NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Truli Technologies, Inc., a Delaware corporation
initially incorporated on July 28, 2008, (the “Company”) is a holding company based in Bristol, Connecticut. On June
21, 2018, pursuant to shareholder approval, the Company changed its name to Truli Technologies, Inc. from Truli Media Group, Inc.
Immediately following the October 30, 2017 closing of the License Agreement (the “License”) and issuance of preferred
shares described below and in Note 2, Mr. Michael Solomon, our Founder and then a director of the Company, exercised his Option,
granted to him in September 2016, to purchase the Company’s subsidiary, Truli Media Corp (“TMC”) for $5,000.
As a result, TMC is no longer a subsidiary of the Company.
On October 17, 2017, the Company formed
a new, wholly-owned subsidiary, VocaWorks, Inc. (“VocaWorks”), a New Jersey corporation.
Prior to the exercise of the Option by
Mr. Solomon to purchase TMC, the Company was focused on the on-demand media and social networking markets as an aggregator of family-friendly,
faith-based Christian content, media, music and Internet Protocol Television (“IPTV”) programming. With the exercise
of the Option by Mr. Solomon, the Company has exited those activities.
Effective October 30, 2017, the Company
entered into a License with Recruiter.com, Inc., a Delaware corporation (“Recruiter”) under which Recruiter granted
the Company’s newly created subsidiary, VocaWorks, a license to use certain of Recruiter’s proprietary software and
related intellectual property. The Company is rebranding itself under the VocaWorks brand name and moving into the rapidly expanding
field of online and mobile-enabled staffing and talent acquisition solutions through its entry into the License with Recruiter.
VocaWorks will offer a native mobile iOS app solution, as well as a web-based SaaS platform offering and will facilitate the hiring
of personnel, including project-based consultants, focusing initially on specialized technology talent.
In September 2018 the Company announced that
it has signed a letter of intent to acquire Recruiter in exchange for issuing to Recruiter shareholders shares of a new series
of Truli’s preferred stock (the “New Preferred”) which will be convertible into 775 million shares of Truli’s
common stock. In exchange for receiving the New Preferred, Recruiter will give up the right to acquire shares of Truli’s
Series B. See Note 4.
“Truli”, “our”,
“us”, “we” or the “Company” refer to Truli Technologies, Inc. and its subsidiaries. The operations
of TMC are included through the date of the exercise of the Option by Mr. Solomon. In discussing the business of the Company, we
refer to the business now operated by VocaWorks except as otherwise made clear from the context.
From commencement of its former and current
business operations through the date of these unaudited condensed consolidated financial statements, the Company has not generated
any revenues and has incurred significant expenses.
The Company’s operations are subject
to all the risks and uncertainties inherent in the establishment of a new business enterprise, including failing to secure additional
funding to carry out the Company’s business plan.
Basis of Presentation
The accompanying condensed consolidated
financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual consolidated
financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the information not misleading.
These interim financial statements as of
and for the three and six months ended September 30, 2018 and 2017 are unaudited; however, in the opinion of management, such
statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position,
results of operations and cash flows of the Company for the periods presented. The results for the three and six months ended September 30,
2018 are not necessarily indicative of the results to be expected for the year ending March 31, 2019 (“Fiscal 2019”)
or for any future period. All references to September 30, 2018 and 2017 in these footnotes are unaudited.
These unaudited condensed consolidated
financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for
the year ended March 31, 2018, included in the Company’s annual report on Form 10-K filed with the SEC on June
29, 2018.
The condensed consolidated balance sheet
as of March 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all
disclosures required by GAAP.
Cash and Cash Equivalents
The Company considers all short-term highly
liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash
equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has
not experienced any losses related to these balances.
Use of Estimates
The preparation of financial statements in
conformity with 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 revenue
and expenses during the reporting period. Actual results could differ from those estimates. Included in these estimates
are assumptions used to estimate useful lives of intangible assets, calculate the beneficial conversion feature of convertible
preferred stock, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.
Income Taxes
The Company follows Accounting Standards
Codification subtopic 740-10, Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are
computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense
or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more
likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary
differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred
taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.
Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to reverse and relate primarily to stock based compensation
basis differences. As of September 30, 2018 and March 31, 2018, the Company has provided a 100% valuation against the deferred
tax benefits.
Earnings (Loss) Per Share
The Company follows Accounting Standards
Codification subtopic ASC 260, Earnings Per Share for calculating the basic and diluted earnings (loss) per share. Basic earnings
(loss) per share are computed by dividing earnings (loss) available to common shareholders by the weighted-average number of common
shares outstanding. Diluted earnings (loss) per share is computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been outstanding if the potential common shares had
been issued and if the additional common shares were dilutive. Common share equivalents are excluded from the diluted earnings
(loss) per share computation if their effect is anti-dilutive. Common share equivalents of 496,970,729 and 109,985,440 were excluded
from the computation of diluted earnings per share for the three and six months ended September 30, 2018 and 2017, respectively,
because their effect is anti-dilutive.
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Options
|
|
|
3,705,000
|
|
|
|
182,040
|
|
Warrants
|
|
|
180,000,000
|
|
|
|
-
|
|
Convertible preferred stock
|
|
|
313,265,729
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|
|
|
-
|
|
Convertible notes payable
|
|
|
-
|
|
|
|
109,803,400
|
|
|
|
|
496,970,729
|
|
|
|
109,985,440
|
|
Fair Value
Accounting Standards Codification subtopic
825-10, Financial Instruments requires disclosure of the fair value of certain financial instruments. The carrying amount reported
in the condensed consolidated balance sheet for accounts payable and accrued expenses and notes payable approximates fair value
because of the immediate or short-term maturity of these financial instruments.
Convertible Instruments
The Company evaluates and accounts for
conversion options embedded in its convertible instruments in accordance with Accounting Standards Codification subtopic 815, Derivatives
and Hedging (“ASC 815”).
Professional standards generally provides
three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them
as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of
the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and
(c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional
standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional
standards as “The Meaning of Conventional Convertible Debt Instrument”.
The Company accounts for convertible instruments
(when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance
with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those
professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary,
discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion
price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest
date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded
in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of
the preferred shares transaction and the effective conversion price embedded in the preferred shares.
ASC 815-40 provides that, among other things,
generally, if an event is not within the entity’s control or could require net cash settlement, then the contract shall be
classified as an asset or a liability.
Derivative Instruments
The Company’s derivative financial
instruments consist of embedded derivatives related to the convertible debt and conversion features embedded within our convertible
debt. The accounting treatment of derivative financial instruments requires that we record the derivatives at their fair values
as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair
value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives
was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives
was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.
Stock-Based Compensation
The Company utilizes the Black-Scholes
option-pricing model to determine fair value of options and warrants granted as stock-based compensation, which requires us to
make judgments relating to the inputs required to be included in the model. In this regard, the expected volatility is based on
the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated
cash dividend on common stock over the expected life of the stock options. The U.S. Treasury bill rate for the expected life of
the stock options is utilized to determine the risk-free interest rate. The expected term of stock options represents the period
of time the stock options granted are expected to be outstanding.
Intangible Assets
Intangible assets consist of the License
and related software, website and iPhone App development costs. These costs will be amortized over their estimated economic lives
once placed in service. The assets have not been placed in service as of September 30, 2018.
Recently Issued Accounting Pronouncements
With the exception of those discussed below,
there have not been any recent changes in accounting pronouncements and Accounting Standards Update (“ASU”) issued
by the Financial Accounting Standards Board (“FASB”) during the six months ended September 30, 2018 that are of significance
or potential significance to the Company.
In June 2018, the FASB issued ASU 2018-07,
“Compensation—Stock Compensation (Topic 718)—Improvements to Nonemployee Share-based Payment Accounting”,
as a simplification for the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic
718, Compensation-Stock Compensation. This standard is effective for fiscal years beginning after December 15, 2018, with early
adoption permitted. We are evaluating the impact that ASU 2018-07 may have on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09,
“Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting”, (“Topic 718”)
which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under
the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of
the award changes as a result of the change in terms or conditions. If an award is not probable of vesting at the time a change
is made, the new guidance clarifies that no new measurement date will be required if there is no change to the fair value, vesting
conditions, and classification. Topic 718 will be applied prospectively and is effective for fiscal years beginning after December
15, 2017, and interim periods within those years, with early adoption permitted. The adoption of this standard did not have a
material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No.
2016-02, Leases (Topic 842) (“Topic 842”) to increase transparency and comparability among organizations by recognizing
lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects
any entity that enters into a lease, with some specified scope exemptions. The guidance in this update supersedes Topic 840, Leases.
The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should
recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term. For public companies, the amendments in this update are
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which would
be the Company’s fiscal year ending March 31, 2020. The Company does not expect the adoption of Topic 842 to have a material
effect on its business, its financial position, results of operations or cash flows.
In October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“Topic 740”), to improve and simplify
the accounting for the income tax consequences of intra-entity transfers of assets other than inventory, requiring companies to
recognize income tax consequences upon the transfer of the asset to a third party. Topic 740 is effective for annual periods beginning
after December 15, 2017, and interim periods within those annual periods, which would be the Company’s fiscal year ending
March 31, 2019. While the Company does not expect the adoption of Topic 740 to have a material effect on its business, the Company
is still evaluating any potential impact that adoption of Topic 740 may have on its financial position, results of operations or
cash flows.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606) (“Topic 606”) which amended the existing accounting standards for
revenue recognition. Topic 606 establishes principles for recognizing revenue upon the transfer of promised goods or services to
customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015,
the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting
periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning
after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively
to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application
(modified retrospective). The Company adopted Topic 606 in the first quarter of Fiscal 2019 and applied the full retrospective
approach. The adoption of Topic 606 did not have a material effect on our business, financial position, results of operations or
cash flows.
NOTE 2 — GOING CONCERN
The Company’s management has evaluated
whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial
doubt existed as of the date of the end of the period covered by this Quarterly Report on Form 10-Q (the “Form 10-Q”).
This determination was based on the following factors: (i) the Company’s available cash as of the date of this filing will
not be sufficient to fund its anticipated level of operations for the next 12 months; (ii) the Company will require additional
financing for the remainder of Fiscal 2019 to continue at its expected level of operations; and (iii) if the Company fails to obtain
the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease
operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company
to continue as a going concern as of the date of the end of the period covered by this Form 10-Q and for one year from the issuance
of the unaudited condensed consolidated financial statements.
There is no assurance that the Company
will be successful in any capital-raising efforts that it may undertake to fund operations during the next 12 months. The Company
anticipates that it will issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash
flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership.
The Company cannot guarantee when or if it will generate positive cash flow.
The Company recently completed another
round of funding in the first quarter of Fiscal 2019. However, there is no assurance that the Company will be successful in any
other capital-raising efforts that it may undertake to fund operations during the next 12 months. The Company anticipates that
it will issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support
its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company
cannot guarantee when or if it will generate positive cash flow.
The accompanying unaudited condensed consolidated
financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going
concern.
NOTE 3 — INTANGIBLE ASSETS
Intangible assets consist of the License
with Recruiter to use certain of Recruiter’s proprietary software and related intellectual property. In consideration for
the License, the Company issued to Recruiter 125,000,000 shares of common stock. We have valued the License at $625,000. Recruiter
will receive 625,000 shares of Series B Preferred Stock (the “Series B”) upon the launch of a functional software platform
and receipt of $10,000 in sales revenue. Recruiter is entitled to receive up to an additional 1,250,000 shares of Series B following
the achievement of certain milestones as provided for in the License. Recruiter shall provide VocaWorks with support services free
of charge, which shall include (i) a total of 2,400 hours of technology and development services to be provided by Recruiter personnel
during the two year period following the effective date, with a total value of $200,000; and (ii) marketing and advertising services,
which are available to Recruiter’s general customers, and strategic marketing services, to be provided by Recruiter each
year during the four year period following the effective date, with a total value of $500,000.
We also have capitalized software costs
of $80,500 related to the development of our website and iPhone app, both to be used in conjunction with the License acquired from
Recruiter.
These assets have not been placed in service as of September 30,
2018.
NOTE 4 — STOCKHOLDERS’ EQUITY
Preferred stock
The Company is authorized to issue 10,000,000
shares of $0.0001 par value preferred stock. As of September 30, 2018 and March 31, 2018, the Company has 1,009,539 and 716,939
shares of preferred stock issued and outstanding, respectively.
Series A Convertible Redeemable Preferred
Stock
On October 24, 2017, the Company filed
a Certificate of Designations (a “COD”) with the Delaware Secretary of State designating 700,000 shares of the Company’s
authorized preferred stock as Series A Convertible Preferred Stock (the “Series A”), which converts into 200 shares
of common stock per share of Series A, subject to adjustment in the event of stock splits, stock dividends or reverse splits and
issuances of securities at prices below the prevailing conversion price of the Series A. During the year ended March 31, 2018,
the Company entered into Securities Purchase Agreements (each a “SPA”) with the two Investors who converted their Notes
into Series C Convertible Preferred Stock (the “Series C”) and Series C-1 Convertible Preferred Stock (the “Series
C-1”). Pursuant to the SPAs, the Investors paid the Company a total of $600,000 and purchased in the aggregate 600,000 of
shares of Series A and Warrants to purchase 120,000,000 shares of the Company’s common stock.
Dividends accrue on the Series A at a rate
of 10% per annum. Holders of Series A are entitled to vote together with holders of the common stock on an as-converted basis,
subject to a beneficial ownership limitation of 4.99%. The Series A is redeemable in the same manner as the Series C and C-1, defined
below. The Series A is senior to all other preferred stock, except the Company’s Series A-1 Convertible Preferred Stock (the
“Series A-1”) and the common stock upon liquidation of the Company. The Warrants have a five year term and an exercise
price of $0.01 per share, subject to adjustment in the event of stock splits, stock dividends or reverse splits and issuances of
securities at prices below the prevailing exercise price of the Warrants.
Series A-1 Convertible Redeemable Preferred
Stock
On May 25, 2018, the Company filed a COD
authorizing 600,000 shares of the Company’s preferred stock as the Series A-1. The Series A-1 converts into 200 shares of
common stock per share of Series A-1, subject to adjustment in the event of stock splits, stock dividends or reverse splits, and
issuances of securities at prices below the prevailing conversion price of the Series A-1. Dividends accrue on the Series
A-1 at a rate of 10% per annum. Holders of Series A-1 are entitled to vote together with holders of the common stock on an as-converted
basis, subject to a beneficial ownership limitation of 4.99%. The Series A-1 is redeemable upon the occurrence of certain triggering
events.
On June 1, 2018, the Company entered into
SPAs with the Investors. Pursuant to the SPA, the Investors purchased a total of 300,000 of shares of Series A-1 and Warrants to
purchase 60,000,000 shares of the Company’s common stock in exchange for a total of $300,000.
The Investors agreed to waive the Series
A, Series C and Series C-1 conversion price adjustments as they relate to the sale of the Series A-1 preferred stock.
The Warrants have a five year term and
an exercise price of $0.01 per share, subject to adjustment in the event of stock splits, stock dividends or reverse splits and
issuances of securities at prices below the prevailing exercise price of the Warrants.
Series B Convertible Preferred Stock
On October 24, 2017, the Company filed
a COD with the Delaware Secretary of State designating 1,875,000 shares of the Company’s authorized preferred stock as Series
B which converts into 200 shares of common stock per share of Series B, subject to adjustments in the event of stock splits, stock
dividends and reverse splits. Recruiter will receive 625,000 shares of Series B upon the launch of a functional software platform
and receipt of $10,000 in sales revenue. Recruiter is entitled to receive up to an additional 1,250,000 shares of Series B following
the achievement of certain milestones as provided for in the License.
Series C and Series C-1 Convertible
Redeemable Preferred Stock
On October 24, 2017, the Company filed a COD
with the Delaware Secretary of State designating 102,100 shares of the Company’s authorized preferred stock as Series C
which converts into 1,000 shares of common stock per share of Series C, subject to adjustments in the event of stock splits, stock
dividends and reverse splits and issuances of securities at prices below the prevailing conversion price of the Series C. In accordance
with the terms of the License, on October 30, 2017 holders of the Company’s outstanding 4% Convertible Notes converted their
4% Convertible Notes and accrued interest into 102,099,752 shares of Series C.
Also on October 24, 2017, the Company filed
a COD with the Delaware Secretary of State designating 18,839 shares of the Company’s authorized preferred stock as Series
C-1 which converts into 1,000 shares of common stock per share of Series C-1, subject to adjustments in the event of stock splits,
stock dividends and reverse splits and issuances of securities at prices below the prevailing conversion price of the Series C-1.
In accordance with the terms of the License, on October 30, 2017 holders of the Company’s 10% Convertible Notes converted
their 10% Convertible Notes and accrued interest into 18,839 shares of Series C-1.
Holders of shares of Series C and Series
C-1 may cause the Company to redeem in cash the outstanding shares of Series C and C-1 beginning on October 30, 2019, and earlier
than that date upon the occurrence of certain triggering events contained in the COD for the Series C and Series C-1, at a redemption
price based upon a formula contained in the COD for each series. Subject to the prior conversion, the total redemption price if
redeemed after two years from issuance is equal to the amount of the principal and accrued interest on the 4% Convertible Notes
and 10% Convertible Notes due as of the closing date plus potential additional amounts.
During February 2018, the Company filed
an amendment to the Certificates of Designations for the Series C and Series C-1 extending the redemption date to October 2022
and reducing the redemption amount of the preferred shares then outstanding at a redemption price equal to one-half of the Conversion
Amount (as defined) of such preferred shares. During the three and six months ended September 30, 2018 we recorded a credit to
additional paid in capital of $24,777 and $50,479, respectively, as a result of the reduction in the redemption amount. During
the year ended March 31, 2018 we recorded a credit to additional paid in capital of $1,071,932 as a result of the reduction in
the redemption amount.
On February 1, 2018, the Company issued
4,000,000 shares of common stock upon the conversion of 4,000 shares of Series C.
During the three months ended September 30, 2018, the Company issued
7,400,000 shares of common stock upon the conversion of 7,400 shares of Series C.
Common stock
The Company is authorized to issue 250,000,000
shares of common stock, par value $0.0001 per share. As of September 30, 2018 and March 31, 2018 the Company had 138,954,197 and
131,554,197 shares of common stock outstanding, respectively.
On June 21, 2018, pursuant to shareholder
approval, the shareholders approved a reverse stock split in the range of one-for-50 to one-for-100 or any amount in between and
a reduction of its authorized common stock in order to save annual fees in Delaware. The reverse stock split has not yet been implemented.
Common stock options
During the six months ended September
30, 2018 the Company granted to various advisors an aggregate of 1,200,000 options to purchase common stock, exercisable at
$0.06 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options vest
on various dates in the three months ending March 31, 2019.
Common stock warrants
In connection with the sale of our Series
A-1 preferred stock, we issued an aggregate of 60,000,000 common stock purchase warrants to the Investors. The warrants are exercisable
any time on or after 90 days after the issuance date at an exercise price of $0.01 and expire, if unexercised, on September 1, 2023.
The exercise price and number of warrants are subject to adjustment in the event of stock splits, stock dividends or reverse splits
and issuances of securities at prices below the prevailing conversion price of the warrants.
NOTE 5 — STOCK OPTIONS AND WARRANTS
Stock options
The Company granted to six nonemployee advisors
an aggregate of 1,200,000 options to purchase common stock, exercisable at $0.06 per share, under the terms of the 2017 Equity
Incentive Plan. The options have a term of five years. The options vest upon the first anniversary of their grant. We have recorded
compensation expense of $7,250 and $32,250 related to the options during the three and six months ended September 30, 2018, respectively.
We valued the options at September 30, 2018 using the Black Scholes Model with the following assumptions: (1) risk free interest
rate of 2.73% - 2.94%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 381%
- 387%; and (4) an expected life of 4.75 - 5 years.
We recorded compensation expense of $37,617
and $75,234 during the three and six months ended September 30, 2018, respectively, related to options granted to an officer and
directors during the previous fiscal year.
Warrants
In connection with the sale of our Series
A-1 preferred stock, we issued an aggregate of 60,000,000 common stock purchase warrants to the purchasers of the preferred stock.
The warrants are exercisable any time on or after 90 days after the issuance date at an exercise price of $0.01 and expire, if
unexercised, on September 1, 2023. The exercise price and number of warrants are subject to adjustment in the event of stock splits,
stock dividends or reverse splits and issuances of securities at prices below the prevailing conversion price of the warrants.
NOTE 6 — REDEEMABLE CONVERTIBLE PREFERRED STOCK
As described in Note 4, we have issued
shares of Series A, Series A-1, Series C, and Series C-1 convertible preferred stock. Since the convertible preferred stock may
ultimately be redeemable at the option of the holder, the carrying value of the preferred stock has been classified as temporary
equity on the balance sheet at September 30, 2018 and March 31, 2018.
A portion of the proceeds from the sale
of our Series A-1 were allocated to the warrants based on their relative fair value, which totaled $288,000 using the Black Scholes
option pricing model. Further, we attributed a beneficial conversion feature of $7,188,000 to the Series A-1 based upon the difference
between the effective conversion price of those shares and the closing price of our common shares on the date of issuance. The
assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 380%, (3) risk-free
interest rate of 2.74%, (4) expected term of 5 years. The amount attributable to the warrants and beneficial conversion feature,
aggregating $7,476,000, has been recorded as a deemed dividend to the preferred shareholders and as a charge to additional paid-in
capital (since there is a deficit in retained earnings).
For the three months ended September 30, 2018,
we have accrued dividends in the amount of $72,055. The accrued dividends have been charged to additional paid-in capital (since
there is a deficit in retained earnings) and the net unpaid accrued dividends have been added to the carrying value of the preferred
stock. Further, we attributed a beneficial conversion feature of $364,400 to the preferred dividends based upon the difference
between the effective conversion price of those dividends and the quarterly average closing price of our common shares. The amount
attributable to the beneficial conversion feature has been recorded as a deemed dividend to the preferred shareholders and as a
charge to additional paid-in capital (since there is a deficit in retained earnings).
For the six months ended September
30, 2018, we have accrued dividends in the amount of $140,960. The accrued dividends have been charged to additional paid-in capital
(since there is a deficit in retained earnings) and the net unpaid accrued dividends have been added to the carrying value of
the preferred stock. Further, we attributed a beneficial conversion feature of $897,096 to the preferred dividends based upon
the difference between the effective conversion price of those dividends and the quarterly average closing price of our common
shares. The amount attributable to the beneficial conversion feature has been recorded as a deemed dividend to the preferred shareholders
NOTE 7 — ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
As of September 30, 2018 and March 31,
2018, accounts payable and accrued liabilities for the period ending are comprised of the following:
|
|
September 30,
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2018
|
|
Legal and professional fees payable
|
|
$
|
33,311
|
|
|
$
|
60,363
|
|
Other payables
|
|
|
50,635
|
|
|
|
33,522
|
|
|
|
$
|
83,946
|
|
|
$
|
93,885
|
|
NOTE 8 — COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings
and claims from time to time which arise in the ordinary course of its business. Although occasional adverse decisions or settlements
may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its consolidated
financial position, results of operations or liquidity.
Recruiter will receive 625,000 shares
of Series B upon the launch of a functional software platform and receipt of $10,000 in sales revenue. Recruiter is entitled
to receive up to an additional 1,250,000 shares of Series B following the achievement of certain milestones as provided for
in the License.
If the Company completes
the acquisition of Recruiter, the Series B will be cancelled.
NOTE 9 — SUBSEQUENT EVENTS
Management evaluated all activities of
the Company through the issuance date of the Company’s unaudited condensed consolidated financial statements and concluded
that no subsequent events have occurred that would require adjustments or disclosure into the unaudited condensed consolidated
financial statements.