NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A)
Business Description
Plyzer Technologies Inc. (the Company), incorporated on February 23, 2005 under the laws of the state of Nevada, and through its subsidiaries, is engaged in developing commercial web portal (Plyzer) aimed at providing solutions for price comparison using artificial intelligence in a number of niche markets.
In December 2016, the Company entered into a development and consulting agreement with Lupama Producciones,S.L., a Spanish private corporation (Lupama). Lupama has been managing and developing Plyzer. Lupamas CEO, Mr. Luis Pallares is also made CEO of the Companys subsidiary. Technological feasibility of Plyzer was established on October 17, 2018 when the Company enrolled its first non- paying customer.
(B)
Basis of Presentation
The unaudited interim financial statements as of September 30, 2018 and for the three and six months ended September 30, 2018 and 2017 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the balance sheet, operating results and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. Operating results for the three and six months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the SECs rules and regulations for interim reporting.
(C)
Consolidation
The unaudited consolidated interim financial statements include the accounts of the Company and,
a.
Plyzer Corporation, a wholly owned subsidiary incorporated in the State of Delaware on December 9, 2016.
b.
Plyzer Technologies (Canada) Inc., a wholly owned subsidiary incorporated in Ontario, Canada on April 11, 2017.
c.
Plyzer Blockchain Technologies Inc., a wholly owned subsidiary incorporated in Ontario, Canada on November 3, 2017. The subsidiary has not yet commenced any operations.
The unaudited interim financial statements should be read in conjunction with the Companys Annual Report filed on Form 10-K for the year ended March 31, 2018. The significant accounting policies followed are same as those detailed in the said Annual Report.
(D)
Use of estimates
The financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial position and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.
F-5
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Loss Per Share
In accordance with ASC Topic 280 "Earnings Per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method). The computation of basic loss per share for the period ended September 30, 2018 excludes potentially dilutive securities of 10,134,051 shares underlying share purchase warrants and convertible notes, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.
Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.
|
| |
|
September 30, 2018
|
March 31, 2018
|
Stock purchase warrants
|
5,900,000
|
5,900,000
|
Convertible loans
|
4,234,051
|
2,145,573
|
|
10,134,051
|
8,045,573
|
NOTE 2 - GOING CONCERN
The Companys financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and this raises substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Managements plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. While the Company has so far been successful in raising the required capital through debt financing, management cannot provide any assurances that the Company will continue to be able to raise the funding required to the commercial launch of the portal successfully in future.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As of September 30, 2018, the Company has an accumulated deficit amount of approximately $26.6 million.
F-6
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU requires that a lessee recognize the assets and liabilities that arise from operating 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 leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this ASU is permitted for all entities. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments. Based on its preliminary evaluation, the Company expects to start recognizing lease assets and lease liabilities for its operating leases on the Companys statements of financial position as of the end of the first fiscal quarter of 2019 and the comparative period presented. The Company expects no material impact on its results of operations or cash flows in the periods after adoption.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial instruments.
" The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The guidance will become effective for us on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019. We are evaluating the effect of ASU 2016-13 on our consolidated financial statements.
In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting units carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company expects no material impact on its results of operations or cash flows in the periods after adoption.
In February 2018, the FASB issued ASU 2018-02: Income Statement-Reporting Comprehensive Income (Topic 220)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the Act). Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.
F-7
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS (continued)
In June 2018, the FASB issued ASU 2018-07: CompensationStock Compensation (Topic 718)- Improvements to Nonemployee Share-Based Payment Accounting. The Board is issuing this Update as part of its Simplification Initiative. The amendments in this Update expand the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantors own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company expects no material impact on its results of operations or cash flows in the periods after adoption.
The Company evaluates new pronouncements as issued and evaluates the effect of adoption on the Company at the time. The Company has determined that the adoption of recently adopted accounting pronouncements will not have an impact on the financial statements.
NOTE 4 - PREPAID EXPENSES AND DEPOSIT
|
|
|
|
| |
|
September 30, 2018
|
|
March 31, 2018
|
Prepaid development costs
|
$
|
3,000
|
|
$
|
9,000
|
Rent deposit
|
|
3,046
|
|
|
3,086
|
Taxes receivable
|
|
5,857
|
|
|
4,046
|
Convertible debt*
|
|
32,000
|
|
|
--
|
Prepaid cost
|
|
6,629
|
|
|
155
|
|
$
|
50,532
|
|
$
|
16,287
|
* Refers to convertible note for $35,000 issued on September 26, 2018 (Note 5(ii) item # 14) for which cash of $32,000 net of legal fee of $3,000 was received on October 1, 2018. Legal fee have been expensed as professional fees.
NOTE 5 - CONVERTIBLE DEBTS
|
|
|
|
|
| |
|
|
September 30, 2018
|
|
March 31, 2018
|
Principal balance, at beginning of period
|
|
$
|
542,614
|
|
$
|
--
|
Accrued interest and fees
|
|
|
25,975
|
|
$
|
12,229
|
Converted to additional paid in capital
|
|
|
(414,449)
|
|
|
(226,469)
|
Converted to common stock
|
|
|
(1,707)
|
|
|
(2,667)
|
Convertible note settled in cash
|
i
|
|
(104,000)
|
|
|
--
|
Convertible notes issued
|
ii
|
|
752,550
|
|
|
771,750
|
Unamortized debt discount
|
|
|
(567,003)
|
|
|
(433,016)
|
Balance, net of discount, at end of period
|
|
$
|
233,980
|
|
$
|
121,827
|
F-8
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 5 - CONVERTIBLE DEBTS (continued)
i.
During the six months ended September 30, 2018, the Company paid off three loans in cash for a total amount of $144,899 as follows:
|
|
|
|
|
|
| |
Loan amount
|
Prepaid premium
|
Interest
|
Total
|
$
|
38,000
|
$
|
12,075
|
$
|
2,168
|
$
|
52,243
|
|
33,000
|
|
9,900
|
|
2,511
|
|
45,411
|
|
33,000
|
|
9,900
|
|
4,345
|
|
47,245
|
$
|
104,000
|
$
|
31,875
|
$
|
9,024
|
$
|
144,899
|
ii.
During the six months ended September 30, 2018, the Company entered into the following Securities Purchase Agreements with independent lenders in connection with the issuance of convertible notes totalling $752,550:
|
|
|
|
|
|
| |
#
|
Amount
in ($)
|
Issue
date
|
Maturity
date
|
Interest
rate p.a.
|
Loan
balance as
at Sept. 30,
2018 ($)
|
Conversion terms
|
Prepayment terms
|
1
|
53,000
|
11-May-18
|
28-Feb-19
|
12%
|
53,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
2
|
79,800
|
06-Jun-18
|
06-Jun-19
|
8%
|
79,800
|
The conversion price is a variable conversion price which will be 60% of the market price. Market price is the lowest trading price during twenty trading days prior to the conversion date.
|
Prepayment at premium ranging from 135% to 115% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
3
|
33,000
|
13-Jun-18
|
30-Mar-19
|
12%
|
33,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
4
|
53,000
|
22-Jun-18
|
22-Mar-19
|
11%
|
53,000
|
The conversion price is a variable conversion price which will be 60% of the market price. Market price is the average of the lowest 2 trading prices or the lowest closing bid during 20 trading days prior to the conversion date.
|
The Company can redeem the note within six months of issuance without any premium.
|
5
|
50,000
|
29-Jun-18
|
15-Apr-19
|
12%
|
50,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
6
|
27,000
|
25-Jul-18
|
25-Jul-19
|
5%
|
-
|
Settled in Sept 2018
|
|
F-9
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 5 - CONVERTIBLE DEBTS (continued)
|
|
|
|
|
|
| |
#
|
Amount
in ($)
|
Issue
date
|
Maturity
date
|
Interest
rate p.a.
|
Loan
balance as
at Sept. 30,
2018 ($)
|
Conversion terms
|
Prepayment terms
|
7
|
33,000
|
27-Jul-18
|
15-May-19
|
12%
|
33,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
8
|
40,000
|
30-Jul-18
|
|
|
-
|
Settled in August 2018
|
|
9
|
78,750
|
01-Aug-18
|
31-Jul-19
|
8%
|
78,750
|
The conversion price is a variable conversion price which will be 60% of the market price. Market price is the lowest trading price during twenty trading days prior to the conversion date. $14,540 of the original loan plus interest of $615 was converted into 251,984 shares in December 2017.
|
The Company may pay this note any time.
|
10
|
52,000
|
09-Aug-18
|
09-Aug-19
|
8%
|
52,000
|
The conversion price is a variable conversion price which will be 60% of the market price. Market price is the lowest trading price during twenty trading days prior to the conversion date.
|
Prepayment at premium ranging from 115% to 135% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
11
|
80,000
|
03-Aug-18
|
03-May-19
|
10%
|
80,000
|
The conversion price is a variable conversion price which will be 60% of the market price. Market price is the lowest trading price during twenty trading days prior to the conversion date or 60% of the closing bid price if lower.
|
Prepayment at premium ranging from 135% to 145% of the loan note if prepaid within 90 days and after 90 days but before 180 days respectively. Prepayment not allowed after six months.
|
12
|
38,000
|
13-Sep-18
|
30-Jun-19
|
12%
|
38,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
13
|
100,000
|
14-Sep-18
|
14-Sep-19
|
10%
|
100,000
|
The conversion price is a variable conversion price which will be 58% of the market price. Market price is the lowest trading price during twenty trading days prior to the conversion date.
|
Prepayment at premium ranging from 120% to 140% of the loan note if prepaid within 60 days and after 120 days but before 180 days respectively.
|
14
|
35,000
|
26-Sep-18
|
15-Jul-19
|
12%
|
35,000
|
The conversion price is a variable conversion price which will be 61% of the market price. Market price is the average of the lowest 2 trading prices during 10 trading days prior to the conversion date.
|
Prepayment at premium ranging from 110% to 130% of the loan note if prepaid within 30 days and after 120 days but before 180 days respectively.
|
|
752,550
|
|
|
|
685,550
|
|
|
F-10
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 6 - DERIVATIVE LIABILITIES
|
|
|
|
| |
|
September 30, 2018
|
|
March 31, 2018
|
Balance, at beginning of period
|
$
|
933,198
|
|
$
|
--
|
Derivative additions associated with convertible notes on issuance
|
|
749,683
|
|
|
767,931
|
Day one loss on derivatives
|
|
159,850
|
|
|
665,475
|
Change in fair value as at period end
|
|
12,973
|
|
|
(183,633)
|
Value transferred to paid in capital on conversion of convertible notes
|
|
(521,839)
|
|
|
(316,575)
|
Balance, at end of period
|
$
|
1,333,865
|
|
$
|
933,198
|
Since the convertible loan notes issued during the period have a beneficial conversion feature which is contingent upon future market prices, they did not meet the conditions necessary for equity classification and as a result, the embedded conversion feature is considered a derivative liability. The fair value of the derivative was estimated on the issue date and subsequently remeasured on September 30, 2018 using the Black-Scholes valuation technique, using the following assumptions.
|
| |
Issue date:
|
September 30, 2018
|
September 30, 2017
|
Expected dividend
|
nil
|
nil
|
Risk free interest rate
|
0.030%
|
0.030%
|
Expected volatility
|
138% - 180%
|
142%
|
Expected term
|
40 days - 639 days
|
150 days -365 days
|
NOTE 7 - COMMON STOCK
a.
On August 10, 2018, Lupama exercised 29,843,335 warrants to convert into equal number of shares at an exercise price of $.0025 for a total of $74,608 and On September 6, 2018, exercised the remaining 156,665 warrants to convert into equal number of shares at an exercise price of $.0025 for a total of $392. Excercise price was off set against amounts payable to Lupama.
b.
On September 6, 2018, Lupama was issued 843,335 shares and on September 27, issued further 999,999 shares. These shares were valued at $0.45 per share, being the market price prevailing on the dates of their issues for a total of $829,501, which was off set against amount payable to Lupama.
c.
During the six months ended September 30, 2018, twelve convertible notes plus accrued interest were converted into 1,707,499 shares for a total value of $415,658.
At September 30, 2018 and March 31, 2018, the Company had 200,000,000 common shares of par value $0.001 common stock authorized.
F-11
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 8 - WARRANTS
In May 2017, the Company issued 5.9 million warrants in connection with the private placement.
The relative fair value of the 5.9 million warrants issued was estimated at $145,782 using the Black-Scholes valuation technique.
The value of warrants has been included in the paid in capital.
On August 1, 2018, the Company issued 30 million warrants to Lupama for services provided in connection with the development of Plyzer. These warrants vested immediately on issuance and were valid for three years and convertible into equal number of common shares at an exercise price of $0.0025 per share. The fair value of the 30 million warrants issued was estimated at $19,136,270 using the Black-Scholes valuation technique. The value of warrants has been included in the paid in capital and charged to expenses as stock compensation. All warrants were exercised as explained in Note 7(a).
The following assumptions were used in the valuation of these warrants:
| |
Expected dividend
|
nil
|
Risk free interest rate
|
3%
|
Expected volatility
|
138.56%
|
Expected term
|
3 years
|
The movements during the six months ended September 30, 2018 were as follows:
|
|
|
| |
|
September 30, 2018
|
March 31, 2018
|
|
No. of
Warrants
|
Weighted
average
exercise price
|
No. of
Warrants
|
Weighted
average
exercise price
|
Outstanding - beginning of period
|
5,900,000
|
$ 0.20
|
-
|
$ -
|
Issued
|
30,000,000
|
0.0025
|
5,900,000
|
0.20
|
Forfeited/Cancelled/Expired
|
-
|
-
|
-
|
-
|
Exercised
|
(30,000,000)
|
(0.0025)
|
-
|
-
|
Outstanding - end of period
|
5,900,000
|
$ 0.20
|
5,900,000
|
$ 0.20
|
The aforementioned warrants have an average remaining life of approximately 0.9 year as at September 30, 2018 (1.4 years as at March 31, 2018).
NOTE 9 - RELATED PARTY TRANSACTIONS
ADVANCES FROM DIRECTOR AND STOCKHOLDER
|
|
|
|
| |
|
September 30, 2018
|
|
March 31, 2018
|
Balance, beginning of period
|
$
|
195,099
|
|
$
|
74,631
|
Funds advanced (net)
|
|
68,111
|
|
|
120,468
|
Balance, end of period
|
$
|
263,210
|
|
$
|
195,099
|
Funds were advanced from time to time by Mr. Terence Robinson, the CEO and the sole director and by Current Capital Corp., a company owned by a brother of the CEO and a shareholder.
F-12
Plyzer Technologies Inc.
Six months ended September 30, 2018
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 9 - RELATED PARTY TRANSACTIONS (continued)
CONSULTING FEES
Consulting fees include fees charged by the CEO of $9,000 and $18,000 respectively for the three and six months ended September 30, 2018. ($6,250 and $12,500 respectively for the three and six months ended September 30, 2017).
DEVELOPMENT COSTS
Development costs includes fees charged by Lupama of $1,056,568 and 1,318,878 respectively for the three and six months ended September 30, 2018 ($nil and $29,710 respectively for the three and six months ended September 30, 2017). Lupama is a company controlled by the CEO of the Companys subsidiary.
Lupama was issued 30 million warrants valued at $19,136,270 as explained in Note 8 and was also issued 1,843,334 restricted shares valued at $829,501 for services provided.
TRAVEL, MEALS AND PROMOTION
Comprises expenses of $21,474 charged by the CEO for the three and six months ended September 30, 2018. ($3,886 and $27,505 respectively for the three and six months ended September 30, 2017).
NOTE 10 - SUBSEQUENT EVENTS
The Company issued 4,962,640 common shares between July 1, 2018 and November 16, 2018. 962,640 shares were issued to convertible noteholders on conversion of their notes and the balance of four million restricted common shares were issued to Lupama for services provided.
F-13