10-Q 1 form10-q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 333-189359

IMAGE INTERNATIONAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada		90-1126431
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

8105 Birch Bay Square St. Suite 205, Blaine, WA		98230
(Address of principal executive offices)		(Zip Code)

(518) 638-8192

(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 past 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.

Yes [X] No [ ]

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).

Yes [ ] No [ ]

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 filed,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 12, 2016, the Company had 14,059,000 shares of common stock outstanding.

IMAGE INTERNATIONAL GROUP, INC.

Quarterly Report on Form 10-Q

For the Period Ended September 30, 2016

FORWARD-LOOKING STATEMENTS

This Form 10-Q for the quarterly period ended September 30, 2016 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three-month and six-month period ended September 30, 2016 are not necessarily indicative of the results that can be expected for the year ending March 31, 2017.

IMAGE INTERNATIONAL GROUP, INC.

Condensed Consolidated Condensed Financial Statements

September 30, 2016

(Expressed in U.S. dollars)

(unaudited)

	Index

Condensed Consolidated Balance Sheets	F–2
Condensed Consolidated Statements of Operations	F–3
Condensed Consolidated Statements of Cash Flows	F–4
Notes to the Condensed Consolidated Financial Statements	F–5

F-1

IMAGE INTERNATIONAL GROUP, INC.

Condensed Consolidated Balance Sheets

(Expressed in U.S. dollars)

	September 30, 2016 $			March 31, 2016 $
	(unaudited)
ASSETS

Current Assets

Cash		3,104			12,994
Amounts receivable		—			4,868
Total Assets		3,104			17,862

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities

Accounts payable and accrued liabilities		1,000			1,772
Loans payable (Note 3)		102,177			92,677
Due to related parties (Note 4)		267,000			267,000
Total Liabilities		370,177			361,449

Nature of operations and continuance of business (Note 1)

Stockholder’s Deficit

Common stock, 1,000,000,000 shares authorized, $0.001 par value 14,059,000 shares issued and outstanding		14,059			14,059
Additional paid-in capital		784,941			784,941
Deficit		(1,166,073	)		(1,142,587	)
Total Stockholder’s Deficit		(367,073	)		(343,587	)
Total Liabilities and Stockholder’s Deficit		3,104			17,862

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-2

IMAGE INTERNATIONAL GROUP, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

	Three Months Ended September 30, 2016 $			Three Months Ended September 30, 2015 $			Six Months Ended September 30,2016 $			Six Months Ended September 30, 2015 $

Expenses

Consulting fees		—			—			—			18,500
Foreign exchange loss (gain)		(40	)		200			(51	)		1,272
General and administrative		1,360			3,468			3,162			4,746
Management fees (Note 4)		—			22,500			—			45,000
Professional fees		1,900			2,820			5,746			6,750
Transfer agent and filing fees		1,486			3,296			14,629			31,475
Total Expenses		4,706			32,284			23,486			107,743
Net Loss and Comprehensive Loss		(4,706	)		(32,284	)		(23,486	)		(107,743	)
Net Loss Per Share, Basic and Diluted		—			—			—			(0.01	)
Weighted Average Shares Outstanding		14,059,000			14,059,000			14,059,000			14,059,000

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-3

IMAGE INTERNATIONAL GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)

	Six MonthsEnded September 30,2016 $			Six MonthsEnded September 30,2015 $

Operating Activities

Net loss		(23,486	)		(107,743	)

Changes in operating assets and liabilities:
Amounts receivable		4,868			—
Prepaid expenses		—			1,000
Accounts payable and accrued liabilities		(772	)		(6,210	)
Due to related parties		—			45,000
Net Cash Used In Operating Activities		(19,390	)		(67,953	)

Financing Activities
Proceeds from loans payable		9,500			87,677
Net Cash Provided by Financing Activities		9,500			87,677
Increase (Decrease) in Cash		(9,890	)		19,724
Cash, Beginning of Period		12,994			1,921
Cash, End of Period		3,104			21,645
Supplemental Disclosures:
Interest paid		—			—
Income taxes paid		—			—

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-4

IMAGE INTERNATIONAL GROUP, INC.

Notes to the Condensed Consolidated Financial Statements

September 30, 2016

(Expressed in U.S. dollars)

(unaudited)

1.	Basis of Presentation

The accompanying interim condensed consolidated financial statements of Image International Group, Inc. (the “Company”) should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2016, the Company has a working capital deficiency of $367,073 and has accumulated losses of $1,166,073 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.	Significant Accounting Policies

	(a)	Principles of Consolidation

		These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Owlhead Minerals (BC) Corp. All inter-company accounts and transactions have been eliminated on consolidation.

	(b)	Recent Accounting Pronouncements

		The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company 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.

Loans Payable

As at September 30, 2016, the Company owed $102,177 (March 31, 2016 - $92,677) to non-related parties, which is non-interest bearing, unsecured, and due on demand.

4.	Related Party Transactions

	(a)	As at September 30, 2016, the Company owes $144,000 (March 31, 2016 - $144,000) to a company controlled by the President of the Company which is non-interest bearing, unsecured, and due on demand.

	(b)	As at September 30, 2016, the Company owes $123,000 (March 31, 2016 - $123,000) to a company controlled by the Chief Financial Officer of the Company which is non-interest bearing, unsecured, and due on demand.

	(c)	During the six months ended September 30, 2016, the Company incurred management fees of $nil (2015 - $24,000) to a company controlled by the President of the Company.

	(d)	During the six months ended September 30, 2016, the Company incurred management fees of $nil (2015 - $21,000) to a company controlled by the Chief Financial Officer of the Company.

F-5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations for the six-month period ended September 30, 2016

During the six-month period ended September 30, 2016, the Company incurred a net loss of 23,486 (2015 - $107,743).

Consulting fees for the six-month period ended September 30, 2016 were $nil (2015 - $18,500)

Transfer agent and filing fees in the three-month period ended September 30, 2016 were $14,629 (2015 - $31,475).

Expenses during the six-month period included:

-	Renewal of listing on the OTCQB stock exchange; and

-	Financial statement audit.

Management fees in the six-month period ended September 30, 2016 were $nil (2015 - $45,000) as management has agreed to forgo charging any fees until a substantial financing has been completed.

Professional fees for the six-month period ended September 30, 2016 were $5,746 (2015 - $6,750) relating to audit fees.

Following extensive research and discussion with an experienced gemstone and jewelry consultant, the Company decided to expand its business focus to include the acquisition of gemstone and other precious mineral resources and retail jewelry and gemstone outlets. In order to appropriately reflect the Company’s expanded and more comprehensive and inclusive business plan, the Company changed its name to Image International Group, Inc. on December 23, 2014.

We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

Capital Resources and Liquidity

The Company has limited financial resources as at September 30, 2016 with funds on hand of $3,104 (March 31, 2016 - $12,994). As at September 30, 2016 the Company has a working capital deficit of $367,073 compared to $343,587 as at March 31, 2016.

Amounts due to related parties were $267,000 as at September 30, 2016 (March 31, 2016 - $267,000).

Loans payable as at September 30, 2016 was $102,177 (March 31, 2016 - $92,677). The loans are non-interest bearing, unsecured, and due on demand.

The Company has no employees other than officers and uses consultants as and when necessary.

The Company’s ability to continue as a going concern is dependent on its available cash and its ability to raise additional funds in the near future to support corporate operations and the exploration of our mineral property.

Limited Operating History; Need for Additional Capital

There is limited historical financial information about us upon which to base an evaluation of our performance. We have no revenue generating assets. 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 limited capital resources and possible cost overruns due to price and cost increases in services.

The Company is aware that additional financing will be required in order to continue its pursuit of a mineral property opportunity or comparable opportunity in a related field. There is no assurance that additional funding will be successfully completed.

We will require additional financing to cover our costs that we expect to incur over the next twelve months. We believe that debt financing will not be an alternative for funding our operations, as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we will not be able to continue and our business plan will fail.

Cash used in Operating Activities

During the six-month period ended September 30, 2016, the Company used $19,390 (2015 - $67,953) to fund operations. Management fees have not been paid in order to maintain funds.

Cash from Financing Activities

We have funded our business to date primarily from sales of our common stock but did not sell any common stock during the six-month period ended September 30, 2016. During the six-month period ended September 30, 2016, the Company received loan proceeds of $9,500 (2015 - $87,677).

There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our operations and our business will fail.

Future Financing

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned operations.

Off-Balance Sheet Arrangements

We have no 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 that is material to stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2016 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.

Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our consolidated financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 fairly present our financial condition, results of operations and cash flows in all material respects.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:

	1.	Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.

	2.	Insufficient Written Policies & Procedures: We have insufficient written policies and procedures for accounting and financial reporting.

	3.	Inadequate Financial Statement Closing Process: We have an inadequate financial statement closing process.

	4.	Lack of Audit Committee: The lack of a functioning audit committee and lack of a majority of outside directors on the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.

Management, including our Chief Executive Officer and the Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2016 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not presently a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or pending.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

No stock was sold during the six-month period ended September 30, 2016.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to our security holders for a vote during the six-month period ended September 30, 2016.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are attached hereto:

Exhibit No.		Description of Exhibit

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

IMAGE INTERNATIONAL GROUP, INC

By:

/s/ Geoff Armstrong
Geoff Armstrong
Chief Executive Officer
(Principal Executive Officer
November 14, 2016