Notes to Financial Statements
As of December 31, 2015 (audited)
The Company was incorporated on December 31,
2013 (Date of Inception) under the laws of the State of Nevada, as Artesanias Corp. (the “Company”). On June 12, 2015,
the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the current business
focus of the Organization. The Company plans to develop a business that provides marketing, monetization, and support services
for the companies in gaming and mobile application markets.
The company has limited operations and is
considered to be in the development stage.
The summary of significant accounting policies
presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and
accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”)
in all material respects, and have been consistently applied in preparing the accompanying financial statements.
The Company’s financial statements
are prepared using GAAP 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 allow it to continue as a going concern.
The Company had an accumulated deficit of $1,070,763 and a working capital deficit of $513,763 as of December 31, 2015. 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. The Company is contemplating
conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon
its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will
be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
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. These
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts,
or amounts and classification of liabilities that might result from this uncertainty.
|
4.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Use of Estimates
The preparation of the financial
statements in conformity with US 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 revenues and expenses during the reporting periods. Areas involving significant estimates and assumptions
include valuation of derivatives and convertible promissory notes, valuation allowance for deferred tax assets, accruals and going
concern assessment. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported
in earnings in the period in which they become known. Actual results could materially differ from those estimates.
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
Cash and Cash Equivalents
Cash and cash equivalents include cash on
hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90
days or less. The Company did not have cash equivalents as of December 31, 2015 and 2014.
Concentration of Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking
institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December
31, 2015.
Income Taxes
Under ASC 740, “Income Taxes,”
deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that
some or all of the deferred tax assets will not be realized. As of December 31, 2015, there were no deferred taxes due to the
uncertainty of the realization of net operating loss or carry forward prior to expiration.
Loss Per Common Share
Basic loss per common share excludes dilution
and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss
per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised
or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of December
31, 2015, there are no outstanding dilutive securities.
Valuation of Derivatives
The Company evaluates its convertible
instruments to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately
accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the
fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the
fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other
income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the
conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as
equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the
instrument on the reclassification date. The Company analyzed the derivative financial instruments (the Convertible Notes),
in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial
instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a
derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that
falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own
stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must
be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is
indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated,
followed by an evaluation of the instrument's settlement provisions. The Company utilized multinomial lattice models that
value the derivative liability within the notes based on a probability weighted discounted cash flow model. The
Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at
which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing
parties, that is, other than in a forced or liquidation sale.
The derivative liabilities result in a reduction
of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market
each quarter with the change in fair value recorded in the income statement. Unamortized discount is amortized to interest expense
using the effective interest method over the life of the Convertible Note. If the Note is converted or the warrants are exercised,
the derivative liability is released and recorded as additional paid in capital.
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
Fair Value
of Financial Instruments
Accounting Standards Codification Topic 820
“
Fair Value Measurements and Disclosures
” (“ASC 820”) defines fair value, establishes a framework
for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used
to measure fair value:
Level 1 - Valuation based on quoted market
prices in active markets for identical assets or liabilities.
Level 2 - Valuation based on quoted market
prices for similar assets and liabilities in active markets.
Level 3
- Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s
best estimate of what market participants would use as fair value.
In instances where the determination of the
fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy
within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value
measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair value estimates discussed herein are
based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest
rates that are comparable to market rates. These financial instruments include cash, accounts payable and accrued liabilities
and convertible promissory notes. The Company’s bank accounts are maintained with financial institutions of reputable credit, and therefore,
bear minimal credit risk and are carried at amortized costs which approximates the fair value
.
Contingencies
The Company is not currently a party to any
pending or threatened legal proceedings. Based on information currently available, management is not aware of any matters
that would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
|
5.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU No.
2016-02,
"Leases (Topic 842)"
("ASU 2016-02"). Under ASU 2016-02, an entity will be required
to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial
statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual
reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption
permitted. At adoption, this update will be applied using a modified retrospective approach. The Company has evaluated the new
standard and it will not have an impact to the financial statements once implemented.
In January 2016, the
FASB issued accounting guidance that affects the accounting for equity investments, financial liabilities accounted for under
the fair value option and the presentation and disclosure requirements for financial instruments. Under the new guidance, all
equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally
be measured at fair value through earnings. There will no longer be an available-for-sale classification for equity securities
with readily determinable fair values. For financial liabilities when the fair value option has been elected, changes in fair
value due to instrument-specific credit risk will be recognized separately in other comprehensive income. In addition, the FASB
clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized
losses on available-for-sale debt securities. The new guidance is effective January 1, 2018, with the cumulative effect adjustment
from initially applying the new guidance recognized in the Statement of Financial Position as of the beginning of the year of
adoption. The Company does not expect the adoption to have a material impact on its financial statements.
In April 2015, the FASB issued ASU
2015-05, “
Intangibles — Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Fees Paid in a Cloud Computing Arrangement
” (“ASU 2015-05”). ASU
2015-05
provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing
arrangement includes a software license, the customer should account for the software license element of the arrangement
consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software
license, the customer should account for the arrangement as a service contract. The new guidance does not change the
accounting for a customer’s accounting for service contracts. ASU 2015-05 is effective for annual reporting periods
beginning after December 15, 2015, including interim periods within that reporting period. The Company has evaluated
the new standard and it will not have an impact to the financial statements once implemented.
In April 2015, the FASB issued Accounting Standards
Update (ASU) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts and the accounting
for debt issue costs under IFRS. The recognition and measurement guidance for debt issuance costs are not affected by the amendments
in this ASU. The amendments in this Update apply to all companies. They became effective for public business entities in the annual
period beginning after December 15, 2015, and interim periods within those fiscal years.
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue
from Contracts with Customers”
(“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition
requirements in “
Revenue Recognition (Topic 605)
”, and requires entities to recognize revenue in a way that
depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled to in exchange for those goods or services. In July 2015, the FASB decided to delay the effective date
of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including
interim periods within that reporting period. The standard is to be applied retrospectively, with early application permitted
for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The
Company is evaluating the new standard, but do not anticipate a material impact to the financial statements once implemented
Recently Adopted Accounting Standards
In November 2015, the FASB issued
ASU No. 2015-17,
“Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
(“ASU
2015-17”). ASU 2015-17 requires that deferred tax liabilities and assets within each tax jurisdiction, including any
related valuation allowance, be classified as noncurrent in the consolidated balance sheet.
The Company adopted the new requirements
in the fourth quarter of fiscal 2015 on a retrospective basis. The adoption did not have a material impact on the Company's financial
statements.
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
In June 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage
Entities”. The amendments in this update remove the definition of a development stage entity from the Master Glossary of
the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from
U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date
information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a
development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4)
disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the
development stage. The Company adopted the new requirements on a retrospective basis
Pursuant to Exclusive License Agreement dated
May 21, 2015 with a third party, the Company acquired an exclusive license to develop, market and sell products and services based
upon any and all intellectual property. The initial term of this Agreement is five years. This Agreement may be renewed for an
additional five year term upon written notice to be given by the Company no later than thirty days prior to the expiration of
the initial term. In consideration for the license granted hereunder, the Company shall issue to the third party 1,000,000 (200,000
after reverse split) shares of common stock. In addition, the Company shall issue 1,000,000 (200,000 after reverse split) shares
of common stock on or before each anniversary of this Agreement for so long as it shall remain in effect. The Company also agreed
to make payments totaling $120,000 to the third party under an agreed payment schedule.
As technological feasibility has not yet been
achieved, the Company has recognized as expense the total consideration due of $630,000, $120,000 being payable in cash and $510,000
in the form of 1,000,000 (200,000 after reverse split) shares of common stock to be issued valued at the market price of $0.51
per share.
|
7.
|
CONVERTIBLE
PROMISSORY NOTES
|
The outstanding convertible promissory notes
as at December 31, 2015 are as follows:
|
$
|
Promissory notes issued during Q2 2015
|
|
132,200
|
|
Discount recognised due to embedded derivatives
|
|
(132,200
|
)
|
Accretion on notes for Q2 2015
|
|
7,025
|
|
Accreted value of notes as at June 30, 2015
|
|
7,025
|
|
Promissory notes issued during Q3 2015
|
|
80,980
|
|
Discount recognised due to embedded derivatives
|
|
(73,249
|
)
|
Accretion on notes for Q3 2015
|
|
11,966
|
|
Accreted value of notes as at September
30, 2015
|
|
26,722
|
|
Promissory note issued during Q4 2015
|
|
16,000
|
|
Discount recognised due to embedded derivatives
|
|
(12,451
|
)
|
Accretion on notes for Q3 2015
|
|
28,558
|
|
Accreted value of notes as at December 31, 2015
|
|
58,829
|
|
The embedded conversion features and reset
feature in the notes were accounted for as a derivative liability based on FASB guidance (also refer note 8).
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
|
7.
|
CONVERTIBLE
PROMISSORY NOTES (continued)
|
The details of the convertible promissory
notes issued are as follows:
Issue Date
|
Maturity Date
|
Note Amount
|
Interest Rate
|
Variable Conversion Rate
|
|
|
$
|
Per Annum
|
|
June 9, 2015
|
June 9, 2016
|
28,000
|
10%
|
60% of 3 lows out of 10 trading days
|
June 10, 2015
|
June 10, 2016
|
60,000
|
10%
|
60% of 3 lows out of 10 trading days
|
June 11, 2015
|
June 11, 2016
|
30,000
|
10%
|
60% of 3 lows out of 10 trading days
|
June 15, 2015
|
June 15, 2016
|
14,200
|
10%
|
60% of 3 lows out of 10 trading days
|
July 1, 2015
|
July 1, 2016
|
35,000
|
10%
|
60% of 3 lows out of 10 trading days
|
July 11, 2015
|
July 11, 2016
|
17,980
|
10%
|
60% of 3 lows out of 10 trading days
|
August 14, 2015
|
August 14, 2016
|
28,000
|
10%
|
60% of 3 lows out of 10 trading days
|
December 1, 2015
|
December 1, 2016
|
16,000
|
10%
|
60% of 3 lows out of 10 trading days
|
|
|
|
|
|
|
|
229,180
|
|
|
Interest expense for the year ended December
31, 2015 recognized on these convertible promissory notes amounts to $10,963 included in interest and bank charges in the statements
of operations.
Subsequent to the reporting period, on January
11, 2016, the Company consolidated all obligations to CMGT under a single Convertible Promissory Note due on or before June 1,
2018 (the “Consolidated Note”), as detailed in note 13.
|
8.
|
DERIVATIVE
LIABILITIES
|
In connection with the issuance of
convertible promissory notes as detailed in note 5 to the financial statements, the Company may sell options or warrants to
purchase the Company’s common stock. In certain circumstances, these options or warrants may be classified as
derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative
instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the
associated host instrument and accounted for separately as a derivative instrument liability.
The Company's derivative
instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative
liability recorded as charges or credits to income in the period in which the changes occur. For bifurcated embedded
derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using
either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The
valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, the
Company’s current common stock price and expected dividend yield, and the expected volatility of the Company’s
common stock price over the life of the option.
The following table summarizes the movements
in derivative liabilities:
|
$
|
Face value of convertible promissory notes issued during Q2 2015
|
|
132,200
|
|
Day-one derivative loss recognized immediately
|
|
252,683
|
|
Derivative liabilities on issuance
|
|
384,883
|
|
Change in fair value of derivatives
|
|
(77,316
|
)
|
Derivative liabilities as at June 30, 2015
|
|
307,567
|
|
Derivative liability on issuance
|
|
73,249
|
|
Change in fair value of derivatives
|
|
(217,605
|
)
|
Derivative liabilities as at September 30, 2015
|
|
163,211
|
|
Derivative liability on issuance
|
|
12,451
|
|
Change in fair value of derivatives
|
|
2,596
|
|
Derivative liabilities as at December 31, 2015
|
|
178,258
|
|
SocialPlay USA, Inc. (formerly Artesanias Corp.)
Notes to Financial Statements
As of December 31, 2015 (audited)
The multinomial lattice model was used to
value the convertible notes and the embedded derivative liabilities at issuance and period end date, using the following assumptions.
|
December 31,
|
Assumptions
|
2015
|
Dividend yield
|
0.00%
|
Risk-free rate for term
|
0.08% - 0.41%
|
Volatility
|
382.1% - 404%
|
Remaining terms (years)
|
0.50 - 1
|
Stock price ($ per share)
|
1.12 - 1.35
|
|
9.
|
STOCKHOLDERS’
DEFICIENCY
|
Authorized:
The Company is authorized to issue up to 200,000,000
shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.
Issued and outstanding:
During the year ended December 31, 2014, the
Company sold 21,600,000 (4,320,000 after reverse split) shares of its $0.001 par value common stock in a registered public offering
for total cash proceeds of $27,000.
On February 25, 2015, the Company executed
a 12 for 1 forward stock split of issued shares of common stock. Further, on July 27, 2015, the Company effectuated a 1 for 5
reverse stock split. The accompanying financial statements have been retrospectively adjusted for all periods presented to reflect
the effect of the stock split.
On July 1, 2015, the Company issued 1,000,000
(200,000 after reverse split) shares of common stock pursuant to Exclusive License Agreement dated May 21, 2015 as explained in
note 6 to the financial statements.
As at December 31, 2015 and December 31, 2014,
there were 11,720,000 and 11,520,000 (after stock split) shares of common stock, respectively, issued out of the authorized 200,000,000
common shares.
|
10.
|
RELATED
PARTY TRANSACTIONS
|
Accounts payable and accrued liabilities include
the following balances owed to related parties:
|
|
December
31, 2015
|
|
Owed to Director Chitan Mistry for Director fees
|
$
|
57,500
|
|
Owed to former Director Lucie Letellier for Director fees
|
|
53,750
|
|
Owed to shareholder company, Social Play, Inc, as remaining balance for license agreement
|
|
83,067
|
|
During 2015, the Company entered into an Exclusive
License Agreement with Social Play, Inc. for the license to develop, market and sell products and services based upon intellectual
property, as disclosed in Note 6. The total consideration of $630,000 was part payable in cash ($120,000) and part payable in the
form of 1,000,000 (200,000 post-split) shares, valued at $0.0051 per share. During the year, the Company issued 200,000 shares
of common stock, valued at $510,000 and made cash payments of $36,933 to Social Play Inc. as consideration.
Office space and services are provided without
charge by an officer and director of the Company. Such costs are not significant to the financial statements and, accordingly,
have not been reflected therein.
During the years ended December 31, 2015 and
2014, fees charged by directors amounted to $111,250 (including $50,000 bonus) and $nil, respectively.
Income
taxes
The provision for income taxes differs from
that computed at US corporate tax rate of approximately 35% (2014: 35%) as follows:
|
2015
|
|
2014
|
|
|
|
|
Net loss for the year
|
$
|
(1,019,113
|
)
|
|
$
|
(51,050
|
)
|
Expected income tax recovery from net loss
|
|
(356,690
|
)
|
|
|
(17,868
|
)
|
Change in valuation allowance
|
|
356,690
|
|
|
|
17,868
|
|
|
|
—
|
|
|
|
—
|
|
Deferred tax assets
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following
components as of December 31, 2015:
Deferred Tax Assets - Non-current:
|
2015
|
|
2014
|
Tax effect of NOL Carryover
|
$
|
374,767
|
|
|
|
18,078
|
|
Less valuation allowance
|
|
(374,767
|
)
|
|
|
(18,078
|
)
|
Deferred tax assets, net of valuation allowance
|
$
|
—
|
|
|
$
|
—
|
|
At December 31, 2015, the Company had net
operating loss carryforwards of approximately $1,070,763 (2014: $51,650) that may be offset against future taxable income from
the year 2016 to 2036. No tax benefit has been reported in the December 31, 2015 financial statements since the potential tax
benefit is offset by a valuation allowance of the same amount.
The Company has commitments to issue 1,000,000
(200,000 after reverse split) shares of common stock on or before each anniversary pursuant to Exclusive License Agreement dated
May 21, 2015 as explained in note 6 to the financial statements.
The Company’s management has evaluated
subsequent events up to April 14, 2016, the date the financial statements were issued, pursuant to the requirements of ASC Topic
855 and has determined the following subsequent event to report:
On January 11, 2016, the Company consolidated all of its obligations to CMGT under a single Convertible Promissory
Note due on June 1, 2018 (the “Consolidated Note”). The Consolidated Note allows conversion of all amounts owed to
CMGT under same amounts and terms as the original Notes as outlined in note 7. Under the Consolidated Note, the Company is obligated
to pay quarterly payments of interest only commencing March 31, 2016, with all principal and interest due on or before June 1,
2018.