NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A)
Business Description
ZD Ventures Corporation (the Company), incorporated on February 23, 2005 under the laws of the state of Nevada, is a development stage corporation, and operates from its executive office in Toronto, Ontario, Canada.
The Company is currently in the development stage as defined under
Financial Accounting Standards Board Accounting Standards Codification (ASC)
915-10, Development Stage Entities". Most of the activities of the Company to date relate to its organization, funding , and development of a commercial web portal.
In July 2012, the Company acquired certain intellectual properties related to a social website under development (Note 4). The company plans to complete the design and development of this web site and to launch it commercially as soon as possible.
(B)
Basis of Presentation
The audited financial statements for the year ended March 31, 2014
are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars.
(C)
Use of estimates
The financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial position, and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.
(D)
Intangible assets
The Company evaluates intangible assets for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Intangible assets are tested for impairment by first comparing the book value of net assets to the fair value. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the estimated fair value and the carrying value. The fair value is estimated using discounted cash flows. Forecasts of future cash flows are based on managements best estimate of future net sales and operating expenses, based primarily on estimated category expansion, market segment share and general economic conditions.
(E)
Revenue Recognition
The Companys key revenue source is expected to be a percentage commission receivable from ultimate sellers with whom the Company enters into definite affiliate program. The Company is not responsible for holding any inventories nor does it have any latitude in establishing prices. Commission received from sellers and similar amounts earned through other seller sites are recognized when items are sold by sellers and their collectability is reasonably assured. The Company records an allowance for estimated refunds on such commission using historical experience.
F-7
ZD Ventures Corporation
(A development stage enterprise)
Year ended March 31, 2014
NOTES TO FINANCIAL STATEMENTS
(F)
Technology and Content
Technology and content costs consist principally of consulting fees involved in application development, editorial content and system support. These costs are directly incurred on website - BWished - development and applications supporting our business and are capitalized until the commencement of commercial applications and thereafter expensed as per ASC 350-50 Website Development Costs. The capitalized costs will be amortized over five years on commencement of commercial application. Technology and content costs are included in intangible assets.
(G)
Foreign Currency Translation
The Companys functional and reporting currency is the United States Dollar. Assets and liabilities recorded in currencies other than US dollars are translated into USD at the prevailing exchange rates in effect at the end of the reporting period, the historical rate for stockholders equity (deficiency) and revenues, expenses, gains and losses shall be translated at the exchange rate on the dates on which these elements are recognized, or if found to be impractical, the average exchange rate for the period may be used to translate these elements. Adjustments that arise from translation into the reporting currency are recorded as an exchange gain or loss to be included in net income.
(H)
Net income (loss) per share
Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted net loss per share for the Company is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.
(I)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturity of three months or less to be cash equivalent. As of March 31, 2014 and 2013 the Company had no cash equivalents.
(J)
Income taxes
The Company accounts for income taxes under FASB Codification Topic 740 which requires use of the liability method. Topic 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
(K) Share-Based Compensation
FASB ASC 718 Compensation - Stock Compensation prescribes accounting and reporting standards for all stock-based payments awarded to employees, including employee stock option, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (A) the option to settle by issuing equity instruments lacks commercial substance or (B) the present obligation is implied because of an entitys past practice or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
F-8
ZD Ventures Corporation
(A development stage enterprise)
Year ended March 31, 2014
NOTES TO FINANCIAL STATEMENTS
(L
)
Fair Value of Financial Instruments
The Companys balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
FASB Accounting Standards Codification (ASC) topic, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three-level hierarchy for fair value measurements is defined as follows:
·
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
·
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;
·
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
NOTE 2 - GOING CONCERN
The Company
s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Managements plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As of March 31, 2014, the Company has an accumulated deficit amount of $195,480.
F-9
ZD Ventures Corporation
(A development stage enterprise)
Year ended March 31, 2014
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
The management has evaluated all recently issued accounting pronouncements through to the filing date of these financial statements and believes that these pronouncements, although for the current filing date, will not have a material effect on the Company.
NOTE 4 - ACQUIRED INTANGIBLE ASSETS
On July 17, 2012, the Company acquired from Birthday Slam Corporation (BSC), an Ontario, Canada incorporated Private Corporation, owned by a shareholder of the Company, assets comprising of a website and related applications for commercial use under development BWished, which are included as intangible assets and will be amortized on a straight line basis over their useful life, considered to be five years upon commencement of their commercial usage.
The primary reason for this acquisition was to enable the Company to engage in revenue generating business activities.
The following were the movements in the intangible assets during the fiscal year:
|
|
|
| |
|
March 31, 2014
|
March 31, 2013
|
Balance, beginning of the year
|
$
|
502,516
|
$
|
-
|
Amounts relating to acquisition during the year
|
|
-
|
|
385,500
|
Development costs incurred during the year
|
|
-
|
|
117,016
|
Balance, end of the year
|
$
|
502,516
|
$
|
502,516
|
Development costs are comprised of fees paid to various consultants for content development, design and editorial work on the BWished website, resulting in a first beta version of BWished portal. No new expenses were incurred in the fiscal 2014.
One of the key issues that remained to be resolved was the introduction of artificial intelligence technology which would allow customizing gift ideas to each user according to his or her personal preferences. The Companys consultant is currently negotiating with IBM Spain for the use of some of their latest technologies which will enable the Company to incorporate the required artificial intelligence module in the Beta version of BWished. The further development work will commence on receiving approval from IBM for use of their technologies.
The Company has projected that the next live version of B-Wished Portal incorporating all the required tools and technologies can be completed at an additional cost of approximately $100,000, which the existing and new potential investors have indicated they would meet.
In light of the above, the Companys management has concluded that the intangible assets have not sustained any permanent impairment as at March 31, 2014.
No amortization is applied to the carrying cost of the intangible assets since they are still under development.
NOTE 5 - CONVERTIBLE LOAN
In February 2014, the Company received a $100,000 unsecured convertible loan repayable within two years and carrying interest at 5% p.a. The loan and interest accrued can be converted into common shares of the Company at US$0.05 per common share at the discretion of the lender within the repayment period.
F-10
ZD Ventures Corporation
(A development stage enterprise)
Year ended March 31, 2014
NOTES TO FINANCIAL STATEMENTS
We calculated the present value of the beneficial convertible feature (BCF) based on the quoted market price of $0.14 per the Companys common share on the date of the loan, 5% interest and two year term and worked out a BCF of $ 180,000. Since BCF was greater than the face value of the loan, the entire amount of loan is included under equity
pursuant to ACS Topic 470-20, formerly EITF Issue No. 98-5 (EITF 98-05), Accounting for Convertible Securities with Beneficial Conversion Features or Contingency Adjustable Conversion Ratio,
.
Total interest accrued on this note payable as of March 31, 2014 is approximately $781. The note discount is amortized over the term of the convertible loan and charged to interest expense. Debt discount charged to interest expense for the year ending March 31, 2014 was $7,808. Unamortized discount is $92,192.
NOTE 6 - NOTE PAYABLE
The note payable issued to Birthday Slam Corporation (BSC), a Canadian based private company in Ontario, matured for payment on July 17, 2013. However, the Company negotiated a five-year extension up to July 17, 2018. The note holder agreed that no further interest was to be accrued after the original maturity date of July 17, 2013 and that BSC would be entitled to receive 5% of the gross revenue earned by the Company until full settlement of the Note. BSC is owned by Mr. John Robinson who is a shareholder of the Company.
Total interest accrued on this note payable up to July 17, 2013 is $16,250.
NOTE 7 - COMMON STOCK
At March 31, 2012, the Company had 200,000,000 common shares of par value $0.001 common stock authorized and 15,510,000 issued and outstanding. During the year-ended March 31, 2013, the Company issued 400,000 shares of common stock as a part of the purchase agreement for the acquisition of the assets of BSC and 33,300 shares of common stock in settlement of consulting fees. There were no movements during the fiscal year 2014. The Company has a total of 15,943,300 common shares issued and outstanding as of March 31, 2014.
NOTE 8 - RELATED PARTY TRANSACTIONS
ADVANCES FROM STOCKHOLDER
|
|
|
| |
|
March 31, 2014
|
March 31, 2013
|
Balance, beginning of year
|
$
|
160,842
|
$
|
35,422
|
Funds advanced
|
|
25,916
|
|
125,420
|
Balance, end of year
|
$
|
186,758
|
$
|
160,842
|
Funds were advanced from time to time by Current Capital Corporation (CCC), a Canadian based private company in Ontario, fully owned by Mr. John Robinson, a shareholder of the Company. Advances are repayable on demand and carry no interest.
F-11
ZD Ventures Corporation
(A development stage enterprise)
Year ended March 31, 2014
NOTES TO FINANCIAL STATEMENTS
CONSULTING FEES
|
|
|
| |
Year ended March 31,
|
2014
|
2013
|
Fee charged by the CEO
|
$
|
25,000
|
$
|
--
|
Fee charged by a consultant who owns 31.36%
equity interest in the Company
|
|
21,432
|
|
--
|
Other consulting fees
|
|
--
|
|
11,000
|
|
$
|
46,432
|
$
|
11,000
|
The fees charged by the CEO are included in accounts payable.
TRAVEL, MEALS AND PROMOTIONS
Travel and meals costs included $1,013 reimbursed to a consultant who owns 31.36% equity interest in the Company.
NOTE 9 - INCOME TAXES
The Company accounts for income taxes under FASB ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
For the years ended March 31, 2014, and 2013, respectively, the Company produced net operating losses before provision for income taxes of $86,638, and $45,883 respectively; accordingly, a provision for income taxes of $0 was recorded during the year ended March 31, 2014 and 2013.
The component of the Companys deferred tax assets as of March 31, 2014 and 2013 are as follows:
|
|
|
| |
|
2014
|
2013
|
Net operating loss carryover
|
$
|
(68,418)
|
$
|
(38,095)
|
Valuation allowance
|
|
68,418
|
|
38,095
|
Net provision for federal income taxes
|
$
|
--
|
$
|
--
|
The Companys effective income tax rate of 0.0% differs from the federal statutory rate of 35% for the reason set forth below for the years ended March 31:
|
|
|
| |
|
2014
|
2013
|
Income tax (recoverable) payable at statutory rate
|
$
|
(30,323)
|
$
|
(16,675)
|
Valuation allowance
|
|
30,323
|
|
16,675
|
Net provision for federal income taxes
|
$
|
--
|
$
|
--
|
As at the year-end the Company had a net tax loss carried forward of $195,480 (2013: $108,842). Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. These losses expire between 2028 and 2034.
F-12