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 filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company |
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 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operations | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
| Item 4 | Controls and Procedures | |||
| PART II - OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | |||
| Item 1A. | Risk Factors | |||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||
| Item 3. | Defaults Upon Senior Securities | |||
| Item 4. | Mine Safety Disclosures | |||
| Item 5. | Other Information | |||
| Item 6. | Exhibits | |||
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.
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.
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.
| 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; | |
| ● | 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. |
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.
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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.
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.
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PART II - OTHER INFORMATION
| 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 |
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 |
None.
| 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.
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. | ||
| By: | / | |
Barry Tenzer President, CEO and CFO | ||
| (Principal Executive Officer and Principal Financial Officer) | ||
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