On June 18, 2017, the Company entered into a Definitive Acquisition Agreement involving the internet domain and brand Bitreturn. The Agreement represents the Company’s development of a plan to create a technology business in mining digital currency with an operating name of BitReturn. The Company issued 10,000,000 shares of restricted common stock with a fair value of $1,900,000 as payment under the terms of the Agreement, which have been recognized as and included in product development and website costs (Refer to Note 10). The Company is also to make cash payments totaling $350,000 under the terms of the Agreement, which is to be paid as follows, $200,000 from the first $500,000 raised by private placements, and the final portion of $150,000 within six months or when a cumulative amount of $1,000,000 has been raised by private placements. As at July 31, 2017, the Company has not raised $500,000 or $1,000,000 by private placements and as a result, $350,000 is recorded as an amount payable for BitReturn. Product development and website expenses represent costs of acquiring the brand BitReturn, development of the crypto currency mining product, and creation of the website. These costs do not meet the criteria for capitalization, and therefore have been treated as an operating expense.
On July 1, 2017, the Company entered into a Strategic Management and Advisory Agreement for consulting and investor relations services to be provided over a period of twelve months commencing July 1, 2017. In consideration, the Company will pay a total monthly fee of $3,000 cash and a issue a total of 1,000,000 shares of common stock. On July 26, 2017, the Company issued 1,000,000 shares of common stock with a fair value of $250,000, which has been recorded as a prepaid expense and will be amortized over the term of the agreement (Refer to Note 10). During the three months ended July 31, 2017, the Company recognized $20,833 of consulting expense.
ENVOY GROUP CORP.
Notes to the Financial Statements
For the Three Months Ended July 31, 2017
(Unaudited)
NOTE 10. STOCKHOLDERS’ DEFICIT
On May 9, 2014, the Company amended its Articles of Incorporation, decreasing the number of common stock authorized from 250,000,000 to 240,000,000, par value of $0.0001, and authorizing 10,000,000, par value of $0.0001, shares of preferred shares.
At the time of the amendment, the Company designated 10,000 shares of its authorized but unissued shares of preferred stock as Series A Preferred Stock. The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, common stock and preferred stock, as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock have the right to vote. Without the vote or consent of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the common stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend the Certificate of Designations for the Series A Preferred Stock or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.
Subject to the rights of the holders of any other series of preferred stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock and any other series of preferred stock ranking junior to the Series A Preferred Stock with respect to liquidation.
The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock. The Company shall have no rights to redeem Series A Preferred Stock.
COMMON STOCK
On June 26, 2017, the Company issued 1,400,000 shares of common stock for gross proceeds of $14,000, which was received during the year ended April 30, 2017.
On June 27, 2017, the Company issued 10,000,000 shares of common stock with a fair value of $1,900,000 for BitReturn pursuant to the Definitive Acquisition Agreement (Refer to Note 8).
On July 1, 2017, the Company issued 1,000,000 shares of common stock with a fair value of $250,000 for investor relations services pursuant to a Strategic Management and Advisory Agreement (Refer to Note 9).
On July 26, 2017, the Company issued 2,500,000 shares of common stock with a fair value of $400,000 as a signing bonus pursuant to agreements for services to be provided over a term of two years, which have been recorded as consulting fees (Refer to Note 10).
As at July 31, 2017, there are 97,900,000 shares of common stock issued and outstanding.
PREFERRED STOCK - SERIES A
As at July 31, 2017, there are no issued and outstanding Series A Preferred Stock.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company Overview
We were incorporated in the State of Florida on April 8, 2013, with a fiscal year end of April 30. Until June 2017, we had not established any business operations and had not achieved any revenues. Until then, we were in the process of identifying and evaluating feasible business opportunities in the consumer products and technology industries.
On June 18, 2017, the Company entered into a Definitive Acquisition Agreement (the “BitReturn Agreement”) pursuant to which the Company acquired the internet domain and brand, BitReturn. The BitReturn acquisition represents the Company’s development of a plan to create a technology business in mining digital currency with an operating name of BitReturn. The Company issued an aggregate of 10,000,000 shares of restricted common stock, valued at $1,900,000, as payment under the terms of the BitReturn Agreement. The BitReturn Agreement also provides that the Company will pay $350,000, $200,000 of which is payable upon the first $500,000 raised by the Company, and the final portion of $150,000 is payable after six months or when a cumulative amount of $1,000,000 has been raised by the Company.
BitReturn is engaged in the business of designing, marketing and employing blockchain applications. BitReturn is planning a multiphased rollout of blockchain applications. Its Phase One plan is to develop cash flow by the “mining” of cryptocurrencies that were developed by blockchain technology and then to phase in commercial business and personal blockchain applications developed by our technical team. In order to mine digital currencies effectively, BitReturn plans to employ graphic processing units (GPUs) in a facility that is to be leased in Kamloops, British Columbia. The facility is believed to be secure, with available uninterruptible power for our operations. Cryptocurrency mining is intended to run 24 hours a day, 7 days a week by numerous processors arrayed in a 7 or 13 GPU per rig configuration.
Critical Accounting Policies
As of July 31, 2017, there were no critical accounting policies. See the footnotes to our unaudited financial statements, included elsewhere in this quarterly report on Form 10-Q, for a complete summary of the significant accounting policies used in the presentation of our financial statements. The summary is presented to assist the reader in understanding the financial statements. The accounting policies used conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Concentrations, Risks, and Uncertainties
The Company did not have a concentration of business with suppliers or customers constituting greater than 10% of the Company’s gross sales during the reporting period.
Recently Issued Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Pursuant to Jumpstart Our Business Startups Act of 2012, as an “emerging growth company,” we are permitted to take advantage of an extended transition period for complying with new or revised accounting standards until such time as the standards are applicable to private companies. We have chosen to take advantage of this extended transition period. Accordingly, our financial statements may not be comparable to those of companies that comply with public company effective dates.
Results of Operations
The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the unaudited financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.
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The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) product development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation.
Management’s Plan of Operation
We do not have adequate funds to satisfy our working capital requirements for the next twelve months.
Until June 2017, we had not established any business operations and had not achieved any revenues. Until then, we were in the process of identifying and evaluating feasible business opportunities in the consumer products and technology industries. In June 2017, the Company acquired BitReturn.
Results of Operations
There is no historical financial information about us upon which to base an evaluation of our performance. We had net (loss) income of $(2,719,947) and $1,063 for the three months ended July 31, 2017 and 2016, respectively.
We did not generate any revenues from our operations for the three months ended July 31, 2017 or 2016. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies.
During the three months ended July 31, 2017 and 2016, we had operating expenses of $2,719,947 and $(1,063), respectively. The increase in operating expenses is primarily a result of costs associated with the BitReturn acquisition in the current period ($2,255,187) and an increase in consulting fees from $nil for the three months ended July 31, 2016 to $424,997 for the three months ended July 31, 2017. Product development and website expenses associated with the BitReturn acquisition represent costs of acquiring the brand BitReturn, development of the crypto currency mining product, and creation of the website. These costs do not meet the criteria for capitalization, and therefore have been treated as an operating expense.
Since inception, the majority of our time has been spent refining its business plan and preparing for a primary financial offering.
Our results of operations are summarized below:
| | | For the Three
Months Ended
July 31, 2017 | | For the Three
Months Ended
July 31, 2016 | |
| Revenue | | | — | | | — | |
| Cost of Revenue | | | — | | | — | |
| Net Loss (Income) and Comprehensive (Loss) Income | | $ | (2,719,947 | ) | $ | 1,063 | |
| Net Loss (Income) per Common Share, Basic and Diluted | | | (0.03 | ) | | 0.00 | |
| Weighted Average Number of Common Shares Outstanding, Basic and Diluted | | | 88,502,070 | | | 80,000,000 | |
Liquidity and Capital Resources
As of July 31, 2017, we had not generated any revenues from our business operations. As at July 31, 2017, there were 88,502,070 shares of common stock issued and outstanding. Total cash proceeds received from common share issuance since inception to July 31, 2017 is $76,500.
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As of July 31, 2017 and 2016, we had cash and cash equivalents of $5,558 and $nil, respectively. Our cash was not sufficient to meet the obligations associated with being a company that is fully reporting with the SEC. We believe we will require additional financing in the form of share issuance proceeds or advances from our directors.
Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status, we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
During the three months ended July 31, 2017 and 2016, we had operating expenses of $2,719,947 and $(1,063), respectively. Historically, we have relied on loans to fund general and administrative operating expenses. As of July 31, 2017, we had a working capital deficiency of $639,778.
As of July 31, 2017, the Company had no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.
Our independent auditor has expressed doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of July 31, 2017 pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended July 31, 2017 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
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
On June 27, 2017, the Company issued an aggregate of 10,000,000 shares of restricted common stock, with a fair value of $1,900,000 as of July 31, 2017, as partial consideration for the BitReturn acquisition.
The securities issuance was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on an exemption provided by Regulation S promulgated pursuant to the Securities Act and Section 4(a)(2) of the Securities Act. The issuances involved offers and sales of securities outside the United States. The offers and sales were made in offshore transactions and no directed selling efforts were made by the issuer, a distributor, their affiliates or any persons acting on their behalf.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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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.
| | ENVOY GROUP CORP. |
| | |
| Date: September 19, 2017 | By:/s/ Harpreet Sangha | |
| | Harpreet Sangha |
| | Chief Executive Officer and Chief Financial Officer
(principal executive officer, principal financial officer and
principal accounting officer) |
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