GH
CAPITAL INC.
(Exact
name of registrant as specified in its charter)
Commission
file number 000-55798
Florida
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7389
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38-3955212
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(State or other
jurisdiction of
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(Primary Standard
Industrial
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(I.R.S. Employer
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incorporation
or organization)
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Classification
Code Number)
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Identification
No.)
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200
South Biscayne Boulevard
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Suite 2790
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Miami, FL 33131
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Tel.: (305) 714-
9397
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(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive offices)
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Securities registered under Section 12(b) of the Exchange Act:
Title
of each class
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Name
of each exchange on which registered:
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None
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None
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Securities
registered under Section 12(g) of the Exchange Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐
Note
- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act from their obligations under those Sections.
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files) Yes ☒ No ☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller
reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
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Accelerated filer
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Non-accelerated
filer
(Do
not check if a smaller reporting company)
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Smaller reporting company
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☒
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal quarter. $4,652,187.
As
of December 26, 2018, the Company has 71,026,818 shares of common stock issued and outstanding.
GH
CAPITAL INC.
Form
10-K
September
30, 2018
Table
of Contents
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act
of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts.
Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,”
“believe,” “estimate,” “intend,” “could,” “should,” “would,”
“may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,”
“project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions.
These forward-looking statements are found at various places throughout this Report and include information concerning possible
or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of
management; any other statements regarding future operations, future cash needs, business plans and future financial results,
and any other statements that are not historical facts.
From
time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases,
in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements
included in this Report and in any other reports or public statements made by us are not guarantees of future performance and
may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and
beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our
control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.
In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur
or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking
statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except
to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or
otherwise.
For
discussion of factors that we believe could cause our actual results to differ materially from expected and historical results
see “Item 1A — Risk Factors” below.
In
this report, unless otherwise indicated or the context otherwise requires, “GH Capital”, “the Company”,
“we”, “us” or “our” refer to GH Capital Inc., a Florida corporation.
PART
I
ITEM
1. BUSINESS
Overview
GH
Capital Inc. (the “Company”), a Florida corporation, provides consulting services to European and international companies
looking to access US capital markets. Our team consists of attorneys and seasoned professionals who understand the requirements
of “going public”. Pulling together our network of service providers, we help direct companies to the most efficient
and cost-effective solutions for properly entering US capital markets. Our team also works to develop a strategy for handling
the burden of being a public company, including, but not limited to, providing resources for investor relations, public relations,
capital structuring, and personnel.
We
were formed to discover and promote new technologies in the financial industry, but our only product or service was ClickDirectPay.
We offered our service to potentially high-risk, niche markets. These markets included e-commerce, gaming, adult entertainment,
and digital goods. Furthermore, we marketed our service to large acquiring and issuing banks, as well as financial institutions
in Europe, to provide our service to their clients.
Our
business originally was based on our ClickDirectPay product which focused on establishing ClickDirectPay as a cost-effective alternative
to current payment gateway systems used throughout Europe. Our service assisted online merchants to increase profits by reducing
existing processing costs. Our customers and users throughout Europe (including Germany, Austria, Spain, Italy, Greece, and the
Netherlands) preferred to pay bills with an online wire transfer instead of paying with credit cards or Paypal. We believe our
ClickDirectPay payment gateway will meet the needs of the European online marketplace. In 2017, we began work on cryto-currency
payment processing. Although, the Company did not participate in mining, coin offerings, or any other part of the production of
coins, the regulatory environment surrounding cypto-currencies, along with highly volatile markets, we found little success in
the product. On September 18, 2018, we terminated the ClickDirectPay in its entirety to focus on our capital market consulting
business. We currently have two clients and continue to market our services throughout Europe.
Going
Concern
These
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in our financial statements, we had net losses of
$1,058,972 and $5,051,835 for the years ended September 30, 2018 and 2017, respectively. The net cash used in operations were
$215,699 and $147,156 for the years ended September 30, 2018 and 2017, respectively. Additionally, we had an accumulated deficit
of $6,390,864 at September 30, 2018. These conditions raise substantial doubt about our ability to continue as a going concern
for a period of twelve months from the issuance date of this report. The Company is seeking to raise capital through additional
debt and/or equity financings to fund its operations in the future. Management cannot provide assurance that we will ultimately
achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Although we have historically
raised capital from sales of common stock, there is no assurance that we will be able to continue to do so. If we are unable to
raise additional capital or secure additional lending in the near future, management expects that we will need to curtail our
operations. Our financial statements do not include any adjustments related to the recoverability and classification of assets
or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Customers
Currently,
we have engaged 2 clients seeking US capital markets and in negotiation with 2 other parties.
Marketing
We
market our consulting services through word of mouth, participation in online forums such as IPOAngels.com, as well as traditional
print media and online publications in Europe.
We
are focusing on expanding our offering within Europe by seeking out banks and financial institutions in other European countries
in need of our service offering.
Competition
It
is difficult to identify any direct competitors in our space as capital market access tends to be driven by relationships. We
are not aware of any other parties providing consulting services relating to resource management being sold directly to European
parties looking for access to US capital markets.
Government
Regulation
We
are not aware of any existing governmental regulations that would have a material effect on our business at this time. However,
we must at all times be mindful of regulations related to a) trade with the United States and the domicile country of our clients;
and b) the ever-changing landscape of US securities laws, both at the federal and state level. We at no time act as a “broker”
as defined by the Securities Act of 1933.
Employees
We
currently have no employees, aside from the Company’s Directors, Wolfgang Ruecker and William Eilers, our COO and
Director Bane Katic, and our CEO, Secretary and Director William Bollander who was appointed on October 24, 2018.
ITEM
1A. RISK FACTORS
As
a smaller reporting company, we are not required to provide risk factors.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our
common stock is traded on the OTCQB under the symbol “GHHC”.
Holders
of Capital Stock
December
19, 2018, we had 38 holders of our common stock.
Rule
144 Shares
In
general, under Rule 144 as currently in effect, an affiliate who has beneficially owned shares of a company’s common stock
for at least one year is entitled to sell within any three month period a number of shares that does not exceed 1% of the number
of shares of the Company’s common stock then outstanding which, in our case, would equal approximately 710,268 shares of
our common stock as of December 19, 2018.
In
accordance with the volume and trading limitations of Rule 144 of the Act, in general, under Rule 144 as currently in effect,
a person who has beneficially owned shares of a company’s common stock for at least twelve month if the Company is not subject
to the reporting requirements of the Securities Act of 1934 or six months provided that the company has been subject to the reporting
requirements of the Securities Act of 1934 for a minimum of 90 days, is entitled to sell within any three month period a number
of shares that does not exceed the greater of 1% of the number of shares of the company’s common stock then outstanding, since
we are seeking to list our common stock on the OTC.
Sales
under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public
information about the company. Under Rule 144, a person who is not one of the Company’s affiliates at any time during the
three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least one year if the Company
has been subject to the reporting
requirements of the Securities Act of 1934 and two years if not subject to the reporting
requirements of the Securities Act of 1934, is entitled to sell shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Stock
Option and Warrant Grants
We
currently have not issued any stock options. We currently have 50,000 outstanding stock warrants.
Recent
Sales of Unregistered Securities
Please refer to Note 8 of our Financial Statements included
herein for the year ended September 30, 2018.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM
6. SELECTED FINANCIAL DATA
We
are not required to provide the information required by this item because we are a smaller reporting company.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
See
Forward Statements – Cautionary Factors in Item 1 herein
Business
Overview
We
were incorporated on May 5, 2014 in the State of Florida and commenced operations in October 2014. We provided online payment
processing services to consumers, primarily in Europe and provide certain consulting services to assist companies in going public.
On
September 18, 2018, our management terminated our online payment processing services. As a result, we will shift our focus to
our consulting services business. As such, the online payment processing services business activities were reclassified and reported
as part of “discontinued operations”.
For
the years ended September 30, 2018 and 2017, we generated revenues from continuing operations of $62,667 and $0, including
revenues from a related party of $56,000 and $0, respectively. All of the related party revenues were a result of a related
party consulting agreement entered into with Vmoney Holdings, Inc. (“Vmoney”).
Plan
of Operations
The
Company’s strategy is to focus on its consulting services for business development to assist companies in going public.
Critical
Accounting Policies and Estimates
While
our significant accounting policies are more fully described in Note 2 to our financial statements, we believe that the following
accounting policies are the most critical to aid you in fully understanding and evaluating this management’s discussion
and analysis.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Included in these estimates are valuation of marketable securities, assumptions used in determining the useful lives and valuations
of long-lived assets, the fair value of derivative liabilities, valuation allowance for deferred tax assets and the valuation
of stock issued for services or upon conversion of debt.
Marketable
Securities
Pursuant
to ASC 320, Investments – Debt and Equity Securities, marketable securities held by us are held for an indefinite period
of time and thus are classified as available-for-sale securities. The fair value is based on quoted market prices for the investment
as of the balance sheet date. Realized investment gains and losses are included in the statement of operations, as are provisions
for other than temporary declines in the market value of available for-sale securities. Unrealized gains and unrealized losses
deemed to be temporary are excluded from earnings (losses), net of applicable taxes, as a component of other comprehensive income
(loss). Factors considered in judging whether an impairment is other than temporary include the financial condition, business
prospects and creditworthiness of the issuer, the length of time that fair value has been less than cost, the relative amount
of decline, and our ability and intent to hold the investment until the fair value recovers. Realized gains and losses and decline
in value judged to be other than temporary on available-for-sale securities are included in the statements of operations. The
cost of securities sold or disposed is determined on first-in first-out, or FIFO method.
Intangible
Assets
Intangible
assets with finite lives primarily consist of licensed technology and were being amortized on a straight-line basis over the expected
period to be benefited by future cash flows of two years and reviewed for impairment. As a result, we fully impaired all intangible
assets as of September 30, 2017.
Impairment
of Long-lived Assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an
impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount
of impairment is measured as the difference between the asset’s estimated fair value and its book value.
Derivative
liabilities
The
Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those
contracts qualify as derivatives to be separately accounted for in accordance with FASB ASC 815-10-05-4 and 815-40. This
accounting treatment requires that the carrying amount of any embedded conversion options be recorded at fair value at issuance
and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is
the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon
conversion, exercise and repayment, the respective derivative liability is marked to fair value at the conversion, repayment or
exercise date, and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt
extinguishment.
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of a sale arrangement exists, services have been rendered, the
sales price is fixed and determinable and collectability is reasonably assured. There are two sources of recognized revenue.
These comprise (1) payment processing services related to online money transfer transactions for diversified online merchants
with a target market in Europe and (2) consulting for business development. For the consulting services, included in
continuing operations, revenue is recognized when we satisfy the performance obligation based on the consulting agreement. We
received consideration in the form of cash and/or securities. We measure and recognize these securities received at fair
value on the date our revenues are agreed to over the terms of the related consulting agreement. In the payment processing
segment, which is included in loss from discontinued operations, revenues consisted of fees generated through the electronic
processing of payment transactions and related services, and was recognized as revenue during the period the transactions
were processed or when the related services were performed. Merchants may be charged for these processing services at a
bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are
charged for each transaction. Merchant customers were generally charged a flat fee plus percentage per transaction, while
others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other
miscellaneous services. Revenues also included any up-front fees for the work involved in implementing the basic
functionality required to provide electronic payment processing services to a customer. Revenue from such implementation fees
was recognized over the term of the related service contract. The Company’s revenue was comprised of monthly recurring
services provided to customers, for whom charges are contracted for over a specified period of time. Payments received from
customers that are related to future periods are recorded as deferred revenue until the service is provided.
Stock-Based
Compensation
Stock-based
compensation is accounted for based on the requirements of ASC 718, Share-Based Payment, which requires recognition in the financial
statements of the cost of employee and director services received in exchange for an award of equity instruments over the period
the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The
Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services
received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based
payments non-employees, compensation expense is determined at the measurement date defined as the earlier of a) the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached or b) the date at which the counterparty’s
performance is complete.
The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date.
The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated, based on the then
current fair value, at each subsequent reporting date.
Recent
Accounting Pronouncements
From
time to time, the FASB or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB ASC are
communicated through issuance of an Accounting Standards Update (“ASU”).
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606),”
(“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.
This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model
will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities
for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not
permitted.
The
FASB has approved a one-year deferral of the effective date (for annual reporting periods beginning after December 15, 2017) with
the option to early adopt using the original effective date. Entities may use either a full retrospective or a modified retrospective
approach to adopt ASU 2014-09. In December 2016, the FASB issued Accounting Standards Update No. 2016-20, Technical Corrections
and Improvements to Topic 606, Revenue from Contracts with Customers, or ASU 2016-20. In May 2016, the FASB issued Accounting
Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,
or ASU 2016-12. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers
(Topic 606): Identifying Performance Obligations and Licensing, or ASU 2016-10. In March 2016, the FASB issued Accounting Standards
Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue
Gross), or ASU 2016-08.
These
updates provide additional clarification and implementation guidance on the previously issued Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. The amendments in ASU 2016-20 provide technical corrections
to various implementation examples and clarifying guidance on the treatment of capitalized advertising costs, impairment testing
of capitalized contract costs, performance obligation disclosures and scope exceptions. The amendments in ASU 2016-12 provide
clarifying guidance on assessing collectability; noncash consideration; presentation of sales taxes; and transition. The amendments
in ASU 2016-10 provide clarifying guidance on the materiality and evaluation of performance obligations; treatment of shipping
and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to
use or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify
the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain
types of arrangements. Collectively, these updates will require a company to recognize revenue when it transfers promised goods
or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange
for those goods or services. The adoption of ASU 2016-20, ASU 2016-12, ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s
adoption of ASU 2014-09. The new guidance permits adoption through either a full retrospective approach or a modified retrospective
approach with a cumulative effect adjustment to retained earnings. We will adopt this standard as required on October 1, 2018.
The Company has assessed the impact that adopting this new accounting guidance will have on its financial statements and footnote
disclosures and believes such impact will not be material.
In
January 2017, the FASB issued the Accounting Standards Update No. 2017-01 (“ASU 2017-01”), Clarifying the Definition
of a Business. ASU 2017-01 clarifies the definition of a business and establishes a screening process to determine whether an
integrated set of assets and activities acquired is deemed the acquisition of a business or the acquisition of assets. ASU 2017-01
is effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively, with early
adoption permitted. The Company does not expect that adoption of ASU 2017-01 will have a material impact on its financial statements
and related disclosures.
In
June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting
,
which simplifies
several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation
guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07
is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early
adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company
is evaluating the impact this ASU will have on its financial statements.
In
August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”,
which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard
removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s
financial statements.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
Results
of Operations
Revenues
For
the years ended September 30, 2018 and 2017, we had $62,667 and $0 in revenues from continuing operations, including revenues from a related party of
$56,000 and $0, respectively. Revenues increased due to an increase in related party revenue of $56,000. All of the related
party revenues were from Vmoney, Inc.
On
September 18, 2018, our management terminated our online payment processing services. As a result, we will shift our focus to
our consulting services business. As such, the online payment processing services business activities were reclassified and reported
as part of “discontinued operations” (see below).
Cost
of Revenues
For
the year ended September 30, 2018, we had $3,000 in cost of revenues as compared to $0 for the year ended September 30, 2017,
an increase of $3,000. Cost of revenues relates to our consulting service business and consist primarily of labor cost and fees.
Operating
Expenses
For
the year ended September 30, 2018, we incurred $312,403 in operating expenses as compared to $5,046,967 for the year ended September
30, 2017, a decrease of $4,734,564. Operating expenses consisted of the following:
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Year Ended
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September 30,
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2018
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2017
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Compensation
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$
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13,500
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$
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3,061,900
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Amortization of software development costs and intangible asset
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-
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30,617
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Professional fees
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281,364
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1,852,913
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Asset impairment
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-
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85,572
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Other selling, general and administrative expenses
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17,539
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15,965
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Total
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$
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312,403
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$
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5,046,967
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Operating
expenses increased primarily due to
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●
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For
the year ended September 30, 2018, there was a decrease in compensation of $3,048,400, primarily due to stock-based
compensation to our director and CEO for $3,045,000 in 2017; a decrease in professional fees of $1,571,549, primarily due
to a decrease in consulting fees of $1,441,875 which were primarily stock based and a decrease in investor relations
services of $123,650.
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●
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For
the year ended September 30, 2018 there was a decrease in amortization of software development costs of $30,617 (or 100%)
arising from the impairment of these costs during the year ended September 30, 2017.
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Operating
loss from operations from continuing operations
For
the year ended September 30, 2018, we incurred an operating loss from operations from continuing operations of $252,736 as compared
to $5,046,967 for the year ended September 30, 2017, a decrease of $4,794,231. The decrease was resulting from the discussion
above.
Other
Expenses
For
the year ended September 30, 2018, we incurred total other expense of $719,052 as compared to other expense of $1,151,
an increase of $717,901. The increase in other expenses was primarily related to the recording of an initial fair value of
a conversion option liability and a net loss from changes in fair value of the conversion option liability of $389,187 and
interest expense of $289,363 from convertible note borrowings during the year ended September 30, 2018 as compared to $0 for
the year ended September 30, 2017.
Discontinued
Operations
The
remaining assets and liabilities of discontinued operations are presented in the balance sheets under the caption “Assets
of discontinued operations” and “Liabilities of discontinued operations” which relate to the operations of
the online payment processing services. The carrying amounts of the major classes of these assets and liabilities as of September
30, 2018 and 2017 are summarized as follows:
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As of September 30,
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2018
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2017
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Assets:
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Accounts receivable
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$
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-
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$
|
1,761
|
|
Accounts receivable – related party
|
|
|
-
|
|
|
|
980
|
|
Assets of discontinued operations
|
|
$
|
-
|
|
|
$
|
2,741
|
|
Liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,286
|
|
|
|
4,856
|
|
Liabilities of discontinued operations
|
|
$
|
14,286
|
|
|
$
|
4,856
|
|
The
following table sets forth for the years ended September 30, 2018 and 2017, selected financial data of the Company’s discontinued
operations of its online payment processing services.
|
|
For the Years ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
11,996
|
|
|
$
|
28,039
|
|
Cost of sales
|
|
|
(33,669
|
)
|
|
|
29,527
|
|
Gross loss
|
|
|
(21,673
|
)
|
|
|
(1,488
|
)
|
Operating expenses
|
|
|
(65,511
|
)
|
|
|
(2,229
|
)
|
Loss from discontinued operations
|
|
$
|
(87,184
|
)
|
|
$
|
(3,717
|
)
|
Net
Loss
For
the year ended September 30, 2018, we incurred a net loss of $1,058,972 as compared to $5,051,835 for the year ended September
30, 2017, a decrease of $3,992,863, resulting from the discussion above. For the year ended September 30, 2018, loss from continuing
operations, basic and diluted was $0.02 per common share and loss from discontinued operations, basic and diluted was $0.00 per
common share as compared to loss from continuing operations, basic and diluted was $0.10 per common share and loss from discontinued
operations, basic and diluted was $0.00 per common share for the year ended September 30, 2017.
Unrealized
Loss on Available-for-sale Marketable Securities
For
the year September 30, 2018, we incurred an unrealized gain (loss) on available-for-sale marketable securities of $(896) as compared
to an unrealized gain of $2,011 for the year ended September 30, 2017, an increase of $2,907 related to our marketable securities
that we invested in during fiscal 2017.
Comprehensive
Loss
For
the year ended September 30, 2018, we incurred a comprehensive loss of $1,059,868 as compared to $5,049,824 for the year ended
September 30, 2017, a decrease of $3,989,956 resulting from the discussion above.
Liquidity,
Capital Resources, and Off-Balance Sheet Arrangements
Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had working capital
deficit of $888,693 and $67,491 of cash at September 30, 2018 and working capital of $262 and $12,694 of cash at September 30,
2017.
Cash
flows for the year ended September 30, 2018 compared to the year ended September 30, 2017
Net
cash used in operating activities was $215,699 for the year ended September 30, 2018 as compared to $147,156 for the year ended
September 30, 2017, an increase of $68,543.
|
●
|
Net
cash used in operating activities for the year ended September 30, 2018 primarily reflected a net loss of $1,058,972 and the
add-back of non-cash items consisting of stock-based compensation of $105,000, stock based conversion fees and non-cash penalty
fees of $18,500, amortization of debt discounts of $204,217, accretion of debt premium of $37,082, bad debt expense of $2,513,
loss on debt extinguishment of $41,481, initial fair value of conversion option liability and loss from change in fair value
of conversion option liability of $389,187 and, offset by a gain on sale of marketable securities of $838, changes in operating
assets and liabilities of $46,131 primarily related to an increase in accounts payable of $4,653, accrued expenses of $29,569
and liabilities of discontinued operations of $9,430. During the year ended September 30, 2018, cash used in operating activities
primarily consisted of payments of professional fees.
|
|
|
|
|
●
|
Net
cash used in operating activities for the year ended September 30, 2017 primarily reflected a net loss of $5,051,835 and the
add-back of non-cash items consisting of stock-based compensation of $4,779,950, amortization of software development costs
and intangible asset of $30,617, a non-cash asset impairment charge of $85,572 and a loss on sale of marketable securities
of $1,693, offset by changes in operating assets and liabilities of $6,847 primarily related to an increase in prepaid expenses
of $4,167 offset by an increase in accounts payable of $18,532. During the year ended September 30, 2017, cash used in operating
activities primarily consisted of payments of professional fees.
|
Net
cash provided by investing activities was $2,676 for the year ended September 30, 2018 as compared to net cash provided by investing
activities of $10,020 for the year ended September 30, 2017. During the year ended September 30, 2018, we received proceeds from
the sale of marketable securities of $2,676. Net cash provided by investing activities was $10,020 for the year ended September
30, 2017. During the year ended September 30, 2017, we purchased marketable securities of $659 offset by the receipt of proceeds
from the sale of marketable securities of $10,679.
Net
cash provided by financing activities was $267,820 for the year ended September 30, 2018 as compared to $115,258 for the
year ended September 30, 2017, consisting of net proceeds from issuance of convertible debt for $266,750 and loan proceeds
from a related party of $1,070 in fiscal year 2018. We received net proceeds from the sale of common stock of $115,258 for the year ended
September 30, 2017.
Cash
Requirements
Our
management does not believe that our current capital resources will be adequate to continue operating our company and maintaining
our business strategy for much more than 12 months. At the date hereof, we have minimal cash at hand. We require additional capital
to implement our business and fund our operations.
Since
inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund
our operations through the equity and debt financing, either alone or through strategic alliances. Additional funding may not
be available on favorable terms, if at all. We intend to continue to fund our business by way of equity or debt financing until
earned revenues can support the Company. If we raise additional capital through the issuance of equity or convertible debt securities,
the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant
dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common
stock.
If
we are unable to raise capital as needed, we are required to reduce the scope of our business development activities, which could
harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you will
lose all of your investment.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to our stockholders.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are not required to provide the information required by this Item because we are a smaller reporting company.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
financial statements required by this Item 8 are included in this Annual Report following Item 15 hereof. As a smaller reporting
company, we are not required to provide supplementary financial information.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As
disclosed in our Current Report on Form 8-K, on October 24, 2017, we changed our audit firm.
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports,
filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control
objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes
in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As
required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design
and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing,
our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not
effective at the reasonable assurance level due to the material weaknesses described below.
To
address these material weaknesses, management engaged financial consultants, performed additional analyses and other procedures
to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results
of operations and cash flows for the periods presented.
Management’s
Annual Report on Internal Control Over Financial Reporting.
The
management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”)
for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s
management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2018.
The framework used by management in making that assessment was the criteria set forth in the document entitled “2013 Internal
Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures
were not effective as of September 30, 2018 and that material weaknesses in ICFR existed as more fully described below.
A
material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight
Board (“PCAOB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or
detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude
that as of September 30, 2018 our internal controls over financial reporting were not effective at the reasonable assurance level:
1. We
do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended
September 30, 2018. Management evaluated the impact of our failure to have written documentation of our internal controls and
procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted
represented a material weakness.
2. We
do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and
properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation
of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the
initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.
Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and
procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We
do not have personnel with sufficient experience with United States generally accepted accounting principles to address complex
transactions.
4. We
have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a
timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the
lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting
controls and procedures and has concluded that the control deficiency represented a material weakness.
5. We
have determined that oversight over our external financial reporting and internal control over our financial reporting is ineffective.
The Chief Financial Officer has not provided adequate review of the Company’s SEC’s filings and financial statements
and has not provided adequate supervision and review of the Company’s accounting personnel or oversight of the independent
registered accounting firm’s audit of the Company’s financial statement.
We
have taken steps to remediate some of the weaknesses described above, including by engaging a financial reporting advisor with
expertise in accounting for complex transactions. We intend to continue to address these weaknesses as resources permit.
Notwithstanding
the assessment that our ICFR was not effective and that there are material weaknesses as identified herein, we believe that our
financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows
for the years covered thereby in all material respects.
This
annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm as we are a smaller reporting company and are not required to provide the report.
Changes
in Internal Control over Financial Reporting
Our
internal control over financial reporting has not changed during the fourth quarter covered by this Annual Report on Form 10-K.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our
current directors, executive officers and key employees are listed below. The number of directors is determined by the Board.
All directors hold office until the next annual meeting of the board or until their successors have been duly elected and qualified.
Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the
discretion of the Board.
Name
|
|
|
Age
|
|
|
Position
|
Wolfgang Ruecker
|
|
|
42
|
|
|
Director
|
William Bollander
|
|
|
48
|
|
|
President, Chief Executive Officer and Director
|
William Eilers
|
|
|
41
|
|
|
Director
|
Bane Katic
|
|
|
43
|
|
|
Chief Operating Officer
|
Set
forth below is a brief description of the background and business experience of our executive officer and director for the past
five years.
Wolfgang
Ruecker
is the founder of GH Capital Inc., and has been the Company’s President, Chief Executive Officer and Director,
since inception. Prior to this, Mr. Ruecker co-founded Global Humax Cypress in 2008, a payment processing provider in Europe.
He continues to serve as a director and officer of Global Humax Cypress. Mr. Ruecker has over 15 years of experience in the financial
services industry as a venture capitalist.
William
Bollander
serves as our Chief Executive Officer and Director since October 2018. William Bollander also works
as a business consultant to an energy company in the oil & gas sector. He was an independent financial consultant for vFinance,
a registered securities broker dealer located in Boca Raton, Florida, from March 2011 to November 2011. Mr. Bollander
received a Bachelor’s Degree in Accounting & Information Systems from Queens College/City University of New York in
February 1992.
William
Eilers
was appointed on May 24, 2017 as a Director of the Company. Mr. Eilers has been a
securities attorney for ten years focusing his practice on mid and micro-cap securities transactions. Mr. Eilers is well versed
the requirements of SEC compliance as it relates to issuers and securities transactions. He has provided services related to private
securities transactions, private raises under federal securities laws, corporate governance, capital structures, going public
transactions, mergers, corporate actions, and OTC Markets alternative reporting compliance. Mr. Eilers also provides general consulting
services related to fund raising and going public. Recently, Mr. Eilers has begun to focus on the implementation of equity crowdfunding
and its application in underserved communities in rural Appalachia. Mr. Eilers is a graduate of North Carolina State University,
magna cum laude, and received his juris doctorate from the University Of Miami School Of Law.
Bane
Katic
was appointed on October 23, 2018 as the Chief Operating Officer of the Company. Mr. Katic has over fifteen years of
experience in marketing and media. In 2001, he worked for Sky Germany as a broadcast operations officer. In 2011, he started Netbox,
an IT development company, where he managed 28 employees in providing software solutions. Since 2016, Mr. Katic has acted as a
start-up consultant in Europe focusing on increasing marketing sales.
Involvement
in Certain Legal Proceedings
None
of our directors or executive officers has, during the past ten years:
|
●
|
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses);
|
|
|
|
|
●
|
had
any bankruptcy petition filed by or against the business or property of the person, or
of any partnership, corporation or business association of which he was a general partner
or executive officer, either at the time of the bankruptcy filing or within two years
prior to that time;
|
|
|
|
|
●
|
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction or federal or state authority, permanently or
temporarily enjoining, barring, suspending or otherwise limiting, his involvement in
any type of business, securities, futures, commodities, investment, banking, savings
and loan, or insurance activities, or to be associated with persons engaged in any such
activity;
|
|
|
|
|
●
|
been
found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
|
|
●
|
been
the subject of, or a party to, any federal or state judicial or administrative order,
judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including
any settlement of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or regulation, any law
or regulation respecting financial institutions or insurance companies including, but
not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order, or any law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or
|
|
|
|
|
●
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended
or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”)), any registered
entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary authority over its
members or persons associated with a member.
|
Except
as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or
executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates
which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until
removed by the board.
Family
Relationships
There
are no family relationships among any of our officers or directors.
Employment
Agreements
Mr.
Ruecker is not subject to any formal employment agreement. He has agreed to provide services to us without compensation until
such time as we have earnings from revenue, at which time we will re-consider paying him a salary.
Mr.
Bollander receives payment of $1,000 per month, as does Mr. Eilers.
Mr.
Katic does not receive any salary.
ITEM
11. EXECUTIVE COMPENSATION
EXECUTIVE
COMPENSATION
The
following sets forth information with respect to the compensation awarded or paid to Wolfgang Ruecker, our former
President and Chief Executive Officer and current Director, Carl Podeyn, our former Chief Operating Officer, Bane Katic, our
Chief Operating Officer, William Bollander, our Chief Executive Officer and Director, and William Eilers, our Director, for
all services rendered in all capacities to us in fiscal year 2018 and 2017. These executive officers are referred to as the
“named executive officers” throughout this report.
Summary
Compensation Table
The
following table sets forth information regarding each element of compensation that we paid or awarded to our named executive officers
for fiscal year 2018 and 2017.
Name
and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock Awards ($)
|
|
|
Option Awards
|
|
|
Non-Qualified Deferred Compensation Earnings
|
|
|
All Other Compensation
|
|
|
Totals ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wolfgang Ruecker Director and former President and
former Chief Executive Officer (1)
|
|
|
2018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,850,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,850,000
|
|
Carl Podeyn COO and Director (2)
|
|
|
2018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
95,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,900
|
|
|
$
|
111,900
|
|
William Eilers Director
|
|
|
2018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,000
|
|
|
$
|
12,000
|
|
|
|
|
2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,000
|
|
William Bollander Director and CEO
|
|
|
2018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Bane Katic COO
|
|
|
2018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
During
the year ended September 30, 2017, Mr. Ruecker received cash of $0 and 15,000,000 of common shares valued at $0.19 per share or
$2,850,000, these shares were fully vested as there was no forfeiture provision in accordance with ASC 718.
|
|
(2)
|
During
the year ended September 30, 2017, Mr. Podeyn received cash of $16,900 and 500,000 of common shares valued at $0.19 per share
or $95,000, these shares were fully vested as there was no forfeiture provision in accordance with ASC 718.
|
Outstanding
Equity Awards at Fiscal Year-End Table
We
had no outstanding equity awards as of the end of fiscal year 2018.
Compensation
of Directors
Other
than compensation expense disclosed above, our directors receive no other compensation.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Securities
Authorized for Issuance under Equity Compensation Plans
None.
The
following table sets forth certain information as of December 26, 2018 with respect to the holdings of: (1) each person known
to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors, nominees for director and named
executive officers; and (3) all directors and executive officers as a group. Each of the persons named in the table below as beneficially
owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise
indicated.
Name
of Beneficial Owner and Address (1)
|
|
Number of Shares Beneficially Owned
|
|
|
Percent of
Class (2)
|
|
5% Shareholders
|
|
|
|
|
|
|
ROCHE BOSEK
|
|
|
4,150,000
|
|
|
|
5.83
|
%
|
THOMAS MIELKE
|
|
|
5,381,250
|
|
|
|
7.58
|
%
|
SVEN ERIK OETZBACH
|
|
|
4,562,000
|
|
|
|
8.52
|
%
|
Directors
and Executive Officers
|
|
|
|
|
|
|
|
|
WOLFGANG RUECKER (3)
|
|
|
35,047,818
|
|
|
|
39.34
|
%
|
WILLIAM EILERS
|
|
|
500,000
|
|
|
|
0.70
|
%
|
WILLIAM BOLLANDER
|
|
|
0
|
|
|
|
0.00
|
%
|
BRANISLAV KATIC
|
|
|
3,702,000
|
|
|
|
5.21
|
%
|
All directors and officers as a group (4 people)
|
|
|
35,700,318
|
|
|
|
45.25
|
%
|
|
(1)
|
Unless
otherwise noted, the address of each beneficial owner is c/o GH Capital Inc., 200 South Biscayne Boulevard, Suite 2790, Miami,
FL 33131.
|
|
(2)
|
Based
on 71,026,818 shares of common stock issued and outstanding as of December 18, 2018.
|
|
(3)
|
Includes
50,000 shares held by Tuxedo Capital Ltd., a company controlled by Wolfgang Ruecker.
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions
with Related Persons
Please
refer to Note 6 of our financial statements for the year ended September 30, 2018.
Director
Independence
We
do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we
have used the definition of
“independence”
of The NASDAQ Stock Market to make this determination. NASDAQ
Listing Rule 5605(a)(2) provides that an
“independent director”
is a person other than an officer or employee
of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors,
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ
listing rules provide that a director cannot be considered independent if:
|
●
|
the
director is, or at any time during the past three years was, an employee of the company;
|
|
|
|
|
●
|
the director or
a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive
months within the three years preceding the independence determination (subject to certain exclusions, including, among other
things, compensation for board or board committee service);
|
|
●
|
a family member
of the director is, or at any time during the past three years was, an executive officer of t the company;
|
|
|
|
|
●
|
the director or
a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which
the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed
5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain
exclusions);
|
|
|
|
|
●
|
the director or
a family member of the director is employed as an executive officer of an entity where, at any time during the past three
years, any of the executive officers of the company served on the compensation committee of such other entity; or
|
|
|
|
|
●
|
the director or
a family member of the director is a current partner of the company’s outside auditor, or at any time during the past
three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
|
William Eilers, Bane Katic, and William
Bollander are not considered independent because each is an executive officer of the Company.
We
do not currently have a separately designated audit, nominating or compensation committee.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Salberg
& Company, P.A., served for the year ended September 30, 2017 all interim periods and the year ended September 30, 2018.
Audit
Fees
For
the Company’s fiscal year ended September 30, 2018 and 2017, we were billed approximately $23,000 and $11,000 by
Salberg & Company, P.A., a professional services rendered by our independent auditors for the audit and review of our
financial statements (See item 9).
Audit
Related Fees
There
were no fees for audit related services rendered by our independent auditors or the years ended September 30, 2018 and 2017.
Tax
Fees
For
the Company’s fiscal years ended September 30, 2018 and 2017, there were no fees for professional services rendered by our
independent auditors for tax compliance, tax advice, and tax planning.
All
Other Fees
The
Company did not incur any other fees related to services rendered by our independent auditors for the fiscal years ended September
30, 2018 and 2017.
Pre-Approval
Policies
Effective
May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render
any auditing or permitted non-audit related service, the engagement be:
-
approved by our audit committee; or
-
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures
are detailed as to the particular service, the audit committee is informed of each service, and
such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We
do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent
auditors.
All
of the above services and fees were reviewed and approved by the entire board of directors before the respective services were
rendered.
PART
IV
Item
15. Exhibits, Financial Statement Schedules.
a)
Documents filed as part of this Annual Report
1.
Financial Statements
2.
Financial Statement Schedules
3.
Exhibits
(3)
EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:
(1)
Incorporated by reference to the Company’s previously filed Form S-1 Registration Statement, on June 2, 2016.
(2)
Incorporated by reference to the Company’s previously filed Form S-1 Registration Statement, amendment 2, on August 26,
2016
+
In accordance with SEC Release 33-8238, Exhibits 32.1 is being furnished and not filed.
*
In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this report
shall be deemed “furnished” and not “filed.”
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
GH
CAPITAL, INC.
|
|
|
|
Dated: December
28, 2018
|
By:
|
/s/
William Bollander
|
|
|
William Bollander
|
|
|
Chief Executive Officer
(principal executive officer)
|
|
|
|
Dated:
December 28, 2018
|
By:
|
/s/
William Bollander
|
|
|
William Bollander
|
|
|
Chief Financial Officer
(principal financial officer and
principal accounting officer)
|
GH
CAPITAL INC.
INDEX
TO FINANCIAL STATEMENTS
September
30, 2018
CONTENTS
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of:
GH
Capital Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of GH Capital, Inc. (the “Company”) as of September 30, 2018
and 2017, the related statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit) and
cash flows for each of the two years in the period ended September 30, 2018 and the related notes (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of September 30, 2018 and 2017, and the results of its operations and its
cash flows for each of the two years in the period ended September 30, 2018, in conformity with accounting principles
generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has a net loss of $1,058,972 and net cash used in operating activities of $215,699
for the year ended September 30, 2018. The Company also has an accumulated deficit of $6,390,864 and a working capital deficit
of $888,693 at September 30, 2018. These matters raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s Plan regarding these matters is also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting.
As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/
s/ Salberg & Company, P.A
.
|
|
|
|
SALBERG & COMPANY, P.A.
|
|
We have served as the Company’s auditor since 2017
|
Boca Raton, Florida
|
|
December 28, 2018
|
|
2295
NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431
Phone:
(561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com
• info@salbergco.com
Member
National Association of Certified Valuation Analysts • Registered with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide • Member Center for Public Company Audit Firms
GH CAPITAL INC.
BALANCE SHEETS
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
67,491
|
|
|
$
|
12,694
|
|
Marketable securities
|
|
|
-
|
|
|
|
2,734
|
|
Accounts receivable
|
|
|
667
|
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
7,250
|
|
|
|
10,167
|
|
Assets of discontinued operations
|
|
|
-
|
|
|
|
2,741
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
75,408
|
|
|
|
28,336
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
75,408
|
|
|
$
|
28,336
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
24,690
|
|
|
$
|
20,035
|
|
Accrued expenses
|
|
|
22,617
|
|
|
|
-
|
|
Convertible notes payable, net of discounts and premiums (see Note 7)
|
|
|
308,275
|
|
|
|
-
|
|
Due to related parties
|
|
|
4,253
|
|
|
|
3,183
|
|
Derivative liabilities
|
|
|
589,980
|
|
|
|
-
|
|
Liabilities of discontinued operations
|
|
|
14,286
|
|
|
|
4,856
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
964,101
|
|
|
|
28,074
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
Preferred stock ($0.0001 par value; 10,000,000 shares authorized; No shares issued and outstanding at September 30, 2018 and 2017)
|
|
|
-
|
|
|
|
-
|
|
Common stock ($0.0001 par value; 490,000,000 shares authorized; 61,846,818 and 60,661,818 shares issued and outstanding at September 30, 2018 and 2017, respectively)
|
|
|
6,185
|
|
|
|
6,066
|
|
Additional paid-in capital
|
|
|
5,495,986
|
|
|
|
5,325,192
|
|
Accumulated deficit
|
|
|
(6,390,864
|
)
|
|
|
(5,331,892
|
)
|
Accumulated other comprehensive income - marketable securities
|
|
|
-
|
|
|
|
896
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity (Deficit)
|
|
|
(888,693
|
)
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
75,408
|
|
|
$
|
28,336
|
|
See
accompanying notes to financial statements.
GH CAPITAL INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
For the Years Ended
|
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
Consulting
|
|
$
|
6,667
|
|
|
$
|
-
|
|
Consulting - related party
|
|
|
56,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
62,667
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
3,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
59,667
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
13,500
|
|
|
|
3,061,900
|
|
Amortization of software development costs and intangible asset
|
|
|
-
|
|
|
|
30,617
|
|
Professional fees
|
|
|
281,364
|
|
|
|
1,852,913
|
|
Asset impairment
|
|
|
-
|
|
|
|
85,572
|
|
Other selling, general and administrative expenses
|
|
|
17,539
|
|
|
|
15,965
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
312,403
|
|
|
|
5,046,967
|
|
|
|
|
|
|
|
|
|
|
Operating loss from operations from continuing operations
|
|
|
(252,736
|
)
|
|
|
(5,046,967
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses):
|
|
|
|
|
|
|
|
|
Initial fair value of conversion option liability
|
|
|
(218,234
|
)
|
|
|
-
|
|
Loss from change in fair value of conversion option liability
|
|
|
(170,953
|
)
|
|
|
-
|
|
Gain (loss) from foreign currency transactions
|
|
|
141
|
|
|
|
541
|
|
Gain (loss) on sale of marketable securities
|
|
|
838
|
|
|
|
(1,693
|
)
|
Loss on debt extinguishment
|
|
|
(41,481
|
)
|
|
|
-
|
|
Interest income (expense)
|
|
|
(289,363
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(719,052
|
)
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before provision for income taxes
|
|
|
(971,788
|
)
|
|
|
(5,048,118
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(971,788
|
)
|
|
|
(5,048,118
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(87,184
|
)
|
|
|
(3,717
|
)
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operations
|
|
|
(87,184
|
)
|
|
|
(3,717
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (loss):
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,058,972
|
)
|
|
$
|
(5,051,835
|
)
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale marketable securities
|
|
|
(896
|
)
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(1,059,868
|
)
|
|
$
|
(5,049,824
|
)
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
Loss from discontinued operations
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Total Loss per common share, basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding - Basic and diluted
|
|
|
60,953,695
|
|
|
|
49,813,447
|
|
See
accompanying notes to financial statements.
GH CAPITAL INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 2018 AND 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2016
|
|
|
34,617,417
|
|
|
$
|
3,462
|
|
|
$
|
371,088
|
|
|
$
|
(280,057
|
)
|
|
$
|
(1,115
|
)
|
|
$
|
93,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for software license
|
|
|
190,000
|
|
|
|
19
|
|
|
|
37,981
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
|
571,900
|
|
|
|
57
|
|
|
|
115,201
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services and accrued expenses
|
|
|
25,282,501
|
|
|
|
2,528
|
|
|
|
4,800,922
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,803,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on marketable securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,011
|
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,051,835
|
)
|
|
|
-
|
|
|
|
(5,051,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017
|
|
|
60,661,818
|
|
|
|
6,066
|
|
|
|
5,325,192
|
|
|
|
(5,331,892
|
)
|
|
|
896
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
300,000
|
|
|
|
30
|
|
|
|
104,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of principal amount,
accrued interest and conversion fees on convertible notes
|
|
|
885,000
|
|
|
|
89
|
|
|
|
59,618
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants granted with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
6,206
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on marketable securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(896
|
)
|
|
|
(896
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,058,972
|
)
|
|
|
-
|
|
|
|
(1,058,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018
|
|
|
61,846,818
|
|
|
$
|
6,185
|
|
|
$
|
5,495,986
|
|
|
$
|
(6,390,864
|
)
|
|
$
|
-
|
|
|
$
|
(888,693
|
)
|
See
accompanying notes to financial statements.
GH CAPITAL INC.
STATEMENTS OF CASH FLOWS
|
|
For
the Years Ended
|
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,058,972
|
)
|
|
$
|
(5,051,835
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation and professional fees
|
|
|
105,000
|
|
|
|
3,093,866
|
|
Stock-based
conversion fees
|
|
|
3,500
|
|
|
|
-
|
|
Non-cash
penalty fees
|
|
|
15,000
|
|
|
|
-
|
|
Amortization
of software development costs and intangible asset
|
|
|
-
|
|
|
|
30,617
|
|
Amortization
of prepaid stock issued for services
|
|
|
-
|
|
|
|
1,686,084
|
|
Asset
impairment
|
|
|
-
|
|
|
|
85,572
|
|
Accretion
of premium on convertible note
|
|
|
37,082
|
|
|
|
-
|
|
Amortization
expense of debt discount
|
|
|
204,217
|
|
|
|
-
|
|
Bad
debt expense
|
|
|
2,513
|
|
|
|
-
|
|
Loss
(gain) on sale of marketable securities
|
|
|
(838
|
)
|
|
|
1,693
|
|
Loss
on debt extinguishment
|
|
|
41,481
|
|
|
|
-
|
|
Initial
fair value of conversion option liability
|
|
|
218,234
|
|
|
|
-
|
|
Loss
from change in fair value of conversion option liability
|
|
|
170,953
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(3,180
|
)
|
|
|
-
|
|
Prepaid
expenses
|
|
|
2,918
|
|
|
|
(4,167
|
)
|
Assets
of discontinued operations
|
|
|
2,741
|
|
|
|
(1,518
|
)
|
Accounts
payable
|
|
|
4,653
|
|
|
|
18,532
|
|
Accrued
expenses
|
|
|
29,569
|
|
|
|
(2,000
|
)
|
Deferred
revenue - related party
|
|
|
-
|
|
|
|
(4,000
|
)
|
Liabilities
of discontinued operations
|
|
|
9,430
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(215,699
|
)
|
|
|
(147,156
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of marketable securities
|
|
|
-
|
|
|
|
(659
|
)
|
Proceeds
from sale of marketable securities
|
|
|
2,676
|
|
|
|
10,679
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
2,676
|
|
|
|
10,020
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible debt, net of issuance cost
|
|
|
266,750
|
|
|
|
-
|
|
Net
proceeds from sale of common stock
|
|
|
-
|
|
|
|
115,258
|
|
Loan
proceeds from related party
|
|
|
1,070
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
267,820
|
|
|
|
115,258
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
in cash
|
|
|
54,797
|
|
|
|
(21,878
|
)
|
|
|
|
|
|
|
|
|
|
Cash
- beginning of year
|
|
|
12,694
|
|
|
|
34,572
|
|
|
|
|
|
|
|
|
|
|
Cash
- end of year
|
|
$
|
67,491
|
|
|
$
|
12,694
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
stock issued for future services
|
|
$
|
105,000
|
|
|
$
|
1,686,084
|
|
Common
stock issued for principal amount and accrued interest on convertible debt
|
|
$
|
9,975
|
|
|
$
|
-
|
|
Common
stock issued for accrued expenses
|
|
$
|
-
|
|
|
$
|
23,500
|
|
Common
stock issued for intangible asset
|
|
$
|
-
|
|
|
$
|
38,000
|
|
Unrealized
gain (loss) on marketable securities
|
|
$
|
(896
|
)
|
|
$
|
-
|
|
Debt
discounts on convertible debt
|
|
$
|
243,000
|
|
|
$
|
-
|
|
Stock
warrants granted with convertible notes
|
|
$
|
6,206
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
1 -
ORGANIZATION AND NATURE OF OPERATIONS
GH
Capital Inc. (the “Company”), a Florida corporation, was formed on May 5, 2014 and commenced operations in October
2014. The Company provided online payment processing services to consumers, primarily in Europe and provides certain consulting
services to assist companies in going public.
On
September 18, 2018, the Company’s management terminated the Company’s online payment processing services. As a result,
the Company will shift its focus to its consulting services business. As such, the online payment processing services business
activities were reclassified and reported as part of “discontinued operations”.
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”).
The Company’s fiscal year ends on September 30, of each year.
Going
Concern
These
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company
had net losses of $1,058,972 and $5,051,835 for the years ended September 30, 2018 and 2017, respectively. The net cash used in
operations were $215,699 and $147,156 for the years ended September 30, 2018 and 2017, respectively. Additionally, the Company
had an accumulated deficit of $6,390,864 at September 30, 2018. It is management’s opinion that these conditions raise substantial
doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issue date of this
report. The Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the
future. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive, or raise additional debt and/or equity capital. Although the Company has historically raised capital from sales of common
stock and debt financing, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional
capital or secure additional debt in the near future, management expects that the Company will need to curtail its operations.
These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Included in these estimates are valuation of marketable securities, assumptions used in determining the useful lives and valuations
of long-lived assets, the fair value of derivative liabilities, valuation allowance for deferred tax assets and the valuation
of stock issued for services or upon conversion of debt.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
value of financial instruments and fair value measurements
FASB
ASC 820 —
Fair Value Measurements and Disclosures,
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 requires disclosures
about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about
the fair value of financial instruments are based on pertinent information available to the Company on September 30, 2018. Accordingly,
the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on
disposition of the financial instruments.
FASB
ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable
or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market
assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value
hierarchy are as follows:
Level
1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level
2- Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or
corroborated by observable market data.
Level
3- Inputs are unobservable inputs that reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.
The
carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, loans, accounts payable, accrued
expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments.
The
Company analyzes all financial and non-financial instruments with features of both liabilities and equity under the FASB’s
accounting standard for such instruments. Under this standard, financial and non-financial assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the fair value measurement.
The
Company accounts for the following instruments at fair value.
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,734
|
|
|
|
—
|
|
|
|
—
|
|
Derivative liabilities
|
|
|
—
|
|
|
|
—
|
|
|
$
|
589,980
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Fair
Value of Financial Assets and Liabilities Measured on a Recurring Basis
Marketable
securities are adjusted to fair value each balance sheet date, based on quoted prices; which are considered level 1 inputs (see
note 3). The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange
or from future earnings or cash flows. The fair value of marketable securities categorized as Level 1 that are measured on a recurring
basis totaled $0 and $2,734 as of September 30, 2018 and 2017, respectively.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
Company’s convertible notes payable approximate the fair value of such instruments based upon management’s best estimate
of interest rates that would be available to the Company for similar financial arrangements as of September 30, 2018. The Company
uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities (see note 7) and revalues its
derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the statements of operations
that are attributable to the change in the fair value of the derivative liabilities. The fair value of derivative financial instruments,
measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair
value hierarchy as of September 30, 2018 measured $589,980.
A
roll forward of the level 3 derivative liabilities is as follows:
Balance at September 30, 2017
|
|
$—
|
|
Initial fair value of conversion option liabilities
|
|
|
423,778
|
|
Reduction of liability included in loss on debt extinguishment
|
|
|
(4,751
|
)
|
Loss from change in fair value of conversion option liabilities
|
|
|
170,953
|
|
Balance at September 30, 2018
|
|
$
|
589,980
|
|
Cash
and Cash Equivalents
For
purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months
or less at the purchase date and money market accounts to be cash equivalents The Company had no cash equivalents during the years
ended September 30, 2018 and 2017.
Investments,
Carried at Cost
The
Company accounts for equity investments that do not have a readily determinable fair value as cost method investments under the
measurement alternative prescribed within Accounting Standards Update (“ASU”) 2016-01, Financial Instruments –
Recognition and Measurement of Financial Assets and Financial Liabilities , to the extent such investments are not subject to
consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any
impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an
identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the
extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns
of investment and are recorded as a reduction of the cost of the investment. In March 2017, the Company received 18,000,000 common
shares, 19.6%, of Vmoney Holdings, Inc. (“Vmoney”) a startup company as a consulting fee and management determined
that such securities were non-marketable and had a zero value at the receipt date and as of September 30, 2018. Furthermore the
Company’s then CEO received 5,000,000 common shares from Vmoney as a consulting fee for similar consulting services. Since
his personal services cannot be separated as CEO, these 5,000,000 were treated as compensation to him, however, since these shares
were deemed to have a zero fair value and also a zero book value, there was no accounting effect to this compensation.
Concentration
of Credit Risk, Accounts Receivable and Revenues
The
Company maintains its cash in financial institutions in the United States for which balances are insured up to Federal Deposit
Insurance Corporation limits of $250,000 per account. The Company also maintains cash in financial institutions based in the country
of Cyprus. At September 30, 2018, bank accounts in Cyprus are insured for up to $119,000 per Bank under the regulations of the
European Union. At September 30, 2018, $3,655, was maintained in the Cyprus accounts. At times, cash balances may exceed the insured
limits. The Company had no amounts that exceeded insured limits at September 30, 2018 and 2017.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
All
of the Company’s revenues from continuing operations are from customers that are located outside of the United States. There
is one customer that accounts for 89% of revenues from continuing operations in fiscal year 2018 and another customer that accounts
for 100 % of the Company’s Accounts Receivable balance at September 30, 2018. Accounts receivable included in discontinued
operations that were due from a related party was $0 and $908 at September 30, 2018 and 2017, respectively.
Prepaid
Expenses and Other Current Assets
Prepaid
expenses and other current assets of $7,250 and $10,167 at September 30, 2018 and 2017, respectively, consist primarily of costs
paid for future services which will occur within a year. Prepaid expenses may include prepayments in cash and equity instruments
for consulting, public relations and business advisory services, and accounting fees which are being amortized over the terms
of their respective agreements.
Marketable
Securities
Pursuant
to ASC 320, Investments – Debt and Equity Securities, marketable securities held by the Company are held for an indefinite
period of time and thus are classified as available-for-sale securities. The fair value is based on quoted market prices for the
investment as of the balance sheet date. Realized investment gains and losses are included in the statement of operations, as
are provisions for other than temporary declines in the market value of available for-sale securities. Unrealized gains and unrealized
losses deemed to be temporary are excluded from earnings (losses), net of applicable taxes, as a component of other comprehensive
income (loss). Factors considered in judging whether an impairment is other than temporary include the financial condition, business
prospects and creditworthiness of the issuer, the length of time that fair value has been less than cost, the relative amount
of decline, and the Company’s ability and intent to hold the investment until the fair value recovers. Realized gains and
losses and decline in value judged to be other than temporary on available-for-sale securities are included in the statements
of operations. The cost of securities sold or disposed is determined on first-in first-out, or FIFO method.
Capitalized
Software Development Costs
Software
development costs related to the development of our electronic payment platform software, which is developed for internal use,
falls under the accounting guidance of ASC Topic 350-40,
Intangibles Goodwill and Other–Internal Use Software
, in
which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application
development stage once the capitalization criteria are met. Costs capitalized during the application development stage include
external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll and payroll-related
costs for employees who are directly associated with, and who devote time to, the internal-use computer software. Once the project
is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology’s
estimated useful life of three years.
Intangible
Assets
Intangible
assets with finite lives primarily consist of licensed technology and were being amortized on a straight-line basis over the expected
period to be benefited by future cash flows of two years and reviewed for impairment. As a result, we fully impaired all intangible
assets as of September 30, 2017.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment
of Long-lived Assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an
impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount
of impairment is measured as the difference between the asset’s estimated fair value and its book value.
Derivative
Liabilities
The
Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those
contracts qualify as derivatives to be separately accounted for in accordance with FASB ASC 815-10-05-4 and 815-40. This
accounting treatment requires that the carrying amount of any embedded conversion options be recorded at fair value at issuance
and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is
the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon
conversion, exercise and repayment, the respective derivative liability is marked to fair value at the conversion, repayment or
exercise date, and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt
extinguishment.
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of a sale arrangement exists, services have been rendered, the sales
price is fixed and determinable and collectability is reasonably assured. There are two sources of recognized revenue. These
comprise (1) payment processing services related to online money transfer transactions for diversified online merchants with
a target market in Europe and (2) consulting for business development. For the consulting services, included in continuing
operations, revenue is recognized when the Company satisfies the performance obligation based on the consulting agreement.
The Company received consideration in the form of cash and/or securities. The Company measures and recognizes these
securities received at fair value on the date the revenues are agreed upon over the terms of the related consulting
agreement. In the payment processing segment, which is included in loss from discontinued operations, revenues consisted of
fees generated through the electronic processing of payment transactions and related services, and was recognized as revenue
during the period the transactions were processed or when the related services were performed. Merchants may be charged for
these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some
instances, additional fees are charged for each transaction. Merchant customers were generally charged a flat fee plus
percentage per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns,
monthly minimums, and other miscellaneous services. Revenues also included any up-front fees for the work involved in
implementing the basic functionality required to provide electronic payment processing services to a customer. Revenue
from such implementation fees was recognized over the term of the related service contract. The Company’s revenue was
comprised of monthly recurring services provided to customers, for whom charges are contracted for over a specified period of
time. Payments received from customers that are related to future periods are recorded as deferred revenue until the service
is provided.
Cost of Revenues
Cost of revenues primarily includes labor cost or fees related to the Company’s consulting business
services.
Stock-Based
Compensation
Stock-based
compensation is accounted for based on the requirements of ASC 718, Share-Based Payment, which requires recognition in the financial
statements of the cost of employee and director services received in exchange for an award of equity instruments over the period
the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The
Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services
received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based
payments non-employees, compensation expense is determined at the measurement date defined as the earlier of a) the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached or b) the date at which the counterparty’s
performance is complete.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date.
The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated, based on the then
current fair value, at each subsequent reporting date.
Research
and Development
Research
and development costs are expensed as incurred.
Income
Taxes
The
Company recognizes deferred tax liabilities and assets based on the temporary differences between the financial statement and
tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates
in effect for the year in which the differences are expected to affect taxable income. Temporary differences between taxable income
reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as stock-based
compensation and deferred revenue. A valuation allowance is provided against net deferred tax assets when the Company determines
it is more likely than not that it will fail to generate sufficient taxable income to be able to realize the deferred tax assets.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740,
Income Taxes
. Using
that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. As of September 30, 2018 and 2017, the Company had no uncertain
tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2015 to
2017 tax returns are subject to examination. The Company recognizes interest and penalties related to uncertain income tax positions
in other expense. However, no such interest and penalties were recorded during the years ended September 30, 2018 and 2017.
Loss
per Common Share and Common Share Equivalent
Basic
net loss per share is computed by dividing the net loss by the weighted average number of common shares during the period. Diluted
net loss per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding
during the period. At September 30, 2018, the Company has 46,672,138 and 50,000 potentially dilutive securities outstanding, respectively,
related to the convertible promissory notes and outstanding stock warrants. Those potentially dilutive common stock equivalents
were excluded from the dilutive loss per share calculation as they would be antidilutive. The Company had no dilutive securities
outstanding during the year ended September 30, 2017. In addition, there are 39,960,798 shares reserved for issuance related to
convertible note agreements.
Foreign
Currency Transactions
The
reporting and functional currency of the Company is the U.S. dollar. Transactions denominated in foreign currencies are translated
into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in
foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with
any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than
the functional currency are included in the results of operations as incurred. Transaction gains or losses have not had, and are
not expected to have, a material effect on the results of operations of the Company.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently
Issued Accounting Standards
From
time to time, the FASB or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB ASC are
communicated through issuance of an Accounting Standards Update (“ASU”).
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606),”
(“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.
This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model
will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities
for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not
permitted.
The
FASB has approved a one-year deferral of the effective date (for annual reporting periods beginning after December 15, 2017) with
the option to early adopt using the original effective date. Entities may use either a full retrospective or a modified retrospective
approach to adopt ASU 2014-09. In December 2016, the FASB issued Accounting Standards Update No. 2016-20, Technical Corrections
and Improvements to Topic 606, Revenue from Contracts with Customers, or ASU 2016-20. In May 2016, the FASB issued Accounting
Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,
or ASU 2016-12. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers
(Topic 606): Identifying Performance Obligations and Licensing, or ASU 2016-10. In March 2016, the FASB issued Accounting Standards
Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue
Gross), or ASU 2016-08.
These
updates provide additional clarification and implementation guidance on the previously issued Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. The amendments in ASU 2016-20 provide technical corrections
to various implementation examples and clarifying guidance on the treatment of capitalized advertising costs, impairment testing
of capitalized contract costs, performance obligation disclosures and scope exceptions. The amendments in ASU 2016-12 provide
clarifying guidance on assessing collectability; noncash consideration; presentation of sales taxes; and transition. The amendments
in ASU 2016-10 provide clarifying guidance on the materiality and evaluation of performance obligations; treatment of shipping
and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to
use or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify
the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain
types of arrangements. Collectively, these updates will require a company to recognize revenue when it transfers promised goods
or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange
for those goods or services. The adoption of ASU 2016-20, ASU 2016-12, ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s
adoption of ASU 2014-09. The new guidance permits adoption through either a full retrospective approach or a modified retrospective
approach with a cumulative effect adjustment to retained earnings. The Company will adopt this standard as required on October
1, 2018. The Company has assessed the impact that adopting this new accounting guidance will have on its financial statements
and footnote disclosures and believes such impact will not be material.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In
January 2017, the FASB issued the Accounting Standards Update No. 2017-01 (“ASU 2017-01”), Clarifying the Definition
of a Business. ASU 2017-01 clarifies the definition of a business and establishes a screening process to determine whether an
integrated set of assets and activities acquired is deemed the acquisition of a business or the acquisition of assets. ASU 2017-01
is effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively, with early
adoption permitted. The Company does not expect that adoption of ASU 2017-01 will have a material impact on its financial statements
and related disclosures.
In
June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting
,
which simplifies
several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation
guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07
is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early
adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company
is evaluating the impact this ASU will have on its financial statements.
In
August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”,
which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard
removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s
financial statements.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
NOTE
3 –
MARKETABLE SECURITIES
The
Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on
the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated
other comprehensive income (loss), a separate component of stockholders’ equity. Realized gains and losses on available-for-sale
securities are included in net earnings in the period earned or incurred. For the years ended September 30, 2018 and 2017, realized
gains (losses) from the sale of available-for-sale securities were $838 and ($1,693), respectively.
The
following summarizes the carrying value of marketable securities as of September 30, 2018 and 2017:
|
|
September 30,
2018
|
|
|
September 30,
2017
|
|
Historical cost
|
|
$
|
1,838
|
|
|
$
|
1,838
|
|
Less: sales during the period
|
|
|
(2,676
|
)
|
|
|
—
|
|
Realized gain on sale of marketable securities
|
|
|
838
|
|
|
|
—
|
|
Unrealized gain included in accumulated other comprehensive income
|
|
|
—
|
|
|
|
896
|
|
Balance, marketable securities, at fair value
|
|
$
|
—
|
|
|
$
|
2,734
|
|
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
4 –
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
At
September 30, 2018 and 2017, capitalized software development costs, net consisted of the following:
|
|
For the Year Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Capitalized software development costs
|
|
$
|
—
|
|
|
$
|
90,800
|
|
Less: accumulated amortization
|
|
|
—
|
|
|
|
(35,311
|
)
|
Less: non-cash asset impairment charge
|
|
|
—
|
|
|
|
(55,489
|
)
|
Capitalized software development costs, net
|
|
$
|
—
|
|
|
$
|
—
|
|
For
the years ended September 30, 2018 and 2017, the Company recorded amortization expense of $0 and $22,700, respectively. The Company
reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets
may not be recoverable. As a result during the year ended September 30, 2017, we recorded a non-cash impairment charge of $55,489
(which consisted of a $90,800 cost less accumulated amortization of $35,311), associated with the software development costs.
These charges are included in the Statements of Operations and Comprehensive Income (Loss).
NOTE
5 –
INTANGIBLE ASSETS
At
September 30, 2018 and 2017, intangible assets consisted of the following:
|
|
Useful Life
|
|
2018
|
|
|
2017
|
|
Licensed technology
|
|
2.0 Years
|
|
$
|
—
|
|
|
$
|
38,000
|
|
Less: accumulated amortization
|
|
|
|
|
—
|
|
|
|
(7,917
|
)
|
Less: non-cash asset impairment charge
|
|
|
|
|
—
|
|
|
|
(30,083
|
)
|
Intangible assets, net
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
In
May, 2017 the Company licensed certain software technology in exchange for 190,000 common shares valued at $38,000.
Intangible
assets are amortized on a straight-line method of amortization over their estimated useful lives. Intangible assets are reviewed
for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.
For
the years ended September 30, 2018 and 2017 amortization expense amounted to $0 and $7,917, respectively. There was an asset impairment
charge recorded in the amount of $30,083 for the year ended September 30, 2017.
NOTE
6 -
RELATED PARTY TRANSACTIONS
On
March 30, 2015, the Company entered into a services contract with Global Humax Cyprus Ltd. (“Cyprus”), a company owned
by the Company’s chief executive officer. Under the terms of the contract, the Company will provide services to Cyprus for
a period of two years from the date of the agreement. Additionally, the Company earns fees from the processing of payment transactions
and related services from Cyprus. For the years ended September 30, 2018 and 2017, aggregate revenues – related party amount
to $6,364 and $17,279 respectively.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
6 -
RELATED PARTY TRANSACTIONS (continued)
During
the year ended September 30, 2015, Cyprus paid various general and administrative expenses on behalf of the Company in the amount
of $3,173. These advances are non-interest bearing and are due on demand. At September 30, 2018 and 2017, the Company owed Cyprus
$3,173 and $3,173, respectively.
During
the year ended September 30, 2015, the Company’s Chief Executive Officer advanced $10 to the Company for working capital
purpose. The advance is non-interest bearing and payable on demand. At September 30, 2018 and 2017, the Company owed its Chief
Executive Officer $10 and $10, respectively.
During
the year ended September 30, 2018, the Company’s Attorney advanced $1,070 to the Company for working capital purpose. The
advance is non-interest bearing and payable on demand. At September 30, 2018 and 2017, the Company owed its Attorney $1,070 and
$0, respectively.
In
addition to stock-based compensation (see Note 8), for the years ended September 30, 2018 and 2017, the Company paid cash compensation
to a designated member of its board of directors in the amount of $13,500 and $16,900 in connection with a written agreement with
the director, respectively.
On
April 24, 2017, the Company entered into a Consulting Agreement with an unrelated start-up company whereby the Company agreed
to provide certain services related to business development for the entity in exchange for 18,000,000 founder shares of common
stock of the company which represented approximately 19% of that entity. The shares received were valued at estimated fair value
of zero and the receipt of shares resulted in the entity becoming a related party to the Company. Furthermore the Company’s
then CEO received 5,000,000 common shares from Vmoney as a consulting fee for similar consulting services. Since his personal
services cannot be separated as CEO, these 5,000,000 were treated as compensation to him however since these shares were deemed
to have a zero fair value and also a zero book value, there was no accounting effect to this compensation. After 10 months of
providing services, the parties believed it best to extend the term of the agreement through September 30, 2018 in exchange for
$56,000 to the Company as the entity has chosen to “go public” through an S-1 filing with the Securities and Exchange
Commission which will require additional resources on behalf of the Company. During the year ended September 30, 2018, the Company
recognized revenue - related party of $56,000 in connection with this agreement.
NOTE
7–
CONVERTIBLE PROMISSORY NOTES
On
October 10, 2017, the Company issued a 12% Convertible Promissory Note for principal borrowings of $160,000 to a non-related party.
The 12% convertible promissory note and all accrued interest are due on July 10, 2018. The Company received proceeds of $143,250
in cash which is net of offering costs of $16,750, recorded as a discount. The note is unsecured and bears interest at the rate
of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning
on the date which is following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s
common stock at a conversion price equal to a price which is the lower of $0.65 per share or 55% of the lowest trading price of
the Company’s common stock during the 25 trading days immediately preceding the conversion date. At any time during the
period beginning on the issue date and ending on the date which is 90 days following the issue date, the Borrower shall have the
right, exercisable on not less than 3 trading days prior written notice to the holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 130%, multiplied by
the sum of then outstanding principal amount of the Note plus accrued and unpaid interest on the unpaid principal amount of the
Note plus default interest, if any. During the first 180 days following the date of the note, the Company has the right to prepay
the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the
holder under the terms of the note, at a premium of 140%. After this initial 180-day period, the Company does not have a right
to prepay the note. Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate
of 24% per annum from the due date thereof until the same is paid.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
7–
CONVERTIBLE PROMISSORY NOTES (continued)
The
conversion price, however, is subject to full ratchet anti-dilution in the event that the Company issues any securities at a per
share price lower than the conversion price then in effect. The Note contains representations, warranties, and events of default,
beneficial ownership limitations, and other provisions that are customary of similar instruments.
On
April 26, 2018 the Company issued 25,000 shares of common stock to the noteholder with a contractual conversion price of $0.04
to convert $0 principal amount with $501 of accrued and unpaid interest and $500 conversion fee, totaling $1,001.
On
May 25, 2018 the Company issued 50,000 shares of common stock to the noteholder with a contractual conversion price of $0.03 to
convert $0 principal amount with $902 of accrued and unpaid interest and $500 conversion fee, totaling $1,402.
On
June 12, 2018 the Company issued 110,000 shares of common stock to the noteholder with a contractual conversion price of $0.03
to convert $0 principal amount with $2,585 of accrued and unpaid interest and $500 conversion fee, totaling $3,085.
On
July 10, 2018, the Company failed to make the repayment of the outstanding principal and interest at the maturity date which causes
the default interest rate of 24% to become effective.
On
August 21, 2018 the Company issued 150,000 shares of common stock to the noteholder with a contractual conversion price of $0.02
to convert $0 principal amount with $2,056 of accrued and unpaid interest and $500 conversion fee, totaling $2,556.
On
September 7, 2018 the Company issued 100,000 shares of common stock to the noteholder with a contractual conversion price of $0.01
to convert $0 principal amount with $544 of accrued and unpaid interest and $500 conversion fee, totaling $1,044.
On
September 28, 2018 the Company issued 180,000 shares of common stock to the noteholder with a contractual conversion price of
$0.0048 to convert $0 principal amount with $364 of accrued and unpaid interest and $500 conversion fee, totaling $864. The conversion
price falling below $0.01 triggered clause 1.4(g) of the promissory note which allows for the principal amount of the note to
increase by $15,000. Per the noteholder, this $15,000 will be added to the principal at the end of the note, allowing the Company
to convert out of the original principal and interest first, however, for accounting purposes the $15,000 was added to the principal
on September 25, 2018. In addition, the variable conversion price shall be redefined to mean 40% multiplied by the market price
(or a 60% discount).
As
of September 30, 2018, the principal balance of this note is $175,000 and accrued interest of $16,627.
In
February 2018, under a Securities Purchase Agreement, the Company issued a 10% Convertible Promissory Note for principal borrowings
of up to $180,000 and received initial proceeds of $60,000. In June 2018, the Company received additional proceeds of $20,000
which resulted to a total of $80,000 proceeds. The 10% convertible promissory notes and all accrued interest are due in twelve
months from the effective date of each tranche. The notes are unsecured and bears interest at the rate of 10% per annum from the
issuance date thereof until the notes are paid. The note holder shall have the right to convert beginning on the issuance date,
the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price to
a price which is 65% of the lowest trading price of the Company’s common stock during the 25 prior trading days to the conversion
date subject to increases in the discount rate based on certain future events. If at any time while this note is outstanding,
the conversion price is equal to or lower than $0.15, then an additional 15% discount shall be added into the conversion price
resulting in a discount rate of 50%.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
7–
CONVERTIBLE PROMISSORY NOTES (continued)
During
the first 90 days following the date of this note, the Company has the right to prepay the principal and accrued but unpaid interest
due under this note, together with any other amounts that the Company may owe the holder under the terms of this note, at a premium
ranging from 135% to 145% as defined in the note agreement. After this initial 90-day period, the Company does not have a right
to prepay the note. Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate
of 15% per annum from the due date thereof until the same is paid. The conversion price, however, is subject to full ratchet anti-dilution
in the event that the Company issues any securities at a per share price lower than the conversion price then in effect.
The
Company paid an original issuance discount of $8,000 and related loan fees of $3,500 in connection with this note payable which
is being amortized over the term of the note. The Note contains representations, warranties, events of default, beneficial ownership
limitations, piggyback registration rights and other provisions that are customary of similar instruments.
On
September 5, 2018 the Company issued 270,000 shares of common stock to the noteholder with a contractual conversion price of $0.01
to convert $3,023 principal amount with $0 of accrued and unpaid interest and $500 conversion fee, totaling $3,523.
As
of September 30, 2018, the principal balance of this note is $76,977.
The
Company evaluated whether or not the above two convertible promissory notes contains embedded conversion features, which meet
the definition of derivatives under ASC 815 and related interpretations. The Company determined that the terms of the notes discussed
above contains conversion terms, primarily those resulting in an indeterminable number of shares being issued upon conversion
which causes the embedded conversion option to be bifurcated and accounted for as derivative liability at fair value.
In
connection with the issuance of these notes during the year ended September 30, 2018, on the initial measurement date of the notes,
the fair values of the embedded conversion option of $423,778 was recorded as derivative liabilities of which $218,234 was charged
to current period operations as initial derivative expense, and $205,544 was recorded as a debt discount which will be amortized
into interest expense over the term of the note. Upon conversion, the respective derivative liability was marked to fair value
at the conversion, and then a related fair value amount of $4,751 relating to the portion of debt converted was reclassified to
other income or expense as part of gain or loss on debt extinguishment. Additionally, the Company recorded loss on debt extinguishment
of $41,481 during the year ended September 30, 2018 in connection with the conversion of notes.
At
the end of each reporting period, the Company revalues the embedded conversion option derivative liabilities. In connection with
the revaluation, the Company recorded a loss from change in fair value of conversion option liability of $170,953 for the year
ended September 30, 2018 (see Note 2).
In
June 2018, under a Securities Purchase Agreement, the Company issued a 10% Convertible Promissory Note for principal borrowings
of up to $58,000. The 10% convertible promissory note and all accrued interest are due in June 2019. The note is unsecured and
bears interest at the rate of 10% per annum from the issuance date thereof until the notes are paid. The note holder has the right
to convert beginning 180 days following the issuance date, the outstanding principal amount and accrued but unpaid interest into
the Company’s common stock at a conversion price equal to 61% of the average of the lowest two trading prices of the Company’s
common stock during the 20 trading days immediately preceding the conversion date. During the first 30 to 180 days following the
date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under these notes, together
with any other amounts that the Company may owe the holder under the terms of these notes, at a premium ranging from 115% to 140%
as defined in the note agreements. After this initial 180-day period, the Company does not have a right to prepay the note. The
Company paid original issuance cost and related loan fees of $3,000 in connection with this note payable which is being amortized
over the term of the note. The Company granted the note holder 50,000 warrants in connection with the issuance of this note. The
warrants had a term of 5 years from the date of grant and was exercisable at an exercise price of $0.40.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
7–
CONVERTIBLE PROMISSORY NOTES (continued)
The
Company accounted for the warrants by using the relative fair value method and recorded debt discount from the relative fair value
of the warrants of $6,206 using a simple binomial lattice model (see Note 6). The Company has accounted for this convertible promissory
note as stock settled debt under ASC 480 and in June 2018 recorded a debt premium liability of $37,082 and a charge to interest
expense of $37,082. As of September 30, 2018, the principal balance of this note was $58,000.
For
the year ended September 30, 2018, amortization of debt discounts related to all convertible promissory notes amounted to $204,217,
which has been amortized to interest expense on the accompanying statements of operations.
During
the year ended September 30, 2018, the fair value of the derivative liabilities were estimated using the Binomial option pricing
method with the following assumptions:
Dividend rate
|
|
0
|
|
Term (in years)
|
|
0.01 to 0.14 years
|
|
Volatility
|
|
448.79
|
%
|
Risk-free interest rate
|
|
2.12% to 2.36%
|
|
At
September 30, 2018 and 2017, the components of convertible promissory notes, net consisted of the following:
|
|
September 30,
2018
|
|
|
September 30,
2017
|
|
Principal amount of convertible notes
|
|
$
|
309,976
|
|
|
$
|
—
|
|
Debt premium liability
|
|
|
37,082
|
|
|
|
—
|
|
Unamortized debt discount
|
|
|
(38,783
|
)
|
|
|
—
|
|
Convertible notes payable, net – current
|
|
$
|
308,275
|
|
|
$
|
—
|
|
NOTE
8 -
STOCKHOLDERS’ EQUITY
Preferred
Stock
The
Company has 10,000,000 shares of preferred stock authorized. Preferred stock may be issued in one or more series. The Company’s
board of directors is authorized to issue the shares of preferred stock in such series and to fix from time to time before issuance
thereof the number of shares to be included in any such series and the designation, powers, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions thereof, of such series. No shares of preferred
stock have been issued as of September 30, 2018 and 2017.
Common
Stock
Between
October 2016 and March 2017, the Company issued 571,900 of shares of common stock for cash of $115,258.
Effective
August 1, 2016, the Company entered into a twelve month consulting agreement (the “Consulting Agreement”) with an
investor relations firm for investor relations services. In connection with this consulting agreement, the Company shall compensate
the consultant for services rendered 1) cash of $2,000 per month for the first three months then $2,500 per month thereafter and
2) Monthly restricted stock for consulting and services fees paid in advance of services each month to consultant will be $6,000
per month; Such fee will be calculated and valued at the lower of the trailing 5-day volume-weighted average price or the closing
price on the last day of each month. On October 1, 2016, the Company issued 40,000 shares of restricted stock to the consultant.
The shares were valued at their fair value of $6,000 using the recent sale price of the common stock on the dates of grant of
$0.15 per common share.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
8 -
STOCKHOLDERS’ EQUITY (continued)
On
January 23, 2017, the Company issued 160,000 shares of restricted stock to this consultant for services that covered from November
2016 through February 2017. The shares were valued at their fair value of $30,400 using the most recent sale price on October
27, 2016 of the common stock on the dates of grant of $0.19 per common share. Additionally, on March 10, 2017, the Company issued
300,001 shares of restricted stock to this consultant for services covering from March 2017 through July 2017. The shares were
valued at their fair value of $51,000 using the most recent sale price on March 9, 2017 of the common stock on the dates of grant
of $0.17 per common share.
In
aggregate, in connection with the issuance of common shares to this consultant, during the year ended September 30, 2017, the
Company recognized consulting fees of $87,400.
In
connection with various consulting agreements, on March 3, 2017 and March 6, 2017, the Company issued 8,545,000 vested shares
of restricted stock to eight consultants for business development services covering from March 2017 through September 2017. The
shares were valued on the grant dates at their fair value of $1,623,550 using the most recent sale price on October 27, 2016 of
the common stock of $0.19 per common share. During the year ended September 30, 2017, the Company recognized stock based compensation
of $1,623,550 related to these consulting agreements.
On
March 23, 2017, the Company issued 120,000 shares of restricted stock to a consultant for accounting services covering from January
2017 through December 2017. The shares were valued at their fair value of $24,000 using the most recent sale price on March 21,
2017 of the common stock on the dates of grant of $0.20 per common share. During the year ended September 30, 2017, the Company
recognized stock based compensation of $18,000 and prepaid expense of $6,000 to be amortized over the remaining service period.
On
February 27, 2017, in connection with Director Agreements, the Company issued 15,000,000 shares of restricted stock to the Company’s
CEO /Director and issued 500,000 shares of restricted common stock to a director. The 15,500,000 shares of common stock are considered
fully vested on the date of grant. The shares were valued at their fair value of $2,945,000 using the most recent sale price on
October 27, 2016 of the common stock on the dates of grant of $0.19 per common share. During the year ended September 30, 2017,
the Company recognized stock based compensation of $2,945,000 on these fully vested shares as there were no forfeiture provision
in accordance with ASC 718.
On
May 2, 2017, the Company issued 190,000 shares of restricted stock in connection with a two-year software licensing agreement.
The shares were valued at their fair value of $38,000 using the most recent sale price of the Company’s common stock on
the date of grant of $0.20 per common share. In connection with the issuance of these shares, the Company recorded an intangible
asset of $38,000 which was being amortized over the license term until it was deemed fully impaired on September 30, 2017.
On
May 23, 2017, in connection with Director Agreements, the Company issued 500,000 shares of restricted stock to a director of the
Company. The shares were valued at their fair value of $100,000 using the most recent sale price of the common stock on the dates
of grant of $0.20 per common share. During the year ended September 30, 2017, the Company recognized stock based compensation
of $100,000 on these fully vested shares as there were no forfeiture provision in accordance with ASC 718.
On
June 21, 2017, the Company issued 117,500 shares of restricted stock in connection with system development services. The shares
were valued at their fair value of $23,500 using the most recent sale price of the Company’s common stock on the date of
grant of $0.20 per common share. In connection with the issuance of these shares, during the year ended September 30, 2017, the
Company reduced accrued expenses by $23,500.
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
8 -
STOCKHOLDERS’ EQUITY (continued)
On
February 13, 2018, in connection with a contract agreement, the Company issued 300,000 shares of restricted stock to a consultant.
The shares were valued on the date of grant at their fair value of $105,000, or $0.35 per share, using the closing quoted trading
price of the Company’s common stock on February 13, 2018 which was recorded as a prepaid asset to be recognized through
the 7 ½ month term of the agreement, ended September 30, 2018. The Company recognized consulting fees of $105,000 as of
September 30, 2018.
Between
April 2018 and September 2018, the Company issued an aggregate of 885,000 shares of the Company’s common stock to note holders
with contractual conversion prices ranging from $0.01 to $0.04 to convert $3,023 in principal amount with $6,952 of accrued and
unpaid interest and $3,500 of conversion fees, totaling $13,475 (see note 7). The shares were valued at their fair value of $59,707
using the closing quoted trading price of the Company’s common stock on the date of grants ranging from $0.02 to $0.29 per
common share. The Company recorded loss on debt extinguishment of $41,481 during the year ended September 30, 2018 in connection
with the conversion of the notes.
Stock
Warrants
In
June 2018, the Company granted a note holder 50,000 warrants in connection with the issuance of a convertible note. The warrants
have a term of 5 years from the date of grant and are exercisable at an exercise price of $0.40. The Company accounted for the
warrants by using the relative fair value method. The Company recorded debt discount resulting from the relative fair value of
the warrants of $6,206 using a simple binomial lattice model with the following assumptions: stock price at date of grant of $0.18,
exercise price of $0.40, dividend yield of zero, years to maturity of 5, a risk free rate of 2.80%, and expected volatility of
473%. The debt discount is being amortized over the term of the convertible note (see Note 7).
NOTE
9 –
DISCONTINUED OPERATIONS
The
remaining assets and liabilities of discontinued operations are presented in the balance sheets under the caption “Assets
of discontinued operations” and “Liabilities of discontinued operations” which relates to the operations of
the online payment processing services. The carrying amounts of the major classes of these assets and liabilities as of September
30, 2018 and 2017 are summarized as follows:
|
|
As of September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
-
|
|
|
$
|
1,761
|
|
Accounts receivable – related party
|
|
|
-
|
|
|
|
980
|
|
Assets of discontinued operations
|
|
$
|
-
|
|
|
$
|
2,741
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,286
|
|
|
|
4,856
|
|
Liabilities of discontinued operations
|
|
$
|
14,286
|
|
|
$
|
4,856
|
|
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
9 –
DISCONTINUED OPERATIONS (continued)
The
following table sets forth for the years ended September 30, 2018 and 2017, indicated selected financial data of the Company’s
discontinued operations of its online payment processing services.
|
|
For the Years ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
11,996
|
|
|
$
|
28,039
|
|
Cost of sales
|
|
|
(33,669
|
)
|
|
|
29,527
|
|
Gross loss
|
|
|
(21,673
|
)
|
|
|
(1,488
|
)
|
Operating expenses
|
|
|
(65,511
|
)
|
|
|
(2,229
|
)
|
Loss from discontinued operations
|
|
$
|
(87,184
|
)
|
|
$
|
(3,717
|
)
|
NOTE
10 -
INCOME TAXES
The
Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred
tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.
The Company did not have an income tax provision or benefit for the year ended September 30, 2018 or 2017. The Company has incurred
losses and therefore has provided a full valuation allowance against net deferred tax assets as of September 30, 2018 and 2017.
The
Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2015,
2016 and 2017 Corporate Income Tax Returns are subject to Internal Revenue Service examination.
The
items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for
the year ended September 30, 2018 and 2017 were as follows:
|
|
September 30,
2018
|
|
|
September 30,
2017
|
|
Income tax benefit at U.S. statutory rate of 35%
|
|
$
|
(370,640
|
)
|
|
$
|
(1,768,142
|
)
|
State income tax, net of federal benefit
|
|
|
(37,064
|
)
|
|
|
(176,814
|
)
|
Change in Federal tax rate at 21%
|
|
|
135,444
|
|
|
|
—
|
|
Non-deductible expenses
|
|
|
300,287
|
|
|
|
1,840,280
|
|
Change in valuation allowance
|
|
|
(28,027
|
)
|
|
|
104,676
|
|
Total provision for income tax
|
|
$
|
—
|
|
|
$
|
—
|
|
The
Company’s approximate net deferred tax assets as of September 30, 2018 and 2017 were as follows:
|
|
September 30,
2018
|
|
|
September 30,
2017
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
184,471
|
|
|
$
|
182,466
|
|
Intangibles
|
|
|
—
|
|
|
|
30,032
|
|
Total deferred tax assets
|
|
|
184,471
|
|
|
|
212,498
|
|
Valuation allowance
|
|
|
(184,471
|
)
|
|
|
(212,498
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
GH CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
NOTE
10 -
INCOME TAXES (continued)
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act decreases the U.S. corporate
federal income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018. The impact of the re-measurement on
the Corporation’s net deferred tax asset, as of September 30, 2018, was an approximately $135,000 decrease in deferred tax
assets, with a corresponding decrease in the Company’s valuation allowance, and no impact on income tax expense. The Act
also includes a number of other provisions including, among others, the elimination of net operating loss carrybacks and limitations
on the use of future losses, the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities
deduction. These provisions are not expected to have a material effect on the Corporation. Given the significant complexity of
the Act and anticipated additional implementation guidance from the Internal Revenue Service, further implications of the Act
may be identified in future periods.
At
September 30, 2018, the Company had U.S. net operating loss carryforwards of $752,942 for income tax purposes, which expire in
varying amounts through 2037. The amount of any benefit from the Company’s U.S. tax net operating losses is dependent on:
(1) its ability to generate future taxable income, and (2) the unexpired amount of net operating loss carryforwards
available to offset amounts payable on such taxable income. Any change in ownership greater than fifty percent under IRC section
382 places significant annual limitations on the use of the Company’s U.S. net operating losses to offset any future taxable
U.S. income that may be generated. The valuation allowance increased (decreased) by ($28,027) and $104,676 for the periods ended
September 30, 2018 and 2017, respectively.
NOTE
11 –
COMMITMENTS AND CONTINGENCIES
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have
a material adverse effect on our business, financial condition or operating results.
NOTE
12 –
SUBSEQUENT EVENTS
Between
October 4, 2018 and November 29, 2018, the Company issued an aggregate of 9,180,000 shares of the Company’s common stock
to note holders with contractual conversion prices ranging from $0.001 to $0.01 to convert $13,134 in principal amount with $6,848
of accrued and unpaid interest and $3,000 of conversion fees, totaling $22,982. The shares were valued at their fair value of
$137,490 using the closing quoted trading price of the Company’s common stock on the date of grants ranging from $0.01 to
$0.03 per common share. The Company recorded loss on debt extinguishment of $114,508 in connection with the conversion of the
notes.