Notes
to the Consolidated Financial Statements
March
31, 2017
(UNAUDITED)
Note
1 - Organization, Description of Business, and Basis of Accounting
Business
Organization
On January 24, 2017, Alltemp, Inc. (f/k/a
Source Financial, Inc.) (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with CSES Acquisition, Inc., a wholly owned subsidiary of the Company (“CSES Merger Sub”) and CSES Group, Inc. (“CSES”)
pursuant to which the Company agreed to acquire all of the capital stock of CSES (the “Merger”) with CSES becoming
a wholly owned subsidiary of the Company. The consummation of the Merger was effective on April 27, 2017. Pursuant to the Merger
Agreement, the Company agreed to issue to the shareholders of CSES 127,045,969 shares of the Company’s Common Stock and
issue to the holders of (a) warrants to purchase CSES Common Stock, warrants to purchase an aggregate of 18,409,680 shares of
the Company’s Common Stock, (b) options to purchase CSES Common Stock, options to purchase an aggregate of 31,961,200 shares
of the Company’s Common Stock, and (c) a convertible note of CSES, a promissory note of the Company in the principal amount
of $100,000 convertible into approximately 535,681 shares of the Company’s Common Stock.
In
connection with the Merger, the Company’s Certificate of Incorporation was amended to (a) change the Company’s
name to Alltemp, Inc. and (b) increase the Company’s authorized shares to 500,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock.
CSES
is a privately held company that was incorporated in the State of Nevada in June, 2015 for the purpose of commercializing a proprietary
refrigerant known as
alltemp®
.
Basis
of Presentation
The
accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally
accepted accounting principles for interim financial information. However, except as disclosed herein, there have been no material
changes in the information disclosed in the notes to the financial statements for the three months ended March 31, 2017. These
interim unaudited consolidated financial statements should be read in conjunction with those financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2017, are not necessarily indicative of the results that
may be expected for the year ended December 31, 2017.
The
accompanying consolidated financial statements include the accounts of Alltemp, Inc. and its wholly owned subsidiary Venture Track,
Inc. and have been prepared in accordance with accounting principles generally accepted in the United States. All significant
intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
For
comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation
used in 2017. The reclassifications have no impact on net loss.
Note
2 - Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At March 31, 2017,
the Company had accumulated deficit of $773,807. These conditions raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable
to continue as a going concern. The Company’s continued existence is dependent upon its ability to generate sufficient cash
flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis. It is the intent of management and significant stockholders to provide sufficient working capital
necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to
advance or loan funds to the Company or repay any such advances or loans exist.
Note
3 - Convertible Note Receivable – Related Party
On
September 20, 2016, the Company entered into a Binding Memorandum of Understanding (“MOU”) agreement with CSES Group,
Inc. In connection with the MOU, the Company provided a $250,000 bridge loan to CSES Group, Inc., bearing interest at the rate
of 10% per annum. As of March 31, 2017 and December 31, 2016, the Company has a balance of $250,000 outstanding. The Company merged
with CSES Group, Inc. on April 27, 2017 and upon completion of the merger, the $250,000 notes were converted into common shares
of Alltemp, Inc.
Note
4 - Related Party Transactions
The
Company receives advances from an officer of the Company for operation expenses. These advances, which are due on demand, have
an interest rate of 12% per annum and have no collateral. As of March 31, 2017 and December 31, 2016, the Company has advances
outstanding of $7,864 and $6,775, respectively.
Note
5 - Notes Payable
On
March 21, 2016, the Company entered into a 6-month promissory note agreement of $3,000. The note payable, which was due on September
21, 2016, has an interest rate of 12% per annum and is unsecured. The note was amended and is now due on June 21, 2017. As of
March 31, 2017 the note has not been repaid and the Company has an outstanding balance of $3,000.
On
March 23, 2016, the Company entered into a 6-month promissory note agreement of $5,000. The note payable, which was due on September
23, 2016, has an interest rate of 12% per annum and is unsecured. The note was amended and is now due on June 23, 2017. As of
March 31, 2017, the note has not been repaid and the Company has an outstanding balance of $5,000.
Note
6 - Convertible Notes Payable
On
September 14, 2016, the Company entered into a demand convertible promissory note agreement of $250,000. The note payable, which
has quarterly interest only payments, has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31,
2017 and December 31, 2016, the Company had an outstanding balance of $250,000. The noteholder is entitled, at its option, to
convert, at any time and from time to time, until payment in full, all or any part of the principal amount, into a total of 4,464,256
shares (or fraction thereof in the event of a partial conversion or conversions) of the Company’s common stock. On April
27, 2017, the noteholder converted into a total of 4,464,256 common shares the Company’s common stock.
On
December 5, 2016, the Company entered into a demand convertible promissory note agreement of $25,000. The note payable, which
has quarterly interest only payments, has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31,
2017 and December 31, 2016, the Company has an outstanding balance of $25,000. The noteholder is entitled, at its option, to convert,
at any time and from time to time, until payment in full, all or any part of the principal amount, into a total of 357,143 shares
(or fraction thereof in the event of a partial conversion or conversions) of the Company’s common stock. On April 27, 2017,
the noteholder converted into a total of 357,143 common shares the Company’s common stock.
On
December 19, 2016, the Company entered into a demand convertible promissory note agreement of $25,000. The note payable, which
has quarterly interest only payments, has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31,
2017 and December 31, 2016, the Company has an outstanding balance of $25,000. The noteholder is entitled, at its option, to convert,
at any time and from time to time, until payment in full, all or any part of the principal amount, into a total of 357,143 shares
(or fraction thereof in the event of a partial conversion or conversions) of the Company’s common stock. On April 27, 2017,
the noteholder converted into a total of 357,143 common shares the Company’s common stock.
On
December 19, 2016, the Company entered into a demand convertible promissory note agreement of $45,000. The note payable, which
has quarterly interest only payments, has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31,
2017 and December 31, 2016, the Company has an outstanding balance of $45,000. The noteholder is entitled, at its option, to convert,
at any time and from time to time, until payment in full, all or any part of the principal amount, into a total of 642,857 shares
(or fraction thereof in the event of a partial conversion or conversions) of the Company’s common stock. On April 27, 2017,
the noteholder converted into a total of 642,857 common shares the Company’s common stock.
On
December 30, 2016, the Company entered into a demand convertible promissory note agreement of $5,000. The note payable, which
has quarterly interest only payments, has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31,
2017 and December 31, 2016, the Company has an outstanding balance of $5,000. The noteholder is entitled, at its option, to convert,
at any time and from time to time, until payment in full, all or any part of the principal amount, into a total of 71,428 shares
(or fraction thereof in the event of a partial conversion or conversions) of the Company’s common stock. On April 27, 2017,
the noteholder converted into a total of 71,428 common shares the Company’s common stock.
Note
7 – Stockholders’ Deficit
Preferred
Stock
The
Company has 10,000 shares of Preferred Stock authorized, each having a par value of $0.01 per share, of which 5,000 shares are
designated as Series C Preferred Stock. As of March 31, 2017 and December 31, 2016, there were 2,082 Series C Preferred Stock
issued and outstanding. On May 5, 2017, the Series C Preferred Stock was converted into 3,189,208 shares of common stock.
Common
Stock
The
Company has 12,000,000 common shares authorized at a par value of $0.001. As of March 31, 2017 and December 31, 2016, there were
10,748,884 shares issued and outstanding.
On
February 9, 2016, Venture Track, Inc. purchased from a Spider Investments, LLC, all rights, title and interest in and to the development
of the apps in exchange for the issuance of 1,429,786 shares of Common Stock for a total value of $18, the intangibles original
basis prior to the reverse merger the Company.
On
June 30, 2016, prior to the merger with Venture Track, Alltemp (fka Source Financial) entered into a Share Exchange Agreement
(the “Moneytech Agreement”) with Moneytech Group Pty Ltd. and certain shareholders of Alltemp (fka Source Financial).
Pursuant to the terms of the Moneytech Agreement, an aggregate of 6,076,679 shares of Alltemp’s (fka Source Financial) common
stock and 5,000 shares of Series B Preferred Stock were to be cancelled, and a total of 2,714,957 shares of Alltemp’s (fka
Source Financial) common stock were still outstanding. Alltemp (fka Source Financial) was only able to cancel 6,053,004 shares
of their common stock and 5,000 shares of Series B Preferred Stock. Alltemp (fka Source Financial) was unable to cancel 23,675
shares of common stock in accordance with the Moneytech Share Exchange Agreement.
On
June 30, 2016, Alltemp (fka Source Financial) entered into a Share Exchange Agreement with Venture Track. Pursuant to the Share
Exchange Agreement, Venture Track agreed to exchange 100% of its outstanding common stock for 3,089,360 shares of common stock
and 4,500 shares of Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”),
of Alltemp (fka Source Financial). The 4,500 shares of Series C Preferred Stock are convertible into 6,893,100 shares of the Company’s
common stock, at the rate of 1,531.80 per share. The share exchange is accounted for as a reverse merger with Venture Track being
the accounting acquirer as it retained control of Alltemp (fka Source Financial) after the exchange. Alltemp (fka Source Financial)
is the legal parent company; the share exchange was treated as a recapitalization of Venture Track.
On
October 3, 2016, the Company issued a total of 467,000 shares of common stock to two consultants for consulting services valued
at $60,710.
On
October 10, 2016, the Company issued 750,000 shares of common stock valued at $108,000, as per the settlement agreement. See note
9 for litigation details.
On September 14, 2016, the Company entered
into a demand convertible promissory note agreement of $250,000. The note payable, which has quarterly interest only payments,
has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2017, the Company
had an outstanding balance of $250,000. On April 27, 2017, the noteholder converted into a total of 4,464,256 common shares of
the Company’s common stock.
On December 5, 2016, the Company entered
into a demand convertible promissory note agreement of $25,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $25,000. On April 27, 2017, the noteholder converted into a total of 357,143 common shares of the Company’s
common stock.
On December 19, 2016, the Company entered
into a demand convertible promissory note agreement of $25,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $25,000. On April 27, 2017, the noteholder converted into a total of 357,143 common shares of the Company’s
common stock.
On December 19, 2016, the Company entered
into a demand convertible promissory note agreement of $45,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $45,000. On April 27, 2017, the noteholder converted into a total of 642,857 common shares of the Company’s
common stock.
On December 30, 2016, the Company entered
into a demand convertible promissory note agreement of $5,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $5,000. On April 27, 2017, the noteholder converted into a total of 71,428 common shares of the Company’s
common stock.
Note 8 – Stock Options
On August 22, 2013, the Company granted
25,000 Stock Options to a contractor. These Stock Options are exercisable at an exercise price of $1.30 per share. The options
vested and became exercisable immediately upon granting and expired on August 22, 2016. The stock options were valued based on
the value of his services. On August 22, 2016, the stock options were not exercised and expired.
Note 9 – Litigation
A dispute arose between a consultant and
the Company regarding $108,000 in payments made by consultant on behalf of the Company in 2014 and 2013. The Parties agreed that
all lawsuits, claims and controversies between them are settled with the Company’s payment of 750,000 shares of common stock
to consultant. On October 10, 2016, the Company issued 750,000 shares of common stock to consultant for settlement.
Note 10 – Commitments
On September 16, 2016, the Company entered
into a consulting agreement ending on December 31, 2017. The Company is committed to issue the consultant 15,404,987 shares of
common stock for a total value of $912,963. The Company recorded stock-based compensation of $109,641 for the period ended March
31, 2017 and has common stock payable of $374,177 and $264,536 as of March 31, 2017 and December 31, 2016, respectively.
The Company maintains its principal office
at 604 Arizona Ave, Santa Monica, CA 90401, pursuant to a month-to-month lease at the rate of $75 per month.
Note
11 – Subsequent Events
The
consummation of the Merger with CSES Group, Inc. was effective on April 27, 2017. Pursuant to the Merger Agreement, the Company
agreed to issue to the shareholders of CSES 127,045,969 shares of the Company’s Common Stock and issue to the holders of
(a) warrants to purchase CSES Common Stock, warrants to purchase an aggregate of 18,409,680 shares of the Company’s Common
Stock, (b) options to purchase CSES Common Stock, options to purchase an aggregate of 31,961, 200 shares of the Company’s
Common Stock, and (c) a convertible note of CSES, a promissory note of the Company in the principal amount of $100,000 convertible
into approximately 535,681 shares of the Company’s Common Stock.
On September 14, 2016, the Company entered
into a demand convertible promissory note agreement of $250,000. The note payable, which has quarterly interest only payments,
has an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2017, the Company
had an outstanding balance of $250,000. On April 27, 2017, the noteholder converted into a total of 4,464,256 common shares of
the Company’s common stock.
On December 5, 2016, the Company entered
into a demand convertible promissory note agreement of $25,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $25,000. On April 27, 2017, the noteholder converted into a total of 357,143 common shares of the Company’s
common stock.
On December 19, 2016, the Company entered
into a demand convertible promissory note agreement of $25,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $25,000. On April 27, 2017, the noteholder converted into a total of 357,143 common shares of the Company’s
common stock.
On December 19, 2016, the Company entered
into a demand convertible promissory note agreement of $45,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $45,000. On April 27, 2017, the noteholder converted into a total of 642,857 common shares of the Company’s
common stock.
On December 30, 2016, the Company entered
into a demand convertible promissory note agreement of $5,000. The note payable, which has quarterly interest only payments, has
an interest rate of 5% per annum, no maturity date and is unsecured. As of March 31, 2017 and December 31, 2016, the Company has
an outstanding balance of $5,000. On April 27, 2017, the noteholder converted into a total of 71,428 common shares of the Company’s
common stock.
On May 5, 2017, the Series C Preferred
Stock was converted into 3,189,208 shares of common stock.