NOTES
TO FINANCIAL STATEMENTS
(unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Business
Xumanii
International Holdings Corp. (“Xumanii” or the “Company”) was incorporated in the State of Nevada on May
6, 2010. The Company maintains its statutory registered agent’s office at Nevada Corporate Headquarter, 101 Convention Center
Drive, Suite 700 Las Vegas, Nevada 89109 and the Company’s mailing address and business office is located at 9550 South
Eastern Ave. Suite 253-A86, Las Vegas, Nevada 89123.
The Company's
name and trading symbol were changed from Medora Corp. and MORA, repectively, effective September 7, 2012 to Xumanii, Inc. and
XUII, respectively. Subsequently , the name was changed to Xumanii International Holdings Corp.
Xumanii
was a platform that broadcasted live events in HD with a new technology that combines hardware and a software platform to broadcast
from multiple cameras, wirelessly an event with an extremely low production cost until September 30, 2013. In October 2013, the
business plan for Xumanii was changed to enter into the branded tablet market, cloud storage market and app market and pursue
acquisitions that may be synergistic to the company’s focus in various technologies.
Basis
of Presentation
The accompanying
unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and
should be read in conjunction with the audited financial statements and notes thereto contained in Xumanii’s Annual Report
filed with the SEC on Form 10-K for the year ended July 31, 2013. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for
the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the financial statements which substantially duplicate
the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.
Use
of Estimates
The preparation
of financial statements in conformity with U.S. generally accepted accounting principles 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 period. Actual
results could differ from those estimates.
Basic
and Diluted Earnings (Loss) Per Common Shar
e
The basic
net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted
net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted
average number of common shares outstanding plus potential dilutive securities. For all periods presented, there were no potentially
dilutive securities outstanding.
Cash
and Cash Equivalents
The Company
considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
Impairment
of Long-Lived Assets
Management
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment
of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset
and its carrying value.
Financial
Derivatives
All derivatives
are recorded at fair value on the balance sheet. Fair values for securities traded in the open market and derivatives are based
on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing
models incorporating readily observable market data and requiring judgment and estimates.
Fair
Value Measurement
The Company
values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements.
As defined
in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market
participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs
to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company
classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes
the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three
levels of the fair value hierarchy defined by ASC 820 are as follows:
Level 1
– Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets
are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information
on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities
and listed equities.
Level 2
– Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly
observable as of the reported date.
Level 3
– Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may
be used with internally developed methodologies that result in management’s best estimate of fair value. The Company uses
Level 3 to value its derivative instruments.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes
a deferred tax asset for net operating losses carried forward. The potential benefit of net operating losses have not been recognized
in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
Stock-based
Compensation
The Company
estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model and common
shares based on the last quoted market price of the Company’s common stock on the date of the share grant. The fair value
determined represents the cost for the award and is recognized over the vesting period during which an employee is required to
provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected
to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized
compensation costs may be adjusted to reflect the actual for feature rate for the entire award at the end of the vesting period.
Excess tax benefits, if any, are recognized as an addition to paid-in capital.
Recently
Issued Accounting Pronouncements
The Company
does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its results of operations,
financial position or cash flow.
NOTE
2 – GOING CONCERN
These financial
statements have been prepared on a going concern basis, which implies Xumanii will continue to meet its obligations and continue
its operations for the next twelve months. As of April 30, 2014, the Company has an accumulated deficit of $3,597,483, limited
liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs for
the next twelve month period. These factors raise substantial doubt regarding the Company’s ability to continue as
a going concern. The continuation of Xumanii as a going concern is dependent upon financial support from its stockholders, the
ability of Xumanii to obtain necessary equity financing to continue operations, and the attainment of profitable operations. Realization
value may be substantially different from carrying values as shown and these financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
Xumanii be unable to continue as a going concern.
NOTE
3 – NOTES PAYABLE
As of April
30, 2014, the Company had the following loans payable outstanding:
Convertible
notes:
On October
10, 2013, the Company entered into a convertible promissory note with a third party for $37,500
,
with an initial discount of $2,500.
The note bears interest at 8% and a maturity date of July 12, 2014. In the event that
the note remains unpaid at that date, the Company will pay default interest at 22%. The lender has the right after a period of
180 days to convert the balance outstanding into the Company's common stock at a rate equal to 51% of the average of the three
trading prices during the 10 trading days prior to the conversion date.
On March
17, 2014, the Company entered into a convertible promissory note with a third party for $53,500
.
The
note bears interest at 8% and a maturity date of December 19, 2014. The lender has the right after a period of 270 days to convert
the balance outstanding into the Company's common stock at a rate equal to 45% of the lowest trading prices during the 30 trading
days prior to the conversion date.
On
October 21, 2013, the Company entered into a convertible note
with
a third party
for $25,000. This note bears an interest rate of 12% per annum and is due
April 21, 2014.
The lender has the right at any time prior to the maturity date to convert the principal and interest outstanding
into the Company's common stock at a rate equal to 50% of the average of three lowest closing prices during the ten trading days
prior to the conversion date.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
On
March 24, 2014, the Company entered into a convertible promissory note with a third party for $100,000
.
The
note bears interest at 12% and a maturity date of September 24, 2014. The lender has the right after a period of 180 days to
convert the balance outstanding into the Company's common stock at a rate equal to 50% of the average of the three trading
prices during the 20 trading days prior to the conversion date
On
October 23, 2013, the Company entered into a promissory note with
a third party
for $500,000, with an initial discount of $50,000. During the three months
ended October 31, 2013, the Company received the first advance of $50,000. During the three months ended April 30, 2014 the Company
received an additional $125,000. The note has a maturity date of two years from effective date of each payment and bears and interest
rate of 12%. The note can be converted into the Company’s common stock at lessor of $0.03 or 60% of the lowest trade price
in the 25 trading days previous to the conversion.
On
December 23, 2013, the Company entered into a note purchase agreement
with
a third party
to purchase a Convertible Promissory Note for $113,500, with an initial discount
of $13,500. This note bears an interest rate of 8% per annum and is due December 27, 2014.
The lender has the right at
any time on or after 90 days from the issuance date to convert the balance outstanding into the Company's common stock at a rate
equal to 55% of the lowest sale price of the common stock for the 20 trading immediately prior to the voluntary conversion date.
During the quarter ended April 30, 2014, the Company issued $25,000 of common stock. Balance on this note as of April 30, 2014
$73,500.
On
December 13, 2013, the Company entered into a convertible note
with
a third party
for $35,000, with an initial discount of $5,000. This note bears an interest
rate of 10% per annum and is due June 1, 2014.
The lender has the right after a period of 180 days to convert the balance
outstanding into the Company's common stock at a rate equal to 60% of the lowest closing prices during the twenty trading days
prior to the conversion date.
On March
21, 2014, the Company entered into a convertible promissory note with a third party for $55,000
,
with and an initial discount of $5,000.
The note bears interest at 10% and a maturity date of October 1, 2014. The lender
has the right after a period of 180 days to convert the balance outstanding into the Company's common stock at a rate equal to
60% of the lowest trading prices during the 20 trading days prior to the conversion date.
On
December 3, 2013, the Company entered into a senior convertible note
with
a third party
for $450,000, with an initial discount of $150,000. The note has a maturity
date of June 3, 2014 and bears and interest rate of 12%.
The lender has the right at any time to convert the balance
outstanding into the Company's common stock at a conversion price of $0.00616 (subject to adjustment).
On
December 12, 2013, the Company entered into a convertible note
with
a third party
for $100,000, with an initial discount of $10,000. This note bears an interest
rate of 10% per annum and is due December 12, 2014.
The lender has the right to convert the balance outstanding into the
Company's common stock at a rate equal to 60% of the lowest trading prices during the 15 trading days prior to the holder elected
conversion date. During the quarter ended April 30, 2014 the Company converted $90,000 of this note to common stock.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
On
December 12, 2013, the Company entered into a convertible promissory note
with
a third party
for $450,000, with an initial discount of $10,000. $250,000 of the note was
advanced prior to January 31, 2014. During the quarter ended April 30, 2014 the additional $200,000 was advanced. This note bears
an interest rate of 10% per annum and is due December 12, 2014.
The lender has the right to convert the balance outstanding
into the Company's common stock at a rate equal to 60% of the lowest trading prices during the 15 trading days prior to the holder
elected conversion date. During the quarter ended April 30, 2014 the Company converted $90,000 of this note to common stock.
On
October 31, 2013, the Company entered into a convertible note
with
a third party
for $50,000, with an initial discount of $5,500. This note bears an interest
rate of 8% per annum and is due October 31, 2014.
The lender has the right to convert the balance outstanding into the
Company's common stock at a rate equal to 60% of the lowest closing prices during the 20 trading days prior to the conversion
date. During the three months ended April 30, 2014, the Company converted $25,750 of this note to common stock, balance outstanding
on this note as of April 30, 2014 was $18,750.
On
December 27, 2013, the Company entered into a convertible note
with
a third party
for $50,000, with an initial discount of $5,500. This note bears an interest
rate of 12% per annum and is due September 30, 2014.
The lender has the right to convert the balance outstanding into the
Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion
date. During the quarter ended April 30, 2014, , the Company converted $25,750 of this note to common stock, balance outstanding
on this note as of April 30, 2014 was $18,750.
On
December 27, 2013, the Company also entered into a convertible note
with
a third party
for $50,000, with an initial discount of $5,500. This note bears an interest
rate of 12% per annum and is due September 30, 2014.
The lender has the right to convert the balance outstanding into the
Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion
date.
On March
20, 2014, the Company entered into a convertible promissory note with a third party for $84,000
.
The
note bears interest at 8% and a maturity date of March 20, 2015. The lender has the right after a period of 360 days to convert
the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest trading prices during the 20 trading
days prior to the conversion date.
On
November 18, 2013, the Company entered into a convertible debenture
with
a third party
for $250,000. This note bears an interest rate of 10% per annum and is due
May 18, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal
to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. During the quarter ending April
30, 2014 the Company converted $87,500 of this note to common stock, balance on this note as of April 30, 2014 was $162,500.
On
November 18, 2013, the Company entered into a convertible debenture with
a third party
for $150,000. This note bears an interest rate of 10% per annum and is due
May 18, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal
to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. During the quarter ending January
31, 2014 the Company converted $150,000 of the note to common stock.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
On
November 18, 2013, the Company entered into a convertible debenture with
a third party
for $150,000. This note bears an interest rate of 10% per annum and is due
May 18, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal
to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. During the quarter ending January
31, 2014, the Company converted $150,000 of the note to common stock.
On
November 18, 2013, the Company entered into a convertible debenture with
a third party
for $225,000. This note bears an interest rate of 10% per annum and is due
May 18, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal
to 50% of the lowest closing prices during the twenty trading days prior to the conversion date.
On
December 27, 2013, the Company entered into a convertible note
with
a third party
for $50,000. This note bears an interest rate of 12% per annum and is due
September 30, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at a rate
equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date. During the quarter ended April
30, 2014, the Company converted $25,750 of the note to common stock.
On
December 27, 2013, the Company also entered into a convertible note
with
a third party
for $50,000. This note bears an interest rate of 12% per annum and is
due September 30, 2014.
The lender has the right to convert the balance outstanding into the Company's common stock at
a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
On April
30, 2014, the Company entered into a convertible promissory note with a third party for $37,500
.
The
note bears interest at 8% and a maturity date of January 30, 2015. The lender has the right after a period of 360 days to convert
the balance outstanding into the Company's common stock at a rate equal to 55% of the average lowest 2 day trading prices during
the 15 trading days prior to the conversion date.
The Company
evaluated the conversion features on the above convertible notes and determined that they created an embedded financial derivative
due to there being no explicit limit to the number of shares to be issued upon conversion. The Company recorded the initial fair
value of $1,878,951 on the financial derivatives as discount to the convertible notes.
For the
nine months ended April 30, 2014, the Company recorded $1,095,201 interest expense under straight-line method to amortize the
discounts (both original discount and derivative discount) on the convertible notes. The remaining unamortized discount as of
April 30, 2014 was $1,027,522.
Note
payable:
The Company
has a note payable to Atoll Finance. Interest on the note is 5% per annum. During the nine months ended April 30, 2014, the
Company (through its other lenders) repaid $1,204,000 and the balance was reduced from $1,712,242 to $451,009 including
accrued interest. The note is unsecured and is currently past due. A lender has an option to purchase $312,242 of the remaining
balance. The Company recorded $42,800 of imputed interest on the payable due to Atoll Finance for the nine months ended April
30, 2014.
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
NOTE
4 – DERIVATIVE LIABILITY
The Company
evaluated the terms of the convertible notes and concluded that since the conversion prices were not fixed, and the number of
shares of the Company’s common stock that are issuable upon the conversion of the convertible notes are indeterminable until
such time as the note holder elects to convert to common stock, the embedded conversion features created a derivative liability.
The Company
measured the derivative liability using the input attributes at each issuance date and recorded an initial derivative liability
of $1,878,951. On April 30, 2014, the Company re-measured the derivative liability using the input attributes below and determined
the derivative liability value to be $828,055. Other income of $1,050,896 was recorded for the nine months ended April 30, 2014
and included in the statements of operations in order to adjust the derivative liability to the re-measured value.
|
|
Issuance date
|
|
April 30, 2014
|
|
|
|
|
|
|
Stock price
|
$0.007 - $0.024
|
|
$0.007
|
|
Exercise price
|
$0.005 - $0.0236
|
|
$0.004 - $0.018
|
|
Shares issuable upon conversion
|
97,538,960 shares
|
|
287,785,714 shares
|
|
Expected dividend yield
|
0.00%
|
|
0.00%
|
|
Expected life (years)
|
0.5 - 2 years
|
|
0.2 - 2 years
|
|
Risk-free interest rate
|
0.30% - 0.47%
|
|
0.30% - 0.47%
|
|
Expected volatility
|
147% - 310%
|
|
174% - 295%
|
NOTE 5
– RELATED PARTY TRANSACTIONS
During
the nine months ended April 30, 2014, the Company advanced $541,451, to ACLH, LLC, an entity associated with the Company’s
CEO. $165,000 was repaid by ACLH, LLC to the Company.
NOTE
6 – EQUITY TRANSACTIONS
During
the nine months ended April 30, 2014:
|
|
-
|
11,160,023
shares were cancelled and returned to the Company;
|
|
|
|
|
|
|
-
|
9,615,384 shares
of common stock, with fair value of $272,500, were issued for the acquisition of RFID patents;
|
|
|
|
|
|
|
-
|
122,723,335 shares
of common stock were issued for the conversion of a third-party note payable in the amount of $1,204,000;
|
Xumanii
International Holdings Corp.
(formerly
Xumanii Inc.)
NOTES
TO FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
-
|
24,518,914 shares
of common stock, with fair value of $497,379, were issued for services; and,
|
|
|
|
|
|
|
-
|
33,000,000 shares
of common stock were issued for a subscription receivable of $330,000.
|
NOTE
7 – SUBSEQUENT EVENTS
Subsequent
to April 30, 2014, the Company issued common stock:
|
|
-
|
33,956,473
shares were issued in conjunction with debt conversion of Atoll note
|
|
|
-
|
26,098,901 shares
were issued for the acquisition of RFID patents
|
|
|
-
|
70,000,000 shares
were issued in connection with the acquisition of Amonshare
|
Subsequent
to April 30, 2014, the Company received $21,434 on its $330,000 subscription receivable.
On May 2,
2014, the Company entered into a convertible promissory note with a third party for $100,000. The note bears interest
at 10% per annum and with a maturity date of November 2, 2014. The lender has the right to convert the balance outstanding
into the Company's common stock at a rate equal to 50% of the lowest one day closing prices during the 20 trading days prior to
the conversion date.
On May 7,
2014, the Company entered into a convertible promissory note with a third party for $101,500. The note bears interest
at 12% per annum and with a maturity date of May 7, 2015. The lender has the right to convert the balance outstanding
into the Company's common stock at a rate equal to 55% of the lowest one day closing prices during the 5 trading days prior to
the conversion date.