KinerjaPay Corp.
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Consolidated Balance Sheets
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As of
March 31, 2017 (Unaudited) and December 31, 2016
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March 31, 2017 (Unaudited)
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December 31, 2016
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ASSETS
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Current assets:
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Cash
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$
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4,544
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$
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32,591
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Restricted cash
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-
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16,181
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Prepaid expenses
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4,325
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28,966
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Total current assets
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8,869
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77,738
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Equipment, net of accumulated depreciation of $660 and $289, respectively
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5,832
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3,845
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Total assets
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$
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14,701
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$
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81,583
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current liabilities:
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Accounts
payable - trade
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$
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2,642
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3,461
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Tax payable
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554
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95
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Accrued expenses
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-
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4,107
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Unissued stock
subscriptions
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150,000
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150,000
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Total current liabilities
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153,196
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157,663
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Total liabilities
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153,196
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157,663
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Stockholders'
Deficit:
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Preferred
stock, par value $0.0001 per share; 10,000,000 shares authorized: none
issued
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-
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-
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Common
stock, par value $0.0001 per share; 500,000,000 shares authorized;
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9,727,013 and 8,627,013 shares issued and outstanding at March 31, 2017
and December 31, 2016, respectively
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972
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862
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Additional
paid-in capital
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4,705,584
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3,508,529
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Accumulated deficit
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(4,845,206)
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(3,585,626)
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Accumulated other comprehensive income
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155
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155
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Total stockholders' deficit
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(138,495)
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(76,080)
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Total liabilities and stockholders' deficit
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$
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14,701
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$
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81,583
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The accompanying notes to
the consolidated unaudited financial statements are
integral part of these financial statements.
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KinerjaPay Corp.
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Consolidated Statements of
Operations
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For the
Three Months Ended March 31, 2017 and 2016
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For the Three Months
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For the Three Months
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Ended March 31, 2017
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Ended March 31, 2016
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Revenue
from services
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$
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2,002
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$
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-
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Costs related to service revenue
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782
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-
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1,220
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-
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Expenses:
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General and administrative
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1,260,465
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1,350,151
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Depreciation expense
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335
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-
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Total
general and administrative expenses
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1,260,800
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1,350,151
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(Loss) from
operations
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(1,259,580)
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(1,350,151)
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Other income
(expense)
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Interest expense
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-
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(3)
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Loss of extinguishment of debt
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-
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(9,003)
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Total
costs and expenses
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(1,259,580)
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(1,359,157)
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Net loss before
for income taxes
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(1,259,580)
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(1,359,157)
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Income taxes
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-
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-
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Net
loss
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$
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(1,259,580)
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$
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(1,359,157)
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Basic and diluted per share amounts:
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Basic and diluted
net loss
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$
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(0.14)
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$
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(0.21)
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Weighted
average number of common shares outstanding (basic and diluted)
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9,114,235
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6,412,325
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The accompanying notes to
the consolidated unaudited financial statements are
integral part of these financial statements.
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KinerjaPay Corp.
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Consolidated Statements of
Comprehensive Loss
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For the
Three Months Ended March 31, 2017 and 2016
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Contents
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For the Three Months
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For the Three Months
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Ended March 31, 2017
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Ended March 31, 2016
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Net loss
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$
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(1,259,580)
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$
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(1,359,157)
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Other comprehensive loss
adjustments, net of tax:
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Foreign
currency translation adjustments
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-
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-
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Total
other comprehensive
income, net of tax
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-
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-
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Total comprehensive loss,
net of tax
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$
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(1,259,580)
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$
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(1,359,157)
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The accompanying notes to
the consolidated unaudited financial statements are
integral part of these financial statements.
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KinerjaPay Corp.
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Consolidated Statements of Cash
Flows
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For the
Three Months Ended March 31, 2017 and 2016
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For the Three Months
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For the Three Months
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Ended March 31, 2017
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Ended March 31, 2016
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Cash flows from
operating activities:
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Net
loss
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$
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(1,259,580)
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$
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(1,359,157)
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Adjustments
required to reconcile net (loss) to net cash (used in) operating activities:
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Depreciation expense
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335
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-
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Loss on extinguishment of debt
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-
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9,003
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Share-based compensation
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1,022,165
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1,200,133
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Changes in net
assets and liabilities:
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(Increase) decrease in prepaid expenses
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24,641
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-
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Increase (decrease) in accounts payable
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(360)
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12,485
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Increase (decrease) in accrued liabilities
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(4,107)
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-
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Net cash used in operating activities
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(216,906)
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(137,536)
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Cash flows from
investing activities:
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Purchase of equipment
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(2,322)
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-
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Net cash used in investing activities
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(2,322)
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-
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Cash flows from
financing activities:
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Proceeds from issuance of common stock
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175,000
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474,987
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Payments on debt
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-
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(8,689)
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Net cash provided by financing activities
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175,000
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466,298
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Foreign currency translation adjustments
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-
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-
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Net (decrease)
increase in cash
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(44,228)
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328,762
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Cash -
beginning
of period
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48,772
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250,194
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Cash
- end of period
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$
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4,544
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$
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578,956
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The accompanying notes to
the consolidated unaudited financial statements are
integral part of these financial statements.
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KinerjaPay Corp.
Notes to
Consolidated Unaudited
Interim Financial Statements
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1. The Company and Significant Accounting Policies
Organizational Background
KinerjaPay Corp. (the "Company") is a Delaware corporation and has not
commenced operations. The Company was incorporated under the laws of the
State of Delaware on February 12, 2010. The business plan of the Company was
to develop a commercial application of the design in a patent of a "Solar
element and method of manufacturing the same". On November 10, 2015 this
plan was abandoned and all related contracts and agreements rescinded.
On December 1, 2015, the Company entered into a license agreement with PT
Kinerja Indonesia, an entity organized under the laws of Indonesia and
controlled by Mr. Ng ("PT Kinerja"), for an exclusive, world-wide license to
use and commercially exploit certain technology and intellectual property
and its website, KinerjaPay.com. Pursuant to the License Agreement, the
Company was granted the exclusive, world-wide rights to the KinerjaPay IP,
an e-commerce platform that provides users with the convenience of e-wallet
service for bill transfer and online shopping and is among the first portals
to allow users the convenience to top-up phone credit. In conjunction with
the agreement the company changed its name from Solarflex Corp. to
KinerjaPay Corp. On April 6, 2016, P.T. Kinerja Pay Indonesia a subsidiary
was organized under the laws of Indonesia.
The accompanying financial statements of the Company were prepared from
the accounts of the Company under the accrual basis of accounting.
Basis of Presentation:
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
The Company has not established sufficient revenue to cover its operating
costs, and as such, has incurred an operating loss since inception. Further,
as of March 31, 2017, the cash resources of the Company were insufficient to
meet its current business plan. These and other factors raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from
the possible inability of the Company to continue as a going concern.
Principles of Consolidation:
The financial statements include the accounts of KinerjaPay Corp. and its
wholly owned subsidiary PT KinerjaPay, Indonesia. All significant
inter-company balances and transactions have been eliminated.
Significant Accounting Policies
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents:
For financial statement presentation purposes, the Company considers
those short-term, highly liquid investments with original maturities of
three months or less to be cash or cash equivalents. There were no cash
equivalents as of March 31, 2017 and December 31, 2016.
Property and Equipment:
New property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally 5 years. Expenditures for renewals and betterments are
capitalized. Expenditures for minor items, repairs and maintenance are
charged to operations as incurred. Gain or loss upon sale or retirement due
to obsolescence is reflected in the operating results in the period the
event takes place.
Valuation of Long-Lived Assets:
We review the recoverability of our long-lived assets including
equipment, goodwill and other intangible assets, when events or changes in
circumstances occur that indicate that the carrying value of the asset may
not be recoverable. The assessment of possible impairment is based on our
ability to recover the carrying value of the asset from the expected future
pre-tax cash flows (undiscounted and without interest charges) of the
related operations. If these cash flows are less than the carrying value of
such asset, an impairment loss is recognized for the difference between
estimated fair value and carrying value. Our primary measure of fair value
is based on discounted cash flows. The measurement of impairment requires
management to make estimates of these cash flows related to long-lived
assets, as well as other fair value determinations.
Stock-Based Compensation:
Stock-based awards are accounted for using the fair value method in
accordance with ASC 718, Share-Based Payments. Our primary type of
share-based compensation consists of stock options. We use the Black-Scholes
option pricing model in valuing options. The inputs for the valuation
analysis of the options include the market value of the Company's common
stock, the estimated volatility of the Company's common stock, the exercise
price of the warrants and the risk free interest rate.
Accounting For Obligations And Instruments Potentially To Be Settled In
The Company's Own Stock: We account for obligations and instruments
potentially to be settled in the Company's stock in accordance with FASB ASC
815, Accounting for Derivative Financial Instruments. This issue addresses
the initial balance sheet classification and measurement of contracts that
are indexed to, and potentially settled in, the Company's own stock.
Fair Value of Financial Instruments:
FASB ASC 825, "Financial Instruments," requires entities to disclose the
fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to
estimate fair value. FASB ASC 825 defines fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties. At March 31, 2017 and
December 31, 2016, the carrying value of certain financial instruments (cash
and cash equivalents, accounts payable and accrued expenses.) approximates
fair value due to the short-term nature of the instruments or interest
rates, which are comparable with current rates.
Fair Value Measurements:
The Company measures fair value under a framework that utilizes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of inputs which prioritize the inputs used
in measuring fair value are:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices
for identical assets or liabilities in active markets that the Company has
the ability to access.
Level 2: Inputs to the valuation methodology
include:
- Quoted prices for similar assets or liabilities in active
markets;
- Quoted prices for identical or similar assets or liabilities
in inactive markets;
- Inputs other than quoted prices that are
observable for the asset or liability;
- Inputs that are derived
principally from or corroborated by observable market data by correlation or
other means.
If the asset or liability has a specified (contractual)
term, the level 2 input must be observable for substantially the full term
of the asset or liability.
Level 3: Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The assets or liability's fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to
the fair value measurement. Valuation techniques used need to maximize the
use of observable inputs and minimize the use of unobservable inputs. The
following table presents assets that were measured and recognize at fair
value on March 31, 2017 and December 31, 2016 and the years then ended on a
recurring basis:
Fair Value Measurements at March 31, 2017
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Quoted Prices in Active
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Significant Other
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Significant
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Markets for Identical Assets
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Observable Inputs
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Unobservable Inputs
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Total
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(Level 1)
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(Level 2)
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(Level 3)
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None
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$
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-
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$
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-
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$
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-
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$
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-
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Total assets
and liabilities at fair value
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$
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-
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$
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-
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$
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-
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$
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-
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Fair Value Measurements at
December 31, 2016
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Quoted Prices in Active
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Significant Other
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Significant
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Markets for Identical Assets
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Observable Inputs
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Unobservable Inputs
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Total
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(Level 1)
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(Level 2)
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(Level 3)
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None
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$
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-
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$
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-
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$
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-
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$
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-
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Total assets
and liabilities at fair value
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$
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-
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$
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-
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$
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-
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$
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-
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When the Company changes its valuation inputs for measuring financial
assets and liabilities at fair value, either due to changes in current
market conditions or other factors, it may need to transfer those assets or
liabilities to another level in the hierarchy based on the new inputs used.
The Company recognizes these transfers at the end of the reporting period
that the transfers occur. For the periods ended March 31, 2017 and 2016,
there were no significant transfers of financial assets or financial
liabilities between the hierarchy levels.
Revenue Recognition:
Our principal products and services are: (i) our electronic payment
service ("EPS") and (ii) our virtual marketplace both of which are available
on our portal under the domain name KinerjaMall.com. Through our Portal and
Mobile App we provide EPS to consumers and merchants. Our EPS provides an
affordable, secure and reliable method to consumers and merchants, as well
as friends and family, to pay and transfer money using electronic devices
(e.g., mobile, tablets and personal computers). In addition, consumers,
merchants and businesses of all sizes can accept payments from merchant
websites and mobile devices. Our EPS service enables consumers to
conveniently pay utility bills, phone bills, credit card payments and add
credit to their cell phone accounts. We developed a proprietary digital
e-wallet software, which provides users with the ability to complete EPS
transactions safely and conveniently. The e-wallet acts as an escrow account
as payments will only be released to the seller once the buyer has received
the product. We recognize revenue as a percentage the dollar value of each
at the completed transaction.
We pay transaction fees as follows: (i) 3.9% + $0.30 when senders fund
payment transactions using PayPal; (ii) no fees when customers fund payment
transactions by electronic transfer of funds from a bank accounts; and (iii)
fees of $0.25 to $0.50 per transaction if customers fund payment
transactions by using a third party payment gateway. To date, 0%, 80% and
20%, respectively, of our fees are represented by transactions (i), (ii) and
(iii), respectively.
Earnings per Common Share:
We compute net income (loss) per share in accordance with ASC
260, Earning per Share. ASC 260 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing Diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive.
Common Stock Split:
On January 15, 2016, we declared a reverse split of our common stock. The
formula provided that every thirty (30) issued and outstanding shares of
common stock of the Corporation be automatically split into one (1) share of
common stock. The reverse split was effective upon receipt of approval from FINRA. Except as otherwise noted, all share, option and warrant numbers have
been restated to give retroactive effect to this split. All per share
disclosures retroactively reflect post-split shares.
Income Taxes:
We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC
740, we are required to compute tax asset benefits for net operating losses
carried forward. The potential benefits of net operating losses have not
been recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating losses
carried forward in future years.
We must make certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and judgments
occur in the calculation of certain tax assets and liabilities, which arise
from differences in the timing of recognition of revenue and expense for tax
and financial statement purposes.
Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the differences are
expected to reverse. ASC 740 provides for the recognition of deferred tax
assets if realization of such assets is more likely than not to occur.
Realization of our net deferred tax assets is dependent upon our generating
sufficient taxable income in future years in appropriate tax jurisdictions
to realize benefit from the reversal of temporary differences and from net
operating loss, or NOL, carryforwards. We have determined it more likely
than not that these timing differences will not materialize and have
provided a valuation allowance against substantially all of our net deferred
tax asset. Management will continue to evaluate the realizability of the
deferred tax asset and its related valuation allowance. If our assessment of
the deferred tax assets or the corresponding valuation allowance were to
change, we would record the related adjustment to income during the period
in which we make the determination. Our tax rate may also vary based on our
results and the mix of income or loss in domestic and foreign tax
jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to which,
additional taxes will be due. If we ultimately determine that payment of
these amounts is unnecessary, we will reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no
longer necessary. We will record an additional charge in our provision for
taxes in the period in which we determine that the recorded tax liability is
less than we expect the ultimate assessment to be.
ASC 740 which requires recognition of estimated income taxes payable or
refundable on income tax returns for the current year and for the estimated
future tax effect attributable to temporary differences and carry-forwards.
Measurement of deferred income tax is based on enacted tax laws including
tax rates, with the measurement of deferred income tax assets being reduced
by available tax benefits not expected to be realized.
Uncertain Tax Positions:
When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or
the amount of the position that would be ultimately sustained. In accordance
with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax
Positions, the benefit of a tax position is recognized in the financial
statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or
litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the
benefits associated with tax positions taken that exceeds the amount
measured as described above should be reflected as a liability for
unrecognized tax benefits in the accompanying consolidated balance sheets
along with any associated interest and penalties that would be payable to
the taxing authorities upon examination.
Our federal and state income tax returns are open for fiscal years ending
on or after December 31, 2013. We are not under examination by any
jurisdiction for any tax year. At March 31, 2017 we had no material
unrecognized tax benefits and no adjustments to liabilities or operations
were required under FASB ASC 740-10.
Recent Issued Accounting Standards
Effective January, 2017, the Company adopted Accounting Standards Update
(ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of
Deferred Taxes, which changes how deferred taxes are classified in
organizations' balance sheets. The ASU eliminates the current requirement
for organizations to present deferred tax liabilities and assets as current
and noncurrent in a classified balance sheet. Instead, all deferred tax
assets and liabilities will be required to be classified as noncurrent. The
amendments apply to all organizations that present a classified balance
sheet. For public companies, the amendments are effective for financial
statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods (i.e., in the first quarter of
2017 for calendar year-end companies).Early adoption is permitted for all
entities as of the beginning of an interim or annual reporting period. The
guidance may be applied either prospectively, for all deferred tax assets
and liabilities, or retrospectively (i.e., by reclassifying the comparative
balance sheet). If applied prospectively, entities are required to include a
statement that prior periods were not retrospectively adjusted. If applied
retrospectively, entities are also required to include quantitative
information about the effects of the change on prior periods. The adoption
of this ASU did not have a significant impact on the condensed consolidated
financial statements.
Management does not anticipate that the adoption of these standards will
have a material impact on the financial statements.
Effective January, 2017, the Company adopted Accounting Standards Update
(ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting. The amendments are
intended to improve the accounting for employee share-based payments and
affect all organizations that issue share-based payment awards to their
employees.
Several aspects of the accounting for share-based payment award
transactions are simplified, including: (a) income tax consequences;
(b) classification of awards as either equity or liabilities; and
(c) classification on the statement of cash flows. The amendments also
simplify two areas specific to private companies.
For public business entities, the amendments are effective for annual
periods beginning after December 15, 2016, and interim periods within those
annual periods. Early adoption is permitted in any interim or annual period
periods (i.e., in the first quarter of 2017 for calendar year-end
companies).
The adoption of these ASU's did not have a significant impact on the
consolidated financial statements.
In May 2014, The FASB issued Accounting Standard Update 2014-09, Revenue
from Contracts with Customers (Topic 606) ("ASU 2014-09").ASU 2014-09
outlines a single comprehensive model to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue
recognition guidance, including industry-specific guidance. ASU 2014-09 also
requires entities to disclose sufficient information, both quantitative and
qualitative, to enable users of financial statements to understand the
nature, amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers.
During 2016, the FASB issued several Accounting Standard Updates that
focuses on certain implementation issues of the new revenue recognition
guidance including Narrow-Scope Improvements and Practical Expedients,
Principal versus Agent Considerations and Identifying Performance
Obligations and Licensing.An entity should apply the amendments in this ASU
using one of the following two methods:
1. Retrospectively to each prior reporting period presented with a
possibility to elect certain practical expedients, or,
2.
Retrospectively with the cumulative effect of initially applying ASU 2014-09
recognized at the date of initial application. If an entity elects the
latter transition method, it also should provide certain additional
disclosures.
For a public business entity, the amendments in ASU
2014-09 (including the amendments introduced through recent ASU's) are
effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period (the first quarter of
fiscal year 2018 for the Company). Early application is permitted only as of
annual reporting periods beginning after December 15, 2016, including
interim reporting periods within that reporting period.
The Company intends to adopt ASU 2014-09 as of January 1, 2018.
The Company is in the process of evaluating the impact of ASU 2014-09 on
its revenue streams and selling contracts, if any, and on its financial
reporting and disclosures. Management is expecting to complete the
evaluation of the impact of the accounting and disclosure changes on the
business processes, controls and systems throughout 2017. Since the Company
did not report so far, material revenues, management believes that the
adoption of ASU 2014-09 will not have significant impact on its financial
statements.
The accompanying balance sheet as of March 31, 2017, which was derived
from unaudited financial statements, and the unaudited interim financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") for interim
financial information and in accordance with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by U.S. GAAP for complete financial
statements. These financial statements should be read in conjunction with
the audited financial statements and related notes for the fiscal year ended
December 31, 2016, included in the Company's Annual Report on Form 10-K
covering that period.
The preparation of these financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related intangible assets, income taxes, insurance
obligations and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other resources. Actual results may
differ from these estimates under different assumptions or conditions. The
results of operations for the periods presented are not necessarily
indicative of the results for the full fiscal year or any future period.
In the opinion of management, the information furnished in these interim
financial statements reflects all adjustments necessary for a fair statement
of the financial position and results of operations and cash flows as of and
for the three-month periods ended March 31, 2017 and 2016. All such
adjustments are of a normal recurring nature. The Financial Statements do
not include some information and notes necessary to conform to annual
reporting requirements.
2. Stockholders' Equity
On January 15, 2016 we amended our certificate of incorporation to
increase authorized capital to include 10 million shares of $.0001 par value
preferred shares. No preferred shares have been issued.
Common Stock and Warrants Issued for Cash
During the first quarter of 2017, the Company received $175,000 through a
placement of 350,000 common stock units to PT Stareast Asset Management, an
affiliated party, for the offering price of
$0.50 per unit. Each unit consisted of one share of common stock and one
warrant to purchase common stock. The 350,000 warrants are exercisable at
$1.00 and expire two years from the date of issuance. The warrants were
valued using the Black-Scholes pricing model to estimate the relative fair
value of $125,119. The Black-Sholes pricing model assumptions used are as
follows: expected dividend yield of 0%; risk-free interest rate of 1.36%;
expected volatility of 179%, and warrant exercise period based upon the
stated terms. The warrants were classified within stockholders' equity.
Stock-Based Compensation
During the first quarter of 2017, the Company issued 750,000 fully-vested
shares of the Company common stock and 1,200,000 warrants (400,000 "A"
warrants with exercise price of $1.00, 400,000 "B" warrants with exercise
price of $2.00 and 400,000 "C" warrants with exercise price of $3.00) to
consultants as payment for services. As the equity instruments issued are
fully vested and non-forfeitable, the fair value of the grants was
recognized as an increase additional paid-in capital at the measurement date
as. The shares were valued at the closing price as of the date of the
underlying agreements (ranging from $0.65 to $1.40) and resulted in current
recognition of $675,000 in consulting service expense.
The warrants were valued using the Black-Scholes pricing model to
estimate the fair value and resulted in current recognition of $347,165 in
additional consulting services. The Black-Sholes pricing model assumptions
used are as follows: expected dividend yield of 0%; risk-free interest rate
of 1.21%; expected volatility of 179%, and warrant exercise period based
upon the stated terms.
3. Related Party Transactions
On February 19, 2016, we issued 1,333,333 shares of our common stock to
Mr. Ng, our CEO, sole director and control person. Mr. Ng is the sole
officer and directors and control person of PT Kinerja, the other party to
this agreement, as payment for services as part of a service agreement
resulting from the license agreement. The shares were valued at the closing
price as of the date of the agreement ($0.9001) and resulted in full
recognition of $1,200,133 in consulting services expense.
As of March 31,
2017, we had $1,187 in accounts payable due to our CEO.
4. Going Concern
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
The Company has not established sufficient revenue to cover its
2017 operating costs, and as such, has incurred an operating loss since
inception. Further, as of March 31, 2017, the cash resources of the Company
were insufficient to meet its current business plan. These and other factors
raise substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a
going concern.
5. Subsequent Events
In April and May 2017, we received $682,000 in proceeds from the sale of
944,000 shares of common stock and warrants.
There were no other material subsequent events following the period ended
March 31, 2017 and throughout the date of the filing of Form 10-Q.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
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As used in this Form 10-Q, references to the "KinerjaPay," Company," "we," "our" or
"us" refer to KinerjaPay Corp.
Unless the context otherwise indicates.
The following plan of operation provides information which management
believes is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial statements and
notes thereto. This section includes a number of forward-looking statements that reflect
our current views with respect to future events and financial performance. Forward-looking
statements are often identified by words like believe, expect, estimate, anticipate,
intend, project and similar expressions, or words which refer to future
events. These
forward-looking statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from our predictions.
Plan of Operation
The Company was incorporated in Delaware on February 12, 2010 under the
name Solarflex Corp. for the purpose of developing, manufacturing and
selling a solar photovoltaic element, a device that converts light into
electrical flow (also known as a photovoltaic cell) based on certain
proprietary technology to enable an increase in solar energy conversion and
provide energy at a lower cost. We did not generate any revenues from the sale of any solar
photovoltaic element, nor did we successfully manufacturer or construct a
working prototype. We
determined during the 4th quarter of 2015 to evaluate potential business
opportunities.
On December 1, 2015, the Company entered into a license agreement (the
"License Agreement") with PT Kinerja Indonesia, an entity organized under
the laws of Indonesia and controlled by Mr. Ng ("PT Kinerja"), for an
exclusive, world-wide license to use and commercially exploit certain
technology and intellectual property (the "KinerjaPay IP") and its website,
KinerjaPay.com. Pursuant to the License Agreement, the Company was granted
the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce
portal.
In connection with the License Agreement, we agreed to: (i) change the name
of the Company from Solarflex Corp to KinerjaPay Corp.; (ii) implement a
reverse split of our common stock on a one-for-thirty (1:30) basis; and
raise equity capital in the minimum offering amount of $500,000 and the
maximum offering amount of $2,500,000 through the offering of units at a
price of $0.50, each Unit, each consisting of 1 share of common stock
(post-reverse) and 1 class A warrant exercisable for a period of 24 months
to purchase 1 additional share of common stock (post-reverse) at $1.00. The
Unit Offering was made only to "accredited investors" who are not U.S.
Persons in reliance upon Regulation S promulgated by the SEC under the
Securities Act of 1933, as amended (the "Act"). On January 20, 2016, the
Company closed the Minimum Offering after it received subscription proceeds
in excess of $500,000. To date, we have raised $1,105,000 under the Unit
Offering, while the Unit Offering is continuing.
On March 10, 2016, the Company's name change to KinerjaPay Corp.
and its one-for-thirty reverse stock split became effective. The Company's
shares of common stock are subject to quotation on the OTCQB market under
the symbol KPAY.
On August 31, 2016, the Registrant and its
wholly-owned Indonesian subsidiary, PT. Kinerja Pay Indonesia, entered into
an a Cooperation and Service Agreement with Black Grace Investment Ltd,
organized under the laws of the British Virgin Island ("Black Grace") and
its affiliate, PT. Pay Secure Online Indonesia, organized under the laws of
Indonesia. Pursuant to this Agreement, PT/ PaySec granted PT. Kinerja Pay
the right to use the PT. PaySec's payment services ("Payment Services")
under a revenue sharing arrangement. As consideration for the use of the
Payment Services, the Registrant agreed to issue 200,000 restricted shares
to Black Grace or its designee. As further consideration for the use of the
Payment Services, the Parties agreed that to share the net revenues
generated from the use of the Payment Services and e-wallet and payment
gateway technology on a 50/50 basis.
On
September 8, 2016, PT. Kinerja Pay entered into a second Cooperation and
Service Agreement with PT. Indonesia Enam Dua, organized under the laws of
Indonesia ("PT.IED"), which owns 62hall.co.id, an integrated wholeseller that sells online a wide range of products and services, an
online search engine and extensive customer services. Pursuant to this
Agreement, the parties agreed to share resources in connection with the
development of PT, Kinerja Pay's new e-commerce portal, KinerjaMall.com. In
consideration for PT.IED's services, the parties agreed to allocate the
profits, defined as an item's selling price on KinerjaMall.com minus the
cost price of the item sold, 90% to PT. Kinerja Pay and 10% to PT.IED.
On April 10, 2017, the Company announced that consumers can now use its
platform to make payments to state-run Pegadaian, the largest provider of
fiduciary services and credit across Indonesia. The relationship facilitates
Pegadaian's collections capabilities and is expected to result in a
meaningful reduction in their infrastructure needs.
Our principal products and services are (i) our
electronic payment service (the "EPS"); and (ii) our virtual marketplace
(the "Marketplace") both of which
are available on our portal under the domain name KinerjaPay.com (the
"Portal").
Our Android-based mobile app not only
serves as an extension of desktop or laptop access to our website, but has additional
in-app services that cater to mobile users, such as social engagement and
digital entertainment (the "Mobile App").
We believe that in
combining our EPS function
("PAY") with the ability to buy and sell products via our
virtual marketplace ("Buy") enhanced by a
gamification component ("Play")
our customers and merchants increase their loyalty to our
services.
While the Registrant began
operating activities in May 2016, it did not have in place the
infrastructure to conduct billing and collections. We expect to generate
revenues from sales of our Portal services during the remainder of
2017.
Indonesia, the world's fourth most-populous country, having a population
estimated to be 255 million people, is becoming an economic
power in the Southeast Asia region. Over 50% of its population is below the
age of 30 and we believe that the young Indonesian population is highly adaptive to
new technology. The rise of Smartphones and tablets that sell for less than US$100 is rapidly
broadening internet access and pushing the Indonesian e-commerce
market toward a critical point in terms of scale and profitability, in spite
of significant challenges due to poor infrastructure and payment systems. The number of internet users is excepted to double to
125 million by 2017 and Smartphone ownership is to rise from 20 per cent to
52 per cent in the same period, the
highest percentage compared to other Southeast Asian countries, according to Redwing, an advisory group.
Notwithstanding
our belief that our Portal represents a significant advance as compared to other
Indonesian portals, there are a number of potential difficulties that we might face,
including the following:
We may not be able to raise sufficient additional funds
to fully implement our business plan and grow our business;
Competitors may develop
alternatives that render our Portal services redundant or
unnecessary;
Our
proprietary technology may be shown to have characteristics that may render
it insufficient for our business;
Our
Portal may not become widely accepted by consumers and merchants; and
Strict,
new government regulations and
inappropriate e-commerce policies, especially in an emerging economy such as
Indonesia, may
hinder the growth of the e-commerce market.
During the three
months ended March 31, 2017, we raised $175,000 in equity capital and we may be expected to require up to an additional $2.5 million
in capital during the next 12 months to
fully implement
our business plan and fund our operations.
Results of Operations during the three months
ended March 31, 2017 as compared
to the three months ended March 31, 2016
During the three months ended March 31, 2017, we
generated $2,002 in revenues from services as compared to no revenues in the
same period in the prior year. Our costs related to our revenues were $782
during the three months ended March 31, 2017.
During the three months ended March 31, 2017, we had operating expenses related to general and administrative expenses being a public company and
depreciation expenses.
During
the three months ended March 31, 2017
, we incurred a net loss of $1,259,580 due to general and administrative expenses of $1,260,465
and depreciation expenses of $335.
During
the three months ended March 31, 2016
, we incurred a net loss of
$1,359,157 due to general and administrative expenses
of $1,350,151, interest expense of $3 and
a loss of $9,003 related
to extinguishment of debt
.
The significant decrease in net loss during the three month ended March 31,
2017 as compared to the same period in the prior year was mainly due to
a decrease in professional fees and non-cash compensation expenses.
Liquidity and Capital Resources
On March 31, 2017, we had $8,869 in current assets
represented by cash of $4,544 and prepaid expenses of $4,325. On December 31, 2016, we had $77,738 in current assets consisting of $32,591
in cash, $16,181 in restricted cash and $28,966 in prepaid expenses.
We had fixed assets of $5,832 as of March 31,
2017 and $3,845 as of December 31,
2016. We had total assets of of $14,701 as of March 31, 2017 and $81,583 as
of December 31, 2016.
As of March 31, 2017, we had $153,196 in current liabilities comprised of
$2,642 in accounts payable, $554 in tax payable and $150,000 in unissued
stock subscriptions.
As of December 31, 2016, we had total current liabilities of $157,663
consisting of accounts payable of $3,461, tax payable of $95, accrued
expenses of $4,107 and unissued stock subscriptions of $150,000.
We had no long-term liabilities
as of March 31, 2017 and December 31, 2016.
We used $216,906 in our operating activities during the three months ended March
31, 2017, which was
due to a net loss of $1,259,580 offset by $335 in depreciation expense, non-cash compensation charges of $1,022,165, a
decrease in
prepaid expenses of $24,641, a decrease in accounts payable of $360 and a
decrease in accrued liabilities of $4,107.
We used $137,536 in our operating activities during the three months ended March
31, 2016, which was
due to a net loss of $1,359,157 offset by non-cash compensation charges of $1,200,133, an increase in
accounts payable and accrued liabilities of $12,485 and loss on debt conversion
of $9,003.
We financed our negative cash flow from operations during the
period ended March 31, 2017 through the issuance of common stock of $175,000. We financed our negative cash flow from operations during the
period ended March 31, 2016 through the issuance of common stock of $474,987
reduced by payments of $8,689 related to principal payments on debt.
We had investing activities of $2,322 during the three
months ended March 31, 2017 related to the purchase of equipment in the same
amount and had no such activities during the same period in the prior year.
Availability of Additional Capital
Notwithstanding our success in raising over $175,000 from the private
sale of equity securities during the three month ended March 31, 2017 and our expectation that we will
be successful in raising up to an additional $2.5 million during 2017, there can be no assurance that we will continue to be
successful in raising equity capital and have adequate capital resources to
fund our operations or that any additional funds will be available to us
on favorable
terms or in amounts required by us.
If we determine that it is necessary to raise additional funds, we may
choose to do so through public or private equity or debt financing, a bank
line of credit, or other arrangements.
If we are unable to obtain adequate
capital resources to fund operations, we may be required to delay, scale
back or eliminate some or all of our plan of operations, which may have a
material adverse effect on our business, results of operations and ability
to operate as a going concern.
We are not
aware of any material trend, event or capital commitment, which would or
could potentially adversely affect our liquidity. The Company currently has
no arrangements with any persons or entities with regard to our existing
debt, however limited. We do not have any arrangements with potential
investors or lenders to provide us with any additional financing and there
can be no assurance that any such additional financing will be available
when required in order to proceed with the business plan.
Any additional equity financing may be dilutive
to our stockholders, new equity securities may have rights, preferences or
privileges senior to those of existing holders of our shares of common
stock. Debt or equity financing may subject us to restrictive covenants and
significant interest costs.
Going Concern Consideration
Our registered independent auditors have issued an opinion on our financial statements which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
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A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required
to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
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Evaluation of disclosure controls and procedures.
As of
March 31, 2017, the Company's chief executive officer and chief financial
officer conducted an evaluation regarding the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under
the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013), our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures were
ineffective as March 31, 2017. Management has identified corrective actions to address the weaknesses and
plans to implement them during the second quarter of 2017.
Changes
in Internal Control Over Financial Reporting
There were no changes in
the Company's internal control over financial reporting during the
period covered by this report, which were identified in connection with
management's evaluation required by paragraph (d) of Rules 13a-15 and
15d-15 under the Exchange Act, that have materially affected, or are
reasonably likely to materially affect, the Company's internal control
over financial reporting.