Notes to the Audited Consolidated Financial Statements
July 31, 2017
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Mirage Energy Corporation (formerly Bridgewater Platforms Inc.) (the “Company”) is a Nevada corporation incorporated on May 6, 2014. On May 20, 2014, the Company incorporated a Canadian subsidiary known as Bridgewater Construction Ltd. in Ontario in association with its construction business. Mirage Energy Corporation is based at 900 Isom Rd Suite 306, San Antonio, TX 78216. The Company’s fiscal year end is July 31.
On August 11, 2016, a change in Company control occurred whereby Company affiliate shareholder, Eric Davies, sold 2,500,000 (90,000,000 post-split shares) of his Company shares to Michael R. Ward. The sale represented 30% of the Company’s total issued and outstanding common shares. Additionally, Emanuel Oliveira, an affiliate shareholder, sold 774,000 common shares (27,864,033 post-split shares) to Mr. Ward and 1,726,000 shares (62,136,075 post-split shares) to Choice Consulting, LLC, a Wyoming limited liability company.
On November 7, 2016, the Company increased the authorized shares from 75,000,000 to 900,000,000 shares of $0.001 par value. It also designated 10,000,000 shares of Series A Preferred Stock. On November 7, 2016, the Company implemented a forward stock split of its common shares on a 36:1 basis. The issued and outstanding common shares increased from 8,333,336 to 300,000,456 shares. All share and per share amounts have been restated from the first day of the first period presented to reflect the split.
On January 24, 2017, Mirage Energy Corporation, a Nevada corporation (“Mirage” or the “Company”) entered into an agreement with Mirage’s President and CEO, Mr. Michael Ward, whereby Mirage acquired all of the issued and outstanding shares of 4Ward Resources Inc., a Texas corporation (“4Ward Resources”) from Mr. Ward in exchange for 10,000,000 shares of Mirage’s Common Stock and 10,000,000 shares of Mirage’s Series A Preferred Stock. The acquisition of 4Ward Resources was completed on January 24, 2017. The Series A shares possess 20 votes per share and are convertible into 200,000,000 common shares. Through this acquisition, the Company’s scope of business was expanded to include 4Ward Resource’s development of an integrated Texas/Mexico natural gas pipeline transportation and storage facility in Northeastern Mexico. This transaction was combined with the August 11, 2016 transaction and treated as a reverse merger and recapitalization whereby 4Ward Resources was determined to be the accounting acquirer under ASC 805 and assumed $40,288 of net assets of Mirage.
Total ownership of a majority of the Company’s issued and outstanding common shares as a result of these transactions is as follows:
Michael R. Ward
|
|
|
127,864,000
|
|
|
|
41.3
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%
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Choice Consulting, LLC
|
|
|
62,136,000
|
|
|
|
20.1
|
%
|
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.
Basis of Consolidation
These financial statements include the accounts of the Company and its wholly owned subsidiaries, 4Ward Resources, Inc., Cenote Energy, S. de R.L. de C.V., WPF Transmission, Inc., and WPF Mexico Pipelines, S. de R.L. de C.V. All material intercompany balances and transactions have been eliminated.
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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $11,776 and $76,165 cash at July 31, 2017 and 2016, respectively.
Accounts Receivable
The Company’s accounts receivable consists of trade receivables from customers. The Company evaluates the collectability of its accounts receivable on an on-going basis and write off the amount when it is considered to be uncollectible. The Company does not have allowance for doubtful accounts. As of July 31, 2017 and 2016, the Company had $0 and $0 in accounts receivable, respectively.
Long Lived Assets
In accordance with ASC 360 "Property Plant and Equipment," the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible assets are amortized over their estimated useful lives.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
During the year ended July 31, 2017, impairment expense of $122,494 was recorded for the U.S. & Mexican projects.
Financial Instruments
The Company follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents, accounts receivable. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company evaluates the collectability of its accounts receivable on an on-going basis and request deposits whenever it is necessary. 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.
Revenue Recognition
The Company will recognize revenue from the sale of products and services in accordance with ASC 605,”Revenue Recognition.” The Company will recognize revenue only when all of the following criteria have been met:
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i)
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Persuasive evidence for an agreement exists;
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ii)
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Service has been provided;
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iii)
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The fee is fixed or determinable; and,
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iv)
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Collectability is reasonably assured.
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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).
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.
There were no share-based expenses for the period ended July 31, 2017 and 2016.
Deferred Income Taxes and Valuation Allowance
The Company accounts for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of July 31, 2017 and 2016.
Net Loss Per Share of Common Stock
The Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The Company has a convertible note in the amount of $33,000 that becomes convertible in 180 days. This note will have a potentially dilutive effect on common stock.
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Commitments and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of July 31, 2017.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In April 2016, the FASB issued ASU 2016–10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
Management has considered all recent accounting pronouncements issued since and their potential effect on our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.
NOTE 3 - GOING CONCERN
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had a net loss of $1,394,807 and had net cash used in operations of $330,963 for the year ended July 31, 2017 and had an accumulated deficit and working capital deficit of $1,843,358 and $1,420,280 at that date. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company may include, but not be limited to: sales of equity instruments; traditional financing, such as loans; sale of participation interests and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 - DEBT
A summary of debt at July 31, 2017 and July 31, 2016 is as follows:
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July 31,
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July 31,
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|
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2017
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|
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2016
|
|
|
|
|
|
|
|
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Notes payables related party, unsecured, interest bearing at 5% rate per annum, on demand
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$
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187,600
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|
|
$
|
50,000
|
|
Note, unsecured interest bearing at 2% per annum, due 07/09/2020
|
|
|
50,000
|
|
|
|
-
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum,, convertible at 12/25/17 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of 03/30/2018
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|
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33,000
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|
|
|
-
|
|
Loan payable related party, unsecured, non-interest bearing, on demand
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21,078
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-
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|
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291,678
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|
|
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50,000
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Less: Current Maturities
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|
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241,678
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|
|
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50,000
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|
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|
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|
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|
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Total Long-Term Debt
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$
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50,000
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|
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$
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-
|
|
The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging,” and determined that the instrument does not qualify for derivative accounting.
NOTE 5 - EQUITY
Authorized Stock
The Company has authorized 900,000,000 common shares with a par value of $0.001 per share. The Company also designated 10,000,000 shares of Series A Preferred Stock with a par value of $0.001 per share which were issued to Mr. Michael Ward on January 23, 2017.
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. Each share of Series A Preferred Stock has the right to be converted into twenty (20) shares of our Common Stock. Holders of Series A Preferred Stock have the right to vote such shares on an “as converted” basis, unless and until such shares are converted into shares of Common Stock.
Common Shares
On July 31, 2015, the Company issued 3,219,058 common shares at $0.001 per share in satisfaction of $3,219 of loan payable to the CEO.
On October 31, 2015, the Company issued 10,013,202 common shares at $0.001 per share in satisfaction of $10,013 of loan payable to the CEO.
On January 31, 2016, the Company issued 12,839,318 common shares at $0.001 per share in satisfaction of $12,839 of loan payable to the CEO.
On April 30, 2016, the Company issued 13,836,113 common shares at $0.001 per share in satisfaction of $13,836 of loan payable to the CEO.
On July 31, 2016, the Company issued 87,956,450 common shares at $0.001 per share in satisfaction of $87,957 of loan payable to the CEO.
On February 2, 2017, the Company offered and sold 40,000 shares of common stock at $0.50 per share to accredited investor for $20,000.
On March 8, 2017, the Company authorized a stock grant of 50,000 common shares to each of three members of the board of directors totaling 150,000 shares at $1.75 per share of common stock valued at $262,500 as director compensation.
NOTE 6 - PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes”. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. It also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Certain tax attributes are subject to an annual limitation as a result of the acquisition of our subsidiaries, which constitute a change of ownership as defined under Internal Revenue Code Section 382.
The Company is subject to taxation in the United States and certain state jurisdictions.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons:
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Year Ended
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|
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Year Ended
|
|
|
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July 31,
2017
|
|
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July 31,
2016
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Income tax expense at statutory rate
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$
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243,020
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|
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$
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27,261
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Valuation allowance
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|
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(243,020
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)
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|
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(27,261
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)
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Income tax expense
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$
|
-
|
|
|
$
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-
|
|
Net deferred tax assets consist of the following components as of:
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|
July 31,
2017
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|
|
July 31,
2016
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|
NOL Carryover
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|
$
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270,941
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|
|
$
|
80,180
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|
Valuation allowance
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|
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(270,941
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)
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|
|
(80,180
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)
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Net deferred tax asset
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|
$
|
-
|
|
|
$
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-
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|
Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $796,885, which expire commencing in fiscal year 2036, 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. The tax years still left open are 2015, 2016 and 2017.
NOTE 7 - RELATED PARTY TRANSACTIONS
On January 24, 2017, Mirage Energy Corporation, a Nevada corporation (“Mirage” or the “Company”) entered into an agreement with Mirage’s President and CEO, Mr. Michael Ward, whereby Mirage acquired all of the issued and outstanding shares of 4Ward Resources Inc., a Texas corporation (“4Ward Resources”) from Mr. Ward in exchange for 10,000,000 shares of Mirage’s Common Stock and 10,000,000 shares of Mirage’s Series A Preferred Stock. The acquisition of 4Ward Resources was completed on January 24, 2017.
On January 28, 2017, 4Ward Resources, Inc., Mirage Energy Corporation’s wholly owned subsidiary, acquired Michael Ward’s ninety (90%) percent interest in two Mexican companies. The remaining ten (10%) percent interest was acquired by Mirage Energy Corporation from Patrick Dosser. Patrick Dosser is Michael Ward’s son.
Together, Mirage Energy and 4Ward Resources own 100% of the two Mexican corporations. The two Mexican corporations are WPF MEXICO PIPELINES, S. de R.L. de C.V., and CENOTE ENERGY S. de R.L. de C.V. Additionally, 4Ward Resources acquired all of Michael Ward’s interest in WPF TRANSMISSION, INC., a Texas corporation. These transactions were valued at their carry over basis of $140,286, representing $99,821 expended on behalf of these companies by 4Ward Resources, $1,500 expended by Mr. Michael Ward to be reimbursed by 4Ward Resources and $38,965 whose vendor payments will be assumed or paid by 4Ward Resources. These transactions were accounted for as a merger of entities under common control under ASC 805-50 whereby the financial information has been combined from the first day of the first period presented similar to a pooling of interest.
As of July 31, 2017 and 2016, the CEO and two other members of management had earned accrued unpaid salary in the amount of $818,750, from June 24, 2015 until July 31, 2017. Accrued salaries of $818,750 combined with accrued payroll taxes of $35,803 for a total accrued related party salaries and payroll tax of $854,553 for the year ended.
Also, Mr. Michael Ward, President, provided $64,800 directly to the company with an additional $26,015 owed to Mr. Ward for monies outlaid on behalf of the Company which was netted for $69,737 payments received leaving a net due Mr. Ward $21,078. Additionally, a company owned by the spouse of the CEO5 provided an additional loan of $137,600 to 4Ward Resources, Inc. during the year. This additional loan increased the total loan amount to $187,600.
NOTE 8 – LEASES
On June 9, 2016, the Company entered into a Lease Agreement for its San Antonio, Texas office lease location. The Lease Period is for three (3) years beginning July 1, 2016. The Company shall pay as additional rent all other sums of money as shall become due and payable by them under this Lease. To date after thirteen (13) months of this thirty-six (36) month lease, no such additional charges have been made. Below is the schedule of rent for the remaining Lease term as of July 31, 2017.
Number of Months Remaining
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|
Rate per SF per Year
|
|
|
Monthly Base Rental
|
|
11
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|
|
$
|
20.00
|
|
|
$
|
6,751.67
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|
12
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|
|
$
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20.50
|
|
|
$
|
6,920,46
|
|
|
|
|
|
|
|
|
|
|
|
Total Remaining Base Rent
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|
|
|
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$
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157,313.89
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|
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has committed to Marcos y Asociados for services as of July 2017, five (5) months of Acquisition of Pipeline Rights of Way remaining of the original eighteen (18) months commitment at $5,000 per month which leaves remaining balance of $25,000.
From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 10 - SUBSEQUENT EVENTS
On August 22, 2017, Mirage Energy Corporation entered into Securities Purchase Agreement with PowerUp Lending Group, Ltd. to issue an additional amount of convertible debenture in the amount of $38,000.