Notes
to Financial Statements
As
of December 31, 2016
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.
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.
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 $1,663,662 and a working capital
deficit of $319,299 as of December 31, 2016. The ability of the Company to continue as a going concern is dependent on the Company
obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital,
it could be forced to cease operations. In order to continue as a going concern, the Company will need, among other things, additional
capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating
capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There
are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to
continue as a going concern.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might result from this uncertainty.
|
|
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 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 Financial Statements
As
of December 31, 2016
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, 2016 and 2015.
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, 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, 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
The
Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per 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, 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 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, 2016
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, 2016
|
|
5.
|
RECENT ACCOUNTING
PRONOUNCEMENTS
|
Recently
Issued Accounting Standards
In
March 2016, the Company adopted the accounting pronouncement issued by the FASB to update guidance on how companies account for
certain aspects of share-based payments to employees. This pronouncement is effective for fiscal years beginning after December
15, 2016, and interim periods within those years, with early adoption permitted. This guidance requires all income tax effects
of awards to be recognized in the income statement when the awards vest or are settled and changes the presentation of excess
tax benefits on the statement of cash flows. The Company adopted these provisions on a prospective basis. In addition, this pronouncement
changes guidance on: (a) accounting for forfeitures of share-based awards and (b) employers’ accounting for an employee’s
use of shares to satisfy the employer’s statutory income tax withholding obligation. The adoption of this pronouncement
did not have a material impact on the Company’s consolidated financial position and/or results of operations.
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.
On
January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB which eliminates the requirement that an
acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize
a measurement-period adjustment during the period in which it determines the amount of the adjustment. The adoption of this pronouncement
did not have a material impact on the consolidated financial position and/or results of operations.
On
January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB to update the guidance related to the presentation
of debt issuance costs. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the
balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset.
The Company adopted this pronouncement on a retrospective basis, and the adoption did not have a material impact 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 intends to adopt this pronouncement on January
1, 2017, and the adoption will not have a material impact on the consolidated financial position and/or results of operations.
SocialPlay
USA, Inc.
Notes
to Financial Statements
As
of December 31, 2016
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
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 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, valued at the market price of $1.14
per share.
|
|
7.
|
CONVERTIBLE PROMISSORY
NOTES
|
The
outstanding convertible promissory notes as at December 31, 2016 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 Financial Statements
As
of December 31, 2016
|
|
7.
|
CONVERTIBLE PROMISSORY
NOTES (continued)
|
The
details of the convertible promissory notes issued are as follows:
|
|
|
$
|
|
|
Promissory notes issued
during 2015 (amended to include accrued interest of $11,867)
|
|
241,047
|
|
|
Promissory notes issued
during 2016
|
|
110,450
|
|
|
Discount recognized
due to embedded derivatives
|
|
(296,380
|
)
|
|
Accretion on notes
for 2016
|
|
52,512
|
|
|
Accreted value
of notes as at December 31, 2016
|
|
107,629
|
|
As
of December 31, 2016, total principal due under the Note was $351,497, and accrued interest totaled $28,990 (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 in 2015 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
|
|
|
|
|
229,180
|
|
Details of the advances under the
convertible promissory note issued in 2016 are as follows:
|
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
|
|
|
October 3, 2016
|
|
8,500
|
|
|
December 12, 2016
|
|
10,000
|
|
|
|
|
110,450
|
|
Interest
expense for the year ended December 31, 2016 recognized on these convertible promissory notes amounts to $28,990 included in interest
and bank charges in the statements of operations ($11,867 – year ended December 31, 2015).
SocialPlay
USA, Inc.
Notes
to Financial Statements
As
of December 31, 2016
|
|
8.
|
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.
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:
|
|
$
|
|
Derivative
fair value of convertible promissory notes issued during 2015
|
|
217,900
|
|
|
Day-one derivative
loss recognized immediately
|
|
252,683
|
|
|
Change in fair value
of derivatives
|
|
(292,
325
|
)
|
|
Derivative liabilities
as at December 31, 2015
|
|
178,258
|
|
|
Change due to Debt
Extinguishment
|
|
(175,223
|
)
|
|
Derivative fair value
of convertible promissory notes issued during 2016
|
|
296,380
|
|
|
Change in Fair Value
|
|
18,819
|
|
|
Fair
value as at December 31, 2016
|
|
318,234
|
|
SocialPlay
USA, Inc.
Notes
to Financial Statements
As
of December 31, 2016
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.
|
|
December
31,
|
|
Assumptions
|
2016
|
|
Dividend yield
|
0.00%
|
|
Risk-free rate for term
|
0.20% - 0.59%
|
|
Volatility
|
294.1% - 308.9%
|
|
Remaining terms (years)
|
0.50 – 1.66
|
|
Stock price ($ per share)
|
0.081 – 0.80
|
|
|
9.
|
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:
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.
As
at December 31, 2016 and December 31, 2015, there were 11,820,003 and 11,720,000 shares of common stock, respectively, issued
out of the authorized 200,000,000 common shares.
|
|
10.
|
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:
|
|
|
December
31, 2016
|
|
|
Owed to former Director
Lucie Letellier for Director fees
|
|
50,750
|
|
|
Owed to shareholder
company, Social Play, Inc, as remaining balance for license agreement
|
|
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
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 years ended December
31, 2016 and 2015 were fees charged by directors amounting to $15,000 and $111,250, respectively.
SocialPlay
USA, Inc.
Notes
to Financial Statements
As
of December 31, 2016
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.
Income
taxes
The
provision for income taxes differs from that computed at US corporate tax rate of approximately 35% (2014: 35%) as follows:
|
|
2016
|
|
2015
|
|
Net
loss for the year
|
$
|
(592,899
|
)
|
|
$
|
(1,019,113
|
)
|
|
Expected
income tax recovery from net loss
|
|
(207,515
|
)
|
|
|
(356,690
|
)
|
|
Change
in valuation allowance
|
|
207,515
|
|
|
|
356,690
|
|
|
|
|
—
|
|
|
|
—
|
|
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, 2016:
|
Deferred Tax Assets - Non-current:
|
2016
|
|
2015
|
|
Tax effect
of NOL Carryover
|
$
|
582,282
|
|
|
|
374,767
|
|
|
Less
valuation allowance
|
|
(582,282
|
)
|
|
|
(374,767
|
)
|
|
Deferred
tax assets, net of valuation allowance
|
$
|
—
|
|
|
$
|
—
|
|
At
December 31, 2016, the Company had net operating loss carryforwards of approximately $1,663,662 (2015: $1,070,763) that may be
offset against future taxable income from the year 2017 to 2037. No tax benefit has been reported in the December 31, 2016 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, 2016
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 6 to the financial statements.
The
Company’s management has evaluated subsequent events up to April 17, 2017 the date the financial statements were issued,
pursuant to the requirements of ASC Topic 855 and has determined the following subsequent events:
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.
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.
On
April 3, 2017, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory
services pursuant to agreement dated February 8, 2017. All services are to be performed by May 7, 2017.
