NOTES
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER
30, 2016
While
the information presented in the accompanying interim nine months consolidated financial statements is unaudited, it includes
all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations
and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States
of America. These interim financial statements follow the same accounting policies and methods of their application as the Company’s
December 31, 2015 annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested
that these interim financial statements be read in conjunction with the Company’s December 31, 2015 annual financial statements.
Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that can be expected
for the year ended December 31, 2016.
Note
2
|
Nature
and Continuance of Operations
|
The
Company was incorporated on June 15, 1998 in the State of Nevada, USA and the Company’s common shares are publicly traded
on the OTC Bulletin Board.
Up
until fiscal 2014, the Company was in the business of mineral exploration. On May 28, 2014, the Company formalized an agreement
whereby it purchased assets associated with a smokeless cannabis delivery system. The Company planned to develop this system for
commercial purposes. On December 14, 2014, this asset purchase agreement was terminated.
On
January 21, 2015, a majority of the Company’s stockholders approved a consolidation of the issued and outstanding shares
of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000.
On March 11, 2015, the Company effectively changed its name from Madison Explorations, Inc. to Madison Technologies Inc. and
effected the stock consolidation. These financial statements give retroactive effect to both these changes.
On
September 16, 2016 the Company entered into an exclusive distribution product license agreement with Tuffy Packs, LLC to distribute
products into the United Kingdom and 43 other countries. The Company will be selling ballistic panels which are personal body
armors, that conforms to the National Institute of Justice (NIJ) Level IIIA threat requirements. The Company’s plan of operations
and sales strategy include online and social media marketing, as well as attending various tradeshows and conferences.
These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to
a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next
twelve months. Realization values may be substantially different from carrying values as shown and these financial statements
do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities
should the Company be unable to continue as a going concern. At September 30, 2016, the Company had not yet achieved profitable
operations, has accumulated losses of $540,718 since its inception and expects to incur further losses in the development of its
business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s
ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional
funds by equity financing and/or related party advances. That said, there is no assurance of additional funding being available.
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
8
|
Note
3
|
Summary
of Significant Accounting Policies
|
T
here
has been one addition to accounting policies from those disclosed in the notes to the audited consolidated financial statements
for the year ended December 31, 2015.
Intangible
assets
Intangible
assets are non-monetary identifiable assets, controlled by the Company that will produce future economic benefits, based on reasonable
and supportable assumptions about conditions that will exist over the life of the asset. An intangible asset that does not meet
these attributes will be recognized as an expense when it is incurred. Intangible assets that do, are capitalized and initially
measured at cost. Those with a determinable life will be amortized on a systematic basis over their future economic life. Those
with a indefinite useful life shall not be amortized until its useful life is determined to be longer indefinite. An intangible
assets subject to amortization shall be periodically reviewed for impairment. A recoverability test will be performed and, if
applicable, unscheduled amortization is considered.
A
license agreement has been capitalized and recorded at cost. It will be amortized over the life of the contract, which is two
years.
Note
4
|
Recent
Accounting Pronouncements
|
The
Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued,
which may be in advance of their effective date. Management does not believe that any pronouncement not yet effective but recently
issued would, if adopted, have a material effect on the accompanying financial statements.
The
Company entered into an exclusive product license agreement on September 16, 2016 to sell Ballistic Panels in certain countries.
The license is for a period of two years unless terminated and may be renewed for successive terms of two years each. The payment
terms for the license is as follows:
1.
$10,000 payable within seven days after the effective date;
2.
An additional $15,000 payable within 30 days after the effective date; and
3.
A final payment of $25,000 payable within 90 days of the effective date.
At
September 30, 2016, the Company paid $10,000 to the Licensor.
The
Company has two notes payable to Paleface Holdings Inc. Each note is unsecured and payable on demand.
|
a)
|
$25,000
note with annual interest payable at 8%.
|
As
at September 30, 2016, accrued interest on the note was $23,297 (September 30, 2015 - $21,297). The note payable balance including
accrued interest was $48,297 as at September 30, 2016 (September 30, 2015 - $46,297). Interest on the debt for each of the nine
months ended September 30 was $1,500.
|
b)
|
$22,825
($30,000 CDN) with annual interest payable at 5%
|
As
at September 30, 2016, accrued interest on the note was $10,841 (September 30, 2015 - $9,506). The note payable balance including
accrued interest was $33,666 as at September 30, 2016 (September 30, 2015 - $31,892). Interest on debt for the nine months ended
September 30 was $864 in 2016 and $839 in 2015.
The
company also has an unsecured note payable on demand to Gens Incognito Inc. for $25,000. As
at September 30, 2016, accrued
interest on the note was $6,950 (September 30, 2015 - $3,950). The note payable balance including accrued interest was $31,950
as at September 30, 2016 (September 30, 2015 - $28,950)
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
9
|
Note
7
|
Related
Party Advance
|
In
2008 the President advanced the Company $561 repayable without interest or any other terms. The unpaid balance as at September
30, 2016 is $261. There were no related party transactions during the nine months ended September 30, 2016.
On
January 21, 2015, a majority of the Company’s stockholders approved a consolidation of the issued and outstanding shares
of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000.
This was effected on March 11, 2015. This consolidation has been applied retroactively and all references to the number of shares
issued reflect this consolidation.
On
March 30, 2006 the Company entered into a private placement agreement whereby the Company issued 20,000 Regulation-S shares in
exchange for $50,000. ($2.50 per share).
On
June 7, 2004 the Company issued 5,907,000 in consideration of $472 in cash. ($.00008 per share.)
On
June 14, 2001 the Company approved a forward stock split of 5,000:1. These financial statements have been retroactively adjusted
to effect this split.
On
June 15, 1998 the Company authorized and issued 5,375,000 shares of its common stock in consideration of $430 in cash. ($.00008
per share.)
There
are no shares subject to warrants or options as of September 30, 2016.
Note
9
|
Convertible
Notes Payable
|
In
total there are ten convertible notes payable. All notes are non-interest bearing, unsecured and payable on demand. The notes
are convertible into common stock at the discretion of the holder on six different conversion rate: $0.01 debt to 1 common share,
$0.045 to 1 common share; $0.005 to 1 common share; $0.15 to 1 common share; $0.05 to 1 common share; and $0.04 to 1 common share.
The effect that conversion would have on earnings per share has not been disclosed due to the anti-dilutive effect.
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
10
|
There
are four convertible notes payable convertible on the basis of $0.01 of debt to 1 common share
.
The
balance of the first convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
|
|
Sept 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
Value allocated to additional paid-in capital
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
40,000
|
|
|
|
40,000
|
|
Balance, convertible note payable
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
The
total discount of $40,000 was amortized over 5 years starting April 2008. and was fully amortized as at April 2013.
The
balance of the second convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
|
|
Sept 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Value allocated to additional paid-in capital
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
20,000
|
|
|
|
20,000
|
|
Balance, convertible note payable
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
The
total discount of $20,000 was amortized over 5 years starting June 2010 and was fully amortized as at June 2015. Interest of $2,000
was recorded for the nine months ended September 30, 2015.
The
balance of the third convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
|
|
Sept 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Value allocated to additional paid-in capital
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
21,250
|
|
|
|
17,750
|
|
Balance, convertible note payable
|
|
$
|
21,250
|
|
|
$
|
17,750
|
|
The
total discount of $25,000 is being amortized over 5 years starting July 2012. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016 and 2015, $3,750 was recorded as interest expense. As at September 30, 2016 the unamortized
discount is $3,750.
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
11
|
The
balance of the fourth convertible note payable convertible on the basis of $0.01 of debt to 1 common share at is as follows:
|
|
Sept 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Value allocated to additional paid-in capital
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
|
|
|
|
|
|
Amortized discount
|
|
|
17,500
|
|
|
|
13,750
|
|
Balance, convertible note payable
|
|
$
|
17,500
|
|
|
$
|
13,750
|
|
The
total discount of $25,000 is being amortized over 5 years starting April 2013. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016 and 2015, $3,750 was recorded as interest expense. As at September 30, 2016 the unamortized
discount is $7,500.
There
are two convertible notes payable convertible on the basis of $0.005 of debt to 1 common share
The
balance of the first convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
|
|
Jun 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Value allocated to additional paid-in capital
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
10,000
|
|
|
|
9,500
|
|
Balance, convertible note payable
|
|
$
|
10,000
|
|
|
$
|
9,500
|
|
The
total discount of $10,000 is being amortized over 5 years starting April 2011. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016, $500 was recorded as interest expense and $1,500 was recorded as interest expense
for the nine months ended September 30, 2015
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
12
|
The
balance of the second convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
|
|
Sept
30, 2016
|
|
|
Dec
31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from promissory note
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Value
allocated to additional paid-in capital
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Balance
allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized
discount
|
|
|
10,000
|
|
|
|
9,250
|
|
Balance,
convertible note payable
|
|
$
|
10,000
|
|
|
$
|
9,250
|
|
The
total discount of $10,000 is being amortized over 5 years starting May 2011. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016, $750 was recorded as interest expense and $1,500 was recorded as interest expense
for the nine months ended September 30, 2015.
There
is one convertible notes payable convertible on the basis of $0.045 of debt to 1 common share
The
balance of this convertible note payable is as follows:
|
|
Sep 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Value allocated to additional paid-in capital
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
|
|
Amortized discount
|
|
|
12,083
|
|
|
|
8,333
|
|
Balance, convertible note payable
|
|
$
|
12,083
|
|
|
$
|
8,333
|
|
The
total discount of $25,000 is being amortized over 5 years starting May 2014. Accordingly, the annual interest rate is 20% and
for the nine months ended June 30, 2016 and 2015, $3,750 was recorded as interest expense. As at September 30, 2016 the unamortized
discount is $12,917.
There
is one convertible notes payable convertible on the basis of $0.15 of debt to 1 common share
The
balance of this convertible note payable is as follows:
|
|
Sep 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Value allocated to additional paid-in capital
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
|
|
|
|
|
|
Amortized discount
|
|
|
7,500
|
|
|
|
3,750
|
|
Balance, convertible note payable
|
|
$
|
7,500
|
|
|
$
|
3,750
|
|
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
13
|
The
total discount of $25,000 is being amortized over 5 years starting April, 2015. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016, $3,750 was recorded as interest expense, $2,500 was recorded as interest expense
for the nine months ended September 30, 2015. As at September 30, 2016 the unamortized discount was $17,500.
There
is one convertible notes payable convertible on the basis of $0.05 of debt to 1 common share
The
balance of this convertible note payable is as follows:
|
|
Sep 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
21,000
|
|
|
$
|
-
|
|
Value allocated to additional paid-in capital
|
|
|
21,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
1,750
|
|
|
|
-
|
|
Balance, convertible note payable
|
|
$
|
1,750
|
|
|
$
|
-
|
|
The
total discount of $21,000 is being amortized over 5 years starting May, 2016. Accordingly, the annual interest rate is 20% and
for the nine months ended September 30, 2016, $1,750 was recorded as interest expense and $0 was recorded as interest expense
for the nine months ended September 30, 2015. As at September 30, 2016 the unamortized discount is $19,250.
There
is one convertible notes payable convertible on the basis of $0.04 of debt to 1 common share
The
balance of this convertible note payable is as follows:
|
|
Sep 30, 2016
|
|
|
Dec 31, 2015
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from promissory note
|
|
$
|
20,000
|
|
|
$
|
-
|
|
Value allocated to additional paid-in capital
|
|
|
20,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance allocated to convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Amortized discount
|
|
|
-
|
|
|
|
-
|
|
Balance, convertible note payable
|
|
|
-
|
|
|
$
|
-
|
|
The
total discount of $20,000 will be amortized over 5 years starting October, 2016. The annual interest rate will be 20%. and at
September 30, 2016 the unamortized discount is $20,000.
The Company
paid $6,500 of the required $15,000 required under the licensing agreement.
Form 10-Q – Q3
|
Madison Technologies Inc.
|
Page
14
|