POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
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Originated May 27, 2015, unsecured $74,500 convertible promissory note, which carries an 8% interest rate and matures on November 27, 2015 (“First Minerva Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $4,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount on beneficial conversion feature of $-0- and $3,563, respectively).
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74,500
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70,937
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Originated June 29, 2015, unsecured $10,000 convertible promissory note, which carries an 8% interest rate and matures on February 28, 2016 (“Second Minerva Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. (less unamortized discount due to derivative of $2,688 and $2,974, respectively).
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7,312
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7,026
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Originated July 9, 2015, unsecured $53,000 convertible promissory note, which carries a 10% interest rate and matures on July 9, 2016 (“First Essex Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the lowest closing price of the Company’s common stock for the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount due to derivative of $-0- and $17,160, respectively). During the period ended April 30, 2016, the note holder elected to convert a total of $53,000 of principal in exchange for 11,170,809 shares. Due to excess share issuance of 2,026,129, the Company recognized a loss on conversion of $13,686; the excess shares were valued based on fair market value on the date of conversion.
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—
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35,840
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Originated August 4, 2015 unsecured $20,350 convertible promissory note,
which carries an 8% interest rate and matures on August 6, 2016 (“First Abramowitz Note”). The principal and
interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight
percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock, or $0.00005 per share, for
the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $2,000 that is being
amortized over the life of the loan on the straight line method, which approximates the effective interest
method. (less unamortized discount due to derivative of $9,048 and $15,457, respectively). In
conjunction with this note, the company issued 203,500 common stock warrants with an exercise price of $0.011 per share with
a term of 5 years.
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10,814
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4,893
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Originated September 10, 2015, unsecured $30,250 convertible promissory
note, which carries an 8% interest rate and matures on September 10, 2016 (“First Vigere Note”). The principal
and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight
percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading
days prior to the conversion date. The Company paid total debt issuance cost of $2,500 that is being amortized over the life
of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount due to
derivative of $16,229 and $26,035, respectively). In conjunction with this note, the company issued 298,029 common
stock warrants (see note 7) with an exercise price of $0.11165 per share with a term of 5 years.
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13,021
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4,215
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POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
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Originated October 15, 2015, unsecured $30,250 convertible promissory
note, which carries an 8% interest rate and matures on October 15, 2016 (“Second Vigere Note”). The principal and
interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight
percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading
days prior to the conversion date. The Company paid total debt issuance cost of $2,500 that is being amortized over the life
of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount due to
derivative of $19,024 and $28,298, respectively). In conjunction with this note, the company issued 263,043 common
stock warrants (see note 7) with an exercise price of $0.1265 per share with a term of 5 years.
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9,963
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1,962
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Originated February 8, 2016, unsecured $17,000 convertible promissory note, which carries a 10% interest rate and matures on February 8, 2017 (“Essex Global Note #2”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-two percent (42%) of the lowest closing price of the Company’s common stock for the ten (10) trading days prior to the conversion date.
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17,000
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—
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Originated February 8, 2016, unsecured $7,000 convertible promissory note, which carries a 10% interest rate and matures on February 8, 2017 (“Grant Note #1”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-two percent (42%) of the lowest closing price of the Company’s common stock for the ten (10) trading days prior to the conversion date.
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7,000
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—
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Originated February 8, 2016, unsecured $17,000 convertible promissory note, which carries a 10% interest rate and matures on February 8, 2017 (“Minerva Note #3”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-two percent (42%) of the lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares.
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7,312
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—
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Originated February 9, 2016, unsecured $143,995 convertible promissory note, which carries an 8% interest rate and is due on demand (“Polatoff Note #1”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-two percent (42%) of the lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares.
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143,995
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—
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Originated February 12, 2016, unsecured $130,007 convertible promissory note, which carries an 5% interest rate and matures on August 12, 2016 (“Crown Bridge Note #2”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-one percent (51%) of the lowest trading price of the Company’s common stock for the twenty (20) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares.
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104,752
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—
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Originated February 18, 2016, unsecured $26,500 convertible promissory note, which carries an 8% interest rate and matures on February 18, 2017 (“Crown Bridge Note #1”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-one percent (51%) of the lowest trading price of the Company’s common stock for the twenty (20) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares.
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25,369
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—
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POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
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Originated March 24, 2016, unsecured $48,000 convertible promissory note, which carries an 8% interest rate and matures on March 24, 2017 (“Vigere Capital Note #3”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading days prior to the conversion date.
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6,917
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—
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Originated March 17, 2016, unsecured $66,550 convertible promissory note, which carries an 8% interest rate and matures on March 17, 2017 (“Vigere Capital Note #5”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading days prior to the conversion date.
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57,343
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—
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Originated April 28, 2016, unsecured $10,000 loan, which carries a -0-% interest rate and matures on demand. The conversion feature is yet to be determined.
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10,000
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—
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Convertible debenture
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587,780
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240,452
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Less: current maturities of convertible debenture
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(587,780
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)
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(240,452
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Long term convertible debenture
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$
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—
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$
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—
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The Company recognized interest expense in
the amount of $12,006 and $5,041 for the six months ended April 30, 2016 and 2015, respectively, related to the convertible debentures
above.
In addition, a total of $62,000 of debt issuance cost were incurred
pursuant to the closings of the convertible debentures which are being amortized to interest expense over the term of the debentures
using the straight line method, which approximate the effective interest method. The Company recorded a total of $22,047 of interest
expense pursuant to the amortization of the issuance cost during the six months ended April 30, 2016.
In accordance with
ASC 815-15, the Company determined that the variable conversion features and shares to be issued represented derivative features,
and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded
derivative associated with the convertible debentures utilizing a lattice model.
The aforementioned accounting treatment resulted
in a total debt discount equal to $124,160 as of April 30, 2016 and $298,497 for the year ended October 31, 2015. The discount
is amortized on a straight line basis, which approximated the effective interest method due to the short term duration of the note,
from the dates of issuance until the stated redemption date of the debts, as noted above. During the six months ended April 30,
2016 and 2015, the Company recorded debt amortization expense in the amount of $263,888 and $82,269, respectively, attributed to
the aforementioned debt discount.
During the six months
ended April 30, 2016, the Company converted accrued compensation of $143,995 and warrants of $66,550 into convertible debentures.
Note 7 –
Derivative Liability
As discussed in Note 6 under Convertible Debentures,
the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions.
The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s
common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock.
The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the
number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted
and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded
Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative
liabilities on the issuance date.
POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
The fair values of the Company’s derivative
liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The
Company recognized current derivative liabilities of $343,036 and $1,369,662 at April 30, 2016 and October 31, 2015, respectively.
The change in fair value of the derivative liabilities resulted in a gain of $1,050,876 and $-0- for the six months ended April
30, 2016 and 2015, respectively, which has been reported as other income in the statements of operations.
The following presents the derivative liability
value at April 30, 2016 and October 31, 2015, respectively:
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April 30,
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October 31,
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2016
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2015
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Convertible notes
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$
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320,479
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$
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751,505
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Warrants
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22,557
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618,157
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$
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343,036
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$
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1,369,662
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The following is a summary of changes in the fair market value of
the derivative liability during the six months ended April 30, 2016:
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Derivative
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Liability
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Total
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Balance, October 31, 2015
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$
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1,369,662
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Increase in derivative value due to issuances of convertible promissory notes
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89,552
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Increase in derivative value due to issuances of Warrant
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139,242
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Decrease due to debt conversion
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(204,544
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)
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Change in fair market value of derivative liabilities due to the mark to market adjustment
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(1,050,876
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)
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Balance, April 30, 2016
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$
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343,036
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Key inputs and assumptions
used to value the convertible debentures and warrants issued during the year ended October 31, 2015:
Convertible notes derivatives:
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The stock price would fluctuate with the Company projected volatility. The stock price increased
in this period ending 10/31/15 from $0.025 to $0.16.
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•
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The projected volatility curve from an annualized analysis for each valuation period was based
on the historical volatility of the Company and the term remaining for each note.
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•
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The derivative Investor Convertible Notes convert after 90-180 days at the lessor of 51% or 58%
of the average 3 lows in 10 or 30 trading days or the fixed exercise price set at issuance subject to full ratchet reset provisions;
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•
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Capital raising events are a factor for this Notes full reset provisions.
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•
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An event of default at 15% - 24% interest rate would occur 0% of the time, increasing 1.00%per
month to a maximum of 10% with a 150% penalty;
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•
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The company would redeem the notes (with a 120% – 135% – 145% penalty) projected
initially at 0% of the time and increase monthly by 10.0% to a maximum of 50.0% (from alternative financing being available
for a Redemption event to occur);and
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The Holder would automatically convert the note at the maximum of 2 times the conversion price
or the stock price if the registration was effective (assumed after 180 days) and the Company was not in default with the target
conversion price dropping as maturity approaches.
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Warrant derivatives:
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The Warrants exercise prices are fixed and subject to full ratchet reset provisions;
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•
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The stock price would fluctuate with the Company projected volatility. The stock price increased
in this period ending 10/31/15 from
$
0.025 to $0.16.
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The projected volatility curve from
an annualized analysis for each valuation period was based on the historical volatility of the Company and the term remaining for
each note:
POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
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The Holder would exercise the Warrant as they become exercisable (effective registration is projected 90 days from issuance
and the earliest exercise is projected 180 days from issuance) at target prices of 2 times the higher of the projected reset price
or stock price.
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•
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Capital raising events (a single financing at 6 months from the issuance date) are a factor for
these Warrants – full reset events projected to occur based on future stock issuance (quarterly) resulting in a reset exercise
price.
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•
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No Warrants expired nor reset nor exercised in this period ending 10/31/15.
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Key inputs and assumptions used to value the
convertible debentures and warrants issued during the six months ended April 30, 2016:
Convertible notes derivatives:
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The stock price of $0.10 - $0.0056 would fluctuate with the Company projected volatility
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•
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The derivative Investor Convertible Notes convert after 90 – 180 days at the lessor of 51% or 58% of the average 3 lows
in 10 or 30 trading days or the fixed exercise price set at issuance subject to full ratchet reset provisions.
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•
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Capital raising events are a factor for this Note full reset provisions.
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An event of default at 15% - 24% interest rate would occur 0% of the time, increasing 1.00% per month to a maximum of 10% with
a 150% penalty.
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•
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The projected volatility curve from annualized analysis for each valuation period was based on the historical volatility (171%
- 366%) of the Company and the term for each note.
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•
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The company would redeem the notes (with a 120% – 135% – 145% penalty) projected initially
at 0% of the time and increase monthly by 10.0% to a maximum of 50.0% (from alternative financing being available for a Redemption
event to occur);and
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•
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The Holder would automatically convert the note at the maximum of 2 times the conversion price
or the stock price if the registration was effective (assumed after 180 days) and the Company was not in default with the target
conversion price dropping as maturity approaches.
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Warrant derivatives:
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•
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The stock price would fluctuate with the Company projected volatility. The stock price increased
in this period ending 10/31/15 from
$
0.10 to $0.0056.
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•
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The projected volatility curve from an annualized analysis for each valuation period was based
on the historical volatility (171% - 366%) of the Company and the term remaining for each note
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•
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The Holder would exercise the Warrant as they become exercisable (effective registration is projected 90 days from issuance
and the earliest exercise is projected 180 days from issuance) at target prices of 2 times the higher of the projected reset price
or stock price.
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•
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Capital raising events (a single financing at 6 months from the issuance date) are a factor for
these Warrants – full reset events projected to occur based on future stock issuance (quarterly) resulting in a reset exercise
price.
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•
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The Warrants with the fixed exercise prices subject to full ratchet reset provisions.
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•
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No Warrants expired nor exercised in this period ending 4/30/16.
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Note 8 – Changes in Stockholders’
Equity (Deficit)
Authorized Shares, Common Stock
The Company is authorized to issue 50,000,000,000
shares of $0.0001 par value common stock. As of April 30, 2016, there were 273,643,632 shares issued and outstanding.
Authorized Shares, Preferred Stock
The Company is also authorized to issue
1,000,000,000 shares of its preferred stock. On April 25, 2014, the Company designated (the “Designation”) a series
of our preferred stock as Series A Preferred Stock, (“Series A Preferred Stock”) and issued 1,000 shares of the Series
A Preferred Stock to its chief executive officer and sole director.
POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
As a result of the Designation:
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The Company is authorized to issue 1,000 shares of Series A Preferred Stock;
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•
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Holders of the A Preferred Stock will not be entitled to receive dividends;
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•
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The holders of the Series A Preferred Stock then outstanding shall not be entitled to receive any
distribution of Company assets;
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•
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The Series A Preferred Stock will not be convertible into shares of the Company’s common
stock.
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•
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The holders of the Series A Preferred Stock shall have the following voting rights:
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(i)
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To vote together with the holders of the Common Stock as a single class on all matter submitted
for a vote of holders of Common Stock;
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(ii)
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Each one (1) share of Series A Preferred Stock shall have voting rights equal to 50,000 shares
of our Common Stock, providing for the holder of the Series A Preferred Stock to have aggregate voting rights equal to 50,000,000
shares of our Common Stock;
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(iii)
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The holder of the Series A Preferred Stock shall be entitled to receive notice of any stockholders’
meeting in accordance with the Articles of Incorporation and By-laws of the Company.
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(iv)
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So long as any shares of Series A Preferred Stock remain outstanding, we will not, without the
written consent or affirmative vote of the holders of 100% of the outstanding shares of the Series A Preferred Stock, (i) amend,
alter, waive or repeal, whether by merger consolidation, combination, reclassification or otherwise, the Articles of Incorporation,
including this Certificate of Designation, or our By-laws or any provisions thereof (including the adoption of a new provision
thereof), (ii) create, authorize or issue any class, series or shares of Preferred Stock or any other class of capital stock. The
vote of the holders of at least one-hundred percent of the outstanding Series A Stock, voting separately as one class, shall be
necessary to adopt any alteration, amendment or repeal of any provisions of this Resolution, in addition to any other vote of stockholders
required by law.
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Common Stock Issuances, for the Period Ending
October 31, 2015
During the year ended October 31, 2015, the
Company issued 4,295,000 shares of common stock for consulting services. The fair value of the common stock was $471,232 based
on the market price of the Company’s common stock on the date of grant.
During the year ended October 31, 2015, the Company issued 907,850
shares of common stock for payment of accrued compensation to the president of the Company. The fair value of the common stock
was $67,190 based on the market price of the Company’s common stock on the date of grant.
During the year ended October 31, 2015, the
Company issued 1,230,000 shares of common stock for cash in the amount of $12,300.
During the year ended October 31, 2015, the
Company issued 2,211,679 shares of common stock for the conversion of convertible notes payable in the amount of $50,168. As the
conversions were within the terms of the agreement, no additional gain or loss on the conversion has been recognized.
Stock Options, for the Period Ending October
31, 2015
During the year ended October 31, 2015,
the Company issued 500,000 stock options to a service provider and exercisable over a 4 year term expiring on April 28, 2019.
The values of the options were estimated using a Black-Scholes option pricing model equal to $16,614. The key inputs to the
model were the number of options 500,000, share price on the grant date of $0.04, exercise price of $0.20, terms of 4 years,
volatility of 211% and a discount rate of 0.43%.As the shares are fully vested on the date of agreement, the value of the
options of $16,614 was fully expensed on the date of grant.
The following table summarizes the changes in options outstanding
as of October 31, 2015 and April 30, 2016:
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Number of Shares
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Weighted Average Exercise Price
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Outstanding as of October 31, 2015
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500,000
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$
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0.20
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Granted
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—
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—
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Exercised
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—
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—
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Cancelled
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—
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—
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Outstanding at April 30, 2016
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|
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500,000
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$
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0.20
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POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
Common Stock Warrants, for the Period Ending
October 31, 2015
The Company issued 6,846,394 warrants on May
8, 2015 with an exercise price of $0.0140 per share and a term of 5 years in conjunction with the convertible debt issuance. The
exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such,
the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives,
the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.
On August 4, 2015, the Company issued warrants
of 203,500 with an exercise price of $0.011 per share and a term of 5 years in conjunction with the convertible debt issuance.
The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As
such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded
Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance
date.
On August 17, 2015, the Company issued warrants
of 486,662 with an exercise price of $0.0580 per share and a term of 5 years in conjunction with the convertible debt issuance.
The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As
such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded
Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance
date.
On September 10, 2015, the Company issued
warrants of 573,706 with an exercise price of $0.0580 per share and a term of 5 years in conjunction with the convertible
debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on
subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is
indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were
recorded as derivative liabilities on the issuance date.
On October 9, 2015, the Company issued warrants
of 560,000 with an exercise price of $0.011 per share and a term of 5 years in conjunction with the convertible debt issuance.
The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As
such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded
Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance
date.
On October 15, 2015, the Company issued
warrants of 573,706 with an exercise price of $0.0580 per share and a term of 5 years in conjunction with the convertible
debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on
subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is
indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were
recorded as derivative liabilities on the issuance date.
Common Stock Warrants, for the Period Ending April 30, 2016
On January 5, 2016, the Company issued warrants
of 1,512,500 with an exercise price of $0.0110 per share and a term of years in conjunction with the convertible debt issuance.
The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As
such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded
Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance
date.
The following table summarizes the changes in warrants outstanding
as of October 31, 2015 and April 30, 2016:
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Outstanding as of October 31, 2015
|
|
|
|
9,243,968
|
|
|
$
|
0.019
|
|
|
Granted
|
|
|
|
1,512,500
|
|
|
|
0.002
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding at April 30, 2016
|
|
|
|
10,756,468
|
|
|
$
|
0.021
|
|
POCKET GAMES, INC.
Notes to Condensed Financial Statements
April 30, 2016
(Unaudited)
Subscriptions Payable, for the Period Ending
October 31, 2015
On November 6, 2014, the Company issued 155,400
shares of common stock pursuant to an agreement with a consultant which had previously been recorded as Subscriptions Payable in
the amount of $10,878 in the accompanying balance sheet at October 31, 2014.
Settlement of convertible debt, for the
Period Ending October 31, 2015
During the period, the Company repaid back
convertible debt in the amount of $134,000 and converted $50,168 of debt for 2,211,679 shares of the common stock. As a result
of such conversion and repayment, the Company reduced its derivative liability by $66,913.
Beneficial Conversion feature, for the Period
Ending October 31, 2015
During the period, the Company issued convertible
promissory note with a variable conversion price; as a result, the Company recorded $180,959 in discount and amortized the balance
over the life of the notes.(see Note 6 and Note 7).
Common Stock Issuances, for the Period Ending
April 30, 2016
During the six months ended April 30, 2016,
the Company granted 29,900,000 and issued 29,400,000 shares of common stock for consulting services. The fair value of the common
stock issued was $313,375 based on the market price of the Company’s common stock on the date of grant. The 500,000 shares
authorized but not issued is recorded as $1,500 (based on the market value on the date of grant) stock payable as of April 30,
2016.
Settlement of convertible debt, for the
Period Ending April 30, 2016
During the six months ended April 30, 2016,
the Company converted $203,543 of debt for 219,911,718 shares of common stock. Due to excess share issuance, the Company recognized
a loss on conversion of $140,304; the excess shares were valued based on fair market value on the date of conversion.
Note 9 – Subsidiaries
As disclosed in our Form 8-K filed with the
Securities and Exchange Commission, we issued a total of 400,000 shares of our Series B Convertible Preferred Stock in connection
with our acquisition of 80% of the Class A common stock and 100% of the Class B common stock of Social Technology Holdings, Inc.
(“STH”), and reserved an additional 80,000 shares of our Class B voting Convertible Preferred Stock for issuance in
a contemplated merger transaction to acquire the 20% minority interest in the STH Class A common stock. STH is the owner and operator
of “Viximo”, a software platform that allows game providers to access multiple websites from a single source API.”
As disclosed in our Form 8-K filed with the
Securities and Exchange Commission, we issued a total of 270,000 shares of our Series C Convertible Preferred Stock and a $3,960,000
convertible note due March 31, 2019 in connection with our acquisition of 100% of the outstanding common stock of Kicksend Holdings,
Inc., a Delaware corporation (“Kicksend”). Kicksend is engaged in the business of file storage and sharing in real-time
on digital platforms, including desktop, mobile and webapps, to permit users to organize, download and sent storage files.
Under the terms of these acquisitions, the
Company was to receive full financial disclosure in order to maintain its ‘fully reporting’ status with the SEC.
Subsequent to the closing, neither acquisition target was able to provide full financial disclosure and Pocket Games’ attorney
opined that this was a material breach of the contracts and the acquisitions described above were unwound. This resulted in the
unwinding, return, and cancellation of all items related to the acquisitions. The total net effect of this transaction resulted
in $219,951 for the period ended April 30, 2016. There was no gain or loss associated with these transactions.
Note 10 – Commitments and Contingencies
Intellectual Property Purchase Agreement
On February 12, 2014, the Company entered into
an Intellectual Property Purchase Agreement, whereby the Company purchased from the seller a certain software game application.
Subject to the terms and conditions of this Agreement, the Company issued to the seller 1,500,000 shares of common shares. Additionally,
the Company agreed to pay to the Seller the cost for development and modification of $40,000, of which $20,000 was paid during
the year ended October 31, 2014. The remaining balance of $20,000 shall be paid as the work passes through quality control.
Note 11 – Subsequent Events
Subsequent to April
30, 2016, the Company issued a total of 7,593,253,875 shares of common stock.