Notes
to the Financial Statements
For
the Quarter ended June 30, 2018
1.
LEGAL STATUS AND OPERATIONS
Flitways
Technology Inc. (the “Company”), was incorporated in the State of Nevada on December 11, 2012 and established a fiscal
year end of December 31. The Company is involved in the “on demand” transportation business providing businesses and
private traveler’s access to book and schedule ground transportation online or by mobile device. The Company gives travelers
access to customizable travel rides through a network of ground travel providers. It incorporates ride booking into the travel
industry by making travel ride booking available at various travel points of sale to allow travelers to book rides that fit their
lifestyle online and on its mobile application.
2.
BASIS OF PREPARATION
Statement of compliance
The accompanying
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") on a going concern basis.
Accounting convention
These financial
statements have been prepared on the basis of 'historical cost convention using accrual basis of accounting except as otherwise
stated in the respective accounting policies notes.
Management's assessment of
going concern
In assessing
the going concern status of the Company, management has carefully assessed a number of factors covering the operational performance
of the business, the ability to increase the revenue sources of the Company and the appetite of majority shareholder to continue
financial support. Based on the analysis of these, management is comfortable that the Company will be able to continue as a going
concern in the foreseeable future.
Critical accounting estimates
and judgements
The preparation
of financial statements in conformity with the approved accounting standards require management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods.
The areas
involving higher degree of judgment and complexity, or areas where assumptions and estimates made by the management are significant
to the financial statements are as follows:
i)
Operating assets - estimated useful life of property, plant and equipment
ii) Impairment
of assets
iii) Provision
for doubtful advances and other receivables (note - 3.4)
v) Provision
for income tax (note - 3.1)
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Income tax
The tax
expense for the year comprises of income tax, and is recognized in the statement of earnings. The income tax charge is calculated
on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred
income tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred income tax liabilities are recognised for all taxable temporary differences and deferred
income tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible
temporary differences and unused tax losses can be utilized. Deferred income tax is calculated at the rates that are expected
to apply to the period when the differences are expected to be reversed.
Trade and other payables
Liabilities
for trade and other amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for
goods and services received, whether or not billed to the Company.
Provisions
A provision
is recognized in the financial statements when the Company has a legal or constructive obligation as a result of past events and
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of obligation.
Trade debts, advances and
other receivables
These are
non-interest bearing obligations due under normal course of business. The management reviews accounts receivable on a monthly
basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are
used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined
to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the
receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful
accounts as of period ended is adequate.
Contingent liabilities
A contingent
liability is disclosed when the Company has a possible obligation as a result of past events, the existence of which will be confirmed
only by the occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company;
or when the Company has a present legal or constructive obligation, that arises from past events, but it is not probable that
an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation
cannot be measured with sufficient reliability.
Financial liabilities
Financial
liabilities are recognized when the Company becomes party to the contractual provision of the instruments and the Company loses
control of the contractual right that comprise the financial liability when the obligation specified in the contract is discharged,
cancelled or expired. The Company classifies its financial liabilities in two categories: at fair value through profit or loss
and financial liabilities measured at amortized cost. The classification depends on the purpose for which the financial liabilities
were incurred. Management determines the classification of its financial liabilities at initial recognition.
(a) Financial
liabilities at fair value through profit or loss
Financial
liabilities at fair value through profit or loss are financial liabilities held for trading. A financial liability is classified
in this category if incurred principally for the purpose of trading or payment in the short-term. Derivatives (if any) are also
categorized as held for trading unless they are designated as hedges.
(b) Financial
liabilities measured at amortized cost
These are
non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active market. These are recognized
initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost; any difference between
the proceeds (net of transaction costs) and the redemption value is recognized in the profit and loss account.
Property, plant and equipment
All equipments
are stated at cost less accumulated depreciation and impairment loss. The cost of fixed assets includes its purchase price, import
duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and
location for its intended use.
Depreciation
on additions to property, plant and equipment is charged, using straight line method, on pro rata basis from the month in which
the relevant asset is acquired or capitalized, up to the month in which the asset is disposed of. Impairment loss, if any, or
its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.
Maintenance
and normal repair costs are expensed out as and when incurred. Major renewals and improvements are capitalized and assets so replaced,
if any are retired.
Useful lives
of property, plant and equipment are reviewed by the management on periodic basis and change if any, in the estimates is accounted
for on prospective basis.
Gains and losses on disposal
of fixed assets, if any, are recognized in statement of profit and loss.
Cash and cash
equivalents
Cash and
cash equivalents include cash in hand and deposits held at call with banks. For the purpose of the statement of cash flows, cash
and cash equivalents bank balances and short term highly liquid investments subject to an insignificant risk of changes in value
and with maturities of less than three months.
Revenue recognition
Revenue
is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be measured
reliably. Revenue is measured at the fair value of the consideration received or receivable for goods sold or services rendered,
net of discounts and sales tax and is recognised when significant risks and rewards are transferred.
Functional and presentation
currency
Items included
in the financial statements are measured using the currency of the primary economic environment in which the Company operates.
The financial statements are presented in US (Dollars) which is the Company's presentation currency. All financial information
presented in US Dollars has been rounded to the nearest dollar unless otherwise stated.
Foreign currency transactions
Foreign
currency transactions are translated into the functional currency using the exchange rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the exchange rate
prevailing at the statement of financial position date. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates are recognized in the profit and loss account.
Contingencies
The assessment
of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events cannot be predicted
with certainty. The Company, based on the availability of the latest information, estimates the value of contingent assets and
liabilities, which may differ on the occurrence / non-occurrence of the uncertain future event(s).
4. Cash and bank balances
|
|
2018
|
|
|
|
Amount in $
|
|
Cash in hand
|
|
|
–
|
|
Balance with banks
|
|
|
|
|
Current account
|
|
|
4,275
|
|
Overdraft facility
|
|
|
(7,436
|
)
|
|
|
|
(3,161
|
)
|
5. Property, plant and equipment
|
|
Furniture and
Fixtures
|
|
|
Equipment
|
|
|
Product Web Engine
|
|
|
2018
Total
|
|
Cost as at June 30, 2018
|
|
|
18,141
|
|
|
|
3,259
|
|
|
|
9,450
|
|
|
|
30,850
|
|
Accumulated Depreciation as at June 30, 2018
|
|
|
(9,569
|
)
|
|
|
(1,117
|
)
|
|
|
(2,520
|
)
|
|
|
(13,206
|
)
|
Net Book Value as at June 30, 2018
|
|
|
8,572
|
|
|
|
2,142
|
|
|
|
6,930
|
|
|
|
17,645
|
|
6. Accounts payable and accrued liabilities
|
|
2018
|
|
|
|
Amount in $
|
|
Opening balance
|
|
|
1,045,000
|
|
Movement during the
period
|
|
|
30,486
|
|
Closing balance(1)
|
|
|
1,075,486
|
|
______________________________
(1) Balance as at June 30, 2018 comprises of:
|
|
|
|
Accounts payable
|
|
|
836,800
|
|
Accrued liabilities
|
|
|
15,000
|
|
Taxes and government levies
|
|
|
45,674
|
|
Chargeback reserve
|
|
|
1,727
|
|
Markup accrued
|
|
|
176,065
|
|
Others (2)
|
|
|
219
|
|
|
|
|
1,075,486
|
|
_____________________________
(2) This includes interest accrued
on line of credit from related party amounting to $ 17,565.
7. Notes and other payable
|
|
Amount in $
|
|
Opening balance
|
|
|
134,000
|
|
Movement during the period
|
|
|
2,438
|
|
Closing balance (1)
|
|
|
136,438
|
|
________________
(1) Balance as at June 30, 2018 comprises of:
|
|
|
|
Loan Builder
|
|
|
85,902
|
|
Pearl Loan
|
|
|
8,315
|
|
Kabbage Loan
|
|
|
17,263
|
|
Business Funding Advance Loan
|
|
|
16,232
|
|
Kings Cash Loan
|
|
|
8,726
|
|
|
|
|
136,438
|
|
8. Convertible promissory notes - net of discount
Opening balance
|
|
|
987,000
|
|
Movement during the period
|
|
|
22,825
|
|
Closing balance (1)
|
|
|
1,009,825
|
|
______________________________
(1) Balance as at June 30, 2018 comprises of:
|
|
|
|
Convertible notes - L2
|
|
|
168,746
|
|
Notes payable - EMA, net of discount
|
|
|
574,281
|
|
Notes payable - Auctus, net of discount
|
|
|
188,333
|
|
Notes payable - Powerup,
net of discount
|
|
|
78,465
|
|
|
|
|
1,009,825
|
|
As of June 30, 2018, convertible promissory notes payable consisted of the
following:
Principal
|
|
|
597,000
|
|
Additional note
|
|
|
–
|
|
Principal Converted
|
|
|
(21,951
|
)
|
Net balance
|
|
|
575,049
|
|
Default principal
|
|
|
482,990
|
|
Discounts
|
|
|
(48,214
|
)
|
Notes
payable, net
|
|
|
1,009,825
|
|
9. Derivative Liabilities
Opening balance
|
|
|
5,307,000
|
|
Movement during the period
|
|
|
751,494
|
|
Closing balance (1)
|
|
|
6,058,494
|
|
_________________
(1) Balance as at June 30, 2018 comprises of:
|
|
|
|
Derivative Warrants - L2
|
|
|
3,777,778
|
|
Derivative Warrants - EMA and Auctus
|
|
|
243,533
|
|
Derivative Liability - L2
|
|
|
232,039
|
|
Derivative Liability - EMA and Auctus
|
|
|
1,596,435
|
|
Derivative Liability
- Power Up
|
|
|
208,710
|
|
10. Revenue
Sales revenue of the Company is earned from the following sources;
|
|
2018
|
|
|
|
$
|
|
|
|
Gross Revenue
|
|
|
Refunds
|
|
|
Chargebacks
|
|
|
Net Revenue
|
|
Stripe revenue
|
|
|
175,303
|
|
|
|
(15,357
|
)
|
|
|
(5,728
|
)
|
|
|
154,218
|
|
PayPal sales
|
|
|
2,600
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,600
|
|
IRN sales
|
|
|
204,313
|
|
|
|
–
|
|
|
|
(8,603
|
)
|
|
|
195,710
|
|
AMEX sales
|
|
|
24,318
|
|
|
|
(82
|
)
|
|
|
(311
|
)
|
|
|
23,925
|
|
Service sales
|
|
|
281,803
|
|
|
|
–
|
|
|
|
(8,999
|
)
|
|
|
272,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,257
|
|
Less: Trade discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,185
|
|
11. Cost of Sales
|
|
Amount in $
|
|
Cost of revenue sold
|
|
|
490,675
|
|
Cost of revenue fee
|
|
|
24,904
|
|
Invoice wire fees
|
|
|
53
|
|
Uber - COS
|
|
|
66,493
|
|
Stripe payment fees
|
|
|
7,175
|
|
|
|
|
589,299
|
|
12. General and administration expenses
|
|
2018
Amount
in $
|
|
Advertising Expense
|
|
|
214
|
|
Marketing Expense
|
|
|
18,985
|
|
Auto Expense
|
|
|
503
|
|
Office Parking
|
|
|
3,745
|
|
Bank Charges
|
|
|
2,781
|
|
Subscription Fees
|
|
|
51
|
|
Depreciation Expense
|
|
|
1,631
|
|
Freight Expense
|
|
|
38
|
|
FedEx Freight & Printing
|
|
|
349
|
|
Payroll Expenses
|
|
|
117,596
|
|
Insurance Expense
|
|
|
3,398
|
|
Technology Applications
|
|
|
24,834
|
|
Professional Fees - Technology
|
|
|
60,996
|
|
Legal and Professional
|
|
|
3,200
|
|
Human Resources Service
|
|
|
1,250
|
|
Call Center Expense
|
|
|
26,231
|
|
Licenses
|
|
|
425
|
|
Meals and Entertainment
|
|
|
3,715
|
|
Office Expense
|
|
|
13,013
|
|
Office Maintenance
|
|
|
4,623
|
|
Payroll Tax Expense
|
|
|
14,476
|
|
Payroll Process Fee
|
|
|
1,694
|
|
Sales Tax Expense
|
|
|
4,028
|
|
Rent or Lease Expense
|
|
|
59,966
|
|
Telephone
|
|
|
5,874
|
|
Business Expense
|
|
|
949
|
|
Travel
|
|
|
14,165
|
|
Event Travel
|
|
|
1,142
|
|
Payroll Officer
|
|
|
25,000
|
|
Utilities
|
|
|
53
|
|
Audit Expenses
|
|
|
52,000
|
|
Accounting Expenses
|
|
|
22,275
|
|
Legal Expenses
|
|
|
7,690
|
|
Public Filing
|
|
|
4,850
|
|
News Releases PR
|
|
|
299
|
|
Business Consulting
|
|
|
18,270
|
|
Stock Related Expenses
|
|
|
5,175
|
|
Purchases
|
|
|
52
|
|
Uncategorized Expense
|
|
|
45
|
|
|
|
|
525,581
|
|
13. Interest Cost
Interest Expense
|
|
|
238,263
|
|
Finance Cost
|
|
|
57,661
|
|
|
|
|
295,924
|
|
14. Derivative Expense
Change in Fair Value Derivative
|
|
|
2,779,368
|
|
Derivative Expense
|
|
|
15,205
|
|
Stock Option
|
|
|
69,550
|
|
|
|
|
2,864,124
|
|
15. Contingencies and Commitments
The company has no contingency
and commitment as at the end of reporting period.
16. Other Information
i)
Evaluation of Disclosure Controls and Procedures
Management
of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company,
the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated
by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period
covered by this Quarterly Report on Form 10-Q were effective.
ii)
Changes in internal control over financial reporting .
Management
of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s
internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined
that there was no change in the Company’s internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over financial reporting.
17. Date of authorisation for
issue
These financial statements have been authorised for issue by the Board
of Directors of the Company on October 5, 2018
/s/Tobi Mac Aro
|
|
/s/Tobi Mac Aro
|
Chief Executive
|
|
Director
|