UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

 

FORM 10-Q

 

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

 

For the quarterly period ended February 29,November 30, 2016

 

Commission file number: 000-52759

 

DIMI TELEMATICS INTERNATIONAL, INC.

(Name of registrant as specified in its charter)

 

Nevada 20-4743354
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

290 Lenox Avenue, New York, NY 10027

(Address of principal executive offices)(Zip Code)

(855) 633 - 3738

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesxYes☒ Noo ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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).

Yesx Noo ☐

 

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

 

Large accelerated fileroAccelerated filero

Non-accelerated filero ☐
(Do not check if smaller reporting company)

Smaller reporting companyx

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yeso Nox

 

As of April 19, 2016,January 20, 2017, there were 2,923,9072,922,712 shares of common stock outstanding.

 

  

TABLE OF CONTENTS

 

   Page No.
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements 32
Item 2.Management’s Discussion and Analysis of Financial Condition and Plan of Operations 97
Item 3.Quantitative and Qualitative Disclosures About Market Risk 1210
Item 4Controls and Procedures 1210
PART II - OTHER INFORMATION 
Item 1.Legal Proceedings 1311
Item 1A.Risk Factors 1311
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds 1311
Item 3.Defaults Upon Senior Securities 1311
Item 4.Mine Safety Disclosures 1311
Item 5.Other Information 1311
Item 6.Exhibits 1311

 

 

2

 

PART I - FINANCIAL INFORMATION

 

These unaudited condensedconsolidated financial statements have been prepared by the registrant,DiMi Telematics International, Inc. (the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission. These condensedunaudited consolidated financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in the registrant’sCompany���s annual report on Form 10-K for itsthe fiscal year ended August 31, 20152016 as filed with the SECSecurities and Exchange Commission (the “SEC”) on December 30, 2015.16, 2016. In the opinion of the registrant,the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of the Company, as of February 29,November 30, 2016 and August 31, 20152016 and the results of its operations and cash flows for the periods ended February 29,November 30, 2016 and 2015 have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year.

ITEM 1.FINANCIAL STATEMENTS

 

ITEM 1. FINANCIAL STATEMENTS

Dimi Telematics International, Inc.

Consolidated Balance Sheets

(unaudited)(Unaudited)

       
  Feb 29,  August 31, 
  2016  2015 
Assets  (unaudited)     
Current assets        
Cash $34,024  $185,869 
Prepaid expenses-stock based     21,000 
Total current assets  34,024   206,869 
         
Prepaid expense-stock based     74,375 
Intellectual property, net of amortization of $811 and $745, respectively  1,379   1,445 
Total assets $35,403  $282,689 
         
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable and accrued liabilities $24,200  $31,514 
Total current liabilities  24,200   31,514 
         
Stockholders' Equity        
Series A Convertible Prefered Stock, $0.001 par value, 50,000,000        
authorized shares; no shares issued and outstanding as of        
February 29, 2016 and August 31, 2015, respectively      
Common stock, $0.001 par value: 800,000,000 authorized;        
2,923,907 and 2,422,712 shares issued and outstanding as of        
February 29, 2016 and August 31, 2015, respectively  2,923   2,423 
Common stock payable     210,000 
Additional paid-in capital  2,310,876   2,101,376 
Accumulated deficit  (2,302,596)  (2,062,624)
Total stockholders' equity  11,203   251,175 
Total liabilities and stockholders' equity $35,403  $282,689 

  November 30,  August 31, 
  2016  2016 
Assets      
Current assets      
Cash $14,488  $431 
Total current assets  14,488   431 
         
Intellectual property, net of amortization of $909 and $876, respectively  1,281   1,314 
Total assets $15,769  $1,745 
         
Liabilities and Stockholders' Deficit        
Current liabilities        
Accounts payable and accrued liabilities $56,060   69,426 
Accounts payable - related party  -   14,609 
Note payable - related party  116,000   31,500 
Total current liabilities  172,060   115,535 
         
Stockholders' Deficit        
Series A Convertible Preferred Stock, $0.001 par value, 50,000,000 authorized shares;   no shares issued and outstanding as of November 30, 2016 and August 31, 2016, respectively  -   - 
Common stock, $0.001 par value: 800,000,000 authorized; 2,922,712 and 2,922,712 shares issued and outstanding as of  November 30, 2016 and August 31, 2016, respectively  2,923   2,923 
Additional paid-in capital  2,310,876   2,310,876 
Accumulated deficit  (2,470,090)  (2,427,589)
Total stockholders' deficit  (156,291)  (113,790)
Total liability and stockholders' deficit $15,769  $1,745 

 

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

 4- 2 - 

 

Dimi Telematics International, Inc.

Consolidated Statements of Operations

(unaudited)(Unaudited)

 

  For the  For the     
  three months  three months  For the six months  For the six months 
  ended  ended  ended  ended 
  February 29,  February 28,  February 29,  February 28, 
  2016  2015  2016  2015 
             
Operating expenses:                
Selling, general and administrative expenses $3,926  $6,385  $10,793  $11,106 
Payroll expense  22,295   36,331   41,512   49,500 
Professional fees  47,692   45,000   69,692   68,738 
Consulting  106,125   8,000   117,909   21,355 
Amortization expense  33   950   66   1,899 
Total operating expenses  180,071   96,666   239,972   152,598 
                 
Loss from operations  (180,071)  (96,666)  (239,972)  (152,598)
                 
                 
Loss before income tax  (180,071)  (96,666)  (239,972)  (152,598)
Provision for income tax            
Net Loss $(180,071) $(96,666) $(239,972) $(152,598)
                 
Net loss per share: basic and diluted $(0.06) $(0.01) $(0.09) $(0.02)
                 
Weighted average shares outstanding  2,923,907   7,268,136   2,784,756   7,268,136 
basic and diluted                

  For the three months ended 
  November 30,  November 30, 
  2016  2015 
       
Operating expenses:      
Selling, general and administrative expenses $8,452  $6,866 
Payroll expense  24,563   22,717 
Professional fees  8,613   39,692 
Consulting  -   11,784 
Amortization expense  33   33 
Total operating expenses  41,661   81,092 
         
Loss from operations  (41,661)  (81,092)
         
Other expense        
Interest expense  (840)  - 
Total other expense  (840)  - 
         
Loss before income tax  (42,501)  (81,092)
Provision for income tax  -   - 
Net Loss $(42,501) $(81,092)
         
Net loss per share: basic and diluted $(0.01) $(0.03)
         
Weighted average shares outstanding basic and diluted  2,922,712   2,956,129 

 

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

- 3 -

Dimi Telematics International, Inc.

Consolidated Statements of Cash Flows

(unaudited)(Unaudited)

 

 For the six months ended 
 February 29,  February 28, 
  2016  2015 
Cash flows from operating activities        
Net loss $(239,972) $(152,598)
Adjustments to reconcile net loss to net        
cash used in operating activities        
Amortization expense  66   1,899 
Changes in operating assets and liabilities        
Accounts payable  (7,314)  3,365 
Prepaid expense  95,375    
Net Cash used in operating activities  (151,845)  (147,334)
Net increase in cash and cash equivalents  (151,845)  (147,334)
Cash and cash equivalents at beginning of period  185,869   437,772 
Cash and cash equivalents at end of period $34,024  $290,438 
Supplemental disclosure of cash flow information        
Cash paid during period for        
Cash paid for interest $  $ 
Cash paid for income taxes $  $ 
Noncash investing and financing activities:        
Common stock payable being issued $210,000  $ 

  For the three months ended 
  November 30,  November 30, 
  2016  2015 
Cash flows from operating activities      
Net loss $(42,501) $(81,092)
Adjustments to reconcile net loss to net cash used in operating activities        
Amortization expense  33   33 
Stock based compensation  -   5,250 
Changes in operating assets and liabilities        
Accounts payable  (14,206)  16,702 
Accounts payable - related party  (14,609)  - 
Accrued interest expense  840   - 
Prepaid expense  -   (2,000)
Net Cash used in operating activities  (70,443)  (61,107)
         
Cash flow from financing activities        
Payments for note payable - related party  (5,500)    
Proceeds from note payable - related party  90,000   - 
Net cash provided by financing activities  84,500   - 
         
Net increase (decrease) in cash and cash equivalents  14,057   (61,107)
Cash and cash equivalents at beginning of period  431   185,869 
Cash and cash equivalents at end of period $14,488  $124,762 
Supplemental disclosure of cash flow information        
Cash paid during period for        
Cash paid for interest $-  $- 
Cash paid for income taxes $-  $- 

 

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

 6- 4 - 

DiMi Telematics International, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of DiMi Telematics International, Inc. (formerly known as First Quantum Ventures, Inc.), a Nevada corporation (the Company“Company”), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company's annual report on Form 10-K for the fiscal year ended August 31, 2015.2016. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of February 29,November 30, 2016, and the results of operations and cash flows for the sixthree months ended February 29,November 30, 2016 and February 28, 2015. The results of operations for the three and six months ended February 29,November 30, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year.

 

The Company accounted for the acquisition under the purchase method of accounting for business combinations. Under the purchase method of accounting in a business combination effected through an exchange of equity interest, the entity that issues the equity interest is generally the acquiring entity. In some business combinations (commonly referred to as reverse acquisitions), however, the acquired entity issues the equity interest. Accounting for business combinations requires consideration of the facts and circumstances surrounding a business combination that generally involves the relative ownership and control of the entity by each of the parties subsequent to the acquisition. Based on a review of these factors, the acquisition was accounted for as a reverse acquisition, i.e., the Company was considered the acquired company and DTI was considered the acquiring company for accounting purposes. As a result, the Company’s assets and liabilities were incorporated into DTI’s balance sheet based on the fair value of the net assets acquired. Further, the Company’s operating results do not include the Company’s results prior to the date of closing. Accordingly the accompanying financial statements are the financial statements of the DTI. In addition, the Company’s fiscal year end changed to DTI’s fiscal year end of August 31 following the closing.

The Company has retroactively reflected the acquisition in DTI’s common stock in a ratio consistent with the share exchange (the “Share Exchange”).

On March 15, 2012, First Quantum changed its name to DiMi Telematics International, Inc.

Certain prior period amounts have been reclassified to conform to current period presentation.

 

Going Concern

 

The accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. However, the Company has reported a net loss of $239,972$42,501 for the sixthree months ended February 29,November, 2016 and had an accumulateda working capital deficit of $2,302,596$157,572 as of February 29,November 30, 2016.  These conditions raise significantsubstantial doubt about our ability to continue as a going concern.

 

The Company'sCompany’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed."

 

2. EQUITY

 

Common Stock

 

The Company was formed in the state of Nevada on April 13, 2006.  The Company has authorized capital of 800,000,000 shares of common stock with a par value of $0.001, and 50,000,000 shares of preferred stock with a par value of $0.001.

 

On October 1, 2015, the Board of Directors and a majority of the Company’s shareholders approved an amendment of the Company’s Articles of Incorporation to effect a 1one (1) for 3three (3) reverse stock split of the Company’s outstanding common stock (the “Reverse Split”). The Reverse Split became effective on December 1, 2015. As a result of the Reverse Split, each three (3) shares of common stock issued and outstanding prior to the Reverse Split have been converted into one (1) share of common stock,stock. The effect of the Reverse Split has been applied retroactively throughout this document.quarterly report.

 

On, July 8, 2015, the Company authorized the issuance of 250,000 shares of common stock for consulting fees in the amount of $105,000. The shares were issued on October 30, 2015.

 

On, July 8, 2015, the Company authorized the issuance of 250,000 shares of common stock for stock based compensation in the amount of $105,000. The shares were issued on October 30, 2015.

 

$114,625 was expensed under theseOn October 30, 2015, the Company issued the 500,000 shares of common stock awardsgranted on July 8, 2015 to settle the common stock payable of $210,000.

- 5 -

2. NOTE PAYABLE – RELATED PARTY

On April 27, 2016, the Company issued our CEO a 7% unsecured promissory note in the amount of $2,500 which matured six months from the date of issuance. On July 5, 2016, the Company issued our CEO a 7% unsecured note in the amount of $3,000 which matured six months from date of issuance. On November 17, 2016, the Company repaid the principal amount of the note, or$5,500.

The changes in notes payable to related party consisted of the following during the year ending November 30, 2016:

  November 30,
2016
  August 31, 2016 
Notes payable – related party at beginning of period $5,500  $- 
Payments on notes payable – related party  (5,500)  - 
Borrowings on notes payable – related party  -   5,500 
Convertible debenture – related party at end of period $-  $5,500 

On May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the amount of $10,000 which matured six months from the date of issuance. On August 15, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $16,000 which matures six months from the date of issuance. On October 27, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $10,000 which matures six months from the date of issuance. On November 14, 2016, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $80,000 which matures six months from the date of issuance

The changes in notes payable to related party consisted of the following during the year ended August 31, 2015 and the remaining $95,375 was expensed during the six months ended February 29, 2016.November 30, 2016:

 

  November 30,
2016
  August 31, 2016 
Notes payable – related party at beginning of period $26,000  $- 
Payments on notes payable – related party  -   - 
Borrowings on notes payable – related party  90,000   26,000 
Convertible debenture – related party at end of period $116,000  $26,000 

3. RELATED PARTY TRANSACTIONS

 

We currently lease approximately 500 square feet of general office space at 290 Lenox Avenue, New York, NY 10027 from Roberto Fata, our Vice President – Business Development and Director.Operations.

 

On April 27, 2016, the Company issued our CEO two 7% unsecured promissory note in the aggregate amount of $5,500 which matured six months from the date of issuance Both notes have been paid off and the remaining principal amount is $0.

On May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the amount of $10,000 which matured six months from the date of issuance.

On August 15, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $16,000 which matures six months from the date of issuance. 

As of August 31, 2016, the Company had an outstanding payable of $14,609 to the CEO. The payable is unsecured, due on demand and bears no interest. As of November 30, 2016 the accounts payable – related party has been paid and currently has a balance of $0.

On October 27, 2016 the Company issued a significant shareholder a 7% unsecured promissory notes totaling $10,000 which matures six months from the date of issuance.

One November 14, 2016 the Company issued a significant shareholder a 7% unsecured promissory note totaling $80,000 which matures six months from the date of issuance.

 8- 6 - 

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.

Forward-looking Statements

 

We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Quarterly Report and other filings with the SEC, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this Quarterly Report to conform forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:

 

Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
Our failure to earn revenues or profits;
Inadequate capital to continue business;
Volatility or decline of our stock price;
Potential fluctuation in quarterly results;
Rapid and significant changes in markets;
Litigation with or legal claims and allegations by outside parties; and
Insufficient revenues to cover operating costs.
Our failure to earn revenues or profits;
Inadequate capital to continue business;
Volatility or decline of our stock price;
Potential fluctuation in quarterly results;
Rapid and significant changes in markets;
Litigation with or legal claims and allegations by outside parties; and
Insufficient revenues to cover operating costs.

 

The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Quarterly Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.

Overview

 

Cine-Source Entertainment, Inc. (the Old Corporation“Old Corporation”) a Colorado corporation, was formed on July 29, 1988. Pursuant to a Plan of Merger dated February 24, 2004, the Old Corporation filed Articles and Certificate of Merger with the Secretary of State of the State of Colorado merging the Old Corporation into Cine-Source Entertainment, Inc. (the Surviving Corporation“Surviving Corporation”), a Colorado corporation. A previous controlling stockholder group of the Old Corporation arranged the merger for business reasons that did not materialize. On April 26, 2004, the Surviving Corporation effectedeffectuated a 1 for 200 reverse stock split. The name of the Surviving Corporation was changed to First Quantum Ventures, Inc., on April 27, 2004. On April 13, 2006 the Surviving Corporation formed a wholly owned subsidiary, a Nevada corporation named First Quantum Ventures, Inc., and on May 5, 2006 merged the Surviving Corporation with and into this subsidiary, referred to herein as DTII.

 

Name Title(s)
Barry Tenzer President, Chief Executive Officer, Chief Financial Officer, Secretary and Director
Roberto Fata Executive Vice President – Business Development and Director

- 7 -

 

The Share Exchange qualified as a transaction exempt from registration or qualification under the Securities Act of 1933, as amended (the “Securities Act”), and under the applicable securities laws of each jurisdiction where any of the stockholders reside.

 

On March 15, 2012, the Company changed its name to DiMi Telematics, International, Inc.

  

On April 16, 2012, the Company issued a 1 for 1 stock dividend to current stockholders whereby the Company issued an additional 33,959,744 shares of common stock.  On May 16, 2012 the Company issued an additional 1 for 1 stock dividend to current stockholders whereby an additional 71,286,155 shares were issued. The dividends were also applied to outstanding warrants.  The Company has reflected the dividends as splits, which have been retroactively reflected in the financial statements.

 

The Company designs, develops and distributes Machine-to-Machine (“M2M”) communications solutions used to remotely track, monitor, manage and protect multiple mobile and fixed assets in real-time from virtually any web-enabled desktop computer or mobile device. Through our proprietary software and hosted service offerings, the Company is endeavoring to capitalize on the pervasiveness and data transport capabilities of wireless networks in order to facilitate communications and process efficiencies between commercial and industrial business owners/managers and their respective networked control systems, sensors and devices.

 

The Company is focused on the M2M market segments in which we can provide highly differentiated and value-driven solutions capable of unleashing tangible productivity gains, material cost reductions and quantifiable risk mitigation across an enterprise. Aside fromOther than the oversight and administration of our corporate, financial and legal affairs by the executive management team, our Company’s operating activities are centralized in the following three core areas:

 

Sales and Marketing will employ both direct and indirect sales models utilizing an in-house business development team, partners and resellers and self-service through a service on-demand web interface;

 

Operationswill be responsible for managing daily activities related to monitoring and administering our cloud-based server operations, 24/7 client service/help desk, professional services and installation support and quality assurance and testing of ourDiMisoftware and hosting platform, as well as the implementation and ongoing administration of our hosted clients’ M2M communications platform; and

 

Product Developmentwill be charged with enhancing our existing M2M software applications and services and introducing new and complementary hosted products and applications on a timely basis. We anticipate that the creative formulation of enhancements and new product conceptualization will be performed in-house by our officers and directors. Thereafter, we intend to outsource software enhancement and product development to outside third parties.

 

Plan of Operations

 

Product Development Plan

 

Product development will be chargedtasked with enhancing our existing M2M software applications and services and introducing new and complementary hosted products and applications on a timely basis.

 

The primary building blocks of M2M technology on which the Company has focused its development activities have been and will remain:

 

 Building an expert knowledge base of existing and emerging electronics/technologies that enable geo-location, remote monitoring and control, auto-diagnostics and object identification;

 

 Engagement of a cloud computing platform that enables ubiquitous, scalable and on-demand network access;

 

 Development of proprietary software that controls two-way communication events, acts on predefined rules and delivers users a customized web interface that is accessible 24/7 from any web-enabled computer or device anywhere on Earth; and

 

 Information systems that enable users to process management solutions that allow for exploiting the information gathered for intelligent decision-making purposes and enhanced situational awareness.

 

 10- 8 - 

 

Marketing Plan

 

Strategically, the Company is focused on the M2M market segments in which we can provide highly differentiated and value-driven solutions capable of unleashing tangible productivity gains, material cost reductions and quantifiable risk mitigation across an enterprise.

 

We have also taken, and will continue to take, the necessary steps to secure the proprietary aspects of our applications through patent filings in the U.S. and in key international markets. Moreover, we intend to remain focused on proactively developing best-of-breed Internet-enabled M2M solutions that will effectively meet the evolving needs of our primary target market, namely web-based remote asset tracking, management and control with applications in the commercial, industrial, educational, government and military sectors.

 

As soon as practicable, the Company intends to concentrate itsDiMi commercialization efforts on marketing the solution to property management companies, commercial property developers, government/military installations, industrial facilities, retail and restaurant chains, colleges and universities, fleet managers, and any business or institutional concern with valuable fixed and mobile assets requiring remote surveillance, regular maintenance or general oversight.

 

In order to achieve accelerated market penetration and sustainable, recurring revenue from a global customer base, the Company expects to ultimately adopt a hybrid sales and marketing model involving direct sales (solutions team), channel sales (via leading Value-Added Resellers (“VARs”) and distributors dedicated to niche market applications thatDiMi is capable of addressing in target domestic and international markets) and strategic marketing and integration collaborations with industry leading system integrators, Original Equipment Manufacturers (“OEMs”) and large cellular carriers and dealers.

 

Employees

 

As of February 29,November 30, 2016 the Company employed no full time and no part time employees other than its Chief Executive Officer.

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED FEBRUARY 29,NOVEMBER 30, 2016 AND FEBRUARY 28, 2015.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended February 29,November 30, 2016 and February 28, 2015 totaled $3,926$8,452 and $6,385,$6,866, respectively. Payroll expense amounted to $22,295$24,563 and $36,331$22,717 for the three months ended February 29,November 30, 2016 and February 28, 2015, respectively. Consulting expense amounted to $106,125 and $8,000 for the three months ended February 29, 2016 and February 28, 2015, respectively. Professional fees amounted to $47,692 and $45,000 for three months ended February 29, 2016 and February 28, 2015, respectively. 

 

Amortization Expense

 

Amortization expense for the three months ended February 29,November 30, 2016 and February 28, 2015 totaled $33 and $950,$33, respectively. Amortization expense is the expensing of intellectual property and the iPhone application.

Interest Expense

Interest expense on promissory notes for the three months ended November 30, 2016 and 2015, was $840 and $0, respectively.  The Company entered into two unsecured promissory notes with related parties during the three months ended November 30, 2016.  The notes have a 7% interest rate and mature 6 months from the date of issuance. See Note 2.

 

Net Loss

 

For the reasons stated above, our net loss for the three months ended February 29,November 30, 2016 totaled $180,071$42,501 or ($0.06)0.01) per share, an increasea decrease of $83,405$38,591 compared to a net loss for the three months ended February 28,November 30, 2015 of $96,666,$81,092, or ($0.01) per share.. The majority of the additional loss is due to an increase in consulting and professional fees.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2016 AND FEBRUARY 28, 2015.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended February 29, 2016 and February 28, 2015 totaled $10,793 and $11,106, respectively. Payroll expense amounted to $41,512 and $49,500 for the six months ended February 29, 2016 and February 28, 2015, respectively. Consulting expense amounted to $117,909 and $21,355 for the six months ended February 29, 2016 and February 28, 2015, respectively. Professional fees amounted to $69,692 and $68,738 for six months ended February 29, 2016 and February 28, 2015, respectively. 

Amortization Expense

Amortization expense for the six months ended February 29, 2016 and February 28, 2015 totaled $66 and $1,899, respectively. Amortization expense is the expensing of intellectual property and the iPhone application.

Net Loss

For the reasons stated above, our net loss for the six months ended February 29, 2016 totaled $239,972 or ($0.09) per share, an increase of $87,374 compared to a net loss for the six months ended February 28, 2015 that was $152,598 or ($0.02)0.03) per share. The majority of the additional loss is due to an increasea decrease in consulting and professional fees.

- 9 -

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of February 29,November 30, 2016, we had cash and cash equivalents of $34,024.$14,488. Net cash used in operating activities for the sixthree months ended February 29,November 30, 2016 was approximately $151,845.$70,443. Our current liabilities as of February 29,November 30, 2016 totaled $24,200$172,060 consisting of accounts payable and accrued liabilities.liabilities of $56,060 and note payables of $116,000. We have net negative working capital of $9,824$157,572 as of February 29,November 30, 2016.

 

The accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. The Company has reported a net loss of $239,972$42,501 for the sixthree months ended February 29,November 30, 2016 and had an accumulated deficit of $2,302,596$2,470,090 as of February 29,November 30, 2016. These conditions raise significant doubt about our ability to continue as a going concern.

 

We have not generated positive cash flows from operating activities. The primary source of capital has been from the sale of equity securities. Our primary use of capital has been for professional fees and general and administrative costs. Our working capital requirements are expected to increase in line with the growth of our business.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We have no significant 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

ITEM 4.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Management of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 Act (“Exchange Act”)).  The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation, it has been concluded that the design and operation of our disclosure controls and procedures are not effective since the following material weaknesses exist:

 

·Since inception our chief executive officer also functions as our chief financial officer. As a result, our officers may not be able to identify errors and irregularities in the financial statements and reports;
·
We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency did not result in any audit adjustments to our financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties; and

·Documentation of all proper accounting procedures is not yet complete.

 

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the following:capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

·Increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

- 10 -

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1.LEGAL PROCEEDINGS

 

We are not currently a party to, nor is any of our property currently the subject of, any pending legal proceeding that will have a material adverse effect on our business.

ITEM 1A. RISK FACTORS

ITEM 1A.RISK FACTORS

 

Not applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 4.MINE SAFETY DISCLOSURES

 

No disclosure required.

ITEM 5. OTHER INFORMATION

ITEM 5.OTHER INFORMATION

 

None.

ITEM 6.EXHIBITS

 

ITEM 6. EXHIBITS

Exhibit No. Description
   
31.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Label Linkbase Document*
101.PRE XBRL Taxonomy Presentation Linkbase Document*

 

* Filed herewith.

** Furnished herewith.

 13- 11 - 


 

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.

 

 DIMI TELEMATICS INTERNATIONAL, INC.
  

 April 19, 2016January 20, 2017By:

//s/ Barry Tenzer

  

Barry Tenzer

President, CEO and CFO

  (Principal Executive Officer and Principal Financial Officer)

 

 

- 12 -

14