NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2016 AND 2015
1. NATURE OF OPERATIONS
AppYea, Inc. ("AppYea", "the Company", "we" or "us") was incorporated in the State of South Dakota on November 26, 2012 to engage in the acquisition, purchase, maintenance and creation of mobile software applications. The Company is in the development stage with no significant revenues and a limited operating history.
The Company's common stock is traded on the OTC Markets (www.otcmarkets.com) under the symbol "APYP". The first day of trading on the OTC Markets was December 15, 2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company's year-end is June 30.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes 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 period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.
Fixed Assets
The Company's fixed assets represent mobile applications that is has purchased and upgrades that it has made to these applications. These mobile applications and any upgrades are being amortized over their useful lives of 3 years. The Company also purchased a pre-owned vehicle. Due to the age of the vehicle, it is being depreciated over the useful life of 3 years.
Long-Lived Assets
The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” (“ASC No. 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years ended June 30, 2016 and 2015, no impairment losses have been identified.
Stock-based compensation
ASC 718 "Compensation – Stock Compensation," prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, "Equity – Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Related
Parties
The Company follows ASC 850, "Related Party Disclosures," for the identification of related parties and disclosure of related party transactions. See note 11.
Financial Instruments
and Fair Value Measurements
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. FASB ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
The carrying values of cash, accounts receivable, prepaid expenses, accounts payable, and accruals approximate their fair value due to the short-term maturities of these instruments.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Revenue Recognition
The Company generates it revenue from the sale of its mobile software applications through online mobile applications stores. Revenue is recognized in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition", when the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable. The Company has no remaining obligation to customers after the date on which its customers purchase its mobile software applications.
Research and Development Costs
Costs incurred in research and development activities are expensed as incurred.
Advertising cost
Advertising costs were expensed as incurred. Advertising costs of $6,126 and $17,444 were incurred during the year ended June 30, 2016 and 2015, respectively.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740 "Income Taxes". Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At June 30, 2016 and 2015, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. During the year ended June 30, 2016 and 2015, there were shares of convertible preferred stock outstanding and conversion privileges attached to convertible promissory notes payable. The common share equivalents of these securities have not been included in the calculations of loss per share because such inclusions would have an anti-dilutive effect as the Company has incurred losses during the year ended June 30, 2016 and 2015.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company is currently in the process of evaluating the impact of the adoption on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.
In January 2016, the FASB issued ASU 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement –Period Adjustments.” Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance.
In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, and amortization of those costs should be reported as interest expense. This ASU is effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted for financial statements that have not been previously issued. The Company is currently in the process of evaluating the impact of the adoption on its financial statements.
There have been three new ASUs issued amending certain aspects of ASU 2014-09. ASU 2016-08 "Principal versus Agent Considerations (Reporting Revenue Gross Versus Net)," was issued in March, 2016 to clarify certain aspects of the principal versus agent guidance in ASU 2014-09. In addition, ASU 2016-10 "Identifying Performance Obligations and Licensing" issued in April 2016, amends other sections of ASU 2014-09 including clarifying guidance related to identifying performance obligations and licensing implementation. Finally, ASU 2016-12, "Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients" provides amendments and practical expedients to the guidance in ASU 2014-09 in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU 2014-09. The Company is currently evaluating the impact of adopting this guidance.
3. GOING CONCERN AND LIQUIDITY
At June 30, 2016, the Company had cash of $14,637 and current liabilities of $38,549 and had a working capital deficit of $19,745 and an accumulated deficit of $4,082,540. The Company anticipates future losses in its business. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern.
In our financial statements for the year ended June 30, 2016, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed.
4. PREPAID EXPENSES
At June 30, 2016 and 2015, prepaid expenses totaled $4,167 and $1,498,483, respectively; and consisted of the OTC Markets annual fee with a balance of $4,167 and $2,500 and consulting fees with a balance of $0 and $1,495,983, respectively.
Consulting fees consisted of the following:
Consulting fee
On March 9, 2015, the Company entered into a consulting agreement with the Cicero Consulting Group, LLC for the term of 12 months, and automatically renew for an additional 12 months unless terminated by the Company. The Company valued this agreement in accordance with ASC 505-50 as an Equity-Based Payment to Non-Employees at the current market price of the common stock. The Company paid the consultant a commencement fee in the form of 1,723,329 shares of restricted common stock at the current market price, as of March 9, 2015, of $1.02. In October 2015, the Company and Cicero Consulting Group, LLC agreed to terminate the agreement, and Cicero Consulting Group, LLC agreed to return and cancel the shares. As a result, we fully recognized the remaining prepaid expense of $732,415 as consulting fees and reversed common stock of $172. As at June 30, 2016 and 2015, the Company recognized prepaid expense balance of $0 and $1,171,864, respectively.
On May 6, 2015, the Company entered into a consulting agreement with the Alex Consulting, Inc. for the term of one year or until the terms of this Agreement has been satisfied, whichever comes first. The Company valued this agreement in accordance with ASC 505-50 as an Equity-Based Payment to Non-Employees at the current market price of the common stock. The Company paid the consultant a commencement fee in the form of 700,000 shares of restricted common stock at the current market price, as of May 6, 2015, of $0.51. As at June 30, 2016, the Company had recognized a prepaid expense balance of $0 and $314,942, respectively. The prepaid amount of $314,942 was fully expensed from January 1, 2015, to May 5, 2016.
On May 18, 2015, the Company entered into a consulting agreement with the SmallCapVoice.com, Inc. for the term of three months commencing on August 18, 2015. The Company valued this agreement in accordance with ASC 505-50 as an Equity-Based Payment to Non-Employees at the current market price of the common stock. The Company paid a monthly fee of $2,500 and a onetime issuance of 28,000 shares of restricted common stock at the current market price, as of May 18, 2015, of $0.51. As at June 30, 2016 and 2015, the Company had recognized a prepaid expense balance of $0 and $9,177. The prepaid amount of $9,177 was fully expensed from July 1, 2015 to August 18, 2015.
5. FIXED ASSETS
As at June 30, 2016 and 2015, the balance of fixed assets represented a vehicle and mobile application software as follows:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Mobile applications
|
|
$
|
257,870
|
|
|
$
|
179,870
|
|
Automobile
|
|
|
-
|
|
|
|
8,305
|
|
Fixed assets, gross
|
|
|
257,870
|
|
|
|
188,175
|
|
Accumulated depreciation
|
|
|
(175,226
|
)
|
|
|
(111,603
|
)
|
Fixed assets, net
|
|
$
|
82,644
|
|
|
$
|
76,572
|
|
During the year ended June 30, 2016, the Company purchased mobile applications for $78,000, funded by way of a convertible loan of $58,000 and cash of $20,000 on October 15, 2015 (Note 6). During the year ended June 30, 2015, the Company purchased an automobile and certain mobile applications for $60,000, funded by way of loan on October 15, 2014 (Note 6).
During the year ended June 30, 2016, the Company sold the automobile with net book value of $4,613 for $700 cash, resulting in a loss of $3,913.
Depreciation expense for the year ended June 30, 2016 and 2015 was $67,315 and $55,792, respectively.
6. CONVERTIBLE LOANS
At June 30, 2016 and 2015, convertible loans consisted of the following:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
April 2013 Notes - 2
|
|
$
|
-
|
|
|
$
|
14,000
|
|
January 2014 Note
|
|
|
-
|
|
|
|
10,000
|
|
October 2014 Note
|
|
|
-
|
|
|
|
30,000
|
|
February 2015 Note
|
|
|
-
|
|
|
|
15,000
|
|
March 2015 Note
|
|
|
-
|
|
|
|
10,000
|
|
April 2015 Note
|
|
|
-
|
|
|
|
10,000
|
|
Total notes payable
|
|
|
-
|
|
|
|
89,000
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
454
|
|
|
|
10,762
|
|
|
|
|
|
|
|
|
|
|
Less: Debt discount
|
|
|
-
|
|
|
|
(43,697
|
)
|
|
|
|
|
|
|
|
|
|
Total convertible loans
|
|
|
454
|
|
|
|
56,065
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible loans
|
|
|
454
|
|
|
|
56,065
|
|
|
|
|
|
|
|
|
|
|
Long-term convertible loans
|
|
$
|
-
|
|
|
$
|
-
|
|
During the year ended June 30, 2016 and 2015, the Company recognized interest expense of $21,129 and $9,067, amortization of financing cost of $22,702 and $0, derivative origination interest of $0, and $31,202, and amortization of discount of $248,218 and $85,069, respectively.
April 2013 Note
On April 2, 2013, the Company issued a $15,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carried an interest rate of 12% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 20 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed. On July 24, 2014, the Company repaid $1,000 in respect of this convertible note payable leaving an outstanding principle balance of $14,000 in respect of the promissory note. Effective April 2, 2013, the Company recorded no beneficial conversion expense on the conversion feature as the specific conversion price was currently not determinable. However, effective December 15, 2014 the Company's shares of common stock became publicly quoted and accordingly we evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The Company valued the conversion feature at the first day the shares were publicly quoted (December 15, 2014) at $21,736 using the Black Scholes valuation model. $17,020 included accrued interest of $3,020 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $4,716 of the value assigned to the derivative liability was expensed on the first day the shares became publicly traded.
During the year ended June 30, 2016, $14,000 of the convertible note and accrued interest of $5,703 were converted into 6,788,959 common shares and the Company amortized $3,462 of the debt discount and reclassed the derivative liability on the date of conversion of $65,947 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $7,092 was amortized for year ended June 30, 2016.
January 2014 Note
On January 9, 2014, the Company issued a $10,000 convertible promissory note payable. The unsecured convertible promissory note payable has a 12-month term and carries an interest rate of 8% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 60 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed.
Effective January 9, 2014, the Company recorded no beneficial conversion expense on the conversion feature as the specific conversion price was currently not determinable. However, effective December 15, 2014 the Company's shares of common stock became publicly quoted and accordingly we evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the first day the shares were publicly quoted (December 15, 2014) at $13,722 using the Black Scholes valuation model. $10,745 included accrued interest of $745 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $2,977 of the value assigned to the derivative liability was expensed on the first day the shares became publicly traded. On August 6, 2015, the convertible note of $10,000 and accrued interest of $1,530 was converted into 768,720 common shares and the Company amortized the remaining debt discount of $3,403 and reclassed the fair value of the derivative liability on the date of conversion of $45,518 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $4,477 was amortized for the year ended June 30, 2016.
October 2014 Note
On October 15, 2014, as part of its acquisition of a social networking mobile application and a vehicle, the Company agreed to pay $60,000 on a deferred basis in a convertible promissory note payable for a term of 12 months and carried an interest rate of 7% per annum. The unsecured note payable is convertible at the option of the holder at a 45% discount to the lowest closing bid price for the Company's common stock during the 20 trading days immediately preceding the conversion date. Effective October 15, 2014, the Company recorded no beneficial conversion expense on the conversion feature as the specific conversion price is currently not determinable. However, effective December 15, 2014 the Company's shares of common stock became publicly quoted and accordingly we evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the first day the shares were publicly quoted (December 15, 2014) at $62,415 using the Black Scholes valuation model. $60,702 included accrued interest of $702 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $1,713 of the value assigned to the derivative liability was expensed on the first day the shares became publicly traded.
On June 16, 2015, $30,000 of the convertible note was converted into 652,174 common shares of the Company.
During the year ended June 30, 2016, $30,000 of the convertible note and accrued interest of $3,544 were converted into 16,480,000 common shares and the Company amortized $715 of the debt discount and reclassed the derivative liability on the date of conversion of $141,939 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $9,211 was amortized for year ended June 30, 2016.
February 2015 Note
On February 9, 2015, the Company issued a $15,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carried an interest rate of 12% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 60 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed. Effective February 9, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the issue date (February 9, 2015) at $21,817 using the Black Scholes valuation model. $15,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $6,817 of the value assigned to the derivative liability was expensed on the issue date of the convertible note payable.
On August 18, 2015, the convertible note of $15,000 and accrued interest of $651 was converted into 1,043,398 common shares and the Company amortized $6,750 of the debt discount and reclassed the derivative liability on the date of conversion of $42,350 to additional paid-in capital. As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $8,750 was amortized for the year ended June 30, 2016.
March 2015 Note
On March 13, 2015, the Company issued a $10,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 12% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 60 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed. Effective March 13, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The Company valued the conversion feature at the issue date (March 13, 2015) at $14,552 using the Black Scholes valuation model. $10,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $4,552 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, $10,000 of the convertible note and accrued interest of $992 were converted into 13,950,000 common shares and the Company amortized $1,667 of the debt discount and reclassed the derivative liability on the date of conversion of $29,121 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note was $0, the note had accrued interest of $454 and an unamortized debt discount of $0. Debt discount of $6,667 was amortized for year ended June 30, 2016.
April 2015 Note
On April 9, 2015, the Company issued a $10,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 12% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 30 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed. Effective April 9, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the issue date (April 9, 2015) at $16,215 using the Black Scholes valuation model. $10,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $6,215 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, $10,000 of the convertible note and accrued interest of $1,269 were converted into 9,854,055 common shares and the Company amortized $3,500 of the debt discount and reclassed the derivative liability on the date of conversion of $36,758 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $7,500 was amortized for year ended June 30, 2016.
August 2015 Note
On August 13, 2015, the Company issued a $25,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 8% per annum. The note payable is convertible at the option of the holder, at the lower of i) the closing sale price of the common stock on the principal market on the trading day and ii) 50% of the lowest sale price for the 30 consecutive trading.
Effective August 13, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company paid cash fees to this lender of $3,500 recognized as an original issue discount to the note. The Company valued the conversion feature at the issue date (August 13, 2015) at $60,723 using the Black Scholes valuation model. $21,500 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $39,223 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, $25,000 of the convertible note and accrued interest of $6,592 were converted into 64,111,259 common shares and the Company amortized $7,035 of the debt discount and reclassed the derivative liability on the date of conversion of $136,594 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $25,000 was amortized for year ended June 30, 2016.
September 2015 Note - 1
On September 9, 2015, the Company issued a $27,000 convertible promissory note payable and incurred $2,000 financing costs to a third party which were recognized as deferred financing costs. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 8% per annum. The note payable is convertible at the option of the holder, at 55% of the lowest trading price for the 20 prior trading days as reported on the OTC Markets, or any exchange upon which the common stock may be traded in the future.
On September 9, 2015 the Company agreed to issue a $27,000 convertible note payable, the back end note. On May 10, 2016, the Company issued $27,000 back end note and incurred $2,000 financing costs to a third party which were recognized as deferred financing costs.
Effective September 9, 2015 and May 10, 2016, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the issue date (September 9, 2015 and May 10, 2016) at $41,070 and $68,279, respectively, using the Black Scholes valuation model. Both of $27,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $14,070 and $41,279 of the value assigned to the derivative liability were expensed on the issue date of the convertible note.
During the year ended June 30, 2016, total of $54,000 of the convertible note and accrued interest of $1,314 were converted into 89,931,307 common shares and the Company amortized $36,908 of the debt discount and reclassed the derivative liability on the date of conversion of $123,804 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest, unamortized debt discount and deferred financing costs were $0. Debt discount of $54,000 and deferred financing cost of $2,000 were amortized for year ended June 30, 2016.
September 2015 Note - 2
On September 9, 2015, the Company issued a $35,750 convertible promissory note payable and incurred $2,750 financing costs to a third party which were recognized as deferred financing costs. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 10% per annum. The note payable is convertible at the option of the holder, at the lesser of i) 50% multiplied by the lowest trading price during the previous 25 trading day period ending on the latest complete trading day prior the date of this Note and ii) the 50% multiplied by the lowest trading price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date as reported on the OTC Markets, or applicable trading market.
Effective September 9, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company paid cash fees to this lender of $2,500 recognized as an original issue discount to the note. The Company valued the conversion feature at the issue date (September 9, 2015) at $71,483 using the Black Scholes valuation model. $33,250 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $38,233 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, the convertible note of $35,750 and accrued interest of $1,976 was converted into 55,160,266 common shares and the Company amortized $6,380 of the debt discount and reclassed the derivative liability on the date of conversion of $99,840 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest, unamortized debt discount and deferred financing costs were $0. Debt discount of $35,750 and deferred financing cost of $2,750 were amortized for year ended June 30, 2016.
October 2015 Note
On October 14, 2015, the Company issued a $58,000 convertible promissory note payable and paid $20,000 cash to purchase mobile applications. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 15% per annum. The note payable is convertible at a 45% of the lowest closing bid price for the Company’s common stock during the 20 trading days immediately preceding a conversion date.
Effective October 14, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the issue date (October 14, 2015) at $463,519 using the Black Scholes valuation model. $58,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $405,518 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, the convertible note of $58,000 and accrued interest of $5,197 were converted into 80,433,334 common shares and the Company amortized $19,333 of the debt discount and reclassed the derivative liability on the date of conversion of $105,837 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $58,000 was amortized for year ended June 30, 2016.
November 2015 Note
On November 25, 2015, the Company issued a $25,000 convertible promissory note payable and incurred $2,000 financing costs to a third party which were recognized as deferred financing costs. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 10% per annum. The note payable is convertible at 50% of the lowest daily trading price, determined on the then current trading market for the Company's common stock, for 15 trading days prior to conversion at the option of the Holder, in whole at any time and from time to time.
Effective November 25, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the issue date (November 25, 2015) at $50,366 using the Black Scholes valuation model. $25,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $25,366 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.
During the year ended June 30, 2016, the convertible note of $25,000 and accrued interest of $1,351 were converted into 61,661,344 common shares and the Company amortized $5,556 of the debt discount and reclassed the derivative liability on the date of conversion of $55,003 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest, unamortized debt discount and deferred financing costs were $0. Debt discount of $25,000 and deferred financing cost of $2,000 were amortized for year ended June 30, 2016.
Deferred Financing Costs
In connection with the convertible notes issued in September 2015, November 2015, May 2016 and October 2014 Note – Related party, the Company paid cash commissions of $10,692. In addition, the Company paid cash fees of $8,160 and issued an aggregate of 100,000 common shares valued at $3,850 as commissions for all of the convertible loans issued during the year ended June 30, 2016.
These aggregate fees of $22,702 were recognized as deferred financing costs which are being amortized to interest expense over the life of the notes. Aggregate amortization recognized during the year ended June 30, 2016, was $22,702, and the unamortized balance of deferred financing costs was $0 as of June 30, 2016.
7. CONVERTIBLE LOANS – RELATED PARTY
At June 30, 2016 and 2015, convertible loan – related party consisted of the following:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
October 2014 Note – Related party
|
|
$
|
-
|
|
|
$
|
22,000
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
-
|
|
|
|
2,342
|
|
|
|
|
|
|
|
|
|
|
Less: Debt discount
|
|
|
-
|
|
|
|
(6,771
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
|
|
17,571
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible loan
|
|
|
-
|
|
|
|
(17,571
|
)
|
|
|
|
|
|
|
|
|
|
Long-term convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
During year ended June 30, 2016, and 2015, the Company recognized interest expense of $1,319 and $2,350 and amortization of discount of $6,771 and $15,799, respectively. The related party loan is owed to the father of the former sole officer and Director of the Company.
October 2014 Note – Related party
On October 14, 2014, the Company issued a $22,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carried an interest rate of 15% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 60 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed.
Effective October 14, 2014, the Company recorded no beneficial conversion expense on the conversion feature as the specific conversion price was currently not determinable. However, effective December 15, 2014 the Company's shares of common stock became publicly quoted and accordingly we evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
The Company valued the conversion feature at the first day the shares were publicly quoted (December 15, 2014) at $26,782 using the Black Scholes valuation model. $22,570 included accrued interest of $570 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $4,212 of the value assigned to the derivative liability was expensed on the first day the shares became publicly traded.
During the year ended June 30, 2016, convertible note of $22,000 and accrued interest of $3,661 were purchased by third parties and converted into 20,561,051 common shares and the Company reclassed the fair value of the derivative liability on the date of conversion of $99,655 to additional paid-in capital.
As of June 30, 2016, the outstanding principal balance of the note, accrued interest and unamortized debt discount were $0. Debt discount of $6,771 was amortized for year ended June 30, 2016.
8. DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.
Fair Value Assumptions Used in Accounting for Derivative Liabilities.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2016. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used during the year ended June 30, 2016 and 2015:
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Expected term
|
|
0.00 - 1.00 years
|
|
|
0.29 - 1.00 years
|
|
Expected average volatility
|
|
25%-1,390%
|
|
|
108%-218%
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
0.00%-0.57%
|
|
|
0.01%-0.25%
|
|
At June 30, 2016 and 2015, the estimated fair values of the liabilities measured on a recurring basis are as follows:
Fair Value Measurements at June 30, 2016
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
June 30, 2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2015 Note
|
|
$
|
1,452
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,452
|
|
|
|
$
|
1,452
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,452
|
|
Fair Value Measurements at June 30, 2015
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
June 30, 2015
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
April 2013 - Note 2
|
|
$
|
21,984
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
21,984
|
|
January 2014 Note
|
|
|
13,707
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,707
|
|
October 2014 Note
|
|
|
43,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,600
|
|
February 2015 Note
|
|
|
21,648
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,648
|
|
March 2015 Note
|
|
|
15,354
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,354
|
|
April 2015 Note
|
|
|
15,662
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,662
|
|
October 2014 Note - related party
|
|
|
26,820
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,820
|
|
|
|
$
|
158,775
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
158,775
|
|
The following table summarizes the changes in the derivative liabilities during the years ended June 30, 2016 and 2015:
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
|
Balance - June 30, 2014
|
|
$
|
-
|
|
Addition of new derivative recognized as debt discounts
|
|
|
146,037
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
|
31,202
|
|
Settled on issuance of common stock
|
|
|
(40,461
|
)
|
Loss on change in fair value of the derivative
|
|
|
21,997
|
|
Balance - June 30, 2015
|
|
$
|
158,775
|
|
|
|
|
|
|
Addition of new derivative recognized as debt discounts
|
|
|
191,750
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
|
563,691
|
|
Settled on issuance of common stock
|
|
|
(982,366
|
)
|
Loss on change in fair value of the derivative
|
|
|
69,602
|
|
Balance - June 30, 2016
|
|
$
|
1,452
|
|
The aggregate loss on derivatives during the year ended June 30, 2016 and 2015 was $633,293 and $53,199.
9. COMMITMENTS AND CONTINGENCIES
Leases and Long term Contracts
The Company has not entered into any long term leases, contracts or commitments.
Legal
To the best of the Company's knowledge and belief, no legal proceedings are currently pending or threatened.
Rent
As of January 30, 2013, the Company leases office space at $200 per month with three-month terms, which shall be automatically extended for successive three-month periods unless there is the notice to cancel. The lease can be cancelled at any time by either party with 30 days’ notice prior to expiration of an applicable term. For the years ended June 30 2016 and 2015, the Company incurred $2,496 and $2,274, respectively.
10. SHAREHOLDERS' EQUITY
Convertible Preferred Stock
The Company is authorized to issue 5,000,000 shares of convertible preferred stock at a par value of $0.0001.
Each convertible preferred share is convertible into 1,500 shares of common stock and has the voting rights of 1,000 shares of common stock.
As at June 30, 2016 and 2015, 5,000,000 shares of the Company's convertible preferred stock were issued and outstanding.
Common Stock
The Company is authorized to issue 750,000,000 shares of common stock at a par value of $0.0001.
During the year ended June 30, 2016, the Company issued common shares, as follows:
|
·
|
In July 2015, the Company issued 2,400,000 shares of common stock valued at $288,000 to Alex Castle Rock Resources, LLC and 300,000 shares of common stock valued at $39,000 to Gilles Trahan in exchange for consulting services. The fair value of these shares was expensed during the year ended June 30, 2016.
|
|
|
|
|
·
|
In addition, the Company issued 100,000 shares of common stock valued at $3,850 to Almorli Advisors for loan commissions which were recognized as deferred financing costs, and will be amortized during the life of the loan.
|
|
|
|
|
·
|
In October, 2015, 1,723,329 shares of common stock were cancelled, previously issued to the Cicero Consulting Group, LLC in March 2015.
|
|
|
|
|
·
|
On February 29, 2016, the Company issued 5,000,000 shares of common stock to its interim CEO with a fair value of $10,500 for services performed as acting CEO.
|
|
|
|
|
·
|
During the year ended June 30, 2016, an aggregate of 420,743,693 common shares were issued for the conversion of debt and accrued interest of $342,530.
|
During the year ended June 30, 2015, the Company issued common shares, as follows:
|
·
|
In September 2014, the Company issued 20,000 shares of common stock, at $0.75 per share, to one investor, for cash consideration of $15,000; and 3,000 shares of common stock, at $0.75 per share, to a second investor, for cash consideration of $2,250.
|
|
|
|
|
·
|
In March 2015, the Company issued 1,723,329 shares of common stock to the Cicero Consulting Group, LLC in exchange for a consulting agreement for the term of 12 months, with the option to automatically renew for an additional 12 months, unless terminated by the Company. In October of 2015, the Company and Cicero Consulting Group, LLC agreed to terminate the agreement, and Cicero Consulting Group, LLC agreed to return and cancel the shares.
|
|
|
|
|
·
|
In March 2015, the Company issued 4,000 shares of common stock, at $0.75 per share, to an investor, for cash consideration of $3,000; and 4,000 shares of common stock, at $0.75 per share, to another investor, for cash consideration of $3,000.
|
|
|
|
|
·
|
In May 2015, the Company issued 700,000 shares of common stock, at$0.51 per share, to Alex Consulting, Inc., 28,000 shares of common stock, at$0.51 per share, to KJS Investment Corporation and 200,000 shares of common stock, at$0.51 per share, to SmallCapVoice.co, Inc. in exchange for a consulting agreement.
|
|
|
|
|
·
|
In June 2015, $30,000 of the principal amount of the promissory note was converted into 652,174 shares of common stock, at $0.09 per share, pursuant to the conversion of the Note. The Company recorded a gain on extinguishment of debt of $1,265.
|
As at June 30, 2016 and 2015, 464,667,527 and 37,847,163 shares of the Company's common stock were issued and outstanding, respectively.
11. RELATED PARTY TRANSACTIONS
In March 2016, the Company appointed current CEO and approved a base compensation package of $8,000 per month for CEO. The President of the Company provided management and office premises to the Company for no compensation in 2015. As of June 30, 2016 and 2015, the Company recorded accrued salary of $32,000 and $0.
During the year ended June 30, 2016, the former president paid accounts payable of $2,688 on behalf of the Company and the Company repaid $2,688. As of June 30, 2016 and 2015, the balance due to a related party was $0, respectively.
As of June 30, 2016, and 2015, the Company had an outstanding convertible note payable of $0 and $22,000 to the father of the former sole officer and Director of the Company (see Note 7).
12. INCOME TAXES
The Company follows ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
The provision for refundable federal income tax at 35% consists of the following for the periods ending:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Federal income tax benefit attributed to:
|
|
|
|
|
|
|
Net operating loss
|
|
$
|
72,142
|
|
|
$
|
62,256
|
|
Valuation allowance
|
|
|
(72,142
|
)
|
|
|
(62,256
|
)
|
Net benefit
|
|
$
|
-
|
|
|
$
|
-
|
|
The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax amount is as follows:
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Deferred tax attributed:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
176,347
|
|
|
$
|
104,205
|
|
Less: change in valuation allowance
|
|
|
(176,347
|
)
|
|
|
(104,205
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
As at June 30, 2016 the Company had an unused net operating loss (“NOL”) carry-forward of approximating $503,848 that is available to offset future taxable income; the loss carry-forward will start to expire in 2033. The utilization of these NOLs may become subject to limitations based on past and future changes in ownership of the Company pursuant to Internal Revenue Code Section 382.