and expand the business. The registration statement was declared
effective by the SEC as of March 9, 2017; no common stock had been
sold pursuant to the registration statement as of July 31,
2017.
In connection with the termination of the
Amended and Restated Joint Venture Agreement (Note 3), the Company
has elected not to proceed with the offering of common stock. The
Company’s request for the SEC’s consent to withdraw the
registration statement was verbally received on August 21,
2017.
Share-based Expenses
During the year ended July 31, 2016, certain
stock options expired without being exercised. As such, as at July
31, 2016 and 2017, the Company had no options outstanding. A total
of $5,191,122 was reclassified to deficit upon expiration during
the year ended July 31, 2016.
NOTE 6 - COMMITMENTS AND
CONTINGENCIES
On October 16, 2014, the
Company and Chad Ulansky entered into an Employment Agreement (the
“CEO Employment Agreement”), pursuant to which Mr. Ulansky is
employed by the Company as its Chief Executive Officer for three
years. As compensation for his services, Mr. Ulansky shall receive
an annual base salary of $400,000 for the first year of the
Employment Agreement, $450,000 for the second year and $500,000 for
the third year. The Company shall have the right to pay the salary
or any other amounts payable to Mr. Ulansky in deferred shares
units of the Company based on the 90-day volume weighted average
price (“VWAP”) of the common shares of the Company at the end of
each quarter. As at July 31, 2017, $538,156 (July 31, 2016 -
$609,392) has been accrued in accounts payable, which equates to
4,679,613 shares (July 31, 2016 - 1,324,767) if Mr. Ulansky were to
leave the Company.
On July 12, 2015, the
Company and Jennifer Irons entered into an Employment Agreement
(the “CFO Employment Agreement”, together with the CEO Employment
Agreement, known as “the Employment Agreements”), pursuant to which
Ms. Irons is employed by the Company as its Chief Financial Officer
for three years. As compensation for her services, Ms. Irons shall
receive an annual base salary of $125,000 for the first year of the
Employment Agreement, $137,500 for the second year and $150,000 for
the third year. The Company shall have the right to pay the salary
or any other amounts payable to Ms. Irons in deferred share units
of the Company based on the 90-day VWAP of the common shares of the
Company at the end of each quarter. As at July 31, 2017, $145,271
(July 31, 2016 - $147,605) has been accrued in accounts payable,
which equates to 1,263,222 shares (July 31, 2016 - 320,880) if Ms.
Irons were to leave the Company.
The Employment Agreements
shall automatically renew on each anniversary of the Agreement for
one additional year term unless one party provides the other with
notice prior to such anniversary date that such party does not
desire to renew the Employment Agreement. The Company may
immediately terminate Mr. Ulansky and Ms. Irons's employment for
cause. If (i) Mr. Ulansky or Ms. Irons's employment is terminated
by the Company without cause, (ii) Mr. Ulansky or Ms. Irons
terminate his or her employment as a result of the Company
assigning duties inconsistent with his position or the Company
fails to pay the compensation or (iii) there is a change in control
in the Company, then in either case the Company shall pay Mr.
Ulansky and Ms. Irons an amount equal to (a) the product of the
number of years and fractional years for the remainder of the term
multiplied by (b) 50% of the then current base salary in effect as
of the date of termination.
During the year ended July
31, 2017, the Company issued 4,297,188 deferred share units under
the employment agreements; while the value of these deferred share
units has been accrued as a liability each quarter, due to the
changes in market price of the shares, the Company recorded a
recovery of management fees of $73,570 during the year ended July
31, 2017.
Pursuant to their respective
Employment Agreements, the Company has structured individual
Deferred Share Unit Plans for each of Mr. Ulansky and Ms. Irons
effective as of, respectively, October 16, 2014 and July 12, 2015.
Subsequent to the July 31, 2017 year end, Mr. Ulansky and Ms. Irons
have agreed, for the advancement of the Company, to waive a portion
of the DSUs that have been issued to them under their respective
Deferred Share Unit Plans. By mutual agreement, no further DSUs
will be issued under these plans.
NOTE 7 - INCOME
TAXES
The provision for income taxes differs from
the amounts which would be provided by applying the statutory
federal income tax rate of 34 percent to net the loss before
provision for income taxes for the following reasons:
|
|
|
July 31,
2017 |
|
|
July 31,
2016 |
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
$ |
(8,074,759 |
) |
|
$ |
(993,653 |
) |
|
|
|
|
|
|
|
|
|
|
| Income tax recovery at statutory rate |
|
$ |
(2,745,418 |
) |
|
$ |
(337,842 |
) |
| Permanent difference and other |
|
$ |
2,416,418 |
|
|
$ |
- |
|
|
Change in valuation allowance
|
|
|
329,000 |
|
|
|
337,842 |
|
| Income tax expense per books |
|
$ |
- |
|
|
$ |
- |
|
Net deferred tax assets consist of the
following components as of:
|
|
|
July 31,
2017 |
|
|
July 31,
2016 |
|
|
|
|
|
|
|
|
|
|
Non-operating loss carryforward
|
|
$ |
452,000 |
|
|
$ |
123,000 |
|
| Valuation allowance |
|
|
(452,000 |
) |
|
|
(123,000 |
) |
| Net deferred tax asset |
|
$ |
- |
|
|
$ |
- |
|
Due to the change in ownership provisions of
the Tax Reform Act of 1986, net operating loss carry forwards of
$86,001 for federal income tax reporting purposes are subject to
annual limitations. When a change in ownership occurs, net
operating loss carry forwards may be limited as to use in future
years.
During the year ended July 31, 2016, it came
to the attention of management that no tax filings had been
submitted for the Company since its inception. While the Company
had no taxable income and incurred no corporate taxes payable,
there were certain reporting requirements that were not submitted
by the appropriate deadlines. Upon filing, the Company incurred a
$10,000 penalty for each of the 2012, 2013 and 2014 year ends, for
a total of $30,000. The Company then filed a request to waive the
penalties and, during the year ended July 31, 2017, received notice
of assessments for these tax years. The Company filed an objection
to these assessments and succeeded in having the penalties waived.
As such, a recovery of tax filing penalties has been recorded in
the statement of operations.
NOTE 8 - DERIVATIVE
ASSET
On January 22, 2016, the Company entered
into a loan agreement with Blendcore LLC, a Delaware corporation
(“Blendcore”), and Petaquilla Gold, S.A., a Panama corporation
(“Petaquilla Gold”), which is a subsidiary of Petaquilla Minerals
Ltd., a Canadian public company, pursuant to which the Company has
agreed to advance a loan in the principal amount of US$250,000 to
Blendcore (the “Loan”). Petaquilla Gold, as the owner of the
minerals sourced at the Molejon Gold Mine located in Donoso
District, Colon Province, Republic of Panama (the “Mine”), has
engaged Blendcore, as master contractor, to act as operator in
connection with the restarting of the processing of stockpiled ore
at the Mine. In exchange for the provision of the Loan, the Company
is entitled to a royalty of 12.5% on the first 1,000 ounces of gold
produced per month for 12 months (the “Royalty period”). The
Royalty Period is to commence once production ramps up to 1,000
ounces per month. For monthly production between 1,001 and 2,000
ounces of gold per month, the Company is to receive a reduced
royalty of 5%. In addition to the royalty stream, the Company has
the right of first option to provide funding for the expansion and
development of the Mine. The Loan is to be forgiven provided that
there are at least 12,000 ounces of gold produced during the
Royalty Period. Upon the completion of the Royalty Period, the
Company has the option to extend the royalty for a further 12 month
period through the provision of a second $250,000 loan on
substantially the same terms as the initial loan. This right shall
survive the royalty agreement by a period of one year. As at July
31, 2017, the Company has advanced $215,000 to Blendcore LLC.
Valuation of Derivative
As the loan agreement with Blendcore
contains a royalty component, there is an embedded derivative in
its value. Currently, the Company has elected to account for the
entire instrument as a derivative at fair value, with changes in
fair value presented in earnings. The fair value of the derivative
is determined by using a discounted cash flow analysis related to
various expected future cash flows to be received based on weighted
probabilities due to the uncertainty of the potential royalty
streams. This asset is classified as a Level 3 asset within the
fair value hierarchy as our valuation estimates utilize significant
unobservable inputs, including estimates as to the probability and
timing of future gold production. Transaction related fees and
costs are expensed as incurred.
The changes in the estimated fair value from
the derivative along with cash receipts each reporting period are
presented together on the Statement of Operations under the
caption, “Derivative - change in fair value”.
At present, the gold mine has not been
restarted. The Company has engaged the services of a legal firm in
Panama to determine appropriate title to the claim and our course
of action to receive the funds advanced. As such, while the Company
continues to work to recover the funds, it currently considers
there to be negligible chance of recovery and has accordingly
valued the derivate as at July 31, 2017 at $Nil (July 31, 2016 -
$Nil).
NOTE 9 - GOING CONCERN
AND LIQUIDITY CONSIDERATIONS
The accompanying 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 year ended July 31, 2017, the Company incurred
a net loss of $8,074,759. As at July 31, 2017, the Company had an
accumulated deficit of $9,515,316 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 emerge from the exploration stage is dependent upon, among other
things, obtaining additional financing to continue operations, and
development of its business plan. In response to these problems,
management intends to raise additional funds through public or
private placement offerings.
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.
iMINE CORPORATION
(formerly known as
Diamante Minerals, Inc.)
Consolidated Balance Sheets
|
|
|
April
30,
2018
|
|
|
July
31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$ |
53,443 |
|
|
$ |
197,190 |
|
|
Prepaid inventory (Note 3)
|
|
|
331,600 |
|
|
|
- |
|
|
Prepaid expenses (Note 3)
|
|
|
- |
|
|
|
1,450 |
|
|
Total Current Assets
|
|
|
385,043 |
|
|
|
198,640 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
385,043 |
|
|
$ |
198,640 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$ |
85,973 |
|
|
$ |
24,218 |
|
|
Due to related parties (Note
4)
|
|
|
164,706 |
|
|
|
683,427 |
|
|
Convertible
notes (Note 6)
|
|
|
24,063 |
|
|
|
- |
|
|
Total Current
Liabilities
|
|
|
274,742 |
|
|
|
707,645 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
(DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
Common Stock, par value $0.001,
300,000,000 shares authorized, 78,542,286 and 52,042,286 shares
issued and outstanding as at April 30, 2018 and July 31, 2017,
respectively (Note 5)
|
|
|
78,542 |
|
|
|
52,042 |
|
|
Additional paid-in capital (Note
5)
|
|
|
10,761,769 |
|
|
|
8,954,269 |
|
|
Accumulated deficit
|
|
|
(10,730,010 |
) |
|
|
(9,515,316 |
) |
|
Total
Stockholders’ Equity (Deficiency)
|
|
|
110,301 |
|
|
|
(509,005 |
) |
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|
$ |
385,043 |
|
|
$ |
198,640 |
|
The accompanying notes are an
integral part of these consolidated financial statements.
iMINE CORPORATION
(formerly known as
Diamante Minerals, Inc.)
Consolidated Statements of Operations
(Unaudited)
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
|
|
April
30,
2018
|
|
|
April
30,
2017
|
|
|
April
30,
2018
|
|
|
April
30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
262,085 |
|
|
|
6,807 |
|
|
|
277,302 |
|
|
|
18,551 |
|
|
Interest and accretion on
convertible notes (Note 6)
|
|
|
24,063 |
|
|
|
- |
|
|
|
24,063 |
|
|
|
- |
|
|
Management fees (recovery)
|
|
|
(19,572 |
) |
|
|
(68,051 |
) |
|
|
(658,427 |
) |
|
|
(254,543 |
) |
|
Professional fees
|
|
|
46,715 |
|
|
|
39,075 |
|
|
|
87,756 |
|
|
|
110,379 |
|
|
Recovery of tax filing
penalties
|
|
|
- |
|
|
|
(30,000 |
) |
|
|
- |
|
|
|
(30,000 |
) |
|
Share-based expenses (Note 4
and Note 5)
|
|
|
1,484,000 |
|
|
|
- |
|
|
|
1,484,000 |
|
|
|
- |
|
|
TOTAL OPERATING EXPENSES
|
|
|
1,797,291 |
|
|
|
(52,169 |
) |
|
|
1,214,694 |
|
|
|
(155,613 |
) |
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
(1,797,291 |
) |
|
|
52,169 |
|
|
|
(1,214,694 |
) |
|
|
155,613 |
|
|
OTHER INCOME AND LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
TOTAL OTHER INCOME AND LOSS
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
INCOME (LOSS) BEFORE INCOME
TAXES
|
|
|
(1,797,291 |
) |
|
|
52,169 |
|
|
|
(1,214,694 |
) |
|
|
155,613 |
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
NET INCOME (LOSS)
|
|
$ |
(1,797,291 |
) |
|
$ |
52,169 |
|
|
$ |
(1,214,694 |
) |
|
$ |
155,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (Loss) per Share
of Common Stock
|
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (Loss) per
Share of Common Stock
|
|
$ |
(0.03 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted Average Shares
of Common Stock Outstanding
|
|
|
64,441,162 |
|
|
|
52,042,286 |
|
|
|
56,084,411 |
|
|
|
52,042,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted Average
Shares of Common Stock Outstanding
|
|
|
64,441,162 |
|
|
|
55,265,483 |
|
|
|
56,084,411 |
|
|
|
54,402,713 |
|
The accompanying notes are an
integral part of these consolidated financial statements.
iMINE CORPORATION
(formerly known as
Diamante Minerals, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine months
ended
|
|
|
|
|
April
30,
2018
|
|
|
April
30,
2017
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(1,214,694 |
) |
|
$ |
155,613 |
|
|
Adjustments to reconcile net
income to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
Share-based expenses
|
|
|
1,484,000 |
|
|
|
- |
|
|
Management fees recovery
|
|
|
(683,427 |
) |
|
|
(254,543 |
) |
|
Accrued interest and accretion
on convertible notes
|
|
|
24,063 |
|
|
|
- |
|
|
Recovery of income tax
penalties
|
|
|
- |
|
|
|
(30,000 |
) |
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
Increase in prepaid expense
|
|
|
(330,150 |
) |
|
|
(1,090 |
) |
|
Increase (decrease) in accounts
payable and accrued liabilities
|
|
|
61,755 |
|
|
|
(42,789 |
) |
|
Increase in due to related
parties
|
|
|
164,706 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(493,747 |
) |
|
|
(172,809 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds of convertible loan
|
|
|
350,000 |
|
|
|
- |
|
|
Net cash provided by financing
activities
|
|
|
350,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase of Mineracao Batovi
Ltda. interest
|
|
|
- |
|
|
|
(30,000 |
) |
|
Net cash used in investing
activities
|
|
|
- |
|
|
|
(30,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(143,747 |
) |
|
|
(202,809 |
) |
|
Cash - beginning of
period
|
|
|
197,190 |
|
|
|
390,660 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash - end of period
|
|
$ |
53,443 |
|
|
$ |
187,851 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Disclosure:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an
integral part of these consolidated financial statements.
iMINE CORPORATION
(formerly known as
Diamante Minerals, Inc.)
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.
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.