Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
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.
Note
2 – Going Concern
The
Company’s unaudited interim condensed financial statements are prepared using generally accepted accounting principles in
the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The Company has an accumulated deficit of $2,007,147 and a working capital
deficit of $288,236 as of March 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.
Note
3 – Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) for interim financial information and the rules and regulations of the
SEC and are expressed in US dollars. Accordingly, the unaudited condensed financial statements do not include all information
and footnotes required by US GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited
condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary
for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year
ending December 31, 2017 or for any other interim period. The unaudited condensed financial statements should be read in conjunction
with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2016.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
3 – Summary of Significant Accounting Policies (continued)
Use
of Estimates
The
preparation of the interim condensed financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Areas involving
significant estimates and assumptions include valuation of derivatives, valuation allowance for deferred tax assets, accruals
and going concern assessment. These estimates are reviewed periodically, and, as adjustments become necessary, they are
reported in earnings in the period in which they become known. Actual results could materially differ from those estimates
.
Recently
Issued Accounting Standards
In
April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-08, "Presentation of Financial Statements
and Property, Plant, and Equipment - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity'',
which revises what qualifies as a discontinued operation, changes the criteria for determining which disposals can be presented
as discontinued operations and modifies related disclosure requirements. This ASU will be effective for the Company for applicable
transactions occurring after October 1, 2016. The Company will prospectively apply the guidance to applicable transactions and
does not expect adoption to have a material impact on the financial statements.
On
May 28, 2015, the FASB issued a new financial accounting standard on revenue from contracts with customers, ASU 2015-09, “Revenue
from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In July 2016, the
FASB voted to approve a one-year deferral of the effective date of ASU 2015-09, which will be effective for the Company in the
first quarter of fiscal year 2018 and may be applied on a full retrospective or modified retrospective approach. This ASU will
have no impact on the Company until it begins to generate revenue.
In
June 2015, the FASB issued Accounting Standards Update ASU 2015-10, “Development Stage Entities”. The amendments in
this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial
reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition,
the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements
of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3)
disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year
in which the entity is no longer a development stage entity that in prior years it had’ been in the development stage. The
amendments in this update are applied retrospectively.
On
August 27, 2015, the FASB issued a new financial accounting standard on going concern, ASU 2015-15, “Presentation of Financial
Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern”. The standard provides guidance about management’s responsibility to evaluate whether there is substantial
doubt about the organization’s ability to continue as a going concern. The amendments apply to all companies and are effective
in annual periods ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact
of this accounting standard on its interim condensed financial statements.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
3 – Summary of Significant Accounting Policies (continued)
Recently
Issued Accounting Standards (continued)
On
April 7, 2016, the FASB issued ASU No. 2016-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation
of Debt Issuance Costs”. The amendments in this ASU require that debt issuance costs related to a recognized debt liability
be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts and the accounting for debt issue costs under IFRS. The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this ASU. The amendments apply to all companies and are effective for public business entities
in annual periods ending after December 15, 2016, and interim periods within those fiscal years, with early application permitted.
The Company is currently evaluating the impact of this accounting standard on its financial statements.
Note
4 – Licensing Fees
Pursuant
to Exclusive License Agreement dated May 21, 2015 with a related party, the Company acquired an exclusive license to develop,
market and sell products and services based upon any and all intellectual property. The initial term of this Agreement was five
years. This Agreement may be renewed for an additional five year term upon written notice to be given by the Company no later
than thirty days prior to the expiration of the initial term. On May 21, 2015, in consideration for the license granted hereunder,
the Company issued 1,000,000 (200,000 after reverse split) shares of common stock. In addition, the Company shall issue 1,000,000
(200,000 after reverse split) shares of common stock on or before each anniversary of this Agreement for so long as it shall remain
in effect. The Company also agreed to make payments totaling $120,000 through an agreed payment schedule.
As
technological feasibility has not been achieved, the Company recognizes expense at the end of each anniversary (triggering event)
for the shares to be issued, the fair value of which to be determined based on the market price of the share anniversary day as
further explained in note 7 to the financial statements. The Company has issued 400,000 common shares (including 200,000 to be issued) and recorded related license
fee expense up to December 31, 2016. The Company will record expense relating to 200,000 shares to be issued on May 21, 2017 (Triggering
event) during the quarter ending June 30, 2017.
Note
5 – Convertible Promissory Notes and Derivative Liabilities
The
outstanding convertible promissory notes as at March 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. In addition, CMGT’s right to convert is limited such that no conversion can be made which would result
in CMGT or its affiliates owning more than 4.99% of the issued and outstanding common stock of the Company following the conversion.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
5 – Convertible Promissory Notes and Derivative Liabilities
(continued)
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.
The
embedded conversion features and reset feature in the notes were accounted for as a derivative liability based on FASB guidance.
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
movement in convertible notes principal amount, accreted value of notes and derivative liabilities are detailed below:
|
|
Face
value
|
|
Accreted
value
|
|
Derivative
|
|
|
of
notes
|
|
of notes
|
|
liabilities
|
|
|
$
|
|
$
|
|
$
|
|
Balances
as at December 31, 2016
|
|
351,397
|
|
|
|
107,629
|
|
|
|
318,234
|
|
|
Issuance of notes
|
|
37,000
|
|
|
|
2,247
|
|
|
|
34,753
|
|
|
Conversion of accrued
interest
|
|
32,744
|
|
|
|
32,744
|
|
|
|
—
|
|
|
Day-1 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
|
|
The Company recognized interest expense of $8,489 during the quarter ended March 31, 2017 (March 31, 2016:
$5,595). As
of March 31, 2017, accrued interest was $4,736 (December 31, 2016: $28,990).
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
5 – Convertible Promissory Notes and Derivative Liabilities
(continued)
The
multinomial lattice model was used to value the convertible notes and the embedded derivative liabilities at issuance and period
end date, using the following assumptions:
|
|
March
31
|
|
Assumptions
|
2017
|
|
Dividend
yield
|
|
0.00
|
%
|
|
Risk-free rate for
term
|
|
0.81%
- 1.03
|
%
|
|
Volatility
|
|
287.1%
- 290.3
|
%
|
|
Remaining terms (years)
|
|
1.17
to 1.28
|
|
|
Stock price ($ per share)
|
|
0.48
|
|
Further
as explained in note 9, effective April 28, 2017, the Company entered into an agreement with CMGT for the second amendment in
the above convertible promissory notes relating to certain warranties and covenants.
Note
6 – Stockholders’ Deficiency
Authorized:
The
Company is authorized to issue up to 200,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its
$0.001 par value preferred stock.
On
March 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.
Issued
and outstanding:
During
the year ended December 31, 2014, the Company sold 21,600,000 (4,320,000 after reverse split) shares of its $0.001 par value common
stock in a registered public offering for total cash proceeds of $27,000.
On
February 25, 2015, the Company executed a 12 for 1 forward stock split of issued shares of common stock. Further, on July 27,
2015, the Company effectuated a 1 for 5 reverse stock split. The accompanying condensed financial statements have been retrospectively
adjusted for all periods presented to reflect the effect of the forward and reverse stock split.
On
July 1, 2015, the Company issued 1,000,000 (200,000 after reverse split) shares of common stock pursuant to Exclusive License
Agreement dated May 21, 2015 as explained in note 4 to the interim condensed financial statements.
On
February 17, 2016, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate
advisory services amounting to $56,000 pursuant to agreement dated November 16, 2015. All services have been performed as of February
16, 2016.
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
6 – Stockholders’ Deficiency (continued)
Issued
and outstanding (continued):
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 March 31, 2017 and December 31, 2016, there were 11,820,003 (after stock split) shares of common stock respectively, issued
out of the authorized 200,000,000 common shares.
Shares
to be issued:
As
at March 31, 2017, shares to be issued amounting to $252,000 (250,000 shares) comprise of:
During
the year ended December 31, 2016, the Company recognized as expense licensing fee of $228,000 representing the fair value of additional
1,000,000 (200,000 after reverse split) shares to be issued under the agreement (as explained in Note 4) , valued at the market
price of $1.14 per share.
On
February 8, 2017, the Company 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 $13,621
as consulting expense during the period and $10,379 was recorded as prepaid expense.
Note
7 – Commitment
The
Company has commitment to issue 200,000 (after stock split) shares of common stock on or before each anniversary pursuant to Exclusive
License Agreement dated May 21, 2015 as explained in note 4 to the condensed financial statements.
Note
8 – Related Party Transactions
Other
than disclosed elsewhere in the condensed financial statements, the only related party transaction during the three months ended
March 31, 2017 and 2016 is directors’ fees of $-0- and $7,500 respectively. Director fees of $7,500 relate to a former director,
who resigned in the previous year.
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:
|
|
March
31
|
|
December
31
|
|
|
2017
|
|
2016
|
|
Owned to
a former director for director fees
|
|
50,750
|
|
|
|
50,750
|
|
|
Owed
to a related party for lincense agreeement
[Note 4]
|
|
83,067
|
|
|
|
83,067
|
|
|
|
|
133,817
|
|
|
|
133,817
|
|
SocialPlay
USA, Inc.
Notes
to Condensed Financial Statements
As
of March 31, 2017 (unaudited)
Note
9 – Subsequent Events
The
Company’s management has evaluated subsequent events up to May 22, 2017 the date the unaudited condensed financial statements
were issued, pursuant to the requirements of ASC Topic 855 and has determined the following subsequent event:
Effective
April 28, 2017, the Company entered into an agreement with CMGT for the second amendment in convertible promissory notes dated
January 11, 2016 (first amendment date) relating to certain warranties and covenants included in the convertible promissory notes
as explained in note 5 to the interim condensed financial statements.
