Item 1. Unaudited Financial Statements.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's 10-K for the year ending July 31, 2017 filed with the Securities and Exchange Commission and the financial statements contained in the Company’s Current Report 10-Q for the quarter ending April 30, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year ending July 31, 2018.
MIRAGE ENERGY CORPORATION
INDEX TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
April 30, 2018
MIRAGE ENERGY CORPORATION
Consolidated Balance Sheets
|
|
April 30,
|
|
|
July 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,182
|
|
|
$
|
11,776
|
|
Prepaid expenses
|
|
|
540
|
|
|
|
1,559
|
|
Total Current Assets
|
|
|
5,722
|
|
|
|
13,335
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
5,007
|
|
|
|
6,192
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
6,921
|
|
|
|
6,921
|
|
Total Other Assets
|
|
|
6,921
|
|
|
|
6,921
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
17,650
|
|
|
$
|
26,448
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Loans payable, related parties
|
|
$
|
165,877
|
|
|
$
|
208,678
|
|
Accounts payable and accrued liabilities
|
|
|
422,598
|
|
|
|
337,384
|
|
Loan payable
|
|
|
77,844
|
|
|
|
-
|
|
Convertible notes
|
|
|
243,000
|
|
|
|
33,000
|
|
Accrued salaries and payroll taxes, related parties
|
|
|
1,285,567
|
|
|
|
854,553
|
|
Total Current Liabilities
|
|
|
2,194,886
|
|
|
|
1,433,615
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Loan payable
|
|
|
50,000
|
|
|
|
50,000
|
|
TOTAL LIABILITIES
|
|
|
2,244,886
|
|
|
|
1,483,615
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001, 10,000,000 shares authorized, 10,000,000 shares issued and outstanding as of April 30, 2018 and July 31, 2017
|
|
|
10,000
|
|
|
|
10,000
|
|
Common stock, par value $0.001, 900,000,000 shares authorized, 324,516,064 shares issued and outstanding as of April 30, 2018; 310,190,456 shares issued and outstanding as of July 31, 2017
|
|
|
324,516
|
|
|
|
310,190
|
|
Additional paid-in capital
|
|
|
325,146
|
|
|
|
66,101
|
|
Accumulated deficit
|
|
|
(2,886,798
|
)
|
|
|
(1,843,358
|
)
|
Accumulated other comprehensive loss
|
|
|
(100
|
)
|
|
|
(100
|
)
|
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
(2,227,236
|
)
|
|
|
(1,457,167
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
17,650
|
|
|
$
|
26,448
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
MIRAGE ENERGY CORPORATION
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
208,854
|
|
|
$
|
467,278
|
|
|
$
|
748,466
|
|
|
$
|
913,129
|
|
Professional fees
|
|
|
19,389
|
|
|
|
38,510
|
|
|
|
64,957
|
|
|
|
70,734
|
|
Total Operating Expenses
|
|
|
228,243
|
|
|
|
505,788
|
|
|
|
813,423
|
|
|
|
983,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE OPERATIONS
|
|
|
(228,243
|
)
|
|
|
(505,788
|
)
|
|
|
(813,423
|
)
|
|
|
(983,863
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
115,227
|
|
|
|
3,014
|
|
|
|
230,017
|
|
|
|
6,122
|
|
Total Other Expense
|
|
|
115,227
|
|
|
|
3,014
|
|
|
|
230,017
|
|
|
|
6,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(343,470
|
)
|
|
|
(508,802
|
)
|
|
|
(1,043,440
|
)
|
|
|
(989,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(343,470
|
)
|
|
|
(508,802
|
)
|
|
|
(1,043,440
|
)
|
|
|
(989,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE LOSS
|
|
$
|
(343,470
|
)
|
|
$
|
(508,902
|
)
|
|
$
|
(1,043,440
|
)
|
|
$
|
(990,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Basic and Diluted Weighted Average Common Shares Outstanding
|
|
|
316,567,075
|
|
|
|
310,152,928
|
|
|
|
313,795,366
|
|
|
|
191,961,783
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
MIRAGE ENERGY CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(1,043,440
|
)
|
|
$
|
(990,085
|
)
|
Adjustments to reconcile net (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
1,185
|
|
|
|
1,186
|
|
Loss on change in fair value of convertible debt
|
|
|
121,391
|
|
|
|
-
|
|
Penalty on convertible debt
|
|
|
83,500
|
|
|
|
-
|
|
Issuance of stock for services and fees
|
|
|
42,500
|
|
|
|
262,500
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
1,019
|
|
|
|
(4,084
|
)
|
Accounts payable
|
|
|
185,679
|
|
|
|
46,991
|
|
Accrued expenses
|
|
|
13,494
|
|
|
|
32,399
|
|
Accrued salaries and payroll taxes, related parties
|
|
|
419,500
|
|
|
|
429,576
|
|
Net cash (used) in operating activities
|
|
|
(175,172
|
)
|
|
|
(221,517
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Loans to related party
|
|
|
-
|
|
|
|
(11,000
|
)
|
Project development costs
|
|
|
-
|
|
|
|
(33,941
|
)
|
Net cash (used) in investing activities
|
|
|
-
|
|
|
|
(44,941
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from loan, related party
|
|
|
27,700
|
|
|
|
169,744
|
|
Repayments of loan, related party
|
|
|
(93,122
|
)
|
|
|
-
|
|
Proceeds from sale of common stock
|
|
|
25,000
|
|
|
|
20,000
|
|
Proceeds from convertible debt
|
|
|
209,000
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
168,578
|
|
|
|
189,744
|
|
|
|
|
|
|
|
|
|
|
Effects on changes in foreign exchange rate
|
|
|
-
|
|
|
|
1,026
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash
|
|
|
(6,594
|
)
|
|
|
(75,688
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of period
|
|
|
11,776
|
|
|
|
76,165
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of period
|
|
$
|
5,182
|
|
|
$
|
477
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
2,714
|
|
|
$
|
54
|
|
Cash payments for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-Cash Flow Disclosures
|
|
|
|
|
|
|
|
|
Net assets assumed in reverse merger
|
|
$
|
-
|
|
|
$
|
40,288
|
|
Expenses paid by shareholder
|
|
$
|
22,621
|
|
|
$
|
-
|
|
Stock issued for convertible interest
|
|
$
|
3,745
|
|
|
$
|
-
|
|
Stock issued for convertible debt
|
|
$
|
202,126
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
MIRAGE ENERGY CORPORATION
Notes to the Consolidated Interim Financial Statements
April 30, 2018
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Mirage Energy Corporation (formerly Bridgewater Platforms Inc.) (the “Company”) is a Nevada corporation incorporated on May 6, 2014. On May 20, 2014, the Company incorporated a Canadian subsidiary known as Bridgewater Construction Ltd. in Ontario in association with its construction business. Mirage Energy Corporation is based at 900 Isom Rd Suite 306, San Antonio, TX 78216. The Company’s fiscal year end is July 31.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s 10-K filed with the Securities and Exchange Commission on November 30, 2017.
Earnings or Loss per Share:
The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to convertible debt, stock options and warrants for each year.
There are 10,000,000 shares of preferred stock that are convertible into 200,000,000 shares of common stock. As of April 30, 2018, the number of shares of common stock that can be issued for convertible debt as per Note 9 - Subsequent Events are 1,720,482. The other notes were not convertible at April 30, 2018.
Basis of Consolidation
These financial statements include the accounts of the Company and its wholly owned subsidiaries, 4Ward Resources, Inc., Cenote Energy, S. de R.L. de C.V., WPF Transmission, Inc., and WPF Mexico Pipelines, S. de R.L. de C.V. All material intercompany balances and transactions have been eliminated.
Financial Instruments
The Company’s notes that have become convertible are subject to ASC Topic 480, “Distinguishing Liabilities from Equity,” as the debt is a mostly fixed amount to be settled with a variable number of shares.
NOTE 3 - GOING CONCERN
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had a net loss of $1,043,440 and had net cash used in operations of $175,172 for the nine months ended April 30, 2018 and had an accumulated deficit and working capital deficit of $2,886,798 and $2,189,164 at that date. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company may include, but not be limited to: sales of equity instruments; traditional financing, such as loans; sale of participation interests and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 - DEBT
A summary of debt at April 30, 2018 and July 31, 2017 is as follows:
|
|
April 30,
|
|
|
July 31,
|
|
|
|
2018
|
|
|
2017
|
|
Notes payables related party, unsecured, interest bearing at 5% rate per annum, on demand
|
|
$
|
165,877
|
|
|
$
|
187,600
|
|
Note, unsecured interest bearing at 2% per annum, due July 9, 2020
|
|
|
50,000
|
|
|
|
50,000
|
|
Note, unsecured interest bearing at 7.5% per annum, due April 15, 2018. This note is now in default as of April 16, 2018 and has a default interest of 17.5%
|
|
|
77,844
|
|
|
|
-
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum, issued June 28, 2017 in the amount of $33,000 with fees of $3,000 and cash proceeds of $30,000, convertible at December 25, 2017 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of March 30, 2018. This note defaulted on November 15, 2017 and a default penalty of $16,500 was added to the note for a total of $49,500 and incurred default interest rate of 22%. During January and February 2018, $49,500 of this debt plus $1,980 in interest was converted and the Company issued 5,024,243 shares of common stock with a fair value of $110,708 in payment leaving no balance due. The convertible note had a net change in fair value of $59,227.
|
|
|
-
|
|
|
|
33,000
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum, issued August 22, 2017 in the amount of $38,000 with fees of $3,000 and cash proceeds of $35,000, convertible at February 18, 2018 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of May 30, 2018. This note defaulted on November 15, 2017 and a default penalty of $19,000 was added to the note for a total of $57,000 and incurred default interest rate of 22%. During March 2018, $45,000 of this debt was converted and the Company issued 8,251,365 shares of common stock with a fair value of $95,164 in payment leaving a principal balance of $12,000 of which fair market value was recorded at April 30, 2018 as $24,000. The convertible note has a net change in fair value of $62,164.
|
|
|
24,000
|
|
|
|
-
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum,, issued December 4, 2017 in the amount of $53,000 with fees of $3,000 and cash proceeds of $50,000, convertible at June 2, 2018 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of September 15, 2018. This note defaulted on March 25, 2018 and a default penalty of $26,500 was added to the note for a total of $79,500 and incurred default interest rate of 22%. As of April 30, 2018, $0 of this debt was converted and the Company issued no shares of common stock leaving a principal balance of $79,500. This note becomes convertible on June 2, 2018.
|
|
|
79,500
|
|
|
|
-
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum,, issued January 5, 2018 in the amount of $75,000 with an original issue discount of $2,000 and cash proceeds of $73,000, convertible at July 4, 2018 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of January 5, 2019. This note is in default and incurred default interest rate of 18%. The Company has not received any notice of default and associated default penalties remain unassessed by Lender.
|
|
|
75,000
|
|
|
|
-
|
|
Convertible debenture, unsecured, interest bearing at 12% per annum,, issued February 26, 2018 in the amount of $43,000 with fees of $3,000 and cash proceeds of $40,000, convertible at August 25, 2018 with conversion price at a discount rate of 45% of market price which is the average of the lowest trading price during the twenty trading day period ending on the latest complete trading day prior to the conversion date, maturity date of November 30, 2018. This note defaulted on March 25, 2018 and a default penalty of $21,500 was added to the note for a total of $64,500 and incurred default interest rate of 22%. As of April 30, 2018, $0 of this debt was converted and the Company issued no shares of common stock leaving a principal balance of $64,500. This note becomes convertible on August 25, 2018.
|
|
|
64,500
|
|
|
|
-
|
|
Loan payable related party, unsecured, non-interest bearing, on demand
|
|
|
-
|
|
|
|
21,078
|
|
Total Debt
|
|
|
536,721
|
|
|
|
291,678
|
|
Less: Current Maturities
|
|
|
486,721
|
|
|
|
241,678
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Debt
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
At the date each convertible instrument becomes convertible it is subject to ASC Topic 480, “Distinguishing Liabilities from Equity,” since the debt is a mostly fixed amount to be settled with a variable number of shares.
NOTE 5 - RELATED PARTY TRANSACTIONS
As of April 30, 2018, the CEO and two other members of management and one other employee had earned accrued unpaid salary in the amount of $1,238,250 as of April 30, 2018. Accrued salaries of $1,238,250 combined with accrued payroll taxes of $47,317 for a total accrued related party salaries and payroll tax of $1,285,567 for the period from June 2015 until April 30, 2018.
Also, Mr. Michael Ward, President, was owed $21,078 at July 31, 2017 which has decreased to $0 as of April 30, 2018 resulting from additional $27,700 of cash proceeds, expenses paid of $22,621, and repayments of $71,399. Additionally, a company owned by the spouse of the CEO provided a loan of $165,877 and $187,600 respectively, to 4Ward Resources, Inc. for the period ended April 30, 2018 and year ended July 31, 2017. Due to partial payments totaling $21,723, the balance has decreased to a total loan amount of $165,877.
NOTE 6 – LEASES
On June 9, 2016, the Company entered into a Lease Agreement for its San Antonio, Texas office lease location. The Lease Period is for three (3) years beginning July 1, 2016. The Company shall pay as additional rent all other sums of money as shall become due and payable by them under this Lease. To date after twenty-two (22) months of this thirty-six (36) month lease, no such additional charges have been made. Below is the schedule of rent for the remaining Lease term as of April 30, 2018.
Year
|
|
Amount
|
|
2018
|
|
$
|
13,503
|
|
2019
|
|
$
|
83,045
|
|
|
|
|
|
|
Total Remaining Base Rent
|
|
$
|
96,548
|
|
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company committed to eighteen (18) months of Acquisition of Pipeline Rights of Way to Marcos y Asociados with a total amount of $77,844 which was due April 15, 2018 and not paid as of April 30, 2018. Interest will continue accruing after April 30, 2018 until it is paid.
From time to time, the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 8 - EQUITY
In January, the Company entered into consulting agreements with two consultants with total consideration of 1,000,000 shares of common stock valued at $42,500. These shares were issued in March 2018 and are fully vested when they were issued. The term of both agreements shall be for a period of six months.
On March 21, 2018, the Company offered and sold Fifty Thousand (50,000) shares of common stock to Michael Liska valued at $0.50 per share for $25,000.
NOTE 9 - SUBSEQUENT EVENTS
The Company evaluated events occurring subsequent to April 30, 2018, identifying those that are required to be disclosed as follows:
On May 9, 2018, PowerUp Lending Group Ltd. converted principal in the amount of $8,000 of the $38,000 note issued August 22, 2017 that was defaulted to $57,000 for 963,855 shares of common stock.
On May 14, 2018, PowerUp Lending Group Ltd. converted the remaining principal $4,000 of the $38,000 note issued August 22, 2017 that was defaulted to $57,000 along with $2,280 of accrued interest for 756,627 shares of common stock.
On June 7, 2018, PowerUp Lending Group Ltd. converted principal in the amount of $15,000 of the $53,000 note issued December 4, 2017 that was defaulted to $79,500 for 1,562,500 shares of common stock.
On June 11, 2018, PowerUp Lending Group Ltd. converted principal in the amount of $20,000 of the $53,000 note issued December 4, 2017 that was defaulted to $79,500 for 2,083,333 shares of common stock.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Except for historical information, this report contains certain forward-looking statements. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Current Business” and "Risk Factors" sections in our Form 8-K, as filed on January 27, 2017. You should carefully review the risks described in our documents we file from time to time with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
All references in this Form 10-Q to the “Company,” “Mirage Energy,” “we,” “us,” or “our” are to Mirage Energy Corporation.
Corporate Overview
Company’s Plans
The Company has proposed to develop an integrated natural gas pipeline system in Texas and Mexico. The purpose of these pipelines will be to transport and store natural gas in an underground natural gas storage facility, which the Company proposes to permit and develop in northern Mexico. The Company believes that it has made substantial progress toward these goals with its preliminary project engineering designs and high level meetings with representatives of various Mexican regulatory agencies.
Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Three Months ended April 30, 2018 and 2017
Revenues
Three month period ended April 30, 2018
For the three (3) month period ended April 30, 2018, we generated no revenue and incurred a net loss of $343,470.
Our net loss of $343,470 for the three (3) month period ended April 30, 2018 was the result of operating expenses of $228,243 and other expense (comprised of interest expense) of $115,227. Our operating expenses consisted of $208,854 in general and administrative expenses, and $19,389 in professional fees.
Three month period ended April 30, 2017
For the three (3) month period ended April 30, 2017, we generated no revenue and incurred a net loss of $508,802.
Our net loss of $508,802 for the three (3) month period ended April 30, 2017 was the result of operating expenses of $505,788 and other expense (comprised of interest expense) of $3,014. Our operating expenses consisted of $467,278 in general and administrative expenses, and $38,510 in professional fees.
Costs and Expenses
Our primary costs going forward are related to engineering, travel, professional fees, and legal fees associated with our proposed pipeline and natural gas storage activities in Mexico.
For the three (3) months ended April 30, 2018 and April 30, 2017, total general and administrative expenses were $228,243 and $505,788, respectively.
For the three (3) months ended April 30, 2018, we had $208,854 in general and administrative expenses compared to $467,278 in general and administrative expenses for the three (3) months ended April 30, 2017. The $258,424 decrease in general and administrative expenses was primarily due to the reduction in spending related to director compensation.
The professional fees for the three (3) months ending April 30, 2018 and April 30, 2017 were $19,389 and $38,510, respectively. The $19,121 decrease was primarily related to a reduction in legal fees and transfer agent costs.
The executive compensation for the three (3) months ending April 30, 2018 and April 30, 2017 was $116,500 and $116,500, respectively. No change was due to same executives on the payroll during this quarter with no change in compensation amounts.
Liquidity and Capital Resources
Cash Flows
Operating Activities
For the nine (9) month period ended April 30, 2018, net cash used in operating activities was $175,172. The negative cash flow for the nine (9) months ended April 30, 2018 related to our net loss of $1,043,440, a decrease in prepaid expenses of $1,019, adjusted for depreciation of $1,185, an increase of $83,500 in convertible debt due to default, a change of $121,391 in convertible debt due to fair market value, an increase of $185,679 in accounts payable, an increase of $13,494 in accrued expenses and an increase of $419,500 in accrued salaries and payroll taxes – related parties.
For the nine (9) month period ended April 30, 2017, net cash used in operating activities was $221,517. The negative cash flow for the nine (9) months ended April 30, 2017 related to our net loss of $990,085, an increase in prepaid expenses of $4,084, adjusted for depreciation of $1,186, an increase of $46,991 in accounts payable, and an increase of $32,399 in accrued expenses.
Investing Activities
For the nine (9) months ended April 30, 2018 net cash used in investing activities was nil.
For the nine (9) months ended April 30, 2017 net cash used in investing activities was $44,941. The negative cash flow from investing activities for such period was comprised of loans receivable – officer in the amount of $11,000 and project development costs of $33,941.
Financing Activities
For the nine (9) months ended April 30, 2018, net cash provided by financing activities was $168,578. The positive cash flow from financing activities for such period was comprised of an increase in proceeds from related party loan and convertible debt and increase in repayment of related party loan.
For the nine (9) months ended April 30, 2017, net cash provided from financing activities was $189,744. The positive cash flow from financing activities for such period was comprised of an increase in loans payable from related parties and proceeds from sale of common stock.
Liquidity
To date, we have funded our operations primarily with capital provided and loans provided by related parties, salaries accrued to related parties and accounts payable along with sale of convertible debentures.
As of April 30, 2018, Mirage Energy Corporation had $5,182 in cash on hand and prepaid expenses of $540. Since Mirage Energy Corporation was unable to reasonably project its future revenue, it must presume that it will not generate any revenue during the next twelve (12) to twenty-four (24) months. We therefore will need to obtain additional debt or equity funding in the next two (2) – three (3) months, but there can be no assurances that such funding will be available to us in sufficient amounts or on reasonable terms.
The Company’s audited financial statements for the year ended July 31, 2017 contain a “going concern” qualification. As discussed in Note 3 of the Notes to Financial Statements, the Company has incurred losses and has not demonstrated the ability to generate cash flows from operations to satisfy its liabilities and sustain operations. Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.
Our financial objective is to make sure the Company has the cash and debt capacity to fund on-going operating activities, investments and growth. We intend to fund future capital needs through our current cash position, additional credit facilities, future operating cash flow and debt or equity financing. We are continually evaluating these options to make sure we have capital resources to meet our needs.
Existing capital resources are insufficient to support continuing operations of the Company over the next 12 months.
Management makes no assurances that adequate capital resources will be available to support continuing operations over the next 12 months. Management plans to pursue additional capital funding through multiple sources.
For the nine months ended April 30, 2018, the Company has funded operations of $175,172 through loan proceeds of $209,000 and proceeds from related parties’ loan payable of $27,700. The $209,000 loan proceeds are from sale of convertible notes. The Company plans to raise additional funds through various sources to support ongoing operations during 2018.
While no assurances can be given regarding the achievement of future results as actual results may differ materially, management anticipates adequate capital resources to support continuing operations over the next 12 months through the combination of infused capital through exercised warrants, infused capital through non-public private placement and existing cash reserves.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company intends to recognize revenues when earned which shall be as products are shipped and services are delivered to customers or distributors. The Company shall also record accounts receivable for revenue earned but not yet collected.
Income Taxes
Income taxes are provided based upon the liability method of accounting pursuant to FASB ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by FASB ASC 740-10-25-5.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.
At July 31, 2017, the Company had net operating loss carry forwards of approximately ($794,945), which will begin to expire in 2036 and are calculated at an expected blended tax rate of
approximately 26%.
“FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2015, the Company has not taken any tax positions that would require disclosure under FASB ASC 740.
Pursuant to FASB ASC 740, income taxes are provided for based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by FASB ASC 740 to allow recognition of such assets.
Earnings (Loss) Per Share
(“EPS”)
FASB ASC 260, Earnings Per Share provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents considered dilutive and outstanding.
Derivative Instruments
FASB ASC 815, Derivatives and Hedging establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk; or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
Impairment of Long-Lived Assets
Long-lived assets of the Company, including the Technology Rights, are reviewed for impairment when changes in circumstances indicate their carrying value has become impaired, pursuant to guidance established in the FASB ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Management considers assets to be impaired if the carrying amount of an asset exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the asset will be written down to fair value, and a loss is recorded as the difference between the carrying value and the fair value. Fair values are determined based on quoted market values, discounted cash flows, or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
Fair Value of Financial Instruments
The Company’s financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Inflation
It is our opinion that inflation has not had a material effect on our operations.