Notes
to Condensed Financial Statements
As
of September 30, 2017 (unaudited)
Note
3 – Summary of Significant Accounting Policies (continued)
Reclassification
of comparative figures
Certain
of the prior period figures have been reclassified to align with Management’s current view of the Company’s operations.
Use
of Estimates
The
preparation of the 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
The
Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not
have a material effect on the financial position, results of operations or cash flows of the Company.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 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 – Deposits 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 September 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.
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.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2017 (unaudited)
The
movement in convertible notes principal amount, accreted value of notes and derivative liabilities are detailed below:
|
|
Face
value
of notes
|
Cumulative
discount on 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
|
|
137,500
|
|
—
|
|
|
137,500
|
|
|
|
—
|
|
|
Beneficial conversion
feature – Transferred to equity
|
|
—
|
|
573,641
|
|
|
(573,641
|
)
|
|
|
—
|
|
|
Accretion
expense
|
|
—
|
|
(33,402)
|
|
|
33,402
|
|
|
|
—
|
|
|
Balances
as at September 30, 2017
|
|
573,641
|
|
540,239
|
|
|
33,402
|
|
|
|
—
|
|
The
Company recognized interest expense of $14,397 during the quarter ended September 30, 2017 (September 30, 2016: $17,600). As of
September 30, 2017, accrued interest was $31,698 (December 31, 2016: $27,805).
Effective
April 28, 2017, the Company entered into a second amendment of Convertible Promissory Note. As a result of the amendment, derivative
treatment has ended.
Prior
to the amendment on April 28, 2017, the multinomial lattice model was used to value the convertible notes and the embedded derivative
liabilities at issuance and period end date, using the following assumptions:
|
Assumptions
|
|
|
Dividend yield
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
1.01%
- 1.07
|
%
|
|
Volatility
|
|
284.6%
- 285.4
|
%
|
|
Remaining terms (years)
|
|
1.09
to 1.11
|
|
|
Stock price ($ per share)
|
|
0.60-0.75
|
|
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2017 (unaudited)
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 14, 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 sold 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.
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 September 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 September 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 September 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 nine months ended
September 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.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2017 (unaudited)
Note
9 – Related Party Transactions (continued)
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:
|
|
September 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
|
|
Note
10 – Forgiveness of Debt
On
August 22, 2016, the Company entered into a severance and mutual release agreement with a former President, CEO and Director.
The Company made a severance payment in the amount of $10,000 and both the Company and the former President provided mutual general
releases of any liability. As a result of the said agreement, the amount of $62,500 owed to the former President was written back.
Note
11 – Subsequent Events
The
Company’s management has evaluated subsequent events up to December 1, 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.
Working
with Spot and Pay, we have recently integrated Bitcoin payments into the Spot&Pay mobile payment platform. Bitcoin is the
first digital currency to be added to the existing Spot&Pay payment system infrastructure and allows users an additional choice
when it comes to paying for goods and services. In addition to the current method of paying by credit card or direct debit, users
can scan a QR code and choose the Bitcoin payment option on the checkout screen. If Bitcoin is selected, Spot&Pay will connect
to our gateway and generate the URL for the user to complete the transaction by opening their Bitcoin wallet and providing payment
for the purchase.
The
Spot&Pay platform is now integrated with Bitpay, a leading Bitcoin payment gateway and digital currency wallet service and
is available on both IOS and Android apps. As the digital currency market continues to grow, Spot and Pay plans to add other cryptocurrencies
such as Ethereum, Ripple, and Speedcoin options to its payment solutions.
Additionally,
we are is in the initial stages of planning and developing our own reward based cryptocrrency, which will form the basis of a
planned strategic User Loyalty Program.
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. On November 8, 2017 we advanced $30,000 to Friendship Socks.
Although
the agreements with Spot and Play and Friendship Socks have not been extended in writing or amended, the parties to both agreements
remain verbally committed to moving forward, and we are working toward completing these acquisitions.
Significant
Equipment
We
do not intend to purchase any significant equipment for the next twelve months.
Results
of Operations
Balance
Sheet – As at September 30, 2017 and December 31, 2016:
Cash
At
September 30, 2017 we had cash of $2,455 compared to $2,865 as at December 31, 2016.
Deposits
for investments
At
September 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
September 30, 2017, our accounts payable were $144,925 (September 30, 2016: $127,956). 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, $5,000 to Ched Corporate Solutions for consulting services, $5,950 payable to Doty Scott
Enterprises for accounting services and $3,260 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.
At
September 30, 2017, our accrued liabilities were $50,134 (September 30, 2016: $60,391). Accrued liabilities comprise accrued interest
of $31,698 (September 30, 2016: $39,671) and other accrued expenses of $18,437 (September 30, 2016: $20,720).
At
September 30, 2017, our payable to related parties was $133,817 (September 30, 2016: $133,817). 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 September 30, 2017,
the total principal due was $573,641 ($351,397 as of December 31, 2016) and interest accrued on these notes as at September 30,
2017 amounted to $31,698 ($28,497 as at December 31, 2016).
On
January 11, 2016, we consolidated all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018.
On
February 17, 2017, we entered into a First Amendment to Convertible Promissory Note with CMGT, Inc. Under the Amendment, we 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 waived our prior defaults in payment of interest under the Note in the amount of $32,744, and
added such sum to the principal balance of the Note. We are 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, we 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 nine months ended September 30, 2017 and September 30, 2016 respectively:
Expenses
Three
months ended September 30, 2017 and September 30, 2016
We
have not earned any revenues since our inception. During the three months ended September 30, 2017, we incurred operating expenses
of $7,813, which consisted of legal and professional fees of $4,262, transfer agent fees of $1,350, and other expenses of
$2,201.
We
also incurred accretion expense of $26,323 and interest and bank charges of $23,724. We had a net loss for the three months ended
September 30, 2017 of $57,860.
By
comparison, during the three months ended September 30, 2016, we incurred operating expenses of $11,708 and net loss of $1,118,296.
Our
operating expenses during the three months ended September 30, 2016 comprised legal and professional fees of $9,306, consulting
fees for investor relations of $1,000, transfer agent fees of $1,254, and other expenses of $148.
We
also incurred interest and bank charges of $7,744, licensing fees of $1,140,000, Accretion expense of $14,900, loss on the change
in fair value of derivatives of $6,444 and a gain due to forgiveness of debt amounting to $62,500.
Our
expenses and net loss decreased for the three months ended September 30, 2017 as compared to the same period last year primarily
due to decrease in legal and professional fee and licensing fees. We anticipate our operating expenses will increase as we move
toward developing more active operations in our current line of business.
Nine
months ended September 30, 2017 and September 30, 2016
During
the nine months ended September 30, 2017, we incurred operating expenses of $117,680, which consisted of legal and professional
fees of $28,246, Advertising and promotion expense of $998, Consulting fee of $47,958, transfer agent fees of $13,605, and other
expenses of $26,873.
We
also incurred Interest and Bank Charges of $35,686, Licensing Fee of $120,000, Accretion expense of $55,411, Gain on extinguishment
of Debt of $550,962, Day-one derivative loss of $30,579 and loss due to Change in fair value of derivatives of $423,908. We had
a net loss for the nine months ended September 30, 2017 of $232,302.
By
comparison, during the nine months ended September 30, 2016, we incurred operating expenses of $306,447 and net loss of $1,446,593.
Our
operating expenses during the three months ended September 30, 2016 comprised legal and professional fees of $36,363, Advertising
and promotion expense of $5,000, Consulting fee of $233,587, transfer agent fees of $15,009, Directors fee of $15,000 and other
expenses of $1,488.
We
also incurred Interest and Bank Charges of $34,544, Licensing Fee of $1,140,000, Accretion expense of $25,627, Gain on extinguishment
of Debt of $11,462 and loss due to Change in fair value of derivatives of $13,937. We had a net loss for the nine months ended
September 30, 2017 of $1,446,593.
Our
expenses and net loss decreased for the three months ended September 30, 2017 as compared to the same period last year primarily
due to decrease in legal and professional fee and licensing fees. 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 September 30, 2017, we had cash of $2,455 and deposits of $100,000. Our current liabilities as of September 30, 2017 were $362,278.
Thus, we had a working capital deficit of $259,823, as of September 30, 2017.
Cash
Used in Operating Activities
.
Net
cash used in operating activities was of $89,910 for the period ended September 30, 2017 as compared to $91,957 for the period
ended September 30, 2016.
Cash
Used in Investing Activities
.
Deposits
made for investments amounted to $100,000.
Cash
Flows from Financing Activities
.
During
the period ended September 30, 2017, the Company raised $189,500 from convertible promissory notes as compared to $91,950 during
the period ended September 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 September 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.
