PLYZ Plyzer Technologies Inc (CE)

PART I. FINANCIAL INFORMATION

Item 1 - Financial Statements

INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

4

Plyzer Technologies Inc.

Condensed Consolidated Balance Sheets

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A)Business Description 

Plyzer Technologies Inc. (the “Company”), incorporated on February 23, 2005 under the laws of the state of Nevada, and through its subsidiaries, is a provider of custom, real-time, cloud-based business intelligence solutions for brands to analyze critical online price and market data.

Plyzer Spain, a wholly owned subsidiary, commenced its operations in April 2019 and signed its first customer on June 20, 2019.

(B)Basis of Presentation 

The unaudited interim financial statements as of June 30, 2019 and for the three months ended June 30, 2019 and 2018 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the balance sheet, operating results and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. Operating results for the three months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the SEC’s rules and regulations for interim reporting.

(C)Consolidation 

The unaudited consolidated interim financial statements include the accounts of the Company and,

a.)Plyzer Corporation, a wholly owned subsidiary incorporated in the State of Delaware on December 9, 2016. 

b.)Plyzer Technologies (Canada) Inc., a wholly owned subsidiary incorporated in Ontario, Canada on April 11, 2017. 

c.)Plyzer Technologies Spain s.l., a wholly owned subsidiary incorporated in Spain in April 2019 

d.)PlyzerCan Intelligence Ltd., a wholly owned subsidiary incorporated in Ontario, Canada in June 2019. The subsidiary has not yet commenced any operations. 

e.)Plyzer Blockchain Technologies Inc., a wholly owned subsidiary incorporated in Ontario, Canada on November 3, 2017. The subsidiary has not yet commenced any operations. 

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report filed on Form 10-K for the year ended March 31, 2019. The significant accounting policies followed are the same as those detailed in the said Annual Report except for the following new policies which were effective April 1, 2019:

Revenue Recognition

We adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We recognize revenues when we satisfy a performance obligation by transferring a promised good or service (that is, an asset) to a customer. An asset is transferred when the customer obtains control of that asset.

F-5

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

To achieve that core principle, we apply the five steps defined under Topic 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We assess our revenue arrangements against specific criteria in order to determine if we are acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods or services. We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods or services provided. Revenue is recognized upon the transfer of control of promised goods or services to a customer.

Revenue is recorded net of value-added tax.

Accounts Receivable and Allowances

Accounts receivable are recognized and carried at the original invoice amounts less an allowance for any uncollectible amount. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.

We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivable or otherwise evaluate other circumstances that indicate that we should abandon such efforts.

Leases

The Company adopted the new lease accounting standard ASC 842 effective April 1, 2019. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The Company does not currently have any leases over twelve months.

Use of Estimates

The financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial position and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.

F-6

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

Basic and Diluted Loss Per Share

In accordance with ASC Topic 280 - "Earnings Per Share," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.

Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method). The computation of basic loss per share for the period ended June 30, 2019 excludes potentially dilutive securities of 26,324,037 shares underlying share purchase warrants and convertible notes, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

NOTE 2 - GOING CONCERN

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has recently begun commercializing its products but has not yet established an ongoing source of revenues sufficient to cover its operating costs.  The ability of the Company to continue as a going concern is dependent on the Company’s success in securing more revenue and obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital or sale its services, it could be forced to cease operations, which raises doubt about the Company’s ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by seeking equity and/or debt financing. While the Company has so far been successful in raising the required capital through debt and equity financing, management cannot provide any assurances that the Company will continue to be able to raise the funding required to complete its development work and commercial launch of the portal successfully in future.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

F-7

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

In August 2018, the FASB issued authoritative guidance regarding Fair Value Measurement: Disclosure Framework, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The standard is effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, with early adoption permitted.

In August 2018, the FASB issued authoritative guidance regarding Intangibles - Goodwill and Other - Internal-Use Software, which aligns the requirements for a customer to capitalize implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, with early adoption permitted.

The Company evaluates new pronouncements as issued and evaluates the effect of adoption on the Company at the time. The Company has determined that the adoption of the above recently adopted accounting pronouncements will not have an impact on the financial statements.

(i)includes $57,466 relating to tax, subsidy and other government benefits receivable by Plyzer Spain 

(ii)includes fee of $72,750 paid in advance to a consultant 

NOTE 5 - INVESTMENT

On April 10, 2019, the Company invested $86,443 (€ 76,641) in a private company in Spain, Auxistencia SL. The Company’s investment is less than 10% of the equity of Auxistencia SL and is accounted for at cost which is considered equivalent to its fair value.

As at June 30, 2019, the management evaluated the investment for any impairment and concluded that there was none.

F-8

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

(i)During the three months ended June 30, 2019, the Company paid off seven (two during the six months to June 30, 2018) loans in cash for a total amount of $571,002 ($97,654 for the three months to June 30, 2018) as follows: 

(ii)During the three months ended June 30, 2019, the Company entered into convertible notes agreements with independent lenders totaling to $995,450. The following is a summary of the main terms of these agreements: 

One loan with a balance of $8,705 was due on March 15, 2019 but remained unpaid on that date. The terms of the loan agreement provides that on default the loan is immediately payable at 150% of the outstanding amount.

F-9

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

Since the convertible loan notes issued during the period have a beneficial conversion feature which is contingent upon future market prices, they did not meet the conditions necessary for equity classification and as a result, the embedded conversion feature is considered a derivative liability.

The fair value of the derivative was estimated on the issue date and subsequently re-measured on June 30, 2019 using the Black-Scholes valuation technique, using the following assumptions:

NOTE 8 - COMMON STOCK

Three months ended June 30, 2019:

(a)Seven convertible notes plus accrued interest were converted into 1,095,897 shares for a total value of $95,429. 

(b)The Company raised $250,000 under a private placement, which were subscribed by three subscribers who were issued 1,550,000 shares at an average price of $0.20 per share and equal number of warrants convertible into equal number of shares at an exercise price of $0.50 per share within two years of their issuance. 

(c)1,240,000 shares were issued to thirteen consultants valued at $259,800 

There was no common stock activity during the three months ended June 30, 2018.

At June 30, 2019 and March 31, 2019, the Company had 300,000,000 common shares of par value $0.001 common stock authorized.

NOTE 9 - WARRANTS

During three months ended June 30, 2019, the Company issued 1,550,000 warrants in connection with the private placement. The relative fair value of these warrants issued was estimated at $194,056 using the Black-Scholes valuation technique. The warrants are convertible into equal number of shares at an exercise price of $0.50 per share within two years of their issuance.

F-10

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

The following assumptions were used in the valuation of these warrants:

The value of warrants has been included in paid in capital.

The following are the movements in warrants during the three months ended June 30, 2019:

The aforementioned warrants have an average remaining life of approximately 0.62 year as at June 30, 2019 (0.57 year as at March 31, 2019).

Funds were advanced from time to time by Mr. Terence Robinson, the CEO and the sole director and by Current Capital Corp., a company owned by a brother of the CEO and a shareholder.

CONSULTING FEES

Consulting fees include fees charged by the CEO of $9,000 for the three months ended June 30, 2019. ($9,000 for the three months ended June 30, 2018).

DEVELOPMENT COSTS.

Development costs include fee of $123,308 (three months ended June 30, 2018: $262,310) charged by Lupama, a company controlled by the CEO of the Company’s subsidiary.

SELLING AND MARKETING

Includes expenses of $160,181 charged by Lupama. (June 30, 2018: $ nil).

F-11

Plyzer Technologies Inc.

Three months ended June 30, 2019

Notes to Unaudited Condensed Financial Statements

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

·Core developers’ team of two tech leaders and four developers 

·Artificial intelligence developer team of two tech leaders and four developers 

·Marketing - press and communication teams of two journalists, one graphic designer and one trade marketing expert 

·Sales team of one sales manager and five salesmen 

Spanish subsidiaries also began seeking customers for its Plyzer.com and Plyzer intelligence platforms and secured its first contract in Spain.

Testing work on three platforms detailed above was completed and they are all now commercially ready. Most of the development work carried out during the three months to June 30, 2019 related to completion and upgrading the three platforms.

Results of operations

For the three months ended June 30, 2019, the Company had a net loss of approximately $3 million, while its operating loss was approximately $945,000 compared to the operating loss of $348,000 for the three months ended June 30, 2018. Significant increase in operating expenses are due to setting up of  a fully operational office in Spain as explained under business plan and strategy section, hiring of new staff, joining bonus paid in shares to these staff and marketing campaigns launch, these costs contributed to approximately $600,000 to the operating costs.

Revenues

The Company generated its first sale during the three months to June 30, 2019, which generated revenue of approximately $34,000. Spanish subsidiary initiated long term contract discussions with several potential clients including:

·Aboca 

·ISDIN 

·VIñas 

·DAMM 

·Acofarma 

·Sunstar Iberia 

·Reva Health 

There was no revenue for the three months ended June 30, 2018.

Professional Fees

Professional fees for the three months ended June 30, 2019 included review fee of $3,500 charged by the auditors and legal fees of $92,185 comprising due diligence and processing fees charged in connection with the new convertible loan notes. Increase in legal costs was in line with the increase in the number and value of new loan notes from 4 during the three months to June 30, 2018 to 14 during the three months to June 30, 2019.

Fees for the three months ended June 30, 2018 included legal fees of $24,150 and audit and review fee of $5,150. Increase in legal fee was mainly due to increasing number of convertible loan notes issued, each of which involved due diligence and legal paperwork. There were four new notes issued for a total of approximately $218,000 during this period.

Consulting fees

Consulting fee for the three months ended June 30, 2019 included fee charged by the CEO of $9,000 and $187,000 representing value of shares issued to the staff of Spanish subsidiary as a joining bonus and other consultants. The balance of approximately $77,000 was charged by consultants who provided accounting, administrative, business strategy and financial services.

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Consulting fees included fee of $9,000 charged by the CEO and the Balance $14, 726 was charged by third parties for accounting, administrative and financial services.

Development costs

Development costs for the three months ended June 30, 2019 reduced to $186,592 from $283,458 during the same period last year. Main reasons for the reduction were completion of most of the development work during the fiscal 2019 and discontinuation of outsourcing to Lupama and bringing all development work in -house in the Spanish subsidiary.

Much of the development work related to collection of data (crawling) from the web and making qualitative and quantitative improvements in the three platforms described elsewhere in this report. Qualitative improvements included product matching and core content improvements. Data collection for the period included

Spain

·Products: 26081 

·Total Crawled prices: 3081937 Daily 

Canada

·Products: 818 

·Total Crawled prices: 660315 Daily 

Cannabis

·Products: 40672 

·Total Crawled prices: 167901Daily 

Salaries and benefits

Spanish subsidiary became fully operational in April 2019. It hired various staff as follows:

·Chief executive officer 

·Chief technology officer 

·Chief operating officer 

·1 Office Manager 

Crawling Team

·1 crawling manager 

·4 crawling experts 

·2 crawling developers 

Core Developers Team

·2 tech leaders developers 

·4 developers 

AI developers’ team

·2 tech leaders developers 

·4 developers 

Press and Communication + Marketing

·2 journalists 

·1 graphic designer 

·1 Trade Marketing 

Sales Team

·1 sales manager 

·5 salesmen 

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Salaries and benefits relate to these staff.

There were no employees during the three months ended June 30, 2018.

Selling and marketing

Selling and marketing costs for the three months ended June 30, 2019 related to marketing efforts at Plzer Spain and included approximately $160,000 charged by Lupama for various marketing campaigns carried out for Player Spain.

Key marketing efforts included:

Press and Communication

·Maintenance and updating of journalists, medias, bloggers, etc. database 

·MediaStatups: networking event (Barcelona) to connect Startups & journalists 

·Update the communication plan and offline and online media strategy 

·Connect to spanish startups network: El referente 

·Create of communication supports and brochures for Plyzer Intelligence 

·Create of sales supports and brochures for Plyzer Intelligence 

·Creation of precise content aimed at specific media targets 

Contact with journalists and follow Media impacts:

·La Vanguardia, one page: 

·Radio Interview (national channel) 28’30’’ 

·Press Release - (+20 media impacts) 

Creating and updating Blogs, twitter, Linkedin an dother social media

Trade shows:

·Brand & Retail Experience World Congress: stand and speech, contact with press and potential clients and partners. 

·BizBarcelona: speech, contact with press and potential partners 

Social Media

·Implement brand’s identity on Ca.nnabis 

·Keep and adapt the strategy for Plyzer.com 

·Adapt Social Media Plan and Online Marketing Strategy Plan to Summer season. 

·Update and Analysis Competitors by Benchmarking 

There were no such expenses for the three months ended June 30, 2018 as the Company was still in development stage.

General and administrative expenses

General and administrative costs for the three months to June 30, 2019 increased to $55,208 from $11,554 for the three months to June 30, 2018. Plyzer Spain subsidiary, which was incorporated in April 2019, incurred approximately $37,000 of the total expenses. Other costs which included rent for the Toronto office, transfer agent fees etc. remained more or less consistent.

Significant items included in the general and administrative costs for the three months ended June 30, 2018 included rent of $8,545 for three months for the Toronto office and transfer agent fees of $1,360. The transfer agent fees were lower this quarter compared to the fiscal 2018 quarter due to absence of any conversion of the convertible loans.

Interest Expense

Interest expense during the three months ended June 30, 2019 related to approximately 38 convertible unsecured loans, including 11 loans prepaid during the period and 14 new loan notes issued. Interest ranged from 8% to 12% per annum. Also included was amortization of debt discount of $599,770.

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Interest expense during the three months ended June 30, 2018 related to approximately 17 convertible unsecured loans, including two loans prepaid during the period and three new loan notes issued. Interest ranged from 5% to 12% per annum. Also included was amortization of debt discount of $194,718.

Financial Condition, Liquidity and Capital Resources

For the three months ended June 30, 2019, the Company generated a negative cash flow from operations of $593,941 (three months to June 30, 2018: negative cash flow of $349,261) , which was primarily met from existing cash, proceeds from the convertible loans and advances from the director and shareholder. As of June 30, 2019, the Company had cash of $262,320 (as at March 31, 2019:  $183,439).

The Company has started generating revenue from its three platforms; however, revenue currently is not sufficient to meet all its operating needs and thus the Company will continue to be dependent upon financing raised through equity and debts and advances from its director and shareholders.

Our present material commitments is to maintain offices of our subsidiaries and increasing our efforts in securing more customers and increase revenues and professional and administrative fees and expenses associated with the preparation of our filings and other regulatory requirements.

The Company is seeking to raise capital to implement the Company's business strategy. In the event additional capital is not raised or alternatively debt financing is not available from our shareholders, the Company may seek a merger or outright sale.

Investing activities

For three months ended June 30, 2019, Plyzer Spain purchased furniture and equipment of approximately $69,000 and invested $86,000 in a private company in Spain.

There was no new investment during the three months ended June 30, 2018.

Financing activities

During the three months ended June 30, 2019, the Company raised 250,000 through private placement (see Note 8 of the unaudited consolidated financials for the period), $925,450 through convertible notes and settled convertible notes of $392,500 in cash (see Note 6 of the unaudited consolidated financials for the period) and borrowed net of $45,613 from the director and a shareholder (see Note 10 of the unaudited consolidated financials for the period).

The Company raised net $125,269 through shareholder advances and debt financing during the three months ended June 30, 2018.

Going Concern

The accompanying financial statements have been prepared assuming that we will continue as a going concern. We have an accumulated deficit of approximately $ 33.8 million. The Company realized a net loss from operations of $944,983 and $348,038, respectively, for the three months ended June 30, 2019 and 2018. These conditions raise substantial doubt about our ability to continue as a going concern. The Company’s subsidiary, Plyzer Spain has enrolled one customer and generated a small revenue for the three months ended June 30, 2019. It has also made extensive efforts in securing more customers and increase its revenues. The Company continued to secure additional convertible loans and equity financing and has raised approximately $673,000 to date through equity and debt financing. However, there is no guarantee that efforts to raise further financing will success or result in the availability of the required funding.  The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Off-balance sheet arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Item 4 - Controls and Procedures