UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

(Mark One)

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

 

 

 

For the quarterly period ended April 30, 2020 

 

 

or

 

 

¨ 

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

 

 

 

For the transition period from ____________ to ________________

 

Commission file number: 000-55233

 

iMine Corporation

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-3816969

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

8520 Allison Point Blvd Ste. 223 #87928

Indianapolis, Indiana 46250

(Address of principal executive offices)

 

877-464-6388

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ¨

 

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

 

Large accelerated filer

¨

Accelerated filer  

¨

Non-accelerated filer

x

Smaller reporting company

x

 

Emerging growth company

¨

 

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

 

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

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

As of June 10, 2020, there were 79,792,286 shares of the issuer’s common stock, par value $0.001 per share, outstanding.

 

 

 

  

iMINE CORPORATION

 

INDEX

 

 

Page No.

 

Part I: Financial Information

 

Item 1:

Financial Statements

4

 

Consolidated Balance Sheets as of April 30, 2020 and July 31, 2019 (Unaudited)

4

 

Consolidated Statements of Operations for the three and nine months ended April 30, 2020 and 2019 (Unaudited)

5

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended April 30, 2020 and 2019 (Unaudited)

6

 

Consolidated Statements of Cash Flows for the nine months ended April 30, 2020 and 2019 (Unaudited)

7

 

Notes to Unaudited Consolidated Financial Statements

8

 

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

 

Item 3:

Quantitative and Qualitative Disclosures about Market Risk

14

 

Item 4:

Controls and Procedures

14

 

Part II: Other Information

 

Item 6:

Exhibits

15

 

 
2

Table of Contents

 

FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended July 31, 2019, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

 

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

All references in this Form 10-Q to the “Company,” “iMine,” “we,” “us,” “our” and words of like import relate to are to iMine Corporation and its subsidiary, which is inactive.

 

 
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Table of Contents

 

PART I – FINANCIAL INFORMATION

   

Item 1. Financial Statements

 

iMINE CORPORATION

Consolidated Balance Sheets

(Unaudited)

 

 

 

April 30,

 

 

July 31,

 

 

 

2020

 

 

2019

 

ASSETS

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 1,115

 

 

$ 1,850

 

Total Current Assets

 

 

1,115

 

 

 

1,850

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 1,115

 

 

$ 1,850

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 65,976

 

 

$ 59,582

 

Due to related parties

 

 

192,406

 

 

 

164,706

 

Convertible notes payable - related party

 

 

554,163

 

 

 

371,089

 

Liabilities from discontinued operation

 

 

19,500

 

 

 

19,500

 

Total Current Liabilities

 

 

832,045

 

 

 

614,877

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

832,045

 

 

 

614,877

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

Common stock: 300,000,000 authorized; $0.001 par value 79,792,286 shares issued and outstanding at April 30, 2020 and July 31, 2019

 

 

79,792

 

 

 

79,792

 

Additional paid in capital

 

 

11,660,263

 

 

 

11,660,263

 

Accumulated deficit

 

 

(12,570,985 )

 

 

(12,353,082 )

Total Stockholders' Deficit

 

 

(830,930

)

 

 

(613,027 )

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 1,115

 

 

$ 1,850

 

 

The accompanying notes are an integral part of these consolidated financial statements.

   

 
4

Table of Contents

 

iMINE CORPORATION

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 30,

 

 

April 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

285

 

 

 

185

 

 

 

935

 

 

 

871

 

Professional fees

 

 

25,956

 

 

 

7,350

 

 

 

33,894

 

 

 

51,397

 

Total operating expenses

 

 

26,241

 

 

 

7,535

 

 

 

34,829

 

 

 

52,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(26,241 )

 

 

(7,535 )

 

 

(34,829 )

 

 

(52,268 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and accretion on convertible notes

 

 

(41,847 )

 

 

(68,311 )

 

 

(183,074 )

 

 

(209,538 )

Total other expense

 

 

(41,847 )

 

 

(68,311 )

 

 

(183,074 )

 

 

(209,538 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(68,088 )

 

 

(75,846 )

 

 

(217,903 )

 

 

(261,806 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss from continuing operations

 

 

(68,088 )

 

 

(75,846 )

 

 

(217,903 )

 

 

(261,806 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax

 

 

-

 

 

 

(181,125 )

 

 

-

 

 

 

(659,870 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (68,088 )

 

$ (256,971 )

 

$ (217,903 )

 

$ (921,676 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

Discontinued operations

 

 

-

 

 

 

(0.00 )

 

 

-

 

 

 

(0.01 )

Net loss

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.01 )

Basic weighted average number of common shares outstanding

 

 

79,792,286

 

 

 

79,792,286

 

 

 

79,792,286

 

 

 

79,659,502

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
5

Table of Contents

  

iMINE CORPORATION

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

  

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

 Number of

Shares

 

 

 Amount

 

 

Paid in

 Capital

 

 

Accumulated

 Deficit

 

 

Stockholders'

 Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - July 31, 2019

 

 

79,792,286

 

 

$ 79,792

 

 

$ 11,660,263

 

 

$ (12,353,082 )

 

$ (613,027 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74,826 )

 

 

(74,826 )

Balance - October 31, 2019

 

 

79,792,286

 

 

 

79,792

 

 

 

11,660,263

 

 

 

(12,427,908 )

 

 

(687,853 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74,989 )

 

 

(74,989 )

Balance - January 31, 2020

 

 

79,792,286

 

 

 

79,792

 

 

 

11,660,263

 

 

 

(12,502,897 )

 

 

(762,842 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(68,088 )

 

 

(68,088 )

Balance - April 30, 2020

 

 

79,792,286

 

 

$ 79,792

 

 

$ 11,660,263

 

 

$ (12,570,985 )

 

$

(830,930

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Stockholders'

 

 

 

 Number of

Shares

 

 

 Amount

 

 

Paid in

 Capital

 

 

Accumulated

 Deficit

 

 

 Equity

(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - July 31, 2018

 

 

78,542,286

 

 

$ 78,542

 

 

$ 11,365,925

 

 

$ (11,335,439 )

 

$ 109,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,250,000

 

 

 

1,250

 

 

 

223,750

 

 

 

-

 

 

 

225,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(124,500 )

 

 

(124,500 )

Balance - October 31, 2018

 

 

79,792,286

 

 

 

79,792

 

 

 

11,589,675

 

 

 

(11,459,939 )

 

 

209,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(540,205 )

 

 

(540,205 )

Balance - January 31, 2019

 

 

79,792,286

 

 

 

79,792

 

 

 

11,589,675

 

 

 

(12,000,144 )

 

 

(330,677 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(256,971 )

 

 

(256,971 )

Balance - April 30, 2019

 

 

79,792,286

 

 

$ 79,792

 

 

$ 11,589,675

 

 

$ (12,257,115 )

 

$ (587,648 )

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 
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Table of Contents

  

iMINE CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

  

 

 

Nine Months Ended

 

 

 

April 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$ (217,903 )

 

$ (921,676 )

Net loss from discontinued operations

 

 

-

 

 

 

(659,870 )

Net loss from continuing operations

 

 

(217,903 )

 

 

(261,806 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Accrued interest and accretion on convertible notes

 

 

183,074

 

 

 

190,839

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

-

 

 

 

(4,350 )

Accounts payable and accrued liabilities

 

 

6,394

 

 

 

34,471

 

Due to related parties

 

 

27,700

 

 

 

-

 

Net cash used in operating activities - continuing operations

 

 

(735 )

 

 

(40,846 )

Net cash used in operating activities - discontinued operations

 

 

-

 

 

 

(11,020 )

Net cash used in operating activities

 

 

(735 )

 

 

(51,866 )

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(735 )

 

 

(51,866 )

Cash and cash equivalents, beginning of period

 

 

1,850

 

 

 

53,971

 

Cash and cash equivalents, end of period

 

$ 1,115

 

 

$ 2,105

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for taxes

 

$ -

 

 

$ -

 

 

The accompanying notes are an integral part of these consolidated financial statements.

  

 
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Table of Contents

  

iMINE CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

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, a Nevada corporation, into the Company. The Company has one subsidiary, iMine Corporation, an Indiana corporation, which is inactive.

 

During 2018, the Company was engaged in the development of the business of selling computer equipment which can be used for the mining of cryptocurrency. As a result of the decline in the price of cryptocurrency, which made the purchase of the Company’s equipment uneconomical, the Company has discontinued that business, which is reflected as a discontinued operation, and the value of the prepaid inventory, which was the only asset of the discontinued operation at July 31, 2019, was fully reserved against. The Company is not engaged in any business activities and is looking to engage in another business, either through an acquisition of an existing business or by engaging a management team to develop a new business. The Company does not have any agreement to acquire any company or to bring on a management team to commence new business activities. The Company cannot give assurance that it will be successful in attracting either an acquisition candidate or a new management team. Any business the Company may acquire may be an operating business or a business with no history of earnings that is seeking to develop its business. Because of the Company’s financial condition and the market for and market price of its common stock, the Company does not believe that it would be an attractive candidate for a profitable business that is looking to go public through a reverse acquisition.

 

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 (“US GAAP”) for interim financial information and with Rule 8-03 of 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, 2019 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, 2019 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.

 

Principles of Consolidation

 

The accompanying consolidated financial statements, including the accounts of the Company and its wholly-owned subsidiary, iMine Corporation, an Indiana corporation. All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of the accompanying consolidated financial statements in conformity with US 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.

  

Reclassification

 

Certain reclassifications have been made to the prior year financial statements to conform to the current period presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

 

 
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Fair Value of Financial Instruments

 

As defined in ASC 820” Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

The following table summarizes fair value measurements by level at April 30, 2020, measured at fair value on a recurring basis:

 

 

 

April 30,

2020

 

 

Quoted Prices in

Active Markets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 1,115

 

 

$ 1,115

 

 

$ -

 

 

$ -

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable

 

 

554,163

 

 

 

-

 

 

 

554,163

 

 

 

-

 

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Topic 606, which requires the Company to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied. The Company has not realized any revenues from operations, and is not currently engaged in any active business.

 

Stock-based expenses

 

The Company accounts for stock-based compensation arrangements with employees, nonemployee directors and consultants using a fair value method, which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options, on a straight-line basis over the requisite service period in the Company’s consolidated statements of operations. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant.

 

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.

 

 
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Net Loss per Share of Common Stock

 

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares and potential shares outstanding during the period. Potential shares of common stock consist of shares issuable upon the conversion of outstanding convertible debt. As of April 30, 2020, there were 27,708,150common stock equivalents that were not included in the calculation of dilutive earnings per share as their effect would be anti-dilutive.

 

Recent Accounting Pronouncements

 

The Company has implemented all new pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements or results of operations.

 

NOTE 3 - 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 nine months ended April 30, 2020, the Company incurred a net loss of $217,903. As of April 30, 2020, the Company had an accumulated deficit of $12,570,985 and has earned no revenues since inception and was not engaged in an active business. In order to continue as a going concern, the Company will need, among other things, additional capital resources. In addition, convertible notes in the principal amount of $500,000, which are held by the Company’s sole director and officer have matured as to $350,000 at April 30, 2020 and the balance is due on various dates through June 1, 2020.  The Company does not presently have the funds to pay these notes.  Although management plans to seek to raise necessary funding through equity financing arrangements, any such financing may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ended July 31, 2020. However, until the Company engages in an active business or makes an acquisition the Company is not likely to be able to raise any significant debt or equity financing.

 

The ability of the Company to begin operations in any new business is dependent upon, among other things, obtaining financing to commence operations and develop a business plan or making an acquisition. The Company cannot give any assurance as to its ability to develop or acquire a business or to operate profitably.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 4 – DISCONTINUED OPERATION

 

The change of the business qualified as a discontinued operation of the Company (Note 1). In conjunction with the discontinued operations, the Company has excluded results of discontinued operations from its consolidated statements of operations to classify that business as discontinued operations in all periods presented. The liabilities of the discontinued operations were presented separately under the captions “Liabilities from discontinued operation” in the accompanying consolidated balance sheets at April 30, 2020 and July 31, 2019.

   

The following table shows the results of operations which are included in the loss from discontinued operations:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

April 30,

 

 

April 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

Cost of revenue

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory valuation reserve 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(404,350 )

Gross profit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(404,350 )

General and administrative

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,520 )

Stock based compensation

 

 

-

 

 

 

(181,125 )

 

 

-

 

 

 

(228,000 )

Operating loss

 

 

-

 

 

 

(181,125 )

 

 

-

 

 

 

(659,870 )

Income tax provision

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Loss from discontinued operations, net of tax

 

$ -

 

 

$ (181,125 )

 

$ -

 

 

$ (659,870 )

 

 
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The following table summarizes the carrying amounts of the net liabilities from discontinued operations as of April 30, 2020 and July 31, 2019, respectively.

 

 

 

April 30,

 

 

July 31,

 

 

 

2020

 

 

2019

 

Liabilities from discontinued operations

 

 

 

 

 

 

Advance from customer

 

$ 19,500

 

 

$ 19,500

 

 

NOTE 5 - RELATED PARTY TRANSACTIONS

 

On March 19, 2018, the Company entered into a one-year employment agreement with the former chief executive officer, who was 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. As of April 30, 2020 and July 31, 2019, $164,706 was reflected as an amount due to related parties.

 

In 2018, the Company issued convertible notes in the principal amount of $500,000 to an unrelated party who, in August 2019, became the Company’s sole officer and director (see Note 6). As a result of the investor becoming the Company’s sole officer and director, these notes were reclassified as convertible notes – related party.

 

During the nine months ended April 30, 2020, the Company’s shareholder paid operating expenses of $27,700 on behalf of the Company.

 

NOTE 6 - CONVERTIBLE NOTES – RELATED PARTY

 

At April 30, 2020 and July 31, 2019, convertible note consisted of the following:

 

 

 

April 30,

 

 

July 31,

 

 

 

2020

 

 

2019

 

Convertible promissory notes issued

 

$ 500,000

 

 

$ 500,000

 

Less discount

 

 

-

 

 

 

(162,179 )

Total convertible note

 

 

500,000

 

 

 

337,821

 

Accrued interest

 

 

54,163

 

 

 

33,268

 

Liability component

 

$

554,163

 

 

$ 371,089

 

  

Pursuant to a note purchase agreement dated March 20, 2018 between the Company and a then non-affiliated lender, the lender made loans to the Company in the total amount of $500,000, for which the Company issued 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 was purchased from the proceeds of the notes. The equipment was not been delivered to the Company. The Company is in default of its obligation to grant the lender a security interest in the inventory and the Company did not obtain physical possession of the inventory. The lender was appointed as a director, chief executive officer, chief financial officer, president and secretary of the Company on August 14, 2019 upon the resignation of the Company’s previous sole director and officer.

 

Interest of 5% is payable annually until the settlement date. The note is currently in default and default interest rate is 12 % per annum. No interest was paid during the nine months ended April 30, 2020.

 

NOTE 7 - COMMON STOCK

 

Issuance of Common Stock

 

During the nine months ended April 30, 2020, there were no issuance of common stock. During the nine months ended April 30, 2019, the Company issued 1,250,000 shares, to a consultant for consulting services of $225,000, based on the market price on the date of issuance.

 

As of April 30, 2020 and July 31, 2019, the Company had no options and warrants outstanding.

 

At April 30, 2020, the principal and accrued interest on the convertible notes described in Note 6 were convertible into 27,708,150 shares of common stock.

 

NOTE 8 – SUBSEQUENT EVENT

 

Subsequent to April 30, 2020, convertible notes in the principal amount of $150,000 matured, and, at June 1, 2020, the total principal amount of convertible notes described in Note 6 had matured.  

 

 
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Item 2. Management’s Discussion and Analysis of 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 were 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 became our sole executive officer. With the change of management, we changed our business to developing the business of designing and selling computer equipment which can be used for the mining of cryptocurrency. In April 2019, our sole director and officer resigned and we discontinued the business of designing and selling computer equipment for the cryptocurrency business, from which we did not generate any revenue. On August 14, 2019, the then sole officer and director resigned and Jose Maria Eduardo Gonzalez Romero was appointed as our sole officer and director. At the time, Mr. Romero was our largest creditor, having purchased, for $500,000, our 5% convertible notes in the principal amount of $500,000, of which $350,000 had matured as of April 30, 2020 and the full $500,000 had matured as of June 1, 2020.  We are now in the process of looking for a new business, either through an acquisition or commencing new business activities with a new management team. Although we have had discussions with potential acquisition candidates, as of the date of this report, we have not signed any agreement, letter of intent or memorandum of understanding with respect to any potential acquisition or management group, and we cannot assure you that we will be able to make any acquisition. Because of our financial condition, the low price and lack of liquidity of our stock, and our stock being traded on the OTC Pink, and the outstanding convertible debt, it is not likely that we will be able to acquire any company other than a company without a history of earnings. In such event, we will need to raise a significant amount of funds. We have no assurance that financing will be available to us on acceptable, if any, terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. The terms of any acquisition or any equity financing is likely to result in substantial 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 to Mr. Romero, who, at the time, was not a related party. The proceeds of these notes were used to purchase inventory for our cryptocurrency mining equipment business and for working capital purposes, including expenses relating to our status as a public company. Pursuant to the loan agreement, we were to give Mr. Romero a security interest in this equipment. The equipment was never delivered to us in the United States and we did not grant Mr. Romero a security interest in the inventory, which was a beach of our agreement. The value of the inventory was written down to zero. We anticipate that in connection with any acquisition or financing, it may be necessary for us to pay the principal and interest on the notes to Mr. Romero. The need to make this payment or renegotiate the terms of the notes may affect our ability to make an acquisition or, if we can make an acquisition, the terms of the acquisition.  As a result of our failure to pay the notes on the maturity date, the interest rate, from and after the maturity date, accrued at 12% per annum.

 

Results of Operations

 

Three and nine months Ended April 30, 2020 and 2019

 

For the three months ended April 30, 2020, we incurred operating expenses of $26,241, primarily professional fees, resulting in a loss from operations of $26,241. Other expenses consisted of interest and accretion on convertible notes of $41,847, resulting in a net loss from continuing operations and a net loss of $68,088, or ($0.00) per share (basic and diluted). We did not have any loss from discontinued operations for the three months ended April 30, 2020. For the three months ended April 30, 2019, we incurred operating expenses of $7,535, primarily professional fees, resulting in a loss from operations of $7,535. Other expenses consisted of interest and accretion on convertible notes of $68,311, resulting in a net loss from continuing operations of $75,846 or ($0.00) per share (basic and diluted). Our loss from discontinued operations was $181,125, or ($0.00) per share (basic and diluted). Our net loss was $256,971, or ($0.00) per share (basic and diluted).

 

For the nine months ended April 30, 2020, we incurred operating expenses of $34,829, primarily professional fees, resulting in a loss from operations of $34,829.  Other expenses consisted of interest and accretion on convertible notes of $183,074, resulting in a net loss from continuing operations and a net loss of $217,903, or ($0.00) per share (basic and diluted). We did not have any loss from discontinued operations for the nine months ended April 30, 2020.  For the nine months ended April 30, 2019, we incurred operating expenses of $52,268, primarily professional fees, resulting in a loss from operations of $52,268. Other expenses consisted of interest and accretion on convertible notes of $209,538, resulting in a net loss from continuing operations of $261,806, or ($0.00) per share (basic and diluted).  Our loss from discontinued operations was $659,870, or ($0.01) per share (basic and diluted). Our loss from discontinued operations resulted primarily from the writeoff of inventory associated with our former business.  Our net loss was $921,676, or ($0.01) per share (basic and diluted).

 

 
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Liquidity and Capital Resources

 

The following summarizes our change in working capital from July 31, 2019 to April 30, 2020:

 

 

 

April 30,

2020

 

 

July 31,

2019

 

 

Change

 

 

% Change

 

Current assets

 

$ 1,115

 

 

$ 1,850

 

 

$ (735 )

 

 

(39.7 %)

Current liabilities

 

 

832,045

 

 

 

614,877

 

 

 

217,168

 

 

35.3

%

Working capital (deficiency)

 

$ (830,930 )

 

$ (613,027 )

 

 

(217,903 )

 

(35.6

%)

 

The following table summarizes our cash flow for the nine months ended April 30, 2020 and 2019:

 

 

 

Nine months ended

April 30,

 

 

 

2010

 

 

2019

 

Cash flow used in operating activities

 

$ (735 )

 

$ (51,866 )

Net changes in cash

 

 

(735 )

 

 

(51,866 )

 

The cash flow used in operating activities for the nine months ended April 30, 2020 reflects our net loss of $217,903, increased by accrued interest and accretion on convertible notes of $183,074, and increases in accounts payable and accrued liabilities of $6,394 and due to related parties of $27,700. The cash flow used in operating activities for the nine months ended April 30, 2019 reflects the net loss from continuing operations of $261,806, increased by accrued interest and accretion on convertible notes of $190,839 and an increases in accounts payable and accrued liabilities of $34,471and decreased by an increase in prepaid expenses of $4,350.

 

For the nine months ended April 30, 2020 and 2019, we did not have any cash flow from investing or financing activities or non-cash transactions.

 

Going Concern

 

Our financial statements have been prepared assuming that we 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 nine months ended April 30, 2020, we incurred a net loss of $217,903. As of April 30, 2020, we had an accumulated deficit of $12,570,985, we had earned no revenues since inception and we were not engaged in an active business. In order to continue as a going concern, we will need, among other things, additional capital resources. In addition, convertible notes in the principal amount of $500,000, which are held by our sole director and officer, have matured as to $350,000 at April 30, 2020 and the balance was due June 1, 2020. We do not presently have the funds to pay these notes. Although we plan to seek to raise funding through equity financing arrangements, any such financing may be insufficient to fund our capital expenditures, working capital and other cash requirements for the year ended July 31, 2020. However, until we engage in an active business or make an acquisition, we are not likely to be able to raise any significant debt or equity financing.

 

Our ability to begin operations in any new business is dependent upon, among other things, obtaining financing to commence operations and develop a business plan or making an acquisition. We cannot give any assurance as to our ability to develop or acquire a business or to operate profitably. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated 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.

 

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:

 

We recognize revenues in accordance with Topic 606, which requires us to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. We recognize revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied. We have not realized any revenues from operations, and are not currently engaged in any active business.

  

 
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Share-based expenses

 

In accordance with ASC 718 “Compensation – Stock Compensation” we account for stock-based compensation arrangements with employees, nonemployee directors and consultants using a fair value method, which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options, on a straight-line basis over the requisite service period in the Company’s consolidated statements of operations. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant.

 

Net Loss per Share of Common Stock

 

We calculate net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional shares of common stock were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive.

 

Recent Accounting Pronouncements

 

We have implemented all new pronouncements that are in effect and that may impact our consolidated financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial statements or results of operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not Applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of April 30, 2020, the end of the period covered by this quarterly report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, which positions are held by the same person who assumed such positions on August 14, 2019 and who is our only employee and who does not work for us on a full-time basis. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer, concluded that, due to the inadequacy of our internal controls over financial reporting, our sole employee being our chief executive and financial officer and sole director and our limited internal audit function, our disclosure controls were not effective as of April 30, 2020, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the president and treasurer, as appropriate to allow timely decisions regarding disclosure.

 

Changes in Internal Control over Financial Reporting

 

As reported in our annual report on Form 10-K for the year ended July 31, 2019, management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel and excessive reliance on third party consultants for accounting, financial reporting and related activities. The lack of any separation of duties, with the same person, who is our only employee who serves as both chief executive officer and chief financial officer, who is our sole director and who does not have an accounting background and serves on a part-time basis, makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future.

 

During the period ended April 30, 2020, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
14

Table of Contents

 

PART II – OTHER INFORMATION

 

Item 6. Exhibits.

 

Exhibits

 

Exhibit

Number

 

Description of Exhibits

31.1

 

Section 302 Certificate of Chief Executive Officer and Principal Financial Officer.

32.1

 

Section 906 Certificate of Chief Executive Officer and Principal Financial Officer.

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Schema Document

101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Label Linkbase Document

101.PRE

 

XBRL Taxonomy Presentation Linkbase Document

  

 
15

Table of Contents

  

SIGNATURES

 

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

 

 

IMINE CORPORATION

 

Dated: June 15, 2020

/s/ Jose Maria Eduardo Gonzalez Romero

 

Jose Maria Eduardo Gonzalez Romero

 

Chief Executive Officer and Chief Financial Officer

 

 

 
16

 

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