The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
DKG Capital, Inc., (the “Company”) located in Las Vegas, Nevada, was incorporated on October 2, 2013, in the State of Nevada.
Mr. Andy Kim resigned as President and Chief Executive Officer, Secretary and Treasurer of our Company on January 11, 2017 and Mr. Tesheb Casimir became the President and Chief Executive Officer, Secretary and Treasurer. Mr. Tesheb Casimir ended the binary option software development. Mr. Tesheb Casimir’s new business focuses are: 1. Mobile application development; 2. Provision of online marketing services; 3. Operation of self-developed social media platform; and 4. Provision of various leisure services to high net worth clients who are users of our social media platform.
On January 11, 2017 our Board of Directors and a majority of our shareholders’ voting power approved (1) a corporate name change to “DKG Capital, Inc.”, (2) an increase in our authorized shares of common stock to 5,000,000,000 shares from 100,000,000 shares and (3) a 30:1 forward split of our common stock. These corporate actions are now effective. All share and per share amounts herein have been retroactively restated to reflect the split.
On July 6, 2017, the Company’s Board of Directors approved a merger with DKG Mobilepay Inc., a wholly owned subsidiary incorporated in the State of Nevada. The Merger is related to the Company’s revised business plan and the Company will be the surviving company of the Merger. The plan of merger provides for an exchange ratio of 1:35 for the common stock of both constituent corporations, which has the practical effect of a 1 for 35 reverse split of the Company’s common stock, with fractional shares to be rounded up to the nearest whole number of shares. This corporate action was approved by the Company’s Board of Directors as authorized by Nevada corporate law. The 1 for 35 reverse stock split effected by the Merger was effective on August 4, 2017. All share and per share amounts herein have been retroactively restated to reflect the split.
On November 27, 2017, the Company's Articles of Incorporation were amended to 1,000,000,000 shares from 5,000,000,000 shares and to authorize the Company to issue up to 4,000,000,000 shares of preferred stock, par value $0.00001 per share.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Management acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded and (3) transactions are recorded in the period in a timely manner to produce consolidated financial statements which present fairly the financial condition, results of operations and cash flows of the company for the respective periods being presented.
The Company’s consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. The Company has elected a December 31 fiscal year-end.
Principle of Consolidation
The consolidated financial statements of the Company include the Company and its wholly-owned subsidiary DKG HUB SDN BHD. All material intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less which are not securing any corporate obligations. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Accounts Receivable And Deposits
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms. Credit is extended based on evaluation of a customer's financial condition, the customer’s credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. Based on the evaluation, the Company has determined that no allowance for doubtful accounts is required as of December 31, 2017 and 2016.
Impairment of Long-lived Assets
The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. The Company reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. During the year ended December 31, 2016, the Company fully impaired its capitalized website development costs.
Revenue Recognition
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) products are installed and/or the contracted services have been rendered to the customer, (iii) the sales price is fixed or determinable and (iv) collectability is reasonably assured.
All development services are invoiced when completed. Revenues are recognized at the point of sale, which occurs when the service is completed and/or installation services are complete.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the consolidated financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of December 31, 2017 or December 31, 2016.
Stock-Based Compensation
The Company records stock-based compensation at fair value as of the date of grant and recognizes the corresponding expense over the requisite service period (usually the vesting period), utilizing the Black-Scholes option-pricing model. The volatility component of the calculation is based on the historic volatility of the Company’s stock or the expected future volatility. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Profit/ (loss) per Common Share
Basic earnings per share are calculated dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants and options are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were no dilutive shares, options or warrants outstanding as of December 31, 2017 and 2016.
Recently Adopted Accounting Pronouncements
There are no other recent accounting pronouncements that are expected to have a material effect on the Company’s consolidated financial statements.
NOTE 3 - GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and marketing. As a result, the Company incurred accumulated net losses from inception (October 2, 2013) through the period ended December 31, 2017 of $2,042,984 and $2,808,320 as of December 31, 2016, of which $2,393,750 was the result of compensation in the form of stock issuances for consulting and other services paid in 2014 and an additional $27,500 paid during 2015. As of December 31, 2017, the Company has a working capital deficit. In addition, the Company’s development activities since inception have been financially sustained through the sale of capital stock and capital contributions from note holders. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock or through debt financing and, ultimately, the achievement of significant operating revenues. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
On May 21, 2014 the Company entered into an agreement with Chris Moneymaker, an individual to use his name and likeness alongside a brief positive quote on the Company's website, paraphernalia or literature. In exchange, the Company will compensate Chris Moneymaker the following:
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$1,000 per month – 24 months consulting contract after we have raised $1,000,000 from the time this contract is initiated.
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·
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Additional $500 per month – 24 month consulting contract for every $1,000,000 thereafter that is raised. The above consulting terms are concurrent, meaning, the 2nd contract will be added to the first contract and every other contract thereafter.
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On June 30, 2016, the agreement is terminated.
NOTE 5 – INTANGIBLE ASSETS
During the year ended December 31, 2014, and as part of its marketing strategy to acquaint users with its product, the Company has undertaken to build its own interactive website. The Company capitalized website development costs of $6,400 for the period from January 1, 2014 through website launch on September 1, 2014. The Company’s has written off the remaining balance of website development costs in the year ended December 31, 2016. The Company's capitalized website amortization and impairment is included in general and administrative expenses in the Company's statements of operations, and totaled $0 and $3,208 for the year ended December 31, 2017 and 2016, respectively. Intangible assets were fully impaired during 2016.
NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of royalty fee payable to a third party and other professional charges.
NOTE
7
– RELATED PARTY TRANSACTIONS
During the year, December 31, 2013, the Company accrued expenses for $30,000 for the payment of services provided by an entity controlled by the Company's former sole officer and director. The loan is non-interest bearing, unsecured and has no specific repayment terms or maturity date. As of December 31, 2015, the entire $30,000 was outstanding. Pursuant to a loan waiver letter dated June 30, 2016, the entire balance was forgiven during 2016.
On June 2, 2014 the Company borrowed $25,000 from a former related party with interest of 5% repayable in one payment of $26,250, on June 1, 2015. In the event of default, the note is secured by not less than 2,000,000 shares of the Company's common stock. On August 14, 2015 the note was extended, with an additional interest charge of 5% or $1,322, the entire balance of $26,322, repayable on June 1, 2016. Pursuant to a loan waiver letter dated June 30, 2016, the entire balance was forgiven during 2016.
On June 8, 2015 the Company borrowed $25,000 from a former related party with interest of 2% repayable in one payment of $25,042, on July 8, 2015. On August 14, 2015 the note was extended, under the same terms and conditions, until July 8, 2016, the entire balance of $25,682 payable in one lump sum. In the event of default, unless such default is cured within 10 days, holder has the option of charging the Company an additional 10% of the note amount. Pursuant to a loan waiver letter dated June 30, 2016, the entire balance was forgiven during 2016.
On May 18, 2016, the Company borrowed $10,000 from a former related party and $790 was paid back on June 30, 2016. Pursuant to a loan waiver letter dated June 30, 2016, the entire remaining balance of $9,210 was forgiven during 2016.
On June 30, 2016, $97,515 was the total of the above former related party loan, notes payable and accrued interest which was waived. Since this transaction was with a related party the write-off of the debt was recorded as additional paid–in capital.
As of March 31, 2016, the Company had an outstanding advance to the former Company's President, in the amount of $1,351. The advance was for working capital purposes. The advance has no specific repayments terms or maturity and is non-interest bearing and unsecured. Pursuant to a waiver letter dated June 30, 2016, the entire balance was forgiven by the Company during 2016.
As of December 31, 2017 and 2016, the Company was obligated to a former director for an unsecured, non-interest demand bearing loan with a balance of $2,306.
As of December 31, 2017, the Company was obligated to Mr. Tesheb Casimir, CEO for an unsecured, non-interest demand bearing loan with a balance of $67,013, for the Company’s business expenses paid directly by the CEO on behalf of the Company.
The Company has been provided office space by its chief executive officer at no cost. Management has determined that such cost is nominal and has not recognized any rent expense in its consolidated financial statements.
NOTE 8 – GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses mainly consist of the operating costs of the Company’s head office in Malaysia and the professional fee incurred on the US company level.
NOTE
9
– STOCKHOLDERS’ EQUITY
On January 11, 2017 our Board of Directors and a majority of our shareholders’ voting power approved an increase in our authorized shares of common stock to 5,000,000,000 shares from 100,000,000 shares and a 30:1 forward split of our common stock. These corporate actions is now effective. All share and per share amounts herein have been retroactively restated to reflect the split.
On July 6, 2017, the Company’s Board of Directors approved a 1 for 35 reverse split of our common stock. These corporate actions are now effective. All share and per share amounts herein have been retroactively restated to reflect the split.
On November 27, 2017, the Company's Articles of Incorporation were amended to 1,000,000,000 shares from 5,000,000,000 shares and to authorize the Company to issue up to 4,000,000,000 shares of preferred stock, par value $0.00001 per share.
There were 14,893,714 shares (17,376,000 shares prior to forward split) of common stock issued and outstanding at December 31, 2017 and 2016, respectively.
NOTE
10
—INCOME TAXES
Net deferred tax assets consist of the following components:
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December 31,
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December 31,
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|
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2016
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2017
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Deferred tax asset:
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Net operating loss carryforwards
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(72,650
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)
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(82,250
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)
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Valuation allowance
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72,650
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82,250
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Net deferred tax asset
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$
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-
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$
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-
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The Company has accumulated net operating loss carryovers of approximately $235,000 as of December 31, 2017 which are available to reduce future taxable income. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes may be subject to annual limitations. A change in ownership may limit the utilization of the net operating loss carry forwards in future years. The tax losses begin to expire in 2033. The fiscal years 2013 through 2017 remains open to examination by federal tax authorities and other tax jurisdictions.
NOTE 11—
SUBSEQUENT EVENTS
The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.