Item 1. Financial Statements
Our financial
statements included in this Form 10-Q are as follows:
SocialPlay USA, Inc.
Condensed Balance Sheets
As of June 30, 2017 (unaudited) and December 31, 2016 (audited)
|
|
June 30,
|
|
December 31,
|
|
|
2017
|
|
2016
|
|
|
$
|
|
$
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
31
|
|
|
|
2,865
|
|
|
Deposits for investments
(note 5)
|
|
100,000
|
|
|
|
—
|
|
|
Total assets
|
|
100,031
|
|
|
|
2,865
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
149,647
|
|
|
|
127,956
|
|
|
Accrued liabilities
|
|
26,451
|
|
|
|
60,391
|
|
|
Payable to related parties
[note 9]
|
|
133,817
|
|
|
|
133,817
|
|
|
Total Current Liabilities
|
|
309,915
|
|
|
|
322,164
|
|
|
Convertible promissory notes
[note 6]
|
|
7,079
|
|
|
|
107,629
|
|
|
Derivative Liabilities
[note 6]
|
|
—
|
|
|
|
318,234
|
|
|
Total Liabilities
|
|
316,994
|
|
|
|
748,027
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficiency
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016
[note 7]
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.001 par value, 200,000,000 shares authorized, 11,870,003 and 11,820,003 shares issued and outstanding as of June 30, 2017 and December 31, 2016
[note 7]
|
|
11,870
|
|
|
|
11,820
|
|
|
Additional paid-in capital
|
|
1,261,271
|
|
|
|
678,680
|
|
|
Shares to be issued
[note 4 and 7]
|
|
348,000
|
|
|
|
228,000
|
|
|
Accumulated deficit
|
|
(1,838,104
|
)
|
|
|
(1,663,662
|
)
|
|
Total stockholders' deficiency
|
|
(216,963
|
)
|
|
|
(745,162
|
)
|
|
Total liabilities and stockholders' deficiency
|
|
100,031
|
|
|
|
2,865
|
|
SocialPlay USA, Inc.
Condensed Statements of Operations
For the Three and Six Months ended June 30, 2017 and 2016 (unaudited)
|
|
Three months
|
|
Three months
|
|
Six months
|
|
Six months
|
|
|
ended June 30,
|
|
ended June 30,
|
|
ended June 30,
|
|
ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
REVENUE
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and professional fees
|
|
14,388
|
|
|
|
13,994
|
|
|
|
23,984
|
|
|
|
27,057
|
|
|
Advertising and promotion
|
|
998
|
|
|
|
5,000
|
|
|
|
998
|
|
|
|
5,000
|
|
|
Consulting fees - Investor relations
|
|
17,329
|
|
|
|
97,088
|
|
|
|
47,958
|
|
|
|
232,587
|
|
|
Transfer agent fees
|
|
8,665
|
|
|
|
12,265
|
|
|
|
12,255
|
|
|
|
13,755
|
|
|
Directors' fees
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
15,000
|
|
|
Other operating expenses
|
|
14,294
|
|
|
|
1,195
|
|
|
|
24,672
|
|
|
|
1,340
|
|
|
Total operating expenses
|
|
55,674
|
|
|
|
137,042
|
|
|
|
109,867
|
|
|
|
294,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and bank charges
|
|
3,473
|
|
|
|
17,600
|
|
|
|
11,962
|
|
|
|
12,745
|
|
|
Licensing Fee
[note 4]
|
|
120,000
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
—
|
|
|
Accretion expense
|
|
10,860
|
|
|
|
—
|
|
|
|
29,088
|
|
|
|
24,783
|
|
|
Gain on extinguishment of debt
|
|
(667,665)
|
|
|
|
—
|
|
|
|
(550,962)
|
|
|
|
(11,462)
|
|
|
Day-one derivative loss
[note 6 and 7]
|
|
17,093
|
|
|
|
—
|
|
|
|
30,579
|
|
|
|
—
|
|
|
Change in fair value of derivatives
[note 6 and 7]
|
|
291,521
|
|
|
|
19,591
|
|
|
|
423,908
|
|
|
|
7,493
|
|
|
Net (gain) loss for the year before income taxes
|
|
(169,044)
|
|
|
|
174,233
|
|
|
|
174,442
|
|
|
|
328,298
|
|
|
Income taxes
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net and comprehensive (gain) loss for the period
|
|
(169,044)
|
|
|
|
174,233
|
|
|
|
174,442
|
|
|
|
328,298
|
|
|
Gain (Loss) per share, basic and diluted
|
|
0.0143
|
|
|
|
(0.0148
|
)
|
|
|
(0.0148
|
)
|
|
|
(0.0279
|
)
|
|
Weighted Average Number of common shares outstanding
|
|
11,868,889
|
|
|
|
11,812,222
|
|
|
|
11,844,676
|
|
|
|
11,778,242
|
|
SocialPlay USA, Inc.
Condensed Statements of Cash Flows
For the Three and Six Months ended June 30, 2017 and 2016 (unaudited)
|
|
Six months
|
|
Six months
|
|
|
ended June 30,
|
|
ended June 30,
|
|
|
2017
|
|
2016
|
|
|
$
|
|
$
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(174,442
|
)
|
|
|
(328,298
|
)
|
|
Shares issued for services
|
|
24,000
|
|
|
|
133,500
|
|
|
Interest expense - accretion of convertible notes
|
|
29,088
|
|
|
|
24,783
|
|
|
Day-one derivative loss
|
|
30,579
|
|
|
|
—
|
|
|
Licensing fees
[note 4]
|
|
120,000
|
|
|
|
—
|
|
|
Change in fair value of derivatives
|
|
423,908
|
|
|
|
7,493
|
|
|
Gain on extinguishment of debt
|
|
(550,962
|
)
|
|
|
(11,462)
|
|
|
Net change in non-cash working capital balances:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
—
|
|
|
|
26,210
|
|
|
Accounts payable and accrued liabilities
|
|
20,495
|
|
|
|
85,095
|
|
|
Cash used in operating activities
|
|
(77,334
|
)
|
|
|
(62,679
|
)
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Deposits made for investments
[note 5]
|
|
(100,000
|
)
|
|
|
—
|
|
|
Cash used in investing activities
|
|
(100,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible promissory notes
|
|
174,500
|
|
|
|
62,950
|
|
|
Proceeds for stock receivable
|
|
—
|
|
|
|
—
|
|
|
Cash provided by financing activities
|
|
174,500
|
|
|
|
62,950
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash during the year
|
|
(2,834)
|
|
|
|
271
|
|
|
Cash, beginning of the period
|
|
2,865
|
|
|
|
69
|
|
|
Cash, end of period
|
|
31
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure with respect to cash flows:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
—
|
|
|
|
—
|
|
|
Cash paid for interest
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 1 – Nature of Operations
The Company was incorporated on December
31, 2013 (Date of Inception) under the laws of the State of Nevada, as Artesanias Corp. (the “Company”). On June
12, 2015, the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the
business focus of the Company. The Company plans to develop a business that provides marketing, monetization, and support
services for the companies in gaming and mobile application markets. On January 10, 2017, the former majority shareholder
sold 7,082,000 restricted shares of common stock to the Company’s current President and CEO, Robert Rosner, in a
private transaction. As result of this transaction, a change in control of the company occurred.
The Company has limited operations and is considered
to be in the development stage.
Note 2 – Going Concern
The Company’s unaudited interim
condensed 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 Company has an accumulated deficit of $1,838,104 and a working capital
deficit of $209,884 as of June 30, 2017 ($1,663,662 and $319,299 respectively, as at December 31, 2016). 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. The Company is
contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is
dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances
that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a
going concern.
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. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might result from this uncertainty.
Note 3 – Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) for interim financial information and the rules and regulations of the SEC and are expressed in US dollars. Accordingly,
the unaudited condensed financial statements do not include all information and footnotes required by US GAAP for complete annual
financial statements. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments,
consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not
necessarily indicative of results that may be expected for the year ending December 31, 2017 or for any other interim period. The
unaudited condensed financial statements should be read in conjunction with the audited financial statements of the Company and
the notes thereto as of and for the year ended December 31, 2016.
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 3 – Summary of Significant Accounting
Policies (continued)
Use of Estimates
The preparation of the interim condensed financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Areas involving significant estimates and assumptions include valuation
of derivatives, valuation allowance for deferred tax assets, accruals and going concern assessment. These estimates are
reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become
known. Actual results could materially differ from those estimates.
Recently Issued Accounting Standards
On May 28, 2015, the FASB issued a new financial
accounting standard on revenue from contracts with customers, ASU 2015-09, “Revenue from Contracts with Customers (Topic
606)”. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance. In July 2016, the FASB voted to approve a one-year deferral
of the effective date of ASU 2015-09, which will be effective for the Company in the first quarter of fiscal year 2018 and may
be applied on a full retrospective or modified retrospective approach. This ASU will have no impact on the Company until it begins
to generate revenue.
On April 7, 2016, the FASB issued ASU No. 2016-03,
“Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The amendments
in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with debt discounts and the accounting for debt issue costs
under IFRS. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The
amendments apply to all companies and are effective for public business entities in annual periods ending after December 15, 2016,
and interim periods within those fiscal years, with early application permitted. The Company is currently evaluating the impact
of this accounting standard on its financial statements.
In July, 2017, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting
for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily
redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with
a scope exception. The main provisions of Part I of ASU 2017-11 is to “change the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should
be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing
whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)
no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.
For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS)
to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are
not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability.
Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for
public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption
in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company does not have any outstanding
financial instruments with down round features as of June 30, 2017.
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 4 – Licensing Fees
Pursuant to Exclusive License Agreement dated
May 21, 2015 with a related party, the Company acquired an exclusive license to develop, market and sell products and services
based upon any and all intellectual property. The initial term of this Agreement was five years. This Agreement may be renewed
for an additional five year term upon written notice to be given by the Company no later than thirty days prior to the expiration
of the initial term. On May 21, 2015, in consideration for the license granted hereunder, the Company issued 1,000,000 (200,000
after reverse split) shares of common stock. In addition, the Company shall issue 1,000,000 (200,000 after reverse split) shares
of common stock on or before each anniversary of this Agreement for so long as it shall remain in effect. The Company also agreed
to make payments totaling $120,000 through an agreed payment schedule.
As technological feasibility has not been achieved,
the Company recognizes expense at the end of each anniversary (triggering event) for the shares to be issued, the fair value of
which to be determined based on the market price of the share on anniversary day as further explained in note 7 to the financial
statements.
The Company has recorded 400,000 common shares
to be issued and the related license fee expense as explained in Note 7.
Note 5 – Deposit for Investment
On March 11, 2017, the Company entered into
a binding Letter of Intent (LOI) with a certain company. The LOI contemplates provision of an option to the Company, to purchase
100% equity of such company. The Company has made a deposit of $50,000 as the first stage in the acquisition, however, no formal
and definitive acquisition agreement has been entered into yet.
On May 30, 2017, the Company entered into a
binding LOI with a certain corporation. The LOI contemplates acquisition of a 33% ownership interest in the corporation for an
agreed total purchase price. The Company has made a deposit of $50,000 as the first stage in the acquisition, however, no formal
and definitive acquisition agreement has been entered into yet.
When the Company signs definitive acquisition
agreements, the above two deposits will be treated as investments under the guidance available in US GAAP.
Note 6 – Convertible Promissory Notes
and Derivative Liabilities
The outstanding convertible promissory notes
as at June 30, 2017 represent obligations of the Company to CMGT Inc. (CMGT).
On January 11, 2016, the Company consolidated
all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018 (the “Note”) and recognized
gain on extinguishment of debt amounting to $11,462. The Note bears interest at a rate of ten percent (10%) per year, with all
principal and interest due on or before June 1, 2018. Under the Note, the Company is obligated to pay quarterly payments of interest
only commencing March 31, 2016. The Company may prepay the Note in whole or in part without penalty. CMGT’s right to convert
is limited such that no conversion can be made which would result in CMGT or its affiliates owning more than 4.99% of the
issued and outstanding common stock of the Company following the conversion.
Effective February 17, 2017, the Company
entered into a First Amendment to Convertible Promissory Note (the “Amendment”) with CMGT. Under the Amendment,
the Company modified the conversion feature of the Note so that the conversion price for all amounts owing thereunder is now
$0.10 per share of common stock. In addition, the Amendment waives the Company’s prior defaults in payment of interest
under the Note in the amount of $44,289, and adds such sum to the principal balance of the Note. The Company is now required
to make quarterly interest payments commencing September 30, 2017. The amendment resulted in the extinguishing of the old
notes and re-issuance according to the new terms and discounts.
On April 28, 2017 the Company made an
amendment on all its outstanding notes having face value of $436,141, removing all dilutive and reset provisions from these
notes, therefore ending derivative treatment. The notes issued subsequent to amendment did not require derivative
valuations.
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 6 – Convertible Promissory Notes
and Derivative Liabilities
(continued)
Post amendment, the Company carried out beneficial
conversion feature analysis of all the notes and concluded that based on the intrinsic value of these notes, 100% face value of
the above notes of $558,641 were transferred to additional paid-in-capital and these notes are being amortized using an effective
interest rate over the term of these notes.
The movement in convertible notes principal
amount, accreted value of notes and derivative liabilities are detailed below:
|
|
Face
value
of notes
|
|
Accreted
value
of notes
|
|
Derivative
liabilities
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Balances
as at December 31, 2016
|
|
351,397
|
|
|
|
107,629
|
|
|
|
318,234
|
|
|
Issuance
of notes during Q1 2017
|
|
37,000
|
|
|
|
2,247
|
|
|
|
34,753
|
|
|
Conversion
of accrued interest
|
|
32,744
|
|
|
|
32,744
|
|
|
|
—
|
|
|
Day-one
derivative losses
|
|
—
|
|
|
|
—
|
|
|
|
13,486
|
|
|
Adjustment
of unamortized discount on extinguishment
|
|
—
|
|
|
|
(148,697
|
)
|
|
|
148,697
|
|
|
Loss
on extinguishment of debt
|
|
—
|
|
|
|
—
|
|
|
|
116,703
|
|
|
Accretion
expense
|
|
—
|
|
|
|
18,228
|
|
|
|
—
|
|
|
Change
in fair value of derivatives
|
|
—
|
|
|
|
—
|
|
|
|
132,387
|
|
|
Balances
as at March 31, 2017
|
|
421,141
|
|
|
|
12,151
|
|
|
|
764,260
|
|
|
Pre-Amendment
(End of Derivatives)
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of note
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
Full
discount recognized on the note
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
Day-one
derivative loss on the note
|
|
—
|
|
|
|
—
|
|
|
|
17,093
|
|
|
Change
in fair value of derivatives
|
|
—
|
|
|
|
—
|
|
|
|
291,521
|
|
|
Accretion
expense
|
|
—
|
|
|
|
3,781
|
|
|
|
—
|
|
|
Balance,
pre-amendment
|
|
436,141
|
|
|
|
15,932
|
|
|
|
1,087,874
|
|
|
Transfer
due to end of derivatives
|
|
—
|
|
|
|
420,209
|
|
|
|
(420,209
|
)
|
|
Gain
on extinguishment
|
|
—
|
|
|
|
—
|
|
|
|
(667,665
|
)
|
|
Balance,
post-amendment
|
|
436,141
|
|
|
|
436,141
|
|
|
|
—
|
|
|
Issuances
of notes after amendment
|
|
122,500
|
|
|
|
122,500
|
|
|
|
—
|
|
|
Beneficial
conversion features – Transferred to equity
|
|
—
|
|
|
|
(558,641
|
)
|
|
|
—
|
|
|
Accretion
expense
|
|
—
|
|
|
|
7,079
|
|
|
|
—
|
|
|
Balances
as at June 30, 2017
|
|
558,641
|
|
|
|
7,079
|
|
|
|
—
|
|
The Company recognized interest expense of
$3,473 during the quarter ended June 30, 2017 (June 30, 2016: $17,600). As of June 30, 2017, accrued interest was $4,736 (December
31, 2016: $27,805).
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 6 – Convertible Promissory Notes
and Derivative Liabilities
(continued)
Prior to the amendment on April 28, 2017, the
multinomial lattice model was used to value the convertible notes and the embedded derivative liabilities at issuance and period
end date, using the following assumptions:
|
Assumptions
|
|
|
Dividend yield
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
1.01% - 1.07
|
%
|
|
Volatility
|
|
284.6% - 285.4
|
%
|
|
Remaining terms (years)
|
|
1.09 to 1.11
|
|
|
Stock price ($ per share)
|
|
0.60-0.75
|
|
Effective April 28, 2017, the Company entered
into a second amendment of Convertible Promissory Note. As a result of the amendment, derivative treatment has ended
Note 7 – Stockholders’ Deficiency
Authorized:
The Company is authorized to issue up to 200,000,000
shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.
On March 15, 2017, the Company designated a
new class of Series A Preferred Stock. Series A Preferred Stock consists of 10,000,000 shares, par value $0.001 per share. Series
A Preferred stock has no stated value, ranks pari passu with our common stock upon liquidation, and has no special dividend rights.
Shares of Series A Preferred Stock are convertible to common stock, at the option of the holder, at a rate of 20 shares of common
stock for each share of preferred stock. Shares of Series A Preferred Stock may be voted on an as-of-converted basis on all matters
submitted to the vote or consent of the holders of our common stock. The Company has not issued any shares of Series A Preferred
Stock at this time.
Issued and outstanding:
During the year ended December 31, 2014, the
Company issued 21,600,000 (4,320,000 after reverse split) shares of its $0.001 par value common stock in a registered public offering
for total cash proceeds of $27,000.
On February 25, 2015, the Company executed
a 12 for 1 forward stock split of issued shares of common stock. Further, on July 27, 2015, the Company effectuated a 1 for 5 reverse
stock split. The accompanying condensed financial statements have been retrospectively adjusted for all periods presented to reflect
the effect of the forward and reverse stock split.
On July 1, 2015, the Company issued 1,000,000
(200,000 after reverse split) shares of common stock pursuant to Exclusive License Agreement dated May 21, 2015 as explained in
note 4 to the interim condensed financial statements.
On February 17, 2016, the Company issued 50,000
shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $56,000 pursuant
to agreement dated November 16, 2015. All services have been performed as of February 16, 2016.
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 7 – Stockholders’ Deficiency
(continued)
Issued and outstanding (continued):
On April 15, 2016, the Company
issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $77,500
pursuant to agreement dated March 9, 2016. All services have been performed as of June 10, 2016.
On February 8, 2017, the Company
agreed to issue 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services pursuant
to agreement dated February 8, 2017 for a term of three months. The fair value of the shares amounting to $24,000 was determined
based on the market price of $0.48 per share on the date of agreement. The Company recognized the entire amount as consulting expense
during the period. The shares were issued on April 3, 2017.
As at June 30, 2017 and December 31, 2016,
there were 11,870,003 (7,333,000 restricted shares) and 11,820,003 (7,383,000 restricted shares) (after stock split) shares of
common stock respectively, issued out of the authorized 200,000,000 common shares.
Shares to be issued:
As at June 30, 2017, shares to be issued amounting
to $348,000 (400,000 shares) comprise of:
During the year ended December 31, 2016, the
Company recognized as expense licensing fee of $228,000 representing the fair value of additional 1,000,000 (200,000 after reverse
split) shares to be issued under the agreement (as explained in Note 4) , valued at the market price of $1.14 per share.
During the period ended June 30, 2017, the
Company recognized as expense licensing fee of $120,000 representing the fair value of additional 200,000 shares to be issued under
the agreement (as explained in Note 4) , valued at the market price of $0.6 per share on May 19, 2017.
Note 8 – Commitment
The Company has commitment to issue 200,000
(after stock split) shares of common stock on or before each anniversary pursuant to Exclusive License Agreement dated May 21,
2015 as explained in note 4 to the condensed financial statements.
Note 9 – Related Party Transactions
Other than disclosed elsewhere in the condensed
financial statements, the only related party transaction during the six months ended June 30, 2017 and 2016 is directors’
fees of $nil and $15,000 respectively. Director fees of $15,000 relate to a former director, who resigned in the previous year.
Accounts payable and accrued liabilities include
the following balances, which are unsecured, non-interest bearing and have no set repayment term, owed to related parties:
|
|
June 30
|
|
December 31
|
|
|
2017
|
|
2016
|
|
Owed to a former director for director fees
|
|
50,750
|
|
|
|
50,750
|
|
|
Owed to a related party for license agreement
[Note 4]
|
|
83,067
|
|
|
|
83,067
|
|
|
|
|
133,817
|
|
|
|
133,817
|
|
SocialPlay USA, Inc.
Notes to Condensed Financial Statements
As of June 30, 2017 (unaudited)
Note 10 – Subsequent Events
The Company’s management has evaluated
subsequent events up to November 22, 2017 the date the unaudited condensed financial statements were issued, pursuant to the requirements
of ASC Topic 855 and has determined that there are no material subsequent events to report.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical
information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results,
and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking
statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,”
“estimates,” “intends,” “strategy,” “plan,” “may,” “will,”
“would,” “will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Company Overview
We were incorporated in the State of Nevada
on December 31, 2013 as Artesanias Corp. Our original business plan involved distribution of the arts and crafts of the indigenous
tribes of Panama via the Internet. On January 20, 2015, we underwent a change in control when our former majority shareholder and
sole officer, Jose Soto, sold his controlling interest and resigned after appointing our current CEO and Director, Chitan Mistry,
and our former CFO and Director, Lucie Lettelier. Following the change in control, we are no longer pursuing our original business
plan. On June 12, 2015, the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to
reflect the business focus of the Company.
On April 27, 2015, we entered into an Exclusive
License Agreement (the “Agreement”) with Social Play, Inc. (“Social Play”). Under the Agreement, we have
been granted the exclusive rights within the U.S. and Canada to develop, market and sell products and services based upon Social
Play’s patent-pending “SP Cloud Goods” system. SP Cloud Goods is cloud-based game hosting and management system
where video game developers can add and remove virtual goods from the game, manage players, manage virtual store pricing, and view
vital game and player statistics. Using this system, game developers can affect their games in real-time, without the need
to rebuild or republish the game. The SP Cloud Goods intellectual property also includes a system for game developers to collect
payments for virtual goods sold to players in their games, as well as a marketplace component that will allow advertisers and game
developers to choose where, when, and how advertisements are placed in games. The system will also facilitate the transfer of funds
from advertisers to game developers.
The Agreement runs for an initial term of five
(5) years, with an optional extension for an additional five years. In consideration for the license, we agreed to issue Social
Play 1,000,000 (200,000 after reverse split) shares of common stock and an additional 1,000,000 (200,000 after reverse split) shares
on each anniversary of the Agreement for so long as it is in effect. Further, we agreed to make cash payments to Social Play in
the total amount of $120,000, payable in monthly payments of not less than $20,000 until paid in full.
On August 22, 2016, the board of directors
appointed Robert Rosner as our new President, CEO, CFO and Director. Following these appointments, the board accepted the resignation
of Chitan Mistry as our former sole officer and director.
Letter
of Intent with Spot and Play, Inc.
On March
11, 2017, we entered into a binding Letter of Intent (the “LOI”) with Spot and Play, Inc. (“Spot and Play”)
and its sole shareholder, Karthik Mani. Spot and Play is developing the “Spot and Pay” application, which provides
a way to centralize payment or donate money using a unique business code in form of a visual code at location, or using business
name if remote. The LOI contemplates our acquisition of up to 100% of Spot and Play for a total purchase price of $1,000,000. Our
initial investment will consist of $300,000 in cash, to be paid for a 30% ownership interest in Spot and Play. These funds are
to be paid as follows: (i) $50,000 to be paid upon execution of the LOI, (ii) an additional $100,000 to be paid upon certain development
milestones for Spot and Play’s business, and no later than 15 days after the execution of a definitive agreement, and (iii)
the final $150,000 upon Spot and Play’s achievement of certain additional milestones, and no later than 75 days after the
execution of a definitive agreement. Further, we will be granted the exclusive option to purchase the remaining 70% of Spot and
Play to be paid as follows: (i) issuance of shares of our common stock valued at $200,000, no later than 150 days from execution
of a definitive agreement, in order to purchase an additional 19% of Spot and Play, and (ii) issuance of shares of our common stock
valued at $500,000, no later than 180 days from execution of a definitive agreement, in order to purchase the remaining 51% of
Spot and Play. Shares issued as purchase consideration will be valued based on the five-day average trading price of our common
stock immediately preceding their issuance. Shares to be issued as consideration for our acquisition of Spot and Play will be subject
to a one (1) year lock-up, with certain leak-out restrictions on their re-sale thereafter. Upon our acquisition of 100% of the
ownership interests in Spot and Play, Mr. Mani will be granted a royalty based on the gross profits of Spot and Play, with specific
royalty terms to be negotiated. The transaction contemplated by the LOI is subject to final negotiation of a definitive agreement,
requisite corporate approvals, and other conditions. Under the LOI, we have the exclusive rights, through June 30, 2017, to negotiate
and conclude an acquisition agreement for Spot and Play.
Letter
of Intent with Friendship Socks, Inc.
On
May 30, 2017, we entered into a binding Letter of Intent (the “LOI”) with Friendship Socks, Inc., a British
Columbia corporation (“Friendship Socks”). Friendship Socks is a company that manufactures a line of unique
designer socks in the USA and markets its products online. The company leverages social media to connect people through the
gifting of a pair of socks. The LOI contemplates our acquisition of a 33% ownership interest in Friendship Socks for a total
purchase price of $150,000. Our initial investment will consist of $50,000 in cash to be delivered immediately for an 11%
ownership interest in Friendship Socks. Upon the parties’ execution of a definitive acquisition agreement, we have
agreed to acquire an additional 11% interest in exchange for an additional $50,000 upon Friendship Socks achievement
of certain business milestones within 30 days of the execution of the definitive agreement. The final 11% ownership interest
will be acquired for a final $50,000 upon Friendship Socks achievement of certain additional business milestones
within 60 days of the execution of the definitive agreement. Upon completion of all payments as set forth above, Friendship
Socks shall immediately issue sufficient shares of its capital in the name of the Company equal to 33% of its issued and
outstanding stock. Should the definitive acquisition agreement not be entered into, we shall receive 11% equity interest
in Friendship Socks as a result of the initial $50,000 Investment. In the event that the definitive agreement is executed
but Friendship Socks does not achieve the specified milestones, we will have the option to waive the milestones and proceed
with acquisition of the additional 22% ownership interest or, in the alternative, to terminate the agreement without
penalty. Finally, the LOI specifies that will have the right of first refusal with regard to any additional equity
investment, loan, or other financing for Friendship Socks.
Significant Equipment
We do not intend to purchase any significant
equipment for the next twelve months.
Results of Operations
Balance Sheet – As at June 30, 2017
and December 31, 2016:
Cash
At June 30, 2017 we had cash of $31 compared
to $2,865 as at December 31, 2016.
Deposits for investments
At June 30, 2017, we had made deposits in the amount of $100,000
to two companies under LOIs signed with the companies.
Accounts payable, accrued liabilities and
payable to related parties
At June 30, 2017
we had $309,915 of accounts payable, accrued liabilities and payable to related parties as compared to $322,164 as at December
31, 2016. The balance primarily represents $54,000 for advertising services, $20,385 payable to Clark Corporate Law Group for legal
services, $56,277 payable to Ten West Holdings as consideration for consulting services, $5,524 payable to Laxague Law for legal
services and $1,910 payable to Globex for transfer agent services.
At
December 31, 2016, the balance primarily represents $54,000 for advertising services, $20,385 payable to Clark Corporate Law Group
for legal services, $46,277 payable to Ten West Holdings as consideration for consulting services, $1,544 payable to Laxague Law
for legal services and $450 payable to Globex for transfer agent services
Accrued liabilities
comprise accrued interest of $8,014 (2016: $39,671) and accrued expenses of $18,437
(2016:
$20,720).
Payable to related parties represents $50,750
(2016: $50,750) payable to a former director as consideration for director fee services, $83,067 (2016: $83,067) payable to Social
Play Inc. in connection with the license agreement.
Convertible promissory notes and derivative
liabilities
During the previous year, we entered into agreements
with CMGT and issued them convertible promissory notes. As of June 30, 2017, the total principal due was $558,641 ($351,397 as
of December 31, 2016) and interest accrued on these notes as at June 30, 2017 amounted to $3,278 ($28,497 as at December 31, 2016).
On January 11, 2016, the Company consolidated
all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018. These amounts were accordingly reclassified
to long-term liabilities.
On February 17, 2017, the Company entered into
a First Amendment to Convertible Promissory Note with CMGT, Inc. Under the Amendment, the Company has modified the conversion feature
of the Note so that the conversion price for all amounts owing thereunder is now $0.10 per share of common stock. In addition,
the Amendment waives the Company’s prior defaults in payment of interest under the Note in the amount of $44,289, and adds
such sum to the principal balance of the Note. The Company is now required to make quarterly interest payments commencing September
30, 2017. On April 28, 2017, we entered into a Second Amendment to the CMGT Note to remove certain anti-dilution features of the
Note. All other terms of the original Note remain in full force and effect.
Effective April 28, 2017,
the Company entered into an agreement with CMGT for the second amendment in convertible promissory notes dated January 11, 2016
(first amendment date) relating to certain warranties and covenants included in the convertible promissory notes as explained in
note 7 to the interim condensed financial statements.
Statement of Operations - For
the three and six months ended June 30, 2017 and 2016 respectively:
Expenses
Three months ended June 30, 2017 and
June 30, 2016
We have not earned any revenues since our inception.
During the three months ended June 30, 2017, we incurred operating expenses of $55,674, which consisted of consulting fees
for investor relations of $17,329, legal and professional fees of $14,388, transfer agent fees of $8,665, and other expenses of
$14,294.
We also incurred accretion expense of $10,860,
day-one derivative losses of $17,093, interest and bank charges of $3,473, licensing fee of $120,000, a loss on the change in fair
value of derivatives of $291,521 and a gain on extinguishment of debt amounting to $667,665. We had a net gain for the three months
ended June 30, 2017 of $169,044.
By comparison, during the three months ended
June 30, 2016, we had net loss of $174,233. Our expenses during the three months ended June 30, 2016 mainly consisted of directors
fees and other charges of $7,500, consulting fees in connection with investor relations of $97,088, legal and professional fees
of $13,994, transfer agent fees of $12,265, and other expenses of $1,195. We also incurred interest and bank charges of $17,600,
and a loss on the change in fair value of derivatives of $19,591.
Our expenses and net loss decreased for the
three months ended June 30, 2017 as compared to the same period last year primarily due to decreased expenses for investor relations
consulting fees, a decreased expense for directors fees, a decrease in interest and bank charges and due to gain in extinguishment
of debt. We anticipate our operating expenses will increase as we move toward developing more active operations in our current
line of business.
Six months ended June 30, 2017 and June
30, 2016
We incurred expenses
and a net loss in the amount of $174,442 for the six months ended June 30, 2017 as compared to expenses and net loss in the amount
of $328,298 for the six months ended June 30, 2016. Our expenses during the current six month period mainly consisted of consulting
fees for investor relations of $47,958 (Six months ended June 30, 2016: $232,587), legal and professional fees of $23,984 (Six
months ended June 30, 2016: $27,057), directors’ fees and other charges of $nil (Six months ended June 30, 2016: $15,000),
transfer agent fees and stock filing charges of $12,255 (Six months ended June 30, 2016: $13,755), advertising and promotion of
$998 (Six months ended June 30, 2016: $5,000), and other operating expenses of $24,672 (Six months ended June 30, 2016: $1,340).
We also incurred interest
and bank charges of $11,962 (Six months ended June 30, 2016: $37,528), licensing fee of $120,000 (Six months ended June 30, 2016:
$nil), accretion expense of $29,088 (Six months ended June 30, 2016: $nil), a gain on extinguishment of debt amounting to $550,962
(Six months ended June 30, 2016: $11,462), a Day-one derivative loss of $30,579 (Six months ended June 30, 2016: $nil), and a loss
on the change in fair value of derivatives of $423,908 (Six months ended June 30, 2016: $7,493).
Our expenses and net
loss decreased for the six months ended June 30, 2017 as compared to the same period last year primarily due to gain on extinguishment
of debt, partially offset by the accretion expense, day one derivative expense, and loss on the change in fair value of derivatives.
We anticipate our operating expenses will increase as we move toward developing more active operations in our current line of business.
Liquidity and Capital Resources
As of June 30, 2017, we had cash of $31 and
deposits of $100,000. Our current liabilities as of June 30, 2017 were $309,915. Thus, we had a working capital deficit of $209,884,
as of June 30, 2017.
Cash Used in Operating Activities
.
Net cash used in operating activities was $77,334 for the period ended June 30, 2017 as compared to $62,679 for the period ended June 30, 2016.
Cash Used in Investing Activities
.
Deposits made for investments amounted to
$100,000.
Cash Flows from Financing Activities
.
During the period ended June 30, 2017, the
Company raised $174,500 from convertible promissory notes as compared to $62,950 during the period ended June 30, 2016.
Going Concern
As discussed in the notes to our financial
statements, we have no established source of revenue. This has raised substantial doubt for our auditors about our ability
to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as
a going concern.
Our activities to date have been supported
by debt and equity financing. Management continues to seek funding from its shareholders and other qualified investors.
Off Balance Sheet Arrangements
As of June 30, 2017, there were no off balance
sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all
registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated
that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial
condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain. Currently, we do not believe that any accounting
policies fit this definition.
Recently Issued Accounting Pronouncements
Recently issued accounting pronouncements have
been disclosed in note 3 to the interim condensed financial statements.
