The following discussion of our financial condition and results of operations
should be read together with our financial statements audited by MaloneBailey,
LLP, our independent registered public accounting firm and the related notes
that are included elsewhere in this report. This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under the caption "Risk Factors" or in other parts of
this report. See "Cautionary Note Regarding Forward-Looking Statements."
Forward Looking Statements
Some of the statements contained in this Annual Report that are not historical
facts are "forward-looking statements" which can be identified by the use of
terminology such as "estimates," "projects," "plans," "believes," "expects,"
"anticipates," "intends," or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious of
the forward-looking statements, that such statements, which are contained in
this Annual Report, reflect our current beliefs with respect to future events
and involve known and unknown risks, uncertainties and other factors affecting
our operations, market growth, services, products and licenses. No assurances
can be given regarding the achievement of future results, as actual results may
differ materially as a result of the risks we face, and actual events may differ
from the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
· our ability to raise capital when needed and on acceptable terms and
· our ability to attract and retain management, and to integrate and
maintain technical information and management information systems;
· the intensity of competition;
· general economic conditions; and
· other factors discussed in Risk Factors.
All forward-looking statements made in connection with this Annual Report which
are attributable to us or persons acting on our behalf are expressly qualified
in their entirety by these cautionary statements. Given the uncertainties that
surround such statements, you are cautioned not to place undue reliance on such
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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 a proposed 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
Twelve month period ended July 31, 2019
For the twelve (12) month period ended July 31, 2019, we generated no revenue
and incurred a net loss of $3,213,703.
Our net loss of $3,213,703 for the twelve (12) month period ended July 31, 2019
was the result of operating expenses of $1,482,736 and other expense (comprised
of interest expense) of $1,730,967. Our operating expenses consisted of
$1,376,055 in general and administrative expenses, and $106,681 in professional
Twelve month period ended July 31, 2018
For the twelve (12) month period ended July 31, 2018, we generated no revenue
and incurred a net loss of $1,495,687.
Our net loss of $1,495,687 for the twelve (12) month period ended July 31, 2018
was the result of operating expenses of $1,065,035 and other expense (comprised
of interest expense) of $430,652. Our operating expenses consisted of $970,090
in general and administrative expenses, and $94,945 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 years ended July 31, 2018 and July 31, 2019, total general and
administrative expenses were $970,090 and $1,376,055, respectively.
For the year ended July 31, 2018, we had $970,090 in general and administrative
expenses compared to $1,376,055, in general and administrative expense for the
year ended July 31, 2019. The $405,965 increase in general and administrative
expenses was primarily the result of reductions of spending related to directors
fees, filing fees, conferences, non-executive payroll and payroll tax expenses,
travel expenses and utilities, net of increases in consulting and public
relations fees, financing fees, and rent expense.
The professional fees for the years ending July 31, 2018 and July 31, 2019 were
$94,945 and $106,681, respectively. The $11,736 increase was primarily result of
reductions of spending related to audit fees, net of increases in tax
preparation and audit fees.
The executive compensation for the years ending July 31, 2018 and July 31, 2019
was $466,000 and $466,000, respectively. No change was due to the same
executives on the payroll during both years with no change in compensation
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Liquidity and Capital Resources
For the twelve (12) month period ended July 31, 2019, net cash used in operating
activities was $335,249. The negative cash flow for the twelve (12) months ended
July 31, 2019 related to our net loss of $3,213,703, adjusted for depreciation
of $1,581, an increase in financing fees of $30,500, a change of $1,392,576 in
convertible debt due to fair market value, an increase of $288,250 in
convertible debt due to default, an increase of $466,800 in issuance of stock
compensation for services and fees, prepaid expenses of $546, an increase of
$249,441 in accounts payable and accrued expenses and an increase of $448,760 in
accrued salaries and payroll taxes - related parties.
For the twelve (12) month period ended July 31, 2018, net cash used in operating
activities was $221,998. The negative cash flow for the twelve (12) months ended
July 31, 2018 related to our net loss of $1,495,687, adjusted for depreciation
of $1,581, a change of $308,180 in convertible debt due to fair market value, an
increase of $83,500 in convertible debt due to default, an increase of $48,110
in issuance of stock compensation for services and fees, a decrease of prepaid
expenses of $747, an increase of $288,315 in accounts payable and accrued
expenses and an increase of $544,750 in accrued salaries and payroll taxes -
For the twelve (12) months ended July 31, 2019 net cash used in investing
activities was nil.
For the twelve (12) months ended July 31, 2018 net cash used in investing
activities was nil.
For the twelve (12) months ended July 31, 2019, net cash provided from financing
activities was $392,225. The positive cash flow from financing activities for
such period was comprised of a decrease in loans payable from related parties,
proceeds from sale of common stock and proceeds from sale of convertible
debentures, net of loan repayments to a related party and convertible notes.
For the twelve (12) months ended July 31, 2018, net cash provided from financing
activities was $223,702. The positive cash flow from financing activities for
such period was comprised of loans payable from related party and proceeds from
sales of convertible debentures, net of loan repayments to a related party.
To date, we have funded our operations primarily with capital provided and loans
provided by related parties, accruing of salaries and accounts payable, sales of
common stock and convertible debentures.
As of July 31, 2019, Mirage Energy Corporation had $70,456 in cash on hand and
prepaid expenses of $1,760. Since Mirage Energy Corporation is 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.
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The Company's audited financial statements for the year ended July 31, 2019
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 year ended July 31, 2019, the Company has funded operations with debt of
$329,500 from convertible notes, proceeds from sale of $325,978 in common stock,
while making loan repayments of $180,003 to related party and $83,250 to
convertible notes. The Company plans to raise additional funds through various
sources to support ongoing operations during 2019 and 2020.
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.
The Company recognizes 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 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.
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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, 2019, the Company had net operating loss carry forwards of
approximately $4,105,783, which will expire in 2038 and are calculated at an
expected tax rate of approximately 21%.
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. 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.
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.
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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.
It is our opinion that inflation has not had a material effect on our
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