Item
1. Financial Statements
Our
financial statements included in this Form 10-Q are as follows:
SocialPlay
USA, Inc.
Condensed
Balance Sheets
As
of September 30, 2016 (unaudited) and December 31, 2015 (audited)
|
|
September
30,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
$
|
|
$
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
62
|
|
|
|
69
|
|
|
Prepaid expenses
|
|
—
|
|
|
|
26,210
|
|
|
Total assets
|
|
62
|
|
|
|
26,279
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
131,900
|
|
|
|
85,562
|
|
|
Accrued liabilities
|
|
50,006
|
|
|
|
23,076
|
|
|
Payable to related parties
[Note 9]
|
|
133,817
|
|
|
|
194,317
|
|
|
Convertible promissory notes
[Note 5]
|
|
73,403
|
|
|
|
58,829
|
|
|
Derivative liabilities
[Note 6]
|
|
297,792
|
|
|
|
178,258
|
|
|
Total liabilities
|
|
686,918
|
|
|
|
540,042
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficiency
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2016 and December 31,
2015, respectively
[Note 7]
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.001
par value, 200,000,000 shares authorized, 11,820,003 and 11,720,000 common shares issued and outstanding as of September 30,
2016 and December 31, 2015, respectively
[Note 7]
|
|
11,820
|
|
|
|
11,720
|
|
|
Additional paid-in
capital
|
|
678,680
|
|
|
|
545,280
|
|
|
Shares to be issued
|
|
1,140,000
|
|
|
|
—
|
|
|
Accumulated deficit
|
|
(2,517,356
|
)
|
|
|
(1,070,763
|
)
|
|
Total stockholders'
deficiency
|
|
(686,856
|
)
|
|
|
(513,763
|
)
|
|
Total liabilities
and stockholders' deficiency
|
|
62
|
|
|
|
26,279
|
|
See
accompanying notes
SocialPlay
USA, Inc.
Condensed
Statements of Operations
For
the Three and Nine Months ended September 30, 2016 and 2015 (unaudited)
|
|
Three
months
|
|
Three
months
|
|
Nine
months
|
|
Nine
months
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
REVENUE
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and professional
fees
|
|
9,306
|
|
|
|
18,585
|
|
|
|
36,363
|
|
|
|
63,697
|
|
|
Advertising and
promotion
|
|
—
|
|
|
|
2,000
|
|
|
|
5,000
|
|
|
|
56,473
|
|
|
Consulting fees
- Investor relations
|
|
1,000
|
|
|
|
34,500
|
|
|
|
233,587
|
|
|
|
53,468
|
|
|
Transfer agent
fees
|
|
1,254
|
|
|
|
940
|
|
|
|
15,009
|
|
|
|
5,330
|
|
|
Directors' fees
and other charges
[Note 9]
|
|
—
|
|
|
|
65,000
|
|
|
|
15,000
|
|
|
|
80,775
|
|
|
Other
operating expenses
|
|
148
|
|
|
|
4,497
|
|
|
|
1,488
|
|
|
|
17,297
|
|
|
Total operating
expenses
|
|
11,708
|
|
|
|
125,522
|
|
|
|
306,447
|
|
|
|
277,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt
[Note 10]
|
|
(62,500)
|
|
|
|
—
|
|
|
|
(62,500)
|
|
|
|
—
|
|
|
Interest and
bank charges
|
|
7,744
|
|
|
|
17,295
|
|
|
|
34,544
|
|
|
|
25,422
|
|
|
Accretion of discount on convertible notes
|
|
14,900
|
|
|
|
—
|
|
|
|
25,627
|
|
|
|
—
|
|
|
Day-one derivative
loss
[Note 5 and 6]
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
252,683
|
|
|
Licensing fees
[Note 4]
|
|
1,140,000
|
|
|
|
—
|
|
|
|
1,140,000
|
|
|
|
630,000
|
|
|
Gain on extinguishment
of debt
|
|
—
|
|
|
|
—
|
|
|
|
(11,462
|
)
|
|
|
—
|
|
|
Change
in fair value of derivatives
[Note 5 and 6]
|
|
6,444
|
|
|
|
(217,605
|
)
|
|
|
13,937
|
|
|
|
(294,921
|
)
|
|
Loss (Income)
before income taxes
|
|
(1,118,296)
|
|
|
|
(74,788
|
)
|
|
|
1,446,593
|
|
|
|
890,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net
income (loss) for the period
|
|
(1,118,296
|
)
|
|
|
74,788
|
|
|
|
(1,446,593
|
)
|
|
|
(890,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Earnings)
loss per share, basic and diluted
|
|
0.095
|
|
|
|
0.006
|
|
|
|
(0.123
|
)
|
|
|
(0.076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
11,820,003
|
|
|
|
11,720,000
|
|
|
|
11,792,161
|
|
|
|
11,720,000
|
|
See
accompanying notes
SocialPlay
USA, Inc.
Condensed
Statements of Cash Flows
For
the Nine Months ended September 30, 2016 and 2015 (unaudited)
|
|
Nine
Months
Ended
|
|
Nine
Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2015
|
|
|
|
$
|
|
|
|
$
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
for the period
|
|
(1,446,593
|
)
|
|
|
(890,224
|
)
|
|
Shares issued for services
|
|
133,500
|
|
|
|
—
|
|
|
Interest expense -
accretion of convertible notes
|
|
39,683
|
|
|
|
18,991
|
|
|
Day-one derivative
loss
|
|
—
|
|
|
|
252,683
|
|
|
License fees
|
|
1,140,000
|
|
|
|
630,000
|
|
|
Change in fair value
of derivatives
|
|
13,937
|
|
|
|
(294,921
|
)
|
|
Gain on extinguishment
of debt
|
|
(11,462
|
)
|
|
|
—
|
|
|
Net change in non-cash
working capital balances:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
26,210
|
|
|
|
(59,032
|
)
|
|
Accounts
payable and accrued liabilities
|
|
12,768
|
|
|
|
159,809
|
|
|
Cash
used in operating activities
|
|
(91,957
|
)
|
|
|
(182,694
|
)
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Cash
paid for license fees
|
|
—
|
|
|
|
(36,933
|
)
|
|
Cash
used in investing activities
|
|
—
|
|
|
|
(36,933
|
)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of common stock
|
|
—
|
|
|
|
—
|
|
|
Proceeds from stock
receivable
|
|
—
|
|
|
|
—
|
|
|
Proceeds
from issuance of convertible promissory notes
|
|
91,950
|
|
|
|
213,180
|
|
|
Cash
provided by financing activities
|
|
91,950
|
|
|
|
213,180
|
|
|
Net
(decrease) increase in cash during the period
|
|
(7
|
)
|
|
|
(6,447
|
)
|
|
Cash, beginning
of period
|
|
69
|
|
|
|
6,544
|
|
|
Cash,
end of period
|
|
62
|
|
|
|
97
|
|
|
Supplemental
disclosure with respect to cash flows:
|
|
|
|
|
|
|
|
|
Cash paid for income
taxes
|
|
—
|
|
|
|
—
|
|
|
Cash paid for interest
|
|
—
|
|
|
|
—
|
|
See
accompanying notes
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (unaudited)
Note
1 – History and Organization of the Company
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.
The
Company has limited operations and is considered to be in the development stage.
Note
2 – Going Concern
The
Company’s unaudited 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 had an accumulated deficit of $2,517,356 and a working capital
deficit of $686,856 as of September 30, 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, 2016 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, 2015.
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
.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (unaudited)
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.
Note
4 – Prepaid Licensing Fees
Pursuant to Exclusive License Agreement dated
May 21, 2015 with a third 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. In consideration for the license granted hereunder, the Company issued to the third party 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 to the third party through an agreed payment schedule.
As technological feasibility was not achieved,
during the year ended December 31, 2015 the Company recognized as expense the total consideration due of $630,000, $120,000 being
payable in cash and $510,000 in the form of 1,000,000 (200,000 after reverse split) shares of common stock issued on July 1, 2015,
valued at the market price of $0.51 per share.
Further, during the period ended September
30, 2016, the Company recognized as expense licensing fee of $1,140,000 representing the fair value of additional 1,000,000 shares
to be issued under the agreement, valued at the market price of $1.14 per share.
Note
5 – Convertible Promissory Notes
The
outstanding convertible promissory notes as at December 31, 2015 represent obligations of the Company to CMGT Inc. (CMGT). The
movement in this obligation is as follows:
|
|
$
|
|
Promissory notes issued during
2015
|
|
229,180
|
|
|
Discount recognized due to embedded derivatives
|
|
(217,900
|
)
|
|
Accretion on notes
for 2015
|
|
47,549
|
|
|
Accreted value
of notes as at December 31, 2015
|
|
58,829
|
|
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. The Note is convertible at a price equal to sixty percent (60%) of the market price for its common stock,
which is defined as the average of the lowest three closing bid prices for the common stock in the ten trading days preceding
the conversion. The conversion price of the Note is also subject to adjustment in the event of certain stock issuances which are
lower than the conversion price otherwise in effect at the time of the conversion. In addition, 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.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (unaudited)
Note
5 – Convertible Promissory Notes
(continued)
|
|
|
$
|
|
|
Promissory notes issued during 2015
|
|
229,180
|
|
|
Promissory notes issued during Q1 2016
|
|
19,950
|
|
|
Discount recognized due to embedded derivatives
|
|
(217,959
|
)
|
|
Accretion on notes
for Q1 2016
|
|
7,466
|
|
|
Accreted value
of notes as at March 31, 2016
|
|
38,637
|
|
|
Promissory notes
issued during Q2 2016
|
|
43,000
|
|
|
Discount recognized
due to embedded derivatives
|
|
(38,141
|
)
|
|
Accretion on notes
for Q2 2016
|
|
10,727
|
|
|
Accreted value
of notes as at June 30, 2016
|
|
54,223
|
|
|
Promissory
notes issued during Q3 2016
|
|
29,000
|
|
|
Discount
recognized due to embedded derivatives
|
|
(24,720
|
)
|
|
Accretion on notes
for Q3 2016
|
|
14,900
|
|
|
Accreted value
of notes as at September 30, 2016
|
|
73,403
|
|
As
of September 30, 2016, total principal due under the Note was $321,130, and accrued interest totaled $31,340 (December 31, 2015:
$229,180 and $10,963).
The
embedded conversion features and reset feature in the notes were accounted for as a derivative liability based on FASB guidance
(also refer note 5).
Details
of the advances under the convertible promissory note issued are as follows:
|
Advance Date
|
Amount
|
|
|
$
|
|
June 9, 2015
|
|
28,000
|
|
|
June 10, 2015
|
|
60,000
|
|
|
June 11, 2015
|
|
30,000
|
|
|
June 15, 2015
|
|
14,200
|
|
|
July 1, 2015
|
|
35,000
|
|
|
July 11, 2015
|
|
17,980
|
|
|
August 14, 2015
|
|
28,000
|
|
|
December 1, 2015
|
|
16,000
|
|
|
February 12, 2016
|
|
9,000
|
|
|
February 23, 2016
|
|
10,950
|
|
|
May 05, 2016
|
|
10,000
|
|
|
June 02, 2016
|
|
22,000
|
|
|
June 17, 2016
|
|
11,000
|
|
|
July 5, 2016
|
|
4,000
|
|
|
August 15, 2016
|
|
15,000
|
|
|
August 19, 2016
|
|
5,000
|
|
|
September 7, 2016
|
|
5,000
|
|
|
|
|
321,130
|
|
Interest
expense for the quarter ended September 30, 2016 recognized on these convertible promissory notes amounts to $7,715 included in
interest and bank charges in the statements of operations. Interest expense for the nine month period ended September 30, 2015
amounts to $20,166.
Note
6 – Derivative Liabilities
In
connection with the issuance of convertible promissory notes, the Company may sell options or warrants to purchase Company’s
common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as
equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative
features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for
separately as a derivative instrument liability.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (unaudited)
Note
6 – Derivative Liabilities
(continued)
The
Company's derivative instrument liabilities are re-valued at amendment and at the end of each reporting period, with changes in
the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur.
For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities,
the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other
valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free
rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price
over the life of the option.
The
following table summarizes the movements in derivative liabilities:
|
|
$
|
|
Face value of convertible promissory notes issued
during Q2 2015
|
|
132,200
|
|
|
Day-one derivative
loss recognized immediately
|
|
252,683
|
|
|
Derivative liabilities on issuance
|
|
384,883
|
|
|
Change in fair value
of derivatives
|
|
(77,316
|
)
|
|
Derivative liabilities as at June 30, 2015
|
|
307,567
|
|
|
Derivative liability on issuance
|
|
73,249
|
|
|
Change in fair value
of derivatives
|
|
(217,605
|
)
|
|
Derivative liabilities as at September 30,
2015
|
|
163,211
|
|
|
Derivative liability on issuance
|
|
12,369
|
|
|
Change in fair value
of derivatives
|
|
2,678
|
|
|
Derivative liabilities as at December 31,
2015
|
|
178,258
|
|
|
Change due to Debt Extinguishment
|
|
(175,223
|
)
|
|
Change due to Consolidated Debt Re-issuance
(note 4)
|
|
217,959
|
|
|
Change in Fair Value
|
|
(12,098
|
)
|
|
Derivative liabilities
as at March 31, 2016
|
|
208,896
|
|
|
Derivative liability
on issuance
|
|
38,141
|
|
|
Change in fair value
of derivatives
|
|
19,591
|
|
|
Fair value as
at June 30, 2016
|
|
266,628
|
|
|
Derivative
liability on issuance
|
|
24,720
|
|
|
Change
in fair value of derivatives
|
|
6,444
|
|
|
Fair
value as at September 30, 2016
|
|
297,792
|
|
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.
|
|
September
30,
|
|
Assumptions
|
2016
|
|
Dividend yield
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
0.20% - 0.59%
|
|
|
Volatility
|
|
309.4
|
%
|
|
Remaining terms (years)
|
|
0.17-1.67 years
|
|
|
Stock price ($ per share)
|
|
0.80
|
|
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (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.
Issued
and outstanding:
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 condensed financial statements.
As
at September 30, 2016 and December 31, 2015, there were 11,820,003 (after stock split) and 11,720,000 (after stock-split) shares
of common stock respectively, issued out of the authorized 200,000,000 common shares.
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.
Shares
to be issued:
The
amount represents fair value of 1,000,000 shares to be issued on each anniversary of the Exclusive License Agreement referred
to in Note 4.
Note
8 – Commitments
The
Company has commitments to issue 1,000,000 (200,000 after reverse 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
On
April 27, 2015, the Company entered into an Exclusive License Agreement (the “License Agreement”) with related party
Social Play, Inc. (“Social Play”). Under the Agreement, the Company has 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.
On
August 22, 2016, the Company entered into a Severance Agreement and Mutual Release (the “Agreement”) with the former
President, CEO, and director Chitan Mistry. In connection with Mr. Mistry’s resignation, the Company paid him a severance
payment in the amount of $10,000 pursuant to the terms of the Agreement. Under the Agreement, Mr. Mistry and the company also
provided mutual general releases of any liability to one another.
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, 2016
|
|
December
31, 2015
|
|
Owed
to Director Chitan Mistry for Director fees
|
$
|
-
|
|
|
|
57,500
|
|
|
Owed to former Director
Lucie Letellier for Director fees
|
|
50,750
|
|
|
|
53,750
|
|
|
Owed
to shareholder company, Social Play, Inc, as remaining balance for license agreement
|
|
83,067
|
|
|
|
83,067
|
|
Office
space and services are provided without charge by an officer and director of the Company. Such costs are not significant to the
condensed financial statements and, accordingly, have not been reflected therein.
Other
than disclosed elsewhere in the condensed financial statements, the only related party transaction during the nine months ended
September 30, 2016 and 2015 is directors’ fees of $15,000 and $15,775 respectively. During the three months ended September
30, 2016 and 2015, directors’ fees were $0 and $15,000 respectively.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of September 30, 2016 (unaudited)
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 March 31, 2017 the date the unaudited condensed financial statements
were issued, pursuant to the requirements of ASC Topic 855 and has determined the following subsequent events:
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. All other terms of the original Note remain in full force and effect.
On
March 11, 2017, the Company 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 the acquisition of up to 100% of Spot and Play for a total purchase price
of $1,000,000. The initial investment will consist of $300,000 in cash, to be paid for a 30% ownership interest in Spot and Play.
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.
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
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.
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, 2016 and December 31, 2015:
Cash
At
September 30, 2016 we had cash of $62 compared to $69 as at December 31, 2015.
Prepaid
expenses
At
September 30, 2016 we had prepaid expenses of $nil compared to $26,210 as at December 31, 2015. The amount relates to the unamortized
balance of the payments made in connection with advisory services provided by consultants. The consulting contracts expired on
May 26, 2016 and the entire amount was amortized.
Accounts
payable and accrued liabilities
At
September 30, 2016 we had $315,723 of accounts payable and accrued liabilities as compared to $302,955 as at December 31, 2015.
The balance primarily represents $50,750 payable to a former director as consideration for services, $83,067 payable to Social
Play Inc. in connection with the license agreement, $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, $215 payable to Laxague Law
for legal services, $245 payable to Globex for transfer agent services, accrued interest of $31,340 and accrued expenses of $22,463.
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, 2016,
the total principal due was $321,130 ($229,180 as of December 31, 2015) and interest accrued on these notes during the nine month
period ending September 30 amounted to $20,166 ($10,963 for the year ended December 31, 2015).
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.
Share
to be issued
During
the period ended September 30, 2016, we recorded licensing fee of $1,140,000 as fair value of the consideration of 1,000,000 shares
to be issued per the Exclusive License Agreement dated May 21, 2015.
Statement
of Operations - For the three and nine months ended September 30, 2016 and September 30, 2015 respectively:
Expenses
Three
months ended September 30, 2016 and September 30, 2015
We
have not earned any revenues since our inception. During the three months ended September 30, 2016, we incurred operating expenses
of $11,708, which consisted of consulting fees for investor relations of $1,000, legal and professional fees of $9,306, 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
and a loss on the change in fair value of derivatives of $6,444. We had a net loss for the three months ended September 30, 2016
of $1,118,296. By comparison, during the three months ended September 30, 2015, we had net income of $74,788. The only reason
for net income during the quarter was due to recognition of gain of $217,605 in respect of change in fair value of derivatives.
Our expenses during the three months ended September 30, 2015 mainly consisted of directors fees and other charges of $65,000,
which included a bonus of $50,000 recognized during the quarter, consulting fees in connection with investor relations of $34,500,
and legal and professional fees of $18,585.
Nine
months ended September 30, 2016 and September 30, 2015
We
incurred expenses and a net loss in the amount of $1,446,593 for the nine months ended September 30, 2016 as compared to expense
and net loss in the amount of $890,224 for the nine months ended September 30, 2015. Our expenses during the current nine month
period mainly consisted of consulting fees for investor relations of $233,587 (Nine months ended September 30, 2015: $53,468),
legal and professional fees of $36,363 (Nine months ended September 30, 2015: $63,967), directors’ fees and other charges
of $15,000 (Nine months ended September 30, 2015: $80,775), transfer agent fees and stock filing charges of $15,009 (Nine months
ended September 30, 2015: $5,330), advertising and promotion of $5,000 (Nine months ended September 30, 2015: $56,473), and other
operating expenses of $1,488 (Nine months ended September 30, 2015: $17,297). We also incurred interest and bank charges of $34,544
(Nine months ended September 30, 2015: $25,422), licensing fees of $1,140,000 (Nine months ended September 30, 2015: $630,000)and
a loss on the change in fair value of derivatives of $13,937 (Nine months ended September 30, 2015: ($294,921)).
Our
expenses and net loss increased for the three and nine months ended September 30, 2016 as compared to the same period last year
primarily due to day one derivative expense and write-off of license fees contract. 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, 2016, we had cash of $62. Our current liabilities as of September 30, 2016 were $315,723, consisting of $50,750
payable to a former director as consideration for her services, $83,067 payable to Social Play Inc. in connection with the license
agreement, $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, $215 payable to Laxague Law for legal services, $245 payable to
Globex for transfer agent services, accrued interest of $31,340 and accrued expenses of $18,667. Thus, we had a working capital
deficit of $686,856 as of September 30, 2016.
Cash
Used in Operating Activities
. Operating Activities used a net $91,957 in cash for the period ended September 30, 2016, as
compared to a net $182,694 for the same period last year.
Cash
Flows from Financing Activities
. During the period ended September 30, 2016, financing activities provided $91,950 in cash,
all from the issuance of convertible promissory note obligations, as compared to $213,180 for the same period last year.
In
recent months, we have relied upon financing in the form of convertible promissory notes from CMGT, Inc. (“CMGT”).
On January 11, 2016, we consolidated all of our obligations to CMGT under a single Convertible Promissory Note due June 1, 2018
(the “Note”). 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, we are obligated to pay quarterly payments of interest only commencing March 31, 2016.
We may prepay the Note in whole or in part without penalty. The Note is convertible at a price equal to sixty percent (60%) of
the market price for our common stock, which is defined as the average of the lowest three closing bid prices for our common stock
in the ten trading days preceding the conversion. The conversion price of the Note is also subject to adjustment in the event
of certain stock issuances which are lower than the conversion price otherwise in effect at the time of the conversion.
In addition, 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 our issued and outstanding common stock following the conversion. This limit may be waived at CMGT option
with 61 days’ prior notice.
As
of September 30, 2016, total principal due under the Note was $321,130, and accrued interest totaled $31,340. The Note has a face
value of $500,000, and additional advances to us up to that maximum amount may be made from time to time in the discretion of
CMGT.
Our
ability to continue operations and to develop our planned business will be contingent upon us obtaining additional financing through
the issuance of debt or equity. The debt and/or equity financing arrangements available to us, if any, may be insufficient to
fund significant capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements
for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing
will be available to us on acceptable terms, or at all.
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, 2016, 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 judgements, 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
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the financial statements upon adoption.
Item
4. Controls and Procedures
Evaluation
of disclosure controls and procedures
.
We
recently evaluated the effectiveness of our disclosure controls and procedures, as required by paragraph (b) of Rule 13a-15 or
Rule 15d-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, being September 30,
2016. This evaluation was conducted with the participation of our principal executive officer and our principal accounting
officer.
We
maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be
disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based
on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure
controls and procedures were not effective in giving us reasonable assurance that the information we are required to disclose
in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management,
including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. This conclusion was based on the existence of significant deficiencies in
our internal control over financial reporting mainly due to lack of resources and number of employees.
We
do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls
and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the
fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent
limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute
assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls
and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions.
Management
Report on internal control over financial reporting
.
Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in
Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance
regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally
accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail
accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for
preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made
in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that
a misstatement of our financial statements would be prevented or detected.
Management
conducted an evaluation of the effectiveness of our internal control over financial reporting and identified significant deficiencies
in internal control over financial reporting.
A
material weakness is a deficiency, or combination of deficiencies, in internal control over the financial reporting, such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.
A
significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important
enough to merit attention by those responsible for oversight of our financial reporting. We not believe that we have
sufficient documentation with our existing financial processes, risk assessment and internal controls. We plan to work
closely with financial advisors to document the existing financial processes, risk assessment and internal controls systematically
as soon as resources are available. To address the need for more effective internal controls, management has plans to improve
the existing controls and implement new controls appropriate to a business of its size and scale as our financial position and
capital availability improves.
Although
we have not identified any material weaknesses with our financial reporting or any other significant deficiencies with our
internal controls, no assurances can be given that there are no such material weaknesses or significant deficiencies existing.
Changes
in internal control over financial reporting
.
There
have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarters and have
materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
