Notes to Financial Statements
As of December 31, 2017
1.
NATURE OF OPERATIONS
The Company was incorporated on December 31,
2013 (Date of Inception) under the laws of the State of Nevada, as Artesanias Corp. (the “Company”). On June 12, 2015,
the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the business focus
of the Company. The Company plans to develop a business that provides marketing, monetization, and support services for the companies
in gaming and mobile application markets. On January 10, 2017, the former majority shareholder sold 7,082,000 shares of common
stock to the Company’s current President and CEO, Robert Rosner, in a private transaction. As result of this transaction,
a change in control of the company occurred.
The Company has limited operations and is considered
to be in the development stage.
2.
BASIS OF PRESENTATION
The summary of significant accounting policies
presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and
accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”)
in all material respects, and have been consistently applied in preparing the accompanying financial statements.
3.
GOING CONCERN
The Company’s financial statements are
prepared using GAAP 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 revenue sufficient to cover its operating
costs. The Company had an accumulated deficit of $2,115,594 and a working capital deficit of $334,453 as of December 31, 2017.
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.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 certain financial instruments, 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 Financial Statements
As of December 31, 2017
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand
and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days
or less. The Company did not have cash equivalents as of December 31, 2017 and 2016.
Concentration of Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking
institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December
31, 2017 and 2016.
Income Taxes
The Company provides for federal and provincial
income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for
financial statement purposes versus tax purposes. Under ASC 740, “Income Taxes,” deferred tax assets and liabilities
are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will
not be realized. As of December 31, 2017 and 2016, there were no deferred taxes due to the uncertainty of the realization of net
operating loss or carry forward prior to expiration.
Loss Per Common Share
Basic loss per common share excludes dilution
and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss
per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised
or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of December
31, 2017 and 2016, there are no outstanding dilutive securities.
Convertible Notes Payable and Derivative Instruments
The Company accounts for conversion options
embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options
embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments.
ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined
by ASC 815-40.
The Company accounts for convertible notes
deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815,
in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial
conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion
options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction
and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of
the related debt.
Valuation of Derivatives
The Company evaluates its convertible instruments
to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for
under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the
derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded
as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion
or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value
is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under
ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company analyzed
the derivative financial instruments (the Convertible Notes), in accordance with ASC 815. The objective is to provide guidance
for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is
needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification
of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to
an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified
as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded
feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated,
followed by an evaluation of the instrument's settlement provisions. The Company utilized multinomial lattice models that value
the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the
fair value standard ASC 820 set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or
liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other
than in a forced or liquidation sale.
The derivative liabilities result in a reduction
of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market
each quarter with the change in fair value recorded in the income statement. Unamortized discount is amortized to interest expense
using the effective interest method over the life of the Convertible Note. If the Note is converted or the warrants are exercised,
the derivative liability is released and recorded as additional paid in capital.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
Fair Value
of Financial Instruments
Accounting Standards Codification Topic 820
“
Fair Value Measurements and Disclosures
” (“ASC 820”) defines fair value, establishes a framework
for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used
to measure fair value:
Level 1 - Valuation based on quoted market
prices in active markets for identical assets or liabilities.
Level 2 - Valuation based on quoted market
prices for similar assets and liabilities in active markets.
Level 3
- Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s
best estimate of what market participants would use as fair value.
In instances where the determination of the
fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy
within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement
in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its
entirety requires judgment, and considers factors specific to the asset or liability.
Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are
comparable to market rates. These financial instruments include cash, accounts payable and accrued liabilities and convertible
promissory notes. The Company’s bank accounts are maintained with financial institutions of reputable credit, and therefore,
bear minimal credit risk and are carried at amortized costs which approximates the fair value.
Contingencies
The Company is not currently a party to any
pending or threatened legal proceedings. Based on information currently available, management is not aware of any matters
that would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
5.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
In May 2017, the FASB issued Accounting Standards
Update (ASU) No. 2017-09, Compensation – Stock Compensation (Topic 718). The amendments in this ASU require that the company
apply modification accounting when the company changes the terms or conditions of a share-based payment award. The amendments in
this Update apply to all companies. They became effective for public business entities in the annual period ending after December
15, 2017, and interim periods within those fiscal years, with early application permitted. Management does not expect to have a
significant impact of this ASU on the Company’s financial statements.
In July 2017, the FASB issued Accounting Standards
Update (ASU) No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging
(Topic 815).
|
|
I.
|
Accounting for Certain Financial Instruments with Down Round Features
|
|
|
II.
|
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
|
The amendments in Part
I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with
down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s
own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
The amendments in Part
II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content
in the Codification, to a scope exception. Those amendments do not have an accounting effect.
The amendments in this
Update apply to all companies. Part I becomes effective for public business entities in the annual period ending after December
15, 2018, and interim periods within those fiscal years, with early application permitted. Management does not expect to have a
significant impact of this ASU on the Company’s financial statements. The amendments in Part II of this Update do not require
any transition guidance because those amendments do not have an accounting effect.
In February 2016, an
accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to
provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities
on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current
accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early
adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented.
The Company has not yet determined the effect that the adoption of this pronouncement may have on the consolidated financial position
and/or results of operations.
In November 2015, an
accounting pronouncement was issued by the FASB to simplify the presentation of deferred income taxes within the balance sheet.
This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based
on the nature of the underlying assets and liabilities. Instead, the pronouncement requires all deferred tax assets and liabilities,
including valuation allowances, be classified as noncurrent. This pronouncement is effective for fiscal years beginning after December
15, 2016, with early adoption permitted. The Company adopted this pronouncement on January 1, 2017, and the adoption did not have
a material impact on the financial position and/or results of operations.
In May 2014, an accounting
pronouncement was issued by the FASB to clarify existing guidance on revenue recognition. This guidance includes the required steps
to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers
in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
This pronouncement is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted.
The guidance permits the use of one of two retrospective transition methods. The Company will adopt the standard on March 1, 2018
using the modified retrospective method. The adoption of this pronouncement is not expected to have a material impact on the combined
financial position and/or results of operations.
6. DEPOSITS FOR INVESTMENT
On March 11, 2017, the Company entered into
a binding Letter of Intent (LOI) with Spot and Pay, Inc., a Nevada Corporation (“Spot and Pay”). The LOI contemplated
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. On April 9, 2018, the Company entered into a definitive Share Exchange and Funding Agreement (See
Note 14 – Subsequent Events) with Spot and Pay. Under the Agreement, the Company is acquiring a 90% ownership stake in Spot
and Pay.
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.
On
November 8, 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 $30,000 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.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
7.
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. In consideration for the license granted hereunder, the Company issued to the related 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 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 9 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 9.
8.
CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES
The outstanding convertible promissory notes
as at December 31, 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. 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.
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 be transferred to additional paid-in-capital and these notes to be amortized using an effective interest rate over
the remaining term.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
8.
CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES (continued)
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
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of notes after amendment
|
|
145,000
|
|
|
|
—
|
|
|
|
137,500
|
|
|
|
—
|
|
|
Beneficial conversion feature – Transferred to equity
|
|
—
|
|
|
|
145,000
|
|
|
|
(145,000
|
)
|
|
|
—
|
|
|
Accretion expense
|
|
—
|
|
|
|
(95,335
|
)
|
|
|
95,335
|
|
|
|
—
|
|
|
Balances as at December 31, 2017
|
|
718,641
|
|
|
|
589,904
|
|
|
|
128,737
|
|
|
|
|
|
As of December 31, 2017, total principal due
under the Note was $718,641, and accrued interest totaled $47,202 (which is included in accrued liabilities) (December 31, 2016:
$351,397 and $27,805).
Effective April 28, 2017, the Company entered
into a second amendment of Convertible Promissory Note. As a result of the amendment, derivative treatment has ended.
Prior to the amendment on April 28, 2017, the
multinomial lattice model was used to value the convertible notes and the embedded derivative liabilities at issuance and period
end date, using the following assumptions:
|
Assumptions
|
|
|
Dividend yield
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
1.01% - 1.07
|
%
|
|
Volatility
|
|
284.6% - 285.4
|
%
|
|
Remaining terms (years)
|
|
1.09 to 1.11
|
|
|
Stock price ($ per share)
|
|
0.60-0.75
|
|
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
9.
STOCKHOLDERS’ DEFICIENCY
Authorized:
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.
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:
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 financial statements have been retrospectively adjusted for all periods presented to reflect the
effect of the 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 6 to the 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 December 31, 2017 and December 31, 2016,
there were 11,870,003 and 11,820,003 shares of common stock, respectively, issued out of the authorized 200,000,000 common shares.
Shares to be issued:
As at December 31, 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 7), valued at the market price of $1.14 per share.
During the year ended December 31, 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 7), valued at the market price of $0.6 per share on May 19, 2017.
10.
RELATED PARTY TRANSACTIONS
On April 27, 2015, the Company entered into
an Exclusive License Agreement (the “License Agreement”) with a 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:
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Owed to former Director Lucie Letellier for Director fees
|
|
50,750
|
|
50,750
|
|
Owed to shareholder company, Social Play, Inc, as remaining balance for license agreement
|
|
83,067
|
|
83,067
|
|
|
|
133,817
|
|
133,817
|
Office space and services are provided without
charge by an officer and director of the Company. Such costs are not significant to the financial statements and, accordingly,
have not been reflected therein.
Other than disclosed elsewhere in the financial
statements, the only related party transaction during the years ended December 31, 2017 and 2016 were fees charged by directors
amounting to $nil and $15,000, respectively.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
11.
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.
12.
INCOME TAXES
Income
taxes
The Tax Cuts and Jobs Act (the “Act”)
enacted on December 22, 2017 reduces the US federal corporate tax rate from 35% to 21% and requires companies to pay a one-time
transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign
sourced earnings. As of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the
Act; however, as described below, it has made a reasonable estimate of the effects on existing deferred tax balances. These amounts
are provisional and subject to change.
The provision for income taxes differs from
that computed at US corporate tax rate of approximately 21% (2016: 21%) as follows:
|
|
2017
|
|
2016
|
|
Net loss for the year
|
$
|
(124,509
|
)
|
|
$
|
(94,906
|
)
|
|
Tax effect of expenses not deductible for income tax:
|
|
|
|
|
|
|
|
|
Annual effect of book/tax differences
|
|
47,327
|
|
|
|
36,597
|
|
|
Change in valuation allowance
|
|
77,182
|
|
|
|
58,309
|
|
|
|
|
—
|
|
|
|
—
|
|
Deferred tax assets
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following
components as of December 31, 2017:
|
Deferred Tax Assets - Non-current:
|
2017
|
|
2016
|
|
Tax effect of NOL Carryover
|
$
|
110,720
|
|
|
|
262,058
|
|
|
Cumulative change due to reduced rate
|
|
104,823
|
|
|
|
—
|
|
|
Less valuation allowance
|
|
(215,543
|
)
|
|
|
(262,058
|
)
|
|
Deferred tax assets, net of valuation allowance
|
$
|
—
|
|
|
$
|
—
|
|
At December 31, 2017, the Company had net operating
loss carryforwards of approximately $1,026,397 (2016: $748,736) that may be offset against future taxable income from the year
2018 to 2037. No tax benefit has been reported in the December 31, 2017 financial statements since the potential tax benefit is
offset by a valuation allowance of the same amount.
SocialPlay USA, Inc.
Notes to Financial Statements
As of December 31, 2017
13.
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 7 to the financial statements.
14.
SUBSEQUENT EVENTS
The Company’s management has evaluated
subsequent events up to June 15, 2018 the date the financial statements were issued, pursuant to the requirements of ASC Topic 855
and has determined the following subsequent events:
On April 9, 2018, the Company entered into
a definitive Share Exchange and Funding Agreement (the “Agreement”) with Spot and Pay, Inc., a Nevada corporation (“Spot
and Pay”). Under the Agreement, the Company is acquiring a 90% ownership stake in Spot and Pay. Spot and Pay is developing
a mobile payment application that is used in connection with third party QR codes that have been generated for specific uses; i.e.
individual consumer products, specific services or group of services offered to the general public, B2B product and service offerings,
monetary donations to charitable organizations, and quick and easy bill payments on recurring monthly accounts. Following this
acquisition, the Company’s software development plan will include a substantially more robust proprietary platform wallet
feature that will allow users to create their own wallet so that they may buy and sell bitcoin and other cryptocurrencies directly
from the Spot & Pay platform. The Company’s wallet feature will also provide seamless abilities to transfer money within
the Spot & Pay user network instantly from one account to another without any processing delays.
Under the Agreement, the Company acquired
90% of the outstanding capital stock of Spot and Pay from its founder and sole shareholder, Karthikeyan Mani. In exchange, the
Company has agreed to issue Mr. Mani 500,000 shares of the common stock of the Company. The Company has agreed to provide a total
of $300,000 in funding for development of the Spot & Pay platform. The $300,000 includes $50,000 paid previously to Spot and
Pay, together with an additional $250,000 to be paid in one or more tranches over the next 180 days. The Spot & Pay platform
as developed after the Agreement will be considered work-for-hire belonging to SocialPlay USA, Inc. Mr. Mani and Spot and Pay
will use their best efforts to develop the mobile payment platform, with Mr. Mani to be bound by a two-year non-competition agreement
following the conclusion of such efforts. In the event that the Company fails to fund the full $300,000 within 180 days from the
Agreement, the Spot and Pay shares acquired by the Company and the Company’s shares issued to Mr. Mani will be returned
in part based on a sliding scale set forth in the Agreement.