ITEM
1. FINANCIAL STATEMENTS
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Page
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F-1
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F-2
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F-3
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F-4 to F-9
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(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30,
2014
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December 31,
2013
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ASSETS
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Current
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Cash
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$
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544
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$
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30,467
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Accounts receivable
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1,080
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2,330
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Total Current Assets
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1,624
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32,797
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Trademark and Patent, net
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7,695
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7,695
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Total Assets
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$
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9,319
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$
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40,492
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LIABILITIES
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Current
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Accounts payable and accrued liabilities
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88,117
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64,401
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Loan payable
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63,085
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63,573
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Derivative liabilities
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51,708
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23,790
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Total Current Liabilities
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202,910
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151,764
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Convertible notes, net of unamortized discount
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33,863
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19,190
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Total Liabilities
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236,773
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170,954
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STOCKHOLDERS’ DEFICIT
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Preferred Stock, $0.00001 par value;
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authorized: 35,000,000 Series A Preferred
shares, 25,080,985 issued and outstanding as of June 30, 2014 and December 31, 2013
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251
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251
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authorized: 15,000,000 Series B Preferred shares, no shares issued and outstanding as of June 30, 2014 and December 31, 2013
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-
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-
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Common Stock, $0.00001 par value;
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authorized: 480,000,000 shares,
169,758
,040
and 168,824,707 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
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1,697
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1,688
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Additional Paid-in Capital
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172,475
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152,689
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Accumulated deficit
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(401,877)
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(285,090)
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Total Stockholders’ Deficit
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(227,454)
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(130,462)
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Total Liabilities and Stockholders’ Deficit
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$
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9,319
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$
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40,492
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The accompanying notes are an integral part of these unaudited consolidated financial statements
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three month ended
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Six months ended
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June 30,
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June 30,
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2014
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2013
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2014
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2013
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Revenue
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$
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3,349
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$
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2,916
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$
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7,734
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$
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5,290
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Operating Expenses
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Professional fees
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19,128
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522
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27,964
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828
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Software development expenses
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6,461
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6,204
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14,176
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28,738
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Consulting fee
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14,973
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6,058
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22,955
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10,448
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General and administrative expenses
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11,131
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19,221
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18,592
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38,316
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Total operating expenses
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51,693
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32,005
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83,687
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78,330
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Loss from operations
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(48,344
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)
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(29,089
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)
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(75,953
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)
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(73,040
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)
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Other Income (Expenses):
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Loss on change in fair value of derivative liabilities
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(19,701
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)
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-
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(16,727
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)
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-
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Interest expenses
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(4,735
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)
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-
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(9,435
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)
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-
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Accretion of discount on convertible notes
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(7,940
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)
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-
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(14,672
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)
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-
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Total other expenses
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(32,376
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)
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-
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(40,834
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)
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-
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Net loss
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$
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(80,720
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)
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(29,089
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)
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$
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(116,787
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)
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$
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(73,040
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)
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Net loss per share – basic and diluted
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$
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(0.00
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)
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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Weighted average shares outstanding – basic and diluted
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169,450,348
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24,514,319
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169,139,256
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24,514,319
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The accompanying notes are an integral part of these unaudited consolidated financial statements
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Month ended
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June 30,
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2014
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2013
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Cash flows from Operating Activities
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Net loss
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$
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(116,787)
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$
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(73,040)
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Adjustments to reconcile net loss to net cash used in operations:
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Amortization of trademark and patent
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-
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689
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Loss on change in fair value of derivative liabilities
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16,727
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-
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Accretion of discounts on convertible notes
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14,672
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-
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Imputed interest
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2,986
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-
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Foreign exchange in loan payable
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(488)
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-
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Changes in operating assets and liabilities:
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Accounts receivables
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1,250
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(1,250)
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Accrued expenses
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16,583
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-
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Accounts payable
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7,134
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(7,572)
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Net cash used in operating activities
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(57,923)
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(81,173)
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Cash flows from Financing Activities
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Proceeds from sale of common stock
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28,000
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-
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Proceeds from loan payable
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-
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83,198
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Net cash provided by financing activities
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28,000
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83,198
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Increase (decrease) in cash during the period
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(29,923)
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2,025
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Cash, beginning of period
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30,467
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|
492
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Cash, end of period
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$
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544
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$
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2,517
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Supplemental disclosure of cash flow information:
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Cash paid for:
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Interest
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$
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2,986
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|
$
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-
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|
Income taxes
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$
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-
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$
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-
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|
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Non-Cash Transactions
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Shares and warrants reclassified as derivative liability
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$
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11,191
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$
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-
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The accompanying notes are an integral part of these unaudited consolidated financial statements
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Description of business and basis of presentation
Organization and nature of business
Neohydro Technologies Corp. (the “Company”) was incorporated in the State of Nevada on November 13, 2007 as Rioridge Resources Corp. On July 22, 2008, the Company changed its name to Neohydro Technologies Corp.
On August 1, 2014, the Company’s name changed from NeoHydro Technologies Corp. to Epoxy, Inc. in regard to actions taken on May 23, 2014, when the Board of Directors of the Company (the “
Board
”) approved, and recommended to the Majority Stockholders that they approve the Name Change. On May 27, 2014, the Majority Stockholders approved the Name Change by written consent in lieu of a meeting, in accordance with Nevada law. On August 4, 2014, the Company submitted the Name Change to FINRA for their review and approval, as well as the approval of a symbol change from NHYT to EPXY. The Company filed an amendment to our Articles of Incorporation with the Secretary of State of Nevada changing our name to Epoxy, Inc. effective on August 1, 2014.
The Company, through its wholly owned subsidiary, Couponz, Inc., is the developer of Epoxy app, an application or "app" for iPhone iOS and Android operating systems. Epoxy is an innovative smart phone application designed and created to conveniently connect business owners and consumers in order to ease marketing frustrations. The mobile app gives loyal customers the ease of keeping track of rewards and punch cards all in one place while also giving opportunities to review and share businesses with friends. In turn, Epoxy provides businesses the ability to reward customers, share offers, and deliver information about special events with their customers.
Financial Statements Presented
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the six month period ended June 30, 2014, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014. For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission on April 15, 2014.
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
Note 2 – Going Concern
At June 30, 2014 and 2013, the Company had net losses of $116,787 and $73,040, respectively. The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require additional cash resources during 2014 based on its current operating plan and condition. The Company expects cash flows from operating activities to improve, primarily as a result of an increase in revenue and a decrease in certain operating expenses, although there can be no assurance thereof. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 – Correction of an error
During the preparation of the quarterly report for the period ended March 31, 2014, the Company discovered an immaterial error related to its December 31, 2013 balance sheet. The error related to the valuation of an embedded derivative liability, in which the derivative liability was calculated using the wrong number of shares exceeding our authorized (see Note 7). The resulting error totaled $13,824. Pursuant to the Securities and Exchange Commission’s SAB Topic 108, the company has corrected this error in the accompanying December 31, 2013 balance sheet.
The following table reflects the amounts originally reported and as adjusted for each major caption of the balance sheet:
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December 31, 2013
(As Adjusted)
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December 31, 2013
(Original)
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Consolidated Balance Sheets:
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Derivative liabilities
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$
|
23,790
|
|
|
$
|
37,614
|
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Total Liabilities
|
|
$
|
170,954
|
|
|
$
|
184,778
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Additional paid in capital
|
|
$
|
152,689
|
|
|
$
|
138,865
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Total stockholders' deficit
|
|
$
|
(130,462
|
)
|
|
$
|
(144,286
|
)
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Total liabilities and stockholders' deficit
|
|
$
|
40,492
|
|
|
$
|
40,492
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Note 4- Fair Value Measurements
FASB ASC 820, Fair Value Measurements and Disclosures, 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. FASB ASC 820 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. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1
– Quoted prices in active markets for identical assets or liabilities.
Level 2
– Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
– Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of our derivative liabilities as of June 30, 2014 and December 31, 2013:
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Fair value measurements
on a recurring basis
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Level 1
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Level 2
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Level 3
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As of June 30, 2014:
|
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Liabilities
|
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|
|
|
|
|
|
|
|
|
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Embedded derivative
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$
|
-
|
|
|
$
|
-
|
|
|
$
|
51,708
|
|
|
|
|
|
|
|
|
|
|
|
|
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As of December 31, 2013:
|
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|
|
|
|
|
|
|
|
|
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Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivative
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
23,790
|
|
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5- Loans Payable
At June 30, 2014, the Company is indebted to unrelated third parties for $63,085 (December 31, 2013 - $63,573). The loan is non-interest bearing and is due on demand. During the six months ended June 30, 2014, the Company recorded imputed interest of $2,986.
Note 6- Convertible Notes
a)
|
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $25,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $25,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $25,000. At June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $7,057 and $3,973, respectively.
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b)
|
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $25,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $25,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $25,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $7,057 and $3,973, respectively.
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c)
|
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $40,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $40,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $40,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $11,292 and $5,337, respectively.
|
d)
|
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $35,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $35,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $35,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $8,457 and $5,562, respectively.
|
The Company analyzed the conversion feature of above Convertible Notes for derivative accounting consideration under FASB ASC 470 and determined that the conversion feature did not create embedded derivatives.
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 – Common stock
On April 30, 2014, the Company the Company received the final $28,000 installment in respect of a funding agreement entered into on June 17, 2013 (ref: Note 10) for a total of $100,000. The Company accepted a subscription for 933,333 shares of common stock at $0.03 per share for cash proceeds of $28,000 and the Company also agreed to issue a 2-year warrant entitling the holder to acquire an additional 93,333 and shares of common stock at an exercise price of $0.30 per share.
Note 8 - Share Purchase Warrants
During the six month period ended June 30, 2014 the Company issued a 2-year warrant entitling the holders to acquire an additional 93,333 shares of common stock at an exercise price of $0.30 per share as part of Funding Agreement described below in Note 10.
As June 30, 2014, the following share purchase warrants were outstanding:
|
|
Warrants
|
|
|
Weighted Average Exercise Price
|
|
Outstanding - December 31, 2013
|
|
|
856,667
|
|
|
|
0.12
|
|
Granted
|
|
|
93,333
|
|
|
|
0.30
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding – June 30, 2014
|
|
|
950,000
|
|
|
|
0.14
|
|
Exercisable – June 30, 2014
|
|
|
950,000
|
|
|
|
0.14
|
|
The intrinsic value of these warrants was $0 at June 30, 2014.
Note 9- Derivative Liabilities
As of June 30, 2014, we have determined that we currently have (i) the following shares of common stock issued, and (ii) outstanding instruments which are convertible into the shares of common stock indicated below in connection with warrants, convertible notes and preferred shares previously issued by the Company or agreements with the Company:
|
169,758,040
|
|
Common Stock Issued and Outstanding
|
|
|
|
|
|
950,000
|
|
Common Shares exercised from warrants (950,000 warrants outstanding)
|
|
250,000,000
|
|
Common Shares convertible from convertible notes ($125,000 converted at $0.0005 per share )
|
|
62,702,463
|
|
Common Shares convertible from Preferred Series A (25,080,985 shares outstanding)
|
|
1,333,333
|
|
Common Shares convertible from Preferred Series A warrants (533,333 warrants outstanding)
|
|
484,743,836
|
|
Total Common Shares Outstanding and Accounted For/Reserved
|
Accordingly, given the fact that the Company currently has 480,000,000 shares of common stock authorized, the Company could exceed its authorized shares of common stock by approximately 4,743,836 shares (December 31, 2013 – 3,717,168 shares) if all of the financial instruments described in the table above were exercised or converted into shares of common stock. At June 30, 2014, 4,743,836 of these shares were in excess of the authorized shares and were accounted for as a derivative liability. The fair value of these 4,743,836 common shares was determined to be $51,708 ($23,790 as to 3,717,168 shares as of December 31, 2013) using the closing price of Epoxy’s common stock.
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9- Derivative Liabilities (continued)
|
|
Exceed number of authorized shares
|
|
|
Derivate Liabilities
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
3,717,169
|
|
|
$
|
23,790
|
|
Add: Common shares issued
|
|
|
933,334
|
|
|
|
10,174
|
|
Common shares for exercise underlying warrants
|
|
|
93,333
|
|
|
|
1,017
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
|
|
16,727
|
|
Balance: June 30, 2014
|
|
|
4,743,836
|
|
|
$
|
51,708
|
|
|
|
|
|
|
|
|
|
|
We have evaluated our convertible cumulative preferred stock under the guidance set out in FASB ASC 470-20 and have accordingly classified these shares as equity in the consolidated balance sheets.
On June 17, 2013, the Company entered into a Funding Agreement whereby an investor agreed to purchase $100,000 worth of shares of common stock of the Company at $0.03 per share within 90 days (which may be extended by consent of both parties to 120 days) and receive a 2-year warrant for an additional $100,000 worth of shares at $0.30 per share. As of June 30, 2014, the Company has received a total of $100,000 under the Funding Agreement towards the committed purchase value, but not yet issued the shares.
On July 16, 2013 the Company entered into a second Funding Agreement whereby an investor agreed to purchase $17,000 worth of shares of common stock of the Company at $0.03 per share and receive a 2-year warrant for an additional $17,000 worth of shares at $0.03 per share. As of June 30, 2014, the Company had received $17,000 under the Funding Agreement but has not yet issued the shares.
Note 11 – Subsequent events
During the month of July 2014 the Company entered into 5% one-year promissory notes for a total of $20,000 with arm’s length third parties.
On August 1, 2014 the Company successfully amended the terms of certain convertible loan agreements with four (4) investors for a total of $125,000 due and payable on November 27, 2015 (ref: Note 6). Under the amended terms, a total of $125,000 originally available for conversion into a total of 250,000,000 shares of common stock at $0.0005 per share has been amended to reflect a price of $0.005 per share for a total of 25,000,000 shares of common stock, if converted.
On August 8, 2014 the Company entered into an Agency Agreement (the “Agreement”) with Carter, Terry & Company (“C&T”) where under C&T will act as the Company’s exclusive Financial Advisor, Investment Bank and Placement Agent, on a "best efforts" basis for an initial period of 30 days, and then reverting to a non-exclusive financial advisor for the next twelve consecutive (12) months. Under the terms of the Agreement, C&T will receive 500,000, fully paid for and earned, restricted shares of the Compnay’s common stock. In addition, in respect of any introductions that result in financing for the Company C&T shall receive fees as follows:
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11 – Subsequent events (continued)
|
a.
|
10% of the amount for any equity or hybrid equity capital raised up to $2,000,000
|
|
b.
|
8% of the amount for any equity or hybrid equity capital raised up to $5,000,000
|
|
c.
|
6% of the amount for any equity or hybrid equity capital raised over $5,000,000
|
And;
an amount of restricted shares equal to 4% of capital raised divided by the closing price of the stock on the date of close.