MYCB 10-K
My City Builders, Inc. (MYCB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
For the transition period from ______________ to _______________
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of |
| (I.R.S. Employer |
(Address of principal executive offices) |
Registrant’s telephone number, including area code:+ (
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) 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.
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 and post such files).
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this From 10-K. ☒
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 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 | ☐ |
☒ | Smaller reporting company | ||
. | 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 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $
As of April 26, 2021, the registrant had
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. None
TABLE OF CONTENTS
As used in this annual report, the terms “we,” “us,” “our,” and words of like import, and the “Company” refers to iMine Corporation and its wholly-owned subsidiary, iMine Corporation, an Indiana corporation, unless the context indicates otherwise.
| 2 |
| Table of Contents |
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K 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:
| · | Our ability to engage in a business, either through the acquisition of an existing business or the hiring of new management to develop a business; |
| ||
| · | Our ability to attract a business which has the potential to generate revenue and profits; |
| ||
| · | Our ability to obtain the necessary financing for us to develop any business we seek to develop; |
| ||
| · | The effect of our delinquencies in our SEC filings; |
| ||
| · | Our stock being traded on the OTC Pink market maintained by OTC Markets, which, according to the OTC Markets website is “designed for companies with financial reporting problems, economic distress, or in bankruptcy”; |
| ||
| · | The lack of liquidity and trading in our common stock; |
| ||
| · | The low price of our common stock; |
| ||
| · | Our failure to have effective internal controls over financial accounting and disclosure controls and the cost of developing and installing effective internal controls; |
| ||
| · | Changes in national, regional and local government regulations, taxation, controls and political and economic developments that affect any business which we may seek to enter; |
| ||
| · | The pool of prospective businesses that are interested in a shell with no assets and whose stock is not traded on a stock exchange; |
| ||
| · | The ability of any company we may acquire or any business we may develop to market products with the most current technological developments desired by the market; |
| ||
| · | Our ability to obtain and maintain any permits necessary for any business we may seek to enter; |
| ||
| · | Our ability to identify, hire and retain qualified executive, administrative, research and development, and other personnel; |
| ||
| · | Our ability to protect any intellectual property we or any company we may acquire may develop; |
| ||
| · | The costs associated with defending and resolving potential legal claims, even if such claims are without merit; |
| 3 |
| Table of Contents |
| · | The development of a significant market for our common stock; |
| ||
| · | Actions by third parties to either sell or purchase our common stock in quantities that would have a significant effect on our stock price; |
| ||
| · | Significant dilution which is likely to result from any acquisition we may make or from any new management team we may engage or in connection with any financing; |
| ||
| · | The effect of tariffs on any business which we may acquire or which we may seek to develop; |
| ||
| · | Risks generally associated with any business we may seek to acquire or develop; |
| ||
| · | Current and future economic and political conditions; |
| ||
| · | The impact of changes in accounting rules on our financial statements; |
| ||
| · | Other assumptions described in this annual report; and |
| ||
| · | Other matters that are not within our control. |
The forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated, particularly since we do not have any agreement with respect to any proposed business. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.
The forward-looking statements in this annual report speak only as of the date of this annual report 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 annual report 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 annual report, 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.
PART I
Item 1. Business
Business
We are a shell company and are not engaged in any business activities. Prior to 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 in March 2018. From March 2018 until April 2019, we were in the process of developing the business of selling computer equipment which can be used for the mining of cryptocurrency. With the decline in the price of cryptocurrency, we discontinued that business and are 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. As of the date of this annual report, we do not have any agreement to acquire any company or to bring on a management team to commence new business activities. We cannot assure you that we will be successful in attracting either an acquisition candidate or a new management team. Any business we may acquire may be an operating business or a business with no history of earnings that is seeking to develop its business. Because of our financial condition and the market for and market price of our common stock, we do not believe that we would be an attractive candidate for a profitable business that is looking to go public through a reverse acquisition. Although we have engaged in discussions in connection with a potential acquisition, we have not entered into any agreement, memorandum of understanding or letter of intent with respect to any business, and we cannot assure you that we will be successful in making any acquisition.
| 4 |
| Table of Contents |
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 +507 6619-8233. We do not have a corporate website. Information on any website does not constitute a part of this annual report.
Employees
We have one employee, our chief executive officer and chief financial officer, Jose Maria Eduardo Gonzalez Romero, who provides his services to us on a part-time basis.
ITEM 1A. 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 annual report before making an investment decision with regard to our securities. The statements contained in this annual report 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.
Because we are a shell company, you have no basis on which to evaluate our ability to develop or acquire a business.
We are a shell company which has not been successful in its prior business activities. As a result, you have no basis upon which to evaluate our ability to achieve our business objective of completing a business combination or developing any business. If we fail to complete a business combination, we will not generate any operating revenues. We cannot assure you that we can complete an acquisition or develop a business or ever operate profitably.
Our stockholders may not be afforded an opportunity to vote on our proposed acquisition, which means we may complete an acquisition even though a majority of our stockholders do not support such an acquisition.
We may not seek a stockholder vote before we complete an acquisition unless the acquisition would require stockholder approval under applicable law or if we decide to hold a stockholder vote for business or other legal reasons. Accordingly, we may complete an acquisition even if holders of a majority of our shares do not approve of the business we acquire.
| 5 |
| Table of Contents |
Because of our limited resources, it may be difficult for us to complete an acquisition of a profitable business and any acquisition we may complete is likely to be a start-up or early stage company with no history of revenue of earnings.
We encounter intense competition from individuals and entities seeking to acquire a profitable business opportunity. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. Accordingly, because of our lack of financial resources, our history of unprofitable operations, our delinquency in filing our SEC reports, our stock price and the lack of an active market for our common stock, and the fact that our stock, when it trades, is quoted on the OTC Pink market, it is not likely that we will be able to acquire a profitable operating business.
Because of our lack of cash and our working capital deficiency, we will not have resources to fund our search for a target business and complete a business combination and we will need to raise funds for such activities.
At July 31, 2020, we has cash of $1,025 and a working capital deficiency of approximately $853,026, and, because we have no source of revenue, our working capital deficiency has increased since July 31, 2020. If we are unable to obtain funding for these activities we may be unable to complete an acquisition or file our delinquent SEC quarterly reports. If we are unable to complete a business combination because we do not have sufficient funds available to us, we will be forced to cease operations. Any financing which we may be able to obtain is likely to be on very unfavorable terms and, if equity is issued, may result in significant dilution to our stockholders.
Because we do not have an authorized class of preferred stock and we have 300,000,000 authorized shares of common stock, it may be necessary for us to increase our authorized common stock and provide for a class of preferred stock in connection with any acquisition.
We do not have a class of authorized preferred stock and we have 300,000,000 authorized shares of common stock. As of April 26, 2021, we had outstanding 56,808,953 shares of common stock. Since we do not have cash to make an acquisition, we would require equity to be issued to the owners of any business we acquire. We cannot assure you that we will have sufficient common stock available for such issuance, and it may be a condition to any acquisition that we increase our authorized common stock and/or provide for a class of preferred stock.
Subsequent to our completion of an acquisition, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a potential acquisition candidate, and, because of our financial condition, we do not have the financial resources to conduct extensive due diligence on a proposed acquisition candidate, material issues may be present inside a the company that we may acquire that we did not uncover or factors outside of the acquired company’s business and outside of our control may arise. As a result of these factors, we may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses or losses significantly in excess of those we may anticipate based on the financial statement of the acquired company. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject under pre-existing of the acquired company or by virtue of our obtaining post-acquisition debt financing.
Because we are not limited to a particular industry, sector or any specific target businesses with which to pursue an acquisition, you will be unable to ascertain the merits or risks of any particular target business’ operations.
We are not limited to making an acquisition or engaging in any particular industry. As a result, there is no basis for you to evaluate the possible merits or risks of any particular acquisition candidate’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete an acquisition or enter into a new business, we may be affected by numerous risks inherent in the business operations which we acquire. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, which is likely to be the case if we are able to make an acquisition, we may be affected by the risks inherent in the business and operations of a financially unstable or an early stage entity. Although we will endeavor to evaluate the risks inherent in a particular acquisition candidate, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time or financial resources to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
| 6 |
| Table of Contents |
We are in default in our obligations to our chief executive officer.
During 2018, we borrowed $500,000 from Jose Maria Eduardo Gonzalez Romero, who was then an unrelated party and who, upon the resignation of our then chief executive officer, became our sole officer and director. We issued to Mr. Romero our 5% convertible notes in the principal amount of $500,000. The notes were to be secured by inventory relating to our cryptocurrency business, which has been discontinued. The inventory, which has been written down to zero, was never delivered to us in the United States and Mr. Romero never received his security interest. In connection with any acquisition, we anticipate that the notes to Mr. Romero will have to be paid by us after or contemporaneously with, the acquisition. The need to pay these notes may impair our ability to negotiate an acquisition with a potential acquisition candidate.
Our auditors’ report includes a going concern paragraph.
Our financial statements include a going-concern paragraph. Our consolidated 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 year ended July 31, 2020, we incurred a net loss of $359,999. As of July 31, 2020, we had an accumulated deficit of $12,713,081 and we have earned no revenues since inception and were not engaged in an active business with the result that our accumulated deficit has increased since July 31, 2020. We intend to seek to either acquire a business or enter into a new business. However, until we engage in an active business or make an acquisition, we are likely to not be able to raise any significant debt or equity financing or any funds that we may raise are likely to be on very unfavorable terms. We do not presently have the funds to pay the convertible notes which mature at various dates in 2020. Our ability to begin operations in its new business model 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.
We are dependent upon our chief executive officer.
We are dependent upon Jose Maria Eduardo Gonzalez Romero, our chief executive and financial officer and sole director, who is presently our only employee. Although Mr. Romero has an employment agreement for a term ending on July 31, 2021, 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. Romero would materially impair our ability to make an acquisition. We anticipate that, if we make an acquisition, the chief executive officer and chief financial officer (who may be the same person) will assume these positions with us.
If, following an acquisition, we are unable to attract, train and retain technical and financial personnel, our business may be materially and adversely affected.
If we make an acquisition, it is likely that our future success will depend, to a significant extent, on our ability to attract, train and retain key management, technical and financial personnel. Recruiting and retaining capable personnel, particularly for a company with no history of earnings or operations will be vital to our success. We anticipate that there will be substantial competition for qualified personnel. 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.
| 7 |
| Table of Contents |
If we make an acquisition, we may not be able to protect any intellectual property held by the acquired company or developed by us.
We cannot assure you that any company we may acquire will have developed or obtained patent protection for any proprietary intellectual property relating to its business, and we may not be able to protect any intellectual property which had been developed by the acquired company prior to the acquisition or which may be developed after the acquisition. Further, we cannot assure you that any intellectual property used by the acquired company or by us following an acquisition or change of business does not violate 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 our Common Stock
Because our common stock is a penny stock, you may have difficulty selling our common stock.
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.
There is a limited market for our common stock, which may make it difficult for you to sell your stock.
Our common stock trades on the OTC Pink marketplace under the symbol JRVS. The OTC Pink market is not a national securities exchange and does not provide the benefits to stockholders which a national exchange provides. Furthermore, according to the OTC Markets website, the OTC Pink “is for all types of companies that are there by reasons of default, distress or design, which is why they are further segmented based on the level of information that they provide.” There is a limited trading market for our common stock and there are frequently days on which there is no trading in our common stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock. Further, because of the thin float, the reported bid and asked prices may have little relationship to the price you would pay if you wanted to buy shares or the price you would receive if you wanted to sell shares.
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 and does not have an accounting background, 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. Further, we cannot assure you that, if we make an acquisition, we will be able to implement internal controls over financial reporting. Because we anticipate that any company we may acquire will not have internal controls over financial reporting in effect, we cannot assure you that we will be able to implement such internal controls.
| 8 |
| Table of Contents |
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 Jose Maria Eduardo Gonzalez Romero, who is our chief executive officer and chief financial officer. Because we have no independent directors, we do not have any checks and balances on Mr. Romero, 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:
| · | 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; |
| ||
| · | the market’s perception as to our ability to make an acquisition that can generate revenue and net income; |
| ||
| · | the market’s perception as to our ability to generate positive cash flow or earnings following an acquisition or change in business; |
| ||
| · | changes in our or securities analysts’ estimate of our financial performance; |
| ||
| · | our ability or perceived ability to obtain necessary financing for our operations; |
| ||
| · | the perception of the market for our the principal products which any company we may acquire or any business we may seek to develop and our ability to generate revenue and cash flow from that business or proposed business; |
| ||
| · | the risks associated with any business we may acquire or any business we may seek to develop; |
| ||
| · | the anticipated or actual results of our operations; |
| ||
| · | changes in market valuations of other companies in the our industry; |
| ||
| · | litigation or changes in regulations affecting our industry; |
| ||
| · | concern about our lack of internal controls; |
| ||
| · | any discrepancy between anticipated or projected results and actual results of our operations; |
| ||
| · | the effect or anticipated effect of changes in trade and tariffs on our business; |
| ||
| · | actions by third parties to either sell or purchase stock in quantities which would have a significant effect on our stock price; and |
| ||
| · | other factors not within our control. |
| 9 |
| Table of Contents |
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 thin market for our stock; 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.
ITEM 2. PROPERTIES
We do not own or lease any real property.
ITEM 3. LEGAL PROCEEDINGS
We have filed a law suit against the former CEO, Daniel Tsai and are attempting to serve. We are claiming breach of his fiduciary duty and gross misconduct.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable
| 10 |
| Table of Contents |
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock trades on the OTC Pink marketplace under the symbol JRVS. From April 2014 until May 3, 2018, our common stock was traded under the symbol DIMN. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transaction.
Stockholders of Record
As of April 26, 2021, we had approximately 21 record holders of our common stock.
Transfer Agent
Globex Transfer, LLC, 780 Deltona Blvd., Suite 202, Deltona, FL 32725, telephone (813) 344-4490, is the transfer agent for our common stock.
Dividends
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Agreements
None.
| 11 |
| Table of Contents |
ITEM 6. SELECTED FINANCIAL DATA
Not required.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.
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 elected as our sole officer and director. At the time, Mr. Romero was our largest creditor, having invested $500,000 for the purchase of our 5% convertible notes, which mature on various dates in 2020. We are now in the process of looking for a new business, either through an acquisition or commencing new business activities. 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, 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, 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. 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 to Mr. Romero, who, at the time, was not a related party. The proceeds of these notes were used to purchase inventory 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 are aggressively pursuing the manufacturer of the equipment to either deliver the equipment purchased or refund the purchase including interest and damages. The value of the inventory was written down to zero. We anticipate that in connection with any acquisition or financing, we will pay the principal and interest on the notes to Mr. Romero. The need to make this payment may affect our ability to make an acquisition or, if we can make an acquisition, the terms of the acquisition.
| 12 |
| Table of Contents |
Result of operations
Years Ended July 31, 2020 and 2019
We did not generate any revenues during the years ended July 31, 2020 and 2019.
For the year ended July 31, 2020, we incurred operating expenses of $162,429, primarily stock-based compensation and professional fees, resulting in a loss from operations of $162,429. Other expenses consisted of interest and accretion on convertible notes of $197,570, resulting in a net loss from continuing operations of $359,999, or ($0.00) per share (basic and diluted).
For the year ended July 31, 2019, we incurred operating expenses of $77,622, primarily professional fees, resulting in a loss from operations of $77,622. Other expenses consisted of interest and accretion on convertible notes of $280,151, resulting in a net loss from continuing operations of $357,773, or ($0.00) per share (basic and diluted). Our loss from discontinued operations, net of tax, was $659,870, or $(0.01) per share (basic and diluted). Our net loss for the year was $1,017,643, or ($0.01) per share (basic and diluted).
Liquidity and Capital Resources
The following table summarizes our changes in working capital from July 31, 2019 to July 31, 2020:
|
| July 31, |
|
| July 31, |
|
|
|
|
|
|
| ||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
| ||||
Current assets |
| $ | 1,025 |
|
| $ | 1,850 |
|
| $ | (825 | ) |
| (45 | )% | |
Current liabilities |
| $ | 854,051 |
|
| $ | 614,877 |
|
| $ | 239,174 |
|
|
| 39 | % |
Working capital deficiency |
| $ | (853,026 | ) |
| $ | (613,027 | ) |
| $ | 239,999 |
|
|
| 39 | % |
The increase in working capital deficiency is primarily due to an increase in convertible note - related party due to amortization of debt discount.
The following tables summarize our cash flows the years ended July 31, 2020 and 2019.
|
| Year Ended |
|
|
|
| ||||||
|
| July 31, |
|
|
|
| ||||||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Cash used in operating activities |
| $ | (825 | ) |
| $ | (52,121 | ) |
| $ | 51,296 |
|
Cash used in investing activities |
| $ | - |
|
| $ | - |
|
| $ | - |
|
Cash provided by financing activities |
| $ | - |
|
| $ | - |
|
| $ | - |
|
Cash and cash equivalents on hand |
| $ | 1,025 |
|
| $ | 1,850 |
|
| $ | (825 | ) |
The cash flow used in operating activities for the year ended July 31, 2020 reflects our net loss of $359,999, increased by stock-based compensation of $120,000 and accrued interest and accretion on convertible notes of $197,570, and increases in accounts payable and accrued liabilities of $12,994 and due to related parties of $28,610. The cash flow used in operating activities for year ended July 31, 2019 reflects the net loss from continuing operations of $357,773, increased by accrued interest and accretion on convertible notes of $255,151 and an increase in accounts payable and accrued liabilities of $65,871 and decreased by an increase in prepaid expenses of $4,350.
For the years ended July 31, 2020 and 2019, we did not have any cash flow from investing or financing activities or non-cash transactions.
Going Concern
Our financial statements include a going-concern paragraph. Our consolidated 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 year ended July 31, 2020, we incurred a net loss of $359,999. As of July 31, 2020, we had an accumulated deficit of $12,713,081 and we have earned no revenues since inception and were not engaged in an active business with the result that our accumulated deficit has increased since July 31, 2020. We intend to seek to either acquire a business or enter into a new business. However, until we engage in an active business or make an acquisition we are likely to not be able to raise any significant debt or equity financing or any funds that we may raise are likely to be on very unfavorable terms. We do not presently have the funds to pay the convertible notes which mature at various dates in 2021. Our ability to begin operations in its new business model 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.
| 13 |
| Table of Contents |
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:
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 Company 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.
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.
Concentrations of Credit Risk
Our 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. We place our cash with financial institutions of high credit worthiness. At times, our cash balance with a particular financial institution may exceed any applicable government insurance limits. Our 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 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 common shares 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
| 14 |
| Table of Contents |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements start on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Conclusions Regarding Effectiveness 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 July 31, 2020, the end of the year covered by this annual report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, who is the same person and our sole employee. 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 our limited internal audit function and the absence of any accounting staff, our disclosure controls were not effective as of July 31, 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 chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of July 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of July 31, 2020, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements, (iii) a lack of segregation of duties within accounting functions, (iii) the absence of any full-time accounting personnel, and (v) the absence of any independent directors. Therefore, our internal controls over financial reporting were not effective as of July 31, 20120
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, 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.
Due to our size and nature, segregation of all conflicting duties is not possible. However, if we are successful in making an acquisition, to the extent possible, we plan to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals if and when we have sufficient income to enable us to hire such individuals, and we cannot give any assurance that we will be able to hire such personnel. Our financial condition makes it difficult for us to implement a system of internal controls over financial reporting.
Until we generate significantly greater revenues and employ accounting personnel, it is doubtful that we will be able implement any system which provides us with any degree of internal controls over financial reporting. Due to the nature of this material weakness in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could not be prevented or detected.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control over Financial Reporting.
During the period ended July 31, 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.
ITEM 9B. OTHER INFORMATION
None.
| 15 |
| Table of Contents |
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our officers, directors:
Name |
| Age |
| Position(s) |
Jose Maria Eduardo Gonzalez Romero |
| 48 |
| Chief executive officer, chief financial officer, president, secretary and director |
Mr. Romero has been our chief executive officer, chief financial officer, president, secretary and a director since August 14, 2019. Mr. Romero has, since 2010, been president and chief executive officer of Panama Ship Store, a distribution company in Panama which is owned by Mr. Romero and is his principal occupation. From 1998 to 2008, he was director for the export market in Latin America for Procter & Gamble. Mr. Romero has more than 25 years of experience in the marketing, finance, commercial and logistics areas. He holds a university degree in business and economics from the University Autonoma of GDL in Mexico. Mr. Romero will work for us on a part-time basis.
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 Securities Exchange Act of 1934, as amended, requires executive officers and directors of issuers whose securities are registered pursuant to the Securities Exchange Act and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of the our common stock and other equity securities, on Form 3, 4 and 5 respectively. Mr. Romero was delinquent in a Form 3 and Form 4 filing and Iconic Private Equity Partners was delinquent in Form 3 filings.
ITEM 11: EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during the years ended July 31, 2020 and 2019, earned by or paid to our executive officers who served in that capacity during the year ended July 31, 2020.
|
|
|
|
|
|
| Bonus |
|
| Stock |
|
| Options/ Warrant |
|
| Non-Equity Plan |
|
| Nonqualified Deferred |
|
| All Other |
|
|
|
| ||||||||
Name and Principal Position |
| Year |
| Salary |
|
| Awards |
|
| Awards |
|
| Awards |
|
| Compensation |
|
| Earnings |
|
| Compensation |
|
| Total |
| ||||||||
|
| ($) |
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
| ||||||||
Jose Maria Eduardo Gonzalez Romero1 CEO, CFO |
| 2020 |
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Carlos Rizo2 CEO, CFO |
| 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Tsai3 CEO, CFO |
| 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2019 |
|
| 3,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,000 |
|
|
| 3,000 |
|
_________
1 Jose Maria Eduardo Gonzalez Romero is serving on a monthly basis for no compensation
2 Dr. Rizo served as our chief executive officer and chief financial officer from April 11, 2019 until August 14, 2019.
3 Mr. Tsai was chief executive officer and chief financial officer from March 16, 2018 until April 11, 2019.
Employment Agreements
On August 14, 2019, we entered into an employment agreement with Mr. Romero for a term through July 31, 2020, pursuant to which Mr. Romero is to serve as our chief executive officer and we agreed to issue to Mr. Romero a total of 3,000,000 shares of common stock in four installments of 750,000 shares on each of the execution of the employment agreement, November 10, 2019, February 10, 2020 and May 10, 2020, provided that, with certain exceptions, he is employed by us on such date.
On March 19, 2018, we entered into an employment agreement with Mr. Tsai with a term ending on March 31, 2019, 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 were fully vested on issuance.
Pension Benefits
We currently have no plans that provide for payments or other benefits at, following, or in connection with retirement of our officers.
| 16 |
| Table of Contents |
Outstanding Equity Awards at Fiscal Year-End
There are no outstanding equity awards at July 31, 2020.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table provides information as to shares of common stock beneficially owned as of April 26, 2021 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 April 26, 2021.
|
| Amount and |
|
|
|
| ||
|
| Nature of |
|
|
|
| ||
Name and Address of Beneficial Owner |
| Beneficial Ownership |
|
| % of shares |
| ||
|
|
|
|
|
|
| ||
Jose Maria Eduardo Gonzalez Romero1 |
|
| 2,834,767 |
|
|
| 4.99 | % |
8520 Allison Point Blvd Ste. 223 #87928, Indianapolis, Indiana 46250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group (one individual)1 |
|
| 2,834,767 |
|
|
| 4.99 | % |
|
|
|
|
|
|
|
|
|
5% Stockholders |
|
|
|
|
|
|
|
|
Daniel Tsai |
|
| 17,500,000 |
|
|
| 30.81 | % |
7579 Northrup Drive, San Diego, CA 92126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Element 29 Ventures Ltd.3 |
|
| 4,680,000 |
|
|
| 8.24 | % |
203-1634 Harvey Avenue, Kelowna, BC, Canada VIY 6G2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
My Size Inc. |
|
| 3,616,667 |
|
|
| 6.37 | % |
3 Arava St, POB 1026, Airport City, 70100, IS |
|
|
|
|
|
|
|
|
______________
1 | Represents 2,834,767 shares issuable upon exercise of convertible notes held by Mr. Romero and 3,000,000 shares of common stock which are due to him pursuant to his employment agreement. 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. Accordingly, the number of shares beneficially owned by Mr. Romero is 4.99% of the outstanding shares computed after issuance of the shares. |
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. |
| 17 |
| Table of Contents |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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. On April 22, 2021 these shares were returned to the company and cancelled and the $70,588 to be paid to Iconic Private Equity Partners was also cancelled as part of this transaction.
On March 20, 2018, we entered into a loan and security agreement with Jose Maria Eduardo Gonzalez Romero pursuant to which Mr. Romero made loans to the Company 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, the Company agreed to give Mr. Romero a security interest in the equipment. The Company failed to give Mr. Romero the security interest and did not take possession in the United States of the equipment purchased from the proceeds of the loans. 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. Upon full conversion of the notes, we would issue 25,000,000 shares.
Director Independence
We have no independent directors.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the fees billed by our independent accountants, Davidson & Company LLP for each of our last two fiscal years and for KCCW Accountancy Corp. for the years ended July 31, 2020 and 2019 for the categories of services indicated.
KCCW Accountancy Corp.
|
| Year Ended July 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Audit fees |
| $ | 12,500 |
|
| $ | 12,500 |
|
Audit-related fees |
|
| - |
|
|
| - |
|
Tax fees |
|
| - |
|
|
| - |
|
All other fees |
|
| - |
|
|
| - |
|
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements.
All other fees relate to professional services rendered in connection our registration statement.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee’s policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our board approved all services that our independent accountants provided to us in the past two fiscal years.
| 18 |
| Table of Contents |
PART IV
ITEM 15. EXHIBITS
EXHIBIT
Exhibit Number |
| Description |
| Plan and agreement of merger dated March 19, 2018 between the Company and iMine Corporation.1 | |
| ||
| ||
| Employment agreement dated March 19, 2018 between the Company and Daniel Tsai.1 | |
| ||
| ||
| Consulting agreement dated March 19, 2018 between the Company and Iconic Private Equity Partners1 | |
| ||
| ||
| ||
| Section 1350 certification of the chief executive officer and chief financial officer | |
101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Schema Document |
101.CAL |
| XBRL Taxonomy Calculation Document |
101.DEF |
| XBRL Taxonomy Linkbase Document |
101.LAB |
| XBRL Taxonomy Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Presentation Linkbase Document |
_______________
1 | Filed as an exhibit to the Company’s report on Form 8-K filed on March 22, 2018 and incorporated herein by reference. |
2 | Filed as an exhibit to the Company’s registration statement on Form S-1 filed on November 8, 2012 and incorporated by reference. |
3 | Filed as an exhibit to the Company’s registration statement on Form S-1, filed on July 25, 2018, and incorporated herein by reference. |
4 | Filed as an exhibit to the Company’s report on From 8-k filed on August 15, 2019 and incorporated herein by reference. |
5 | Filed as an exhibit to the Company’s annual report on Form 10-K, filed on October 29, 2013 and incorporated herein by reference. |
ITEM 16. FORM 10-K SUMMARY
Not Applicable
| 19 |
| 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.
Date: June 3, 2021
| iMine Corporation |
| |
| |||
| By: | /s/ Jose Maria Eduardo Gonzalez Romero |
|
| Name: Jose Maria Eduardo Gonzalez Romero |
| |
| Title: Chief Executive Officer |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
| Title |
| Date |
| ||||
/s/ Jose Maria Eduardo Gonzalez Romero |
| Chief executive officer, chief financial officer |
| June 3, 2021 |
Jose Maria Eduardo Gonzalez Romero |
| and director (principal executive and financial officer) |
20 |
| Table of Contents |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page |
| |
|
|
|
|
| F-2 | ||
| |||
| F-3 | ||
| |||
Consolidated Statements of Operations for the years ended July 31, 2020 and 2019 |
| F-4 | |
| |||
| F-5 | ||
| |||
Consolidated Statements of Cash Flows for the years ended July 31, 2020 and 2019 |
| F-6 | |
| |||
| F-7 |
| F-1 |
| Table of Contents |
Audit • Tax • Consulting • Financial Advisory Registered with Public Company Accounting Oversight Board (PCAOB) |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of iMINE Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of iMINE Corporation (the “Company”) as of July 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended July 31, 2020 and 2019, in conformity with the U.S. generally accepted accounting principles.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that iMINE Corporation will continue as a going concern. As described in Note 3 to the consolidated financial statements, the Company has incurred losses from operations, has a working capital deficit, and is in need of additional capital to grow its operations so that it can become profitable. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 3. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KCCW Accountancy Corp.
We have served as the Company’s auditor since 2018.
Diamond Bar, California
June 1, 2021
| F-2 |
| Table of Contents |
iMINE CORPORATION
Consolidated Balance Sheets
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Total Current Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Due to related parties |
|
|
|
|
|
| ||
Convertible notes payable - related party |
|
|
|
|
|
| ||
Liabilities from discontinued operation |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Common stock: |
|
|
|
|
|
| ||
Additional paid in capital |
|
|
|
|
|
| ||
Common stock to be issued |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total Stockholders’ Deficit |
|
| ( | ) |
|
| ( | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
iMINE CORPORATION
Consolidated Statements of Operations
|
| Year Ended |
| |||||
|
| July 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net loss from operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other income and expense |
|
|
|
|
|
|
|
|
Interest and accretion on convertible notes |
|
| ( | ) |
|
| ( | ) |
Total other expense |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| ( | ) |
|
| ( | ) |
Provision for income taxes |
|
|
|
|
|
| ||
Net loss from continuing operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share of common stock |
|
|
|
|
|
|
|
|
Continuing operations |
| $ | ( | ) |
| $ | ( | ) |
Discontinued operations |
|
|
| ( | ) | |||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Basic weighted average number of common shares outstanding |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
iMINE CORPORATION
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
| Common |
|
|
|
|
| Total |
| ||||||
|
| Common Stock |
|
| Additional |
|
| stock |
|
|
|
| Stockholders’ |
| ||||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid in Capital |
|
| to be issued |
|
| Accumulated Deficit |
|
| Equity (Deficit) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - July 31, 2018 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Forgiveness of amount due to shareholder |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Balance - July 31, 2019 |
|
|
|
|
|
|
|
|
|
| ( | ) |
| ( | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Balance - July 31, 2020 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
iMINE CORPORATION.
Consolidated Statements of Cash Flows
|
| Year Ended |
| |||||
|
| July 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Net loss from discontinued operations |
|
|
|
|
| ( | ) | |
Net loss from continuing operations |
|
| ( | ) |
|
| ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
| ||
Accrued interest and accretion on convertible notes |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
Net cash used in operating activities - continuing operations |
|
| ( | ) |
|
| ( | ) |
Net cash used in operating activities - discontinued operations |
|
|
|
|
| ( | ) | |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net change in cash |
|
| ( | ) |
|
| ( | ) |
Cash, beginning of period |
|
|
|
|
|
| ||
Cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Contributed capital by principal shareholder and former CEO through debt forgiveness |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
iMINE CORPORATION.
Notes to 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 effective 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, 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 its 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
Basis of Presentation
The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated 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 consolidated 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.
Reclassification
Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. The reclassifications had no impact on previously reported net loss nor accumulated deficit.
Fiscal Period
The Company’s fiscal year end is July 31.
| F-7 |
| Table of Contents |
Fair Value Measurements
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.
FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
| · | Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. |
| ||
| · | Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ||
| · | Level 3 - Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. |
Financial instruments, including cash, prepaid inventory, accounts payable and accrued liabilities, and due to related parties, 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 of July 31, 2020 and 2019, 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:
|
|
|
|
|
|
|
| Significant |
|
|
|
| ||||
|
|
|
|
| Quoted |
|
| Other |
|
| Significant |
| ||||
|
|
|
|
| Prices in |
|
| Observable |
|
| Unobservable |
| ||||
|
| July 31, |
|
| Active Markets |
|
| Inputs |
|
| Inputs |
| ||||
|
| 2020 |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level3) |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable - related party |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
| Significant |
|
|
|
| ||||
|
|
|
|
| Quoted |
|
| Other |
|
| Significant |
| ||||
|
|
|
|
| Prices in |
|
| Observable |
|
| Unobservable |
| ||||
|
| July 31, |
|
| Active Markets |
|
| Inputs |
|
| Inputs |
| ||||
|
| 2019 |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level3) |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| F-8 |
| Table of Contents |
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.
Share-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.
Beneficial Conversion Feature
The issuance of the convertible debt generated a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting in a discount on the convertible debt (recorded as a component of additional paid-in capital). The discount is amortized to interest expense over the term of the convertible debt.
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.
| F-9 |
| Table of Contents |
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 common shares outstanding during the period. Diluted earnings per share of common stock are 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 and shares to be issued for services performed. As of July 31, 2020 and 2019, there were
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt-Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging-Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
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 year ended July 31, 2020, the Company incurred a net loss of $
The ability of the Company to begin operations in its new business model 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 assets and liabilities of the discontinued operations were presented separately under the captions “Assets from discontinued operation” and “Liabilities from discontinued operation,” respectively, in the accompanying consolidated balance sheets at July 31, 2020 and 2019.
| F-10 |
| Table of Contents |
The following table shows the results of operations which are included in the loss from discontinued operations:
|
| Year Ended |
| |||||
|
| July 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
|
|
|
|
|
|
|
Inventory valuation reserve |
|
|
|
|
| ( | ) | |
Gross profit |
|
|
|
|
| ( | ) | |
General and administrative |
|
|
|
|
| ( | ) | |
Stock based compensation |
|
|
|
|
| ( | ) | |
Operating loss |
|
|
|
|
| ( | ) | |
Income tax provision |
|
|
|
|
|
| ||
Loss from discontinued operations, net of tax |
| $ |
|
| $ | ( | ) | |
The following table summarizes the carrying amounts of the net assets from discontinued operations as of July 31, 2020 and 2019, respectively.
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Assets from discontinued operations |
|
|
|
|
|
| ||
None |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Liabilities from discontinued operations |
|
|
|
|
|
|
|
|
Advance from customer |
| $ |
|
| $ |
| ||
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
On March 19, 2018, the Company entered into a one-year consulting agreement with a consultant, who was, at the time, a
During the year ended July 31, 2020 and 2019, our shareholders paid operating expenses of $
The following table sets forth the amounts due to related parties at July 31, 2020 and 2019:
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Due to former chief executive officer pursuant to executive employment agreement |
| $ |
|
| $ |
| ||
Due to shareholders |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
On August 14, 2019, the Company entered into an employment agreement with our CEO and agreed to issue
| F-11 |
| Table of Contents |
NOTE 6 - CONVERTIBLE NOTES - RELATED PARTY
At July 31, 2020 and 2019, convertible note consisted of the following:
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Convertible promissory notes issued |
| $ |
|
| $ |
| ||
Less discount |
|
|
|
|
| ( | ) | |
Total convertible note |
|
|
|
|
|
| ||
Accrued interest |
|
|
|
|
|
| ||
Liability component |
| $ |
|
| $ |
| ||
Pursuant to a note purchase agreement dated March 20, 2018 between the Company and a non-affiliated lender, the lender made loans to the Company in the total amount of $
The notes are convertible into common stock of the Company at $
Interest of
NOTE 7 - COMMON STOCK
Authorized Common Stock
The Company has authorized
Issuance of Common Stock
During the year ended July 31, 2019, the Company issued
There were
As of July 31, 2020 and 2019, the Company had no options and warrants outstanding.
Common Stock to be issued
During the year ended July 31, 2020, the Company recorded
| F-12 |
| Table of Contents |
NOTE 8 - INCOME TAXES
The reconciliation of income tax expense at the U.S. statutory rate of
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Net loss for the year |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Income tax benefit at statutory rate |
| $ |
|
| $ |
| ||
Change in valuation allowance |
|
| ( | ) |
|
| ( | ) |
Income tax expense per books |
| $ |
|
| $ |
| ||
The reconciliation of the effective tax rate reflected in the provision for income taxes to the U.S. federal statutory rate as of July 31, 2020 and 2019:
|
| As of July 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Statutory tax benefit |
|
| ( | )% |
|
| ( | )% |
Increase in valuation allowance |
|
| % |
|
| % | ||
Provision for income taxes |
| - | % |
| - | % | ||
The Company assesses the likelihood that deferred tax assets will not be realized. ASC 740, “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of July 31, 2020 and 2019.
Net deferred tax assets consist of the following components as of:
|
| July 31, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Non-operating loss carryforward |
| $ |
|
| $ |
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax asset |
| $ |
|
| $ |
| ||
The Company has not completed its evaluation of NOL utilization limitation under IRC Section 382, change of ownership rules, but believes that it had a change of ownership that would limit the amount of the U.S. NOLs that could be utilized each year based on the provisions of Section 382.
NOTE 9 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through June 1, 2021, the date on which the financial statements are available to be issued. All subsequent events requiring recognition as of July 31, 2020 have been incorporated into these consolidated financial statements and there are no additional subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
Subsequent to July 31, 2020,
The Company has also filed a lawsuit against the former CEO, Daniel Tsai and is attempting to serve. The Company is claiming breach of his fiduciary duty and gross misconduct.
The Company is aggressively pursuing the manufacturer of the equipment to either deliver the equipment purchased or refund the purchase including interest and damages.
| F-13 |