UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended November 30, 2018August 31, 2019
OR
¨ | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to _______________
Commission File No. 000-55965
|
(Exact Name of Registrant as Specified in Its Charter) |
Nevada |
| 35-2511643 |
(State of Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification Number) |
| ||
1282A Cornwall Road Oakville, Ontario Canada |
| L6J 7W5 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(855) 474-7384535-6643
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
| Emerging growth company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of January 14,October 15, 2019, there were 136,353,318137,603,318 shares of our common stock issued and outstanding, par value $0.001.
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Unaudited Interim |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
| Table of Contents |
Cautionary Note Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to our future operating results; plans for the marketing of our services; future economic conditions; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, as well as statements relating to future dividend payments. Other forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Readers should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 20182019 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These Risk Factors are hereby incorporated by reference into this Quarterly Report.
3 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Unaudited Interim FLOOIDCX CORP.
Condensed CombinedConsolidated Financial Statements
Gripevine, Inc.
For the Quarterly PeriodThree and Six Months Ended November 30,August 31, 2019 and 2018
(Expressed in US dollars)
Gripevine, Inc.
Interim Condensed Combined Financial Statements
For the Quarterly Period Ended November 30, 2018 (Unaudited)(unaudited)
TABLE OF CONTENTSTable of contents
| F-1 |
| Table of Contents |
GRIPEVINE INC.FLOOIDCX CORP.
INTERIM CONDENSED COMBINED BALANCE SHEETS
AS AT NOVEMBER 30, 2018 (UNAUDITED) AND FEBRUARY 28, 2018 (AUDITED)Condensed Consolidated Balance Sheets
(Expressed in USU.S. dollars)
(unaudited)
|
| As at November 30, 2018 |
|
| As at February 28, 2018 |
| ||
|
| $ |
|
| $ |
| ||
ASSETS |
|
|
|
|
|
| ||
Cash |
|
| 10,878 |
|
|
| 24,008 |
|
Prepaid and other receivables |
|
| 31,846 |
|
|
| 27,760 |
|
Total current assets |
|
| 42,724 |
|
|
| 51,768 |
|
|
|
|
|
|
|
|
|
|
Equipment [Note 5] |
|
| 27,108 |
|
|
| 32,118 |
|
Total assets |
|
| 69,832 |
|
|
| 83,886 |
|
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|
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|
|
|
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|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
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Liabilities |
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Accounts payable |
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| 23,716 |
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|
| 11,532 |
|
Accrued liabilities |
|
| 20,256 |
|
|
| 28,643 |
|
Loans payable [Note 6] |
|
| 2,204,153 |
|
|
| 2,034,671 |
|
Due to related parties [Note 6] |
|
| 78,941 |
|
|
| 175,983 |
|
Due to a shareholder [Note 6] |
|
| 569,531 |
|
|
| 626,250 |
|
Total current liabilities |
|
| 2,896,597 |
|
|
| 2,877,079 |
|
Total liabilities |
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| 2,896,597 |
|
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| 2,877,079 |
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|
|
|
|
|
|
|
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Stockholders' deficiency |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 20,000,000 authorized. 1,000,000 shares issued and outstanding as at November 30, 2018 and February 28, 2018, respectively [Note 7] |
|
| 1,000 |
|
|
| 1,000 |
|
Common stock, $0.001 par value, 300,000,000 authorized, 136,353,318 and 132,883,504 shares issued and outstanding as at November 30, 2018 and February 28, 2018, respectively [Note 7] |
|
| 136,354 |
|
|
| 132,884 |
|
Common stock to be issued, nil and 1,249,101 shares to be issued as at November 30, 2018 and February 28, 2018, respectively [Note 7] |
|
| - |
|
|
| 1,249 |
|
Additional paid-in-capital |
|
| 48,149,148 |
|
|
| 47,111,615 |
|
Accumulated other comprehensive income |
|
| 226,592 |
|
|
| 118,660 |
|
Accumulated deficit |
|
| (51,339,859 | ) |
|
| (50,158,601 | ) |
Total stockholders' deficiency |
|
| (2,826,765 | ) |
|
| (2,793,193 | ) |
Total liabilities and stockholders' deficiency |
|
| 69,832 |
|
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| 83,886 |
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Going concern [Note 3] |
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Commitments [Note 9] |
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Subsequent events [Note 10] |
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August 31, 2019 $ February 28, 2019 $ ASSETS Cash Prepaid expenses and deposits Total Current Assets Property and equipment (Note 3) Total Assets LIABILITIES AND STOCKHOLDERS’ DEFICIT Current Liabilities Accounts payable and accrued liabilities Loans payable (Note 4) Due to related party (Note 5) Total Liabilities Nature of Operations and Continuance of Business (Note 1) Commitment (Note 9) Subsequent Events (Note 10) Stockholders’ Deficit Preferred stock, 20,000,000 shares authorized, $0.001 par value 1,000,000 shares issued and outstanding Common stock, 300,000,000 shares authorized, $0.001 par value 136,603,318 and 136,353,318 shares issued and outstanding, respectively Common stock issuable Additional paid-in capital Accumulated other comprehensive income Deficit Total Stockholders’ Deficit Total Liabilities and Stockholders’ Deficit See8,533 5,517 12,386 18,458 20,919 23,975 22,141 25,009 43,060 48,984 133,315 121,300 2,838,171 2,526,650 688,143 633,060 3,659,629 3,281,010 1,000 1,000 136,603 136,353 10,000 10,000 49,424,227 48,250,116 253,035 255,023 (53,441,434 ) (51,884,518 ) (3,616,569 ) (3,232,026 ) 43,060 48,984
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-2 |
| Table of Contents |
GRIPEVINE INC.FLOOIDCX CORP.
INTERIM CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2018 AND 2017 (UNAUDITED)Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in USU.S. dollars)
(unaudited)
For the Three Months Ended November 30, 2018 For the Three Months Ended November 30, 2017 For the Nine Months Ended November 30, 2018 For the Nine Months Ended November 30, 2017 $ $ $ $ REVENUE EXPENSES Stock-based compensation [Note 7] Research and development expenses [Note 8] General and administrative expenses Total operating expenses Income taxes Net loss Foreign currency translation adjustment Comprehensive loss Loss per share, basic and diluted Weighted average number of common shares outstanding Three Months Ended August 31, 2019 $ Three Months Ended August 31, 2018 $ Six Months Ended August 31, 2019 $ Six Months Ended August 31, 2018 $ Expenses General and administrative (Note 5) Research and development (Note 5) Total expenses Net loss for the period Other comprehensive loss Foreign currency translation loss Comprehensive loss for the period Net loss per share, basic and diluted Weighted average number of shares outstanding — — — — 17,316 155,429 323,404 744,399 141,324 146,684 493,466 599,766 117,420 118,262 364,388 300,818 276,060 420,375 1,181,258 1,644,983 — — — — 276,060 420,375 1,181,258 1,644,983 55,688 79,679 107,932 (104,305 ) 331,748 500,054 1,289,190 1,540,678 0.0020 0.0035 0.0088 0.0137 136,353,318 122,749,321 134,776,302 120,909,775 158,030 132,933 387,559 268,227 312,630 321,217 1,169,357 637,024 470,660 454,150 1,556,916 905,251 (470,660 ) (454,150 ) (1,556,916 ) (905,251 ) (58,659 ) (19,932 ) (1,988 ) (52,244 ) (529,319 ) (474,082 ) (1,558,904 ) (957,495 ) – – (0.01 ) (0.01 ) 136,516,361 134,592,150 136,436,840 133,774,136
See(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-3 |
| Table of Contents |
Condensed Consolidated Statements of Stockholders’ Deficit
(Expressed in U.S. dollars)
(unaudited)
INTERIM CONDENSED COMBINED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2018 (UNAUDITED)
|
| Preferred stock |
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| Common stock |
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| Common stock to be issued |
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| Additional paid-in |
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| Accumulated other comprehensive |
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| Accumulated |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| capital |
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| income |
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| deficit |
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| Total |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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As at February 28, 2017 |
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| 120,000,000 |
|
|
| 120,000 |
|
|
| 5,248,626 |
|
|
| 5,249 |
|
|
| 43,698,125 |
|
|
| 233,651 |
|
|
| (46,634,969 | ) |
|
| (2,576,944 | ) |
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|
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|
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|
Issuance of shares |
|
| — |
|
|
| — |
|
|
| 4,720,532 |
|
|
| 4,721 |
|
|
| (4,720,532 | ) |
|
| (4,721 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
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|
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Issuance of stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 880,475 |
|
|
| — |
|
|
| — |
|
|
| 880,475 |
|
|
|
|
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|
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Issuance of shares for services |
|
| — |
|
|
| — |
|
|
| 5,674,944 |
|
|
| 5,675 |
|
|
| — |
|
|
| — |
|
|
| 1,413,061 |
|
|
| — |
|
|
| — |
|
|
| 1,418,736 |
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
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|
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Issuance of shares for cash |
|
| — |
|
|
| — |
|
|
| 2,488,028 |
|
|
| 2,488 |
|
|
| 721,007 |
|
|
| 721 |
|
|
| 1,119,954 |
|
|
| — |
|
|
| — |
|
|
| 1,123,163 |
|
|
|
|
|
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|
|
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|
|
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|
|
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|
|
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Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (114,991 | ) |
|
| — |
|
|
| (114,991 | ) |
|
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|
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Net loss for the year |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,523,632 | ) |
|
| (3,523,632 | ) |
As at February 28, 2018 |
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| 132,883,504 |
|
|
| 132,884 |
|
|
| 1,249,101 |
|
|
| 1,249 |
|
|
| 47,111,615 |
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|
| 118,660 |
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|
| (50,158,601 | ) |
|
| (2,793,193 | ) |
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|
Issuance of shares |
|
| — |
|
|
| — |
|
|
| 1,249,101 |
|
|
| 1,249 |
|
|
| (1,249,101 | ) |
|
| (1,249 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
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Issuance of stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 323,404 |
|
|
| — |
|
|
| — |
|
|
| 323,404 |
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|
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Issuance of shares for debt settlement |
|
| — |
|
|
| — |
|
|
| 435,000 |
|
|
| 435 |
|
|
| — |
|
|
| — |
|
|
| 90,915 |
|
|
| — |
|
|
| — |
|
|
| 91,350 |
|
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|
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|
Issuance of shares for cash |
|
| — |
|
|
| — |
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|
| 1,785,713 |
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|
| 1,786 |
|
|
| — |
|
|
| — |
|
|
| 623,214 |
|
|
| — |
|
|
| — |
|
|
| 625,000 |
|
|
|
|
|
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|
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|
|
|
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|
|
|
|
|
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|
|
|
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|
|
|
|
|
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|
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|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107,932 |
|
|
| — |
|
|
| 107,932 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,181,258 | ) |
|
| (1,181,258 | ) |
As at November 30, 2018 |
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| 136,353,318 |
|
|
| 136,354 |
|
|
| — |
|
|
| — |
|
|
| 48,149,148 |
|
|
| 226,592 |
|
|
| (51,339,859 | ) |
|
| (2,826,765 | ) |
Preferred Stock Common Stock Common Stock Additional Paid-in Accumulated Other Comprehensive Total Stockholders’ Shares # Amount $ Shares # Amount $ Issuable $ Capital $ $ Deficit $ $ Balance, February 28, 2019 Fair value of stock options granted Foreign exchange translation gain Net loss for the period Balance, May 31, 2019 Shares issued for cash Fair value of stock options granted Foreign exchange translation loss Net loss for the period Balance, August 31, 2019 See accompanying notesIncome Deficit 1,000,000 1,000 136,353,318 136,353 10,000 48,250,116 255,023 (51,884,518 ) (3,232,026 ) – – – – – 868,879 – – 868,879 – – – – – – 56,671 – 56,671 – – – – – – – (1,086,256 ) (1,086,256 ) 1,000,000 1,000 136,353,318 136,353 10,000 49,118,995 311,694 (52,970,774 ) (3,392,732 ) – – 250,000 250 – 49,750 – – 50,000 – – – – – 255,482 – – 252,482 – – – – – – (58,659 ) – (58,659 ) – – – – – – – (470,660 ) (470,660 ) 1,000,000 1,000 136,603,318 136,603 10,000 49,424,227 253,035 (53,441,434 ) (3,619,569 )
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-4 |
| Table of Contents |
FLOOIDCX CORP.
GRIPEVINE INC. INTERIM CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2018 AND 2017 (UNAUDITED)Condensed Consolidated Statements of Stockholders’ Deficit (continued)
(Expressed in USU.S. dollars)
|
| For the Nine Months Ended November 30, 2018 |
|
| For the Nine Months Ended November 30, 2017 |
| ||
|
| $ |
|
| $ |
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss for the period |
|
| (1,181,258 | ) |
|
| (1,644,983 | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operations: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| 323,404 |
|
|
| 744,399 |
|
Depreciation |
|
| 9,545 |
|
|
| 17,780 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid and other receivables |
|
| (5,227 | ) |
|
| (11,105 | ) |
Accounts payable |
|
| 12,866 |
|
|
| 3,836 |
|
Accrued liabilities |
|
| (7,722 | ) |
|
| (52,678 | ) |
Cash used in operating activities |
|
| (848,392 | ) |
|
| (942,751 | ) |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
| (5,616 | ) |
|
| (11,998 | ) |
Cash used in investing activities |
|
| (5,616 | ) |
|
| (11,998 | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from issuance of shares |
|
| 625,000 |
|
|
| 873,163 |
|
Loans payable |
|
| 250,247 |
|
|
| 166,687 |
|
Due to related parties |
|
| (1,218 | ) |
|
| (8,961 | ) |
Due to a shareholder |
|
| (34,309 | ) |
|
| 69,552 |
|
Cash provided by financing activities |
|
| 839,720 |
|
|
| 1,100,441 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash during the period |
|
| (14,288 | ) |
|
| 145,692 |
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation |
|
| 1,158 |
|
|
| (25,288 | ) |
|
|
|
|
|
|
|
|
|
Cash at beginning |
|
| 24,008 |
|
|
| 32,678 |
|
Cash at end |
|
| 10,878 |
|
|
| 153,082 |
|
|
|
|
|
|
|
|
|
|
Additional cash flow information |
|
|
|
|
|
|
|
|
Interest paid |
|
| — |
|
|
| — |
|
Taxes paid |
|
| — |
|
|
| — |
|
See accompanying notes(unaudited)
Preferred Stock Common Stock Common Stock Additional Paid-in Accumulated Other Comprehensive Total Stockholders’ Shares # Amount $ Shares # Amount $ Issuable $ Capital $ Income $ Deficit $ Deficit $ Balance, February 28, 2018 Shares issued pursuant to share exchange agreement Shares to be issued pursuant to settlement of accounts payable Share subscriptions received Fair value of stock options granted Foreign exchange translation gain Net loss for the period Balance, May 31, 2018 Shares issued for cash Fair value of options granted Foreign exchange translation gain Net loss for the period Balance, August 31, 2018 1,000,000 1,000 132,883,504 132,884 11,249 47,330,400 146,124 (50,570,351 ) (2,948,694 ) – – 528,094 528 (528 ) – – – – – – – – 435 93,047 – – 93,482 – – – – 1,071 373,929 – – 375,000 – – – – – 151,935 151,935 – – – – – – 33,982 – 33,982 – – – – – – – (451,101 ) (451,101 ) 1,000,000 1,000 133,411,598 133,412 12,227 47,949,311 180,106 (51,021,452 ) (2,745,396 ) – – 2,506,720 2,506 (1,792 ) 249,286 – – 250,000 – – – – – 154,153 – – 154,153 – – – – – – 18,262 – 18,262 – – – – – – – (454,150 ) (454,150 ) 1,000,000 1,000 135,918,318 135,918 10,435 48,352,750 198,368 (51,475,602 ) (2,777,131 )
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-5 |
| Table of Contents |
|
1. NATURE OF OPERATIONS(Expressed in U.S. dollars)
(unaudited)
Six Months Ended August 31, 2019 $ Six Months Ended August 31, 2018 $ Operating Activities Net loss for the period Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Stock-based compensation Changes in operating assets and liabilities: Prepaid expenses and deposits Accounts payable and accrued liabilities Due to related party Net Cash Used In Operating Activities Investing Activities Purchase of property and equipment Net Cash Used in Investing Activities Financing Activities Proceeds from loans payable Repayment of loans payable Proceeds from issuance of common stock Net Cash Provided by Financing Activities Effect of Foreign Exchange Rate Changes on Cash Change in Cash Cash, Beginning of Period Cash, End of Period Supplemental Disclosures: Interest paid Income taxes paid Gripevine, Inc. (formerly Baixo Relocation Services, Inc. (the “Company”) was incorporated in the state of Nevada on January 7, 2014. The Company operated as a relocation service provider for clients moving to the State of Goa, India and ceased this business and engaged in developing and building an online resolution platform after the Share Exchange Agreement as explained in the subsequent paragraphs. The Company’s fiscal year-end is February end.(1,556,916 ) (905,251 ) 4,069 6,915 1,124,361 306,088 6,072 (3,206 ) 12,015 18,705 55,083 (1,637 ) (355,316 ) (578,386 ) (1,447 ) (4,901 ) (1,447 ) (4,901 ) 335,770 51,992 – (2,774 ) 50,000 625,000 385,770 674,218 (25,991 ) 2,446 3,016 93,377 5,517 24,079 8,533 117,456 – – – –
MBE Holdings Inc. (“MBE”) was incorporated as a limited liability company on April 13, 2010 under the laws of the State of Delaware. MBE is engaged in research and development activities to offer an online complaint resolution platform for consumers and business, including ratings, reviews and pollings. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product.
As explained in Note 7 to the unaudited interim condensed combined financial statements, on February 28, 2017, the Company and MBE and the shareholders of MBE who collectively own 100% of MBE entered into and consummated transactions pursuant to a Share Exchange Agreement, whereby the Company agreed to issue to the MBE shareholders an aggregate of 5,248,626 shares of its common stock, par value $0.001, in exchange for 100% of equity interests of MBE held by the MBE shareholders. As a result of the share exchange, MBE became a wholly owned subsidiary of Gripevine.
As a result of the Share Exchange Agreement, the acquisition transaction has been accounted for as a common control transaction in accordance with the Financial Accounting Standards Board (“FASB”) (Accounting Standard Codification (“ASC”) 805-50, Business Combinations – Common control transactions). The Company has evaluated the guidance contained in ASC 805-50 with respect to the combinations among entities or businesses under common control and concluded that since the majority shareholders of the Company and MBE are the same, therefore, this is a common control transaction and does not result in a change in control at the ultimate parent or the controlling shareholder level.
Consequently, common control transactions are not accounted for at fair value. Rather, common control transactions are generally accounted for at the carrying amount of the net assets or equity interests transferred. Any differences between the proceeds received or transferred and the carrying amounts of the net assets are considered equity transactions that would be eliminated in consolidation, and no gain or loss would be recognized in the condensed combined financial statements of the ultimate parent. Resultantly, the financial position and the results of operations of Gripevine and MBE are combined together as if they were operating as one entity from the beginning.
2. BASIS OF PRESENTATION AND COMBINATION
(The accompanying unaudited interimnotes are an integral part of these condensed combinedconsolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited combined financial statements for the years ended February 28, 2018 and February 28, 2017 and notes thereto included in the Form 10-K filed with the SEC on May 29, 2018. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of combined financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the three and nine months ended November 30, 2018, are not necessarily indicative of the results that may be expected for the year ending February 28, 2019.
As explained above in Note 1 to the unaudited interim condensed combined financial statements, as a result of the Share Exchange Agreement, the acquisition transaction has been accounted for as a common control transaction in accordance with the FASB (ASC 805-50). Consequently, the unaudited interim condensed combined financial statements have been prepared as if the Company and MBE were a single organization by the aggregation of their financial statements from the beginning of the previous year and the elimination of transactions and balances between them.statements)
| F-6 |
| Table of Contents |
FLOOIDCX CORP.
Notes to the Condensed Consolidated Financial Statements
Six Months Ended August 31, 2019 and 2018
(Expressed in U.S. Dollars)
(unaudited)
1. | Nature of Operations and Continuance of Business | |
| flooidCX Corp. (formerly Gripevine, Inc. and Baixo Relocation Services, Inc.) (the “Company”) was incorporated in the state of Nevada on January 7, 2014. The Company is in the business of developing and building an online resolution platform. | ||
| ||
| On May 17, 2019, the Company and Resolution 1, Inc. (“R1”) and the shareholders of R1 who collectively own 100% of R1 entered into and consummated transactions pursuant to | ||
| As a result of the Share Exchange Agreement, the acquisition transaction was accounted for as a common control transaction in accordance with the Financial
| ||
| Consequently, common control transactions are not accounted for at fair value. Rather, common control transactions are generally accounted for at the carrying amount of the net assets or equity interests transferred. Any differences between the proceeds received or transferred and the carrying amounts of the net assets are considered equity transactions that would be eliminated in consolidation, and no gain or loss would be recognized in the consolidated financial statements of the ultimate parent. As a result, the financial position and the results of operations of the Company and R1 were consolidated together as if they were operating as one entity from the beginning. | ||
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, creditors, and related parties, and the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As at August 31, 2019, the Company has a working capital deficit of $3,638,710 and has an accumulated deficit of $53,441,434 since inception. Furthermore, during the six months ended August 31, 2019, the Company used $355,316 in operating activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | ||
2. | Significant Accounting Policies | |
| (a) | Basis of Presentation | |
| These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and the following entities: | ||
3. GOING CONCERN
MBE Holdings Inc. | Wholly-owned subsidiary | |
Resolution 1, Inc. | Wholly-owned subsidiary |
The unaudited interim condensed combined financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses from operations and as at November 30, 2018 and February 28, 2018, had a working capital deficiency of $2,853,873 and $2,825,311, respectively, and an accumulated deficit of $51,339,859 and $50,158,601, respectively. Management anticipates the Company will attain profitable status and improve its liquidity through continued business development and additional debt or equity investment in the Company.
The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the combined financial statements. The combined financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence and these adjustments may be material.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of unaudited interim combined financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited interim condensed combined financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: stock-based compensation, fair value of warrants, useful lives of equipment, deferred income tax assets and related valuation allowance, accruals and assessment of going concern assumption. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
Loss Per Share
The Company has adopted the FASB, ASC Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at November 30, 2018 and February 28, 2018.
Fair Value of Financial Instruments
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:
| All inter-company balances and transactions have been eliminated. | ||
| (b) | Interim Financial Statements | |
| The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown. | ||
| The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year. | ||
| F-7 |
| Table of Contents |
FLOOIDCX CORP.
Notes to the Condensed Consolidated Financial StatementsSix Months Ended August 31, 2019 and 2018
(Expressed in U.S. Dollars)
(unaudited)
| Significant Accounting Policies (continued) |
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
| Reclassifications | ||
|
|
|
| Certain of the prior period figures have been reclassified to conform to the current period’s presentation. | ||
|
|
|
| (d) | Recent Accounting Pronouncements | |
| In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on | ||
| In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements. | ||
| The Company has implemented all new accounting pronouncements that are |
In instances where the determination of the fair value measurement is basedin effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact 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 and accounts payable. The Company’s cash, which is carried at fair value, is classified as a Level 1 financial instrument. The Company’s bank accounts are maintained with financial institutions of reputable credit, and therefore, bear minimal credit risk.
Stock Based Compensation
The Company accounts for stock-based payments in accordance with the provision of ASC 718, which requires that all stock-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to stock-based awards is recognized over the requisite service period, which is generally the vesting period.
The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services
Recently Issued Accounting Pronouncements
On March 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify existing guidance on revenue recognition. This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted this pronouncement on a modified retrospective and such adoption did not have a material impact on our combined financial position and/or results of operations.
On March 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.
In February 2016, an accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of the adoption on the financial position and/or results of operations.
| 3. | Property and Equipment |
As at August 31, 2019 $ As at February 28, 2019 $ Computer equipment Furniture and equipment Total Less: Accumulated depreciation Net carrying value 38,164 37,377 37,023 37,067 75,187 74,444 (53,046 ) (49,435 ) 22,141 25,009
| 4. | Loans Payable |
| As at August 31, 2019, the Company owed $2,838,171 (Cdn$3,773,348) (February 28, 2019 – $2,526,650 (Cdn$3,326,587)) which is non-interest bearing, unsecured, and due on demand. | |
| 5. | Related Party Transactions |
| (a) | As at August 31, 2019, the Company owed $688,143 (Cdn$914,866) (February 28, 2019 – $636,060 (Cdn$833,486)) to the President of the Company which is unsecured, non-interest bearing, and due on demand. | |
| (b) | During the six months ended August 31, 2019, the Company incurred $90,151 (2018 – $92,500) in research and development fees to the President of the Company. | |
| (c) | During the six months ended August 31, 2019, the Company incurred $18,820 (2018 – $19,431) in research and development fees to the Chief Operating Officer of the Company. |
| F-8 |
| Table of Contents |
FLOOIDCX CORP.
Notes to the Condensed Consolidated Financial Statements
Six Months Ended August 31, 2019 and 2018
(Expressed in U.S. Dollars)
(unaudited)
| Related Party Transactions (continued) |
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| (d) | During the six months ended August 31, 2019, the Company incurred $6,386 (2018 - $30,460) in administrative fees included in general and administrative to the office manager who is also the spouse of the President of the Company. | |
| (e) | During the six months ended August 31, 2019, the Company recognized stock-based compensation of $1,011,226 (2018 - $104,024) to the President, spouse of the President, and Chief Operating Officer of the Company. |
In February 2016, an accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet quantified the impact that the adoption of this pronouncement will have on its combined financial position and/or results of operations; however, management has begun a process to identify a complete population of its leases. Such process includes reviewing various contracts to identify whether such arrangements convey the right to control the use of an identified asset. The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on its business processes, controls and systems.
6. | Common Stock |
On July 2, 2019, the Company issued 250,000 shares of common stock at $0.20 per share for proceeds of $50,000. | |
| 7. | Share Purchase Warrants |
5. EQUIPMENT
|
| As at November 30, |
|
| As at February 28, |
| ||
|
| 2018 |
|
| 2018 |
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
| ||
Furniture |
|
| 37,006 |
|
|
| 38,428 |
|
Computer equipment |
|
| 36,699 |
|
|
| 32,406 |
|
Total cost |
|
| 73,705 |
|
|
| 70,834 |
|
Less: Accumulated depreciation |
|
| (46,597 | ) |
|
| (38,716 | ) |
|
|
| 27,108 |
|
|
| 32,118 |
|
Number of warrants Weighted average exercise price $ Balance, February 28, 2019 and August 31, 2019 6. LOANS PAYABLE / DUE TO RELATED PARTIES / DUE TO A SHAREHOLDER18,275,000 0.40
Loans payable
| As at August 31, 2019, the following share purchase warrants were outstanding: |
Number of warrants outstanding Exercise price $ Expiry date 18,275,000 December 1, 2019Loans payable represents advances from a related corporation to meet the working capital requirements of the Company. These advances are interest free, unsecured and are repayable on demand. These loans payable as at November 30, 2018 and February 28, 2018 were denominated in Canadian dollars (CAD 2,931,742 and CAD 2,606,211, respectively). 0.40
Due to related parties and due to a shareholder
| 8. | Stock Options |
The following table summarizes the continuity of stock options: |
Number of options Weighted average exercise price $ Aggregate intrinsic value $ Balance, February 28, 2019 Granted Balance, August 31, 2019 The balances due to related parties and a shareholder are mainly in connection with the consulting services and financing provided for the development of an online complaint resolution platform as explained in Note 1 to the unaudited interim condensed combined financial statements. These balances are interest free, unsecured and are repayable on demand.5,706,500 0.20 – 11,050,000 0.20 16,756,500 0.20 –
On May 30, 2018, the Company finalized a Debt Settlement Agreement with a related party of the Company. Pursuant to this agreement, the Company issued 435,000 common shares which were fair valued at $91,350, based on the market price of the shares on the date of settlement. The related debt was reduced by this amount and accordingly no gain or loss was recorded on settlement.
| Additional information regarding stock options outstanding as at August 31, 2019 is as follows: |
Outstanding and exercisable Range of exercise prices $ Number of shares Weighted average remaining contractual life (years) Weighted average exercise price $ 0.20 Due to related parties as at November 30, 2018 and February 28, 2018 were denominated in Canadian dollars (CAD 105,000 and CAD 225,417 respectively).16,756,500 5.5 0.20
| The fair value of stock options granted was estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions: |
Six months ended August 31, 2019 Six months ended August 31, 2018 Risk-free interest rate Expected life (in years) Expected volatility 2.12 % 1.49 % 5 5 245 % 290 %
| F-9 |
| Table of Contents |
FLOOIDCX CORP.
Notes to the Condensed Consolidated Financial Statements
Six Months Ended August 31, 2019 and 2018
(Expressed in U.S. Dollars)
(unaudited)
| 8. | Stock Options (continued) |
|
|
| The fair value of stock options recognized during the six months ended August 31, 2019 was $1,124,361 (2018 - $306,088), which was recorded as additional paid-in capital and charged to
| |
| |
| 9. | Commitment |
| The minimum lease payments over the remaining terms of the premises leases are as follows: |
Fiscal Year $ 2020 6. LOANS PAYABLE / DUE TO RELATED PARTIES / DUE TO A SHAREHOLDER (continued)26,114
Due to a shareholder as at November 30, 2018 and February 28, 2018 were denominated in Canadian dollars (CAD 757,533 and CAD 802,164 respectively).
7. STOCKHOLDERS’ DEFICIENCY
Share Exchange Agreement
On February 28, 2017, the Company, MBE and the shareholders of MBE entered into a Share Exchange Agreement (the “Share Exchange Agreement”). The Board of Directors of the Company approved the execution and consummation of the transaction under the Share Exchange Agreement on February 28, 2017.
In accordance with the terms and provisions of the Share Exchange Agreement, the Company issued an aggregate of 5,248,626 shares of its restricted common stock to the MBE Shareholders in exchange for 157,458,778 of the total issued and outstanding shares of MBE (constituting 100%), thus making MBE its wholly-owned subsidiary. The Board of Directors of the Company and MBE deemed it in the best interests of the respective shareholders to enter into the Share Exchange Agreement pursuant to which the Company would acquire all the technology and assets and assume all liabilities of MBE.
Authorized stock
On October 31, 2016, the Board of Directors of the Company authorized an increase in the Company’s shares of common stock to three hundred million (300,000,000) shares with par value remaining at $0.001 and creation of twenty million (20,000,000) shares of preferred stock, par value $0.001. On November 4, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State increasing its authorized capital to 300,000,000 shares of common stock, par value $0.001, and 20,000,000 shares of preferred stock, par value $0.001 (the “Amendment). The Amendment was effective with the Nevada Secretary of State on November 4, 2016 when the Certificate of Amendment was filed. The Amendment was approved by the Board of Directors pursuant to written consent resolutions dated October 31, 2016 and further approved by the shareholders holding a majority of the total issued and outstanding shares of common stock of the Company pursuant to written consent resolutions dated October 31, 2016.
Common stock issued and outstanding
On May 31, 2016 and effective October 3, 2016, the Company’s previous majority shareholder, sole executive officer and member of the Board of Directors, entered into certain stock purchase agreements (collectively, the “Stock Purchase Agreements”) with certain individuals and/or entities (collectively, the “Investors”). In accordance with the terms and provisions of the Stock Purchase Agreements, the then majority shareholder sold and transferred at a per share price of $0.037 the control block of the Company consisting of 5,000,000 shares of restricted common stock and representing approximately 62.5% of the total issued and outstanding shares of common stock.
During September to November 2017, the Company issued 4,720,532 shares in connection with the Share Exchange Agreement as explained above. And during March to May 2018, the remaining 528,094 shares were also issued.
On January 5, 2018, the Company issued 5,674,944 shares in connection with past services provided by a number of consultants. The fair value of these shares amounting to $1,418,736, were determined based on the market price at the time of issuance and is included in stock-based compensation in the combined statement of operations.
On January 8, 2018, the Company issued 2,488,028 shares in connection with the private placements at a price of $0.35 per common share.
| 10. | Subsequent Events |
On September 26, 2019, the Company issued 1,000,000 common shares for proceeds of $50,000 pursuant to a private placement. | |
On October 11, 2019, the Company entered into an agreement with a company who is to provide financial advisory and investment banking services to the Company for $5,000 per month for a period of six months. The monthly fee is payable in cash of in shares of the Company’s common stock, as determined by the Company. If paid in shares, they are to be valued using the volume-weighted average price of the shares for the five trading days immediately preceding each month fee payment due date. The Company is to issue 2,500,000 shares of common stock upon execution of the agreement and a further 2,500,000 shares of common stock upon an uplisting of the Company’s common stock to a national stock exchange. In addition, for any financing introduced by the financial advisor, the Company is to pay an 8% commission of the amount of capital raised, a fee of 1% of the amount of capital raised for unallocated expenses, and issue warrants to purchase shares of common stock equal to 8% of the number of shares of common stock issued in the financing. The warrants will be exercisable at a price equal to the price of the common stock issued to the investors in the financing and expire five years from the date of issuance. |
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7. STOCKHOLDERS’ DEFICIENCY (continued)
On May 30, 2018 the Company approved to issue 435,000 common shares in connection with a Debt Settlement Agreement as explained in Note 6 to the interim condensed combined financial statements of the Company.
On July 4, 2018, the Company issued 721,006 shares in connection with the private placements which took place during December 2017 and January 2018 at a price of $0.35 per common share. The shares were initially classified to common stock to be issued.
On July 26, 2018, the Company issued 1,785,714 (including above 721,006 shares to be issued) shares in connection with the private placements at a price of $0.35 per common share.
As at November 30, 2018 the Company has 136,353,318 outstanding shares of common stock comprising of 91,353,318 restricted shares and 45,000,000 unrestricted shares. As at February 28, 2018, the Company had 132,883,504 outstanding shares of common stock comprising of 87,883,504 restricted shares and 45,000,000 unrestricted shares.
Common stock to be issued
As at November 30, 2018, there was no common stock to be issued (February 28, 2018: 1,249,101).
Preferred stock
On April 20, 2017, the Board of Directors authorized the issuance of the 1,000,000 shares of Series A Preferred Stock to its sole executive officer and member of the Board of Directors in consideration of his services performed during the year ended February 28, 2017. These preferred shares contain certain rights and preference as detailed below:
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The fair value of these 1,000,000 preferred shares amounting to $38,694,414 was determined by an independent valuation using the assumptions i. e. conversion value, control premium of 11.15% based on similar publicly trading companies, voting and sale/merger rights of the stock and stock price of $0.69. As the issuance of preferred stock related to past services, therefore, this amount was recorded as stock-based compensation in the combined statements of operations during the year ended February 28, 2017.
Warrants
On December 1, 2016, the Company issued 18,275,000 warrants to certain shareholders of the Company for their services for the year ended February 28, 2017. These warrants have a strike price of $0.40 and will expire on December 1, 2019. The fair value of these warrants was measured at the date of grant using the Black-Scholes option pricing model using the following assumptions:
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7. STOCKHOLDERS’ DEFICIENCY (continued)
At grant date the fair value of these warrants was determined at $2,110,333. As the issuance of warrants related to past services, therefore, this amount was recorded as stock-based compensation in the combined statements of operations during the year (fourth quarter) ended February 28, 2017.
As at November 30, 2018 and February 28, 2018, there were 18,275,000 warrants outstanding, fully vested and with a remaining contractual life term of 1.00 and 1.75 years, respectively.
Stock Based Options
On August 16, 2017 (Tranche 1), the Company approved a Directors, Officers, Employees and Consultants Stock Option Plan, under which it authorized 50,000,000 options and issued 5,486,500 options. This plan was established to enable the Company to attract and retain the services of highly qualified and experienced directors, officers, employees and consultants and to give such persons an interest in the success of the Company.
On November 27, 2017 (Tranche 2), the Company approved the issue of a second tranche of 120,000 options to a new Director of the Company pursuant to the Directors, Officers, Employees and Consultants Stock Option Plan, under which it authorized 50,000,000 options.
On May 14, 2018 (Tranche 3), the Company issued a third tranche of 2,000,000 options to a new Consultant of the Company pursuant to the Directors, Officers, Employees and Consultants Stock Option Plan, under which it authorized 50,000,000 options. On July 31, 2018, this contract with the Consultant was terminated and the 2,000,000 options were forfeited.
On October 15, 2018 (Tranche 4), the Company approved the issue of a fourth tranche of 100,000 options to an existing consultant of the Company pursuant to the Directors, Officers, Employees and Consultants Stock Option Plan, under which it authorized 50,000,000 options.
On October 29, 2018 (Tranche 5), the Company approved the issue of a fifth tranche of 1,000,000 options to a new consultant of the Company pursuant to the Directors, Officers, Employees and Consultants Stock Option Plan, under which it authorized 50,000,000 options.
As at November 30, 2018 and February 28, 2018, the Company has issued 6,706,500 and 5,606,500 options respectively.
The fair value of each option granted is estimated at the time of grant using Black-Scholes option pricing model with the following assumptions:
Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Forfeiture rate Stock price Exercise price Volatility Market price Risk free interest rate Expected life 5 Years 5 Years 5 Years 5 Years 5 Years Expected dividend rate Fair value of options 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % $ 0.200 $ 0.200 $ 0.200 $ 0.160 $ 0.160 $ 0.200 $ 0.200 $ 0.235 $ 0.200 $ 0.200 291 % 259 % 136 % 123 % 123 % $ 0.200 $ 0.200 $ 0.200 $ 0.160 $ 0.160 1.49 % 1.62 % 2.70 % 3.01 % 2.91 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % $ 0.200 $ 0.160 $ 0.150 $ 0.130 $ 0.130
For Tranche 1, 50% of the grants vested immediately and 50% vested one year from grant date; for Tranche 2, 100% of the grants vested immediately; for Tranche 3, 25% of the grants vested on October 14, 2018 and thereafter 12.5% will vest every quarter; for Tranche 4, 25% of the grants will vest on January 15, 2019 and thereafter 25% will vest every quarter; and for Tranche 5, 25% of the grants will vest on April 29, 2019 and thereafter 25% will vest every quarter. 100% of the options for Tranche 3 have been forfeited.
All grants will expire on the fifth anniversary of the grant date. The risk-free interest rate is based on the yield of U.S. Treasury securities that correspond to the expected holding period of the options. The volatility was determined based on the Company’s historical stock prices. The expected forfeiture (attrition) rates were based on the position of the consultants receiving the options. The dividend yield was based on an expected future dividend rate for the period at the time of grant.
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7. STOCKHOLDERS’ DEFICIENCY (continued)
The following table summarizes the stock option activities of the Company:
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Granted |
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| 8,706,500 |
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| 0.208 |
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Exercised |
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| 0.208 |
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Forfeited |
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Outstanding as of November 30, 2018 |
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The fair values of options relating to Tranche 1, Tranche 2, Tranche 3, Tranche 4 and Tranche 5 at the issuance dates were determined at $1,087,917, $19,353, $308,668, $13,190 and $129,880 respectively, which are to be expensed based on vesting conditions.
During the quarter ended November 30, 2018, the Company recorded $17,316 relating to the above Tranches (2017: $155,429) and were included in stock-based compensation in the statement of operations with corresponding credit to additional paid-in-capital.
As at November 30, 2018, there were 6,706,500 stock options outstanding and 5,606,500 stock options vested, with remaining contractual life terms ranging from 3.71 to 4.91 years.
8. RELATED PARTY TRANSACTIONS AND BALANCES
The Company’s transactions with related parties were carried out on normal commercial terms and in the normal course of the Company’s business. Other than disclosed elsewhere in the combined financial statements, the related party transactions and balances are as follows:
Research and development expenses for the three months ended November 30, 2018 and 2017 include consulting charges from shareholders and related parties of $45,864 and $54,524, respectively.
9. COMMITMENTS
On March 8, 2016, the Company entered into an operating lease contract for its office premises in Oakville, Ontario for a three year and eight months term which commenced on May 1, 2016. The monthly lease payment is between $2,517 to $3,676 plus applicable taxes.
On December 6, 2016, the Company entered into a second operating lease contract for its additional office premises in Oakville, Ontario for a three-year term commencing from January 1, 2017. The monthly lease payment is between $1,880 to $2,857 plus applicable taxes.
10. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events up to January 14, 2019, the date the interim condensed combined financial statements were issued, pursuant to the requirements of ASC 855 and has determined there were no subsequent events to report.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the Interim Condensed CombinedConsolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K filed for the fiscal year ended February 28, 2018.2019. The discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.
Overview
Gripevine, Inc.flooidCX Corp., formerly known as Baixo Relocation Services,Gripevine, Inc. (the “Company”), was incorporated under the name Baixo Relocation Services, Inc. in the state of Nevada on January 7, 2014, to operate as a relocation service provider for clients moving to the State of Goa, India. On May 31, 2016, Rosy Rodrigues, our prior majority shareholder, sole executive officer and member of the Board of Directors, entered into those certain stock purchase agreements effective October 3, 2016 with certain individuals and/or entities, and sold and transferred the control block of the Company consisting of 5,000,000 shares of restricted common stock, representing approximately 62.5% of the total issued and outstanding shares of common stock and resulting in a change in control.
Effective February 28, 2017, we entered into a share exchange agreement (the “Share“MBE Exchange Agreement”) with MBE Holdings Inc., a private corporation organized under the laws of Delaware (“MBE”) and the shareholders of MBE (the “MBE Shareholders”), pursuant to which ShareMBE Exchange Agreement we acquired all the technology and assets and assumed all liabilities of MBE, and MBE became our wholly-owned subsidiary. In accordance with the terms and provisions of the ShareMBE Exchange Agreement, an aggregate of 5,248,626 shares of our restricted common stock were issued to the MBE Shareholders in exchange for 157,458,778 of the total issued and outstanding shares of MBE.
Effective March 18, 2019, we changed our name to flooidCX Corp. pursuant to Certificate of Amendment to its Articles of Incorporation filed with the Nevada Secretary of State. The name of the Company was changed as part of our rebranding, which better reflects our new business direction into the customer care and feedback solutions space – offering easy to adapt customer care and feedback solutions to enterprises of all sizes.
On May 17, 2019, we entered into a Share Exchange Agreement (the “R1 Exchange Agreement”) with the stockholders of Resolution 1, Inc., a Delaware corporation (“R1”), to acquire all of the outstanding shares of R1 in exchange for 10,000,000 restricted shares of our common stock (the “Acquisition”). R1 has developed a comprehensive customer care and feedback management platform, which is delivered as a cloud-based, software as a service solution. R1 was founded in August 2012 by Richard Hue, the CEO and a director of our Company. The Acquisition was approved by the independent members of the board of directors of the Company. Since the majority shareholders of the Company and R1 are the same, this did not result in the change in control at the ultimate parent or the controlling shareholder level, and was accounted for as a common control transaction.
Our mission is to help businesses bring back the conversation with customers with innovative, simple to use solutions that empower both the businesses and customers to communicate and create positive outcomes. With the consummation of the ShareR1 Exchange Agreement resulting in MBER1 being our wholly-owned subsidiary, we have been involved in the ongoing developmentnow offer a suite of customer relationship management (CRM) solutions that enhances and marketing of “Gripevine”, which is a customer feedback platform for social customer service and consumer reviews. “Gripevine” includes a proprietary process to assist companies in managing the customer feedback (the “Gripevine Proprietary Process” or “Gripevine”). The Gripevine Proprietary Process helps consumers achieve resolutions while enabling businesses with a cost-efficient way to manage reputation and improve consumer loyalty. Our platform includes the management of ratings, reviews, and complaint resolution statuses, whilebuilds upon our initial offering, market data collection features such as scoring, polling, comments, voting, and credibility points – all with the aim of creating a home for connections, resolution, business improvement, and loyalty enhancement. Consumers with legitimate customer feedback can post it (“plant a gripe”) and connect with companies who in turn can interact with their customers on a level playing field to find an amicable resolution.“GripeVine.”
Unlike other review sitesWe offer unified communications and collaboration online CRM solutions - GripeVine and Resolution1. GripeVine is a consumer-to-business platform that cater specificallyhelps build a customer feedback-minded community, focused on transparency, mutual respect and open communications among like-minded customers and businesses – all working together – to accumulatingfacilitate positive outcomes. It allows for private messaging between customers and displaying consumer feedback and creating pay-walls in order to connect directly with consumers, the Gripevine business model offers a pay-wall free solutionbusinesses for positive resolutions, so that both consumersbusinesses are not forced to communicate via the comments section. Resolution1 functions as a cloud-based customer care and feedback workflow management platform, where businesses can connectmanage the entire logistics of customer care, feedback or inquiries throughout their entire organizations. Businesses can respond quickly and resolve freely. Managementaccurately to customers, while keeping track of the Corporation believesevery customer interaction. The platform is designed to grow and scale, so that the Gripevine Proprietary Process brings fairnessbusinesses of all sizes, from small to medium-size enterprises (SMEs) to large enterprises, can use this cloud-based customer care and balance by: (i) ensuring users are real; (ii) allowing companies to reach out and verify customer identity; (iii) flagging as fake those consumers who are not identifiable; and (iv) providing companies free access to their customers. Gripevine’s unique proposition in this social customer experience space is to create consumer-company connections in order to create brand reputation and drive loyalty through efficient and effective handling of online customer feedback and commentary.
As Gripevine prepares to transition from its current R&D beta stage to marketing its platform to both consumers and businesses it has identified several opportunities in the customer feedback space. Gripevine sees its consumer to business social platform as a powerful social customer feedback engine connecting consumers to companies while its back end proprietary social CRM dashboard holds tremendous possibilities as a stand-alone customer success engine managing the customer feedback cycle.management system.
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Results of Operations
The following discussions are based on our unaudited interim condensed combinedconsolidated financial statements, including our wholly owned subsidiary.wholly-owned subsidiaries. These charts and discussions summarize our unaudited interim consolidated financial statements for the three-three and nine-monthssix month periods ended November 30, 2018,August 31, 2019, and should be read in conjunction with the Company’s audited combinedconsolidated financial statements for the year ended February 28, 20182019 and notes thereto included in the Form 10-K filed with the SEC on May 29, 2018.June 13, 2019.
The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. The Corporation’sOur actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Three-MonthsThree-Month Period Ended November 30, 2018August 31, 2019 Compared to Three-MonthsThree-Month Period Ended November 30, 2017August 31, 2018
Total Revenue. We did not generate any revenue during the three-months periodsthree months ended November 30, 2018August 31, 2019 or November 30, 2017.2018.
Operating expenses. expenses:During the three-months periodquarter ended November 30, 2018,August 31, 2019, we incurred operating expenses in the amount of $276,060,$470,660 compared to operating expenses incurred during the comparable 2017 periodquarter ended August 31, 2018 of $420,375 (a decrease$454,150 (an increase of $144,315)$16,510). Operating expenses included:include: (i) general and administrative of $117,420 (2017: $118,262)$158,030 (2018: $132,933); and (ii) research and development expenses of $141,324 (2017: $146,684); and (iii) stock-based compensation of $17,316 (2017: $155,429)$312,630 (2018: $321,217). General and administrative expenses decreasedincreased by $842.$25,097 due to new stock options as compensation in general and administrative services. Research and development expenses decreased by $5,360$8,587 due to efforts to streamline the servicesstreamlining of existing consultants. Stock based compensation also decreased by $138,113 as there was no allocation of the fair value of 5,486,500 stock options granted in 2017.
Net Loss. Thus, during the three-months period ended November 30,Six-Month Period Ended August 31, 2019 Compared to Six-Month Period Ended August 31, 2018 a net loss of ($276,060) was incurred, compared to a net loss of ($420,375) for the three months ended November 30, 2017.
Translation Adjustment.Revenue. During the three-months period ended November 30, 2018, we incurred a translation adjustment of $55,688 compared to $79,679 for the 2017 period, representing change in the foreign exchange rate as a result of translating transaction and balances of our Canadian-based subsidiary.
Comprehensive loss. This resulted in a comprehensive loss of $331,748 or $0.0020 per share for the three-months period ended November 30, 2018 compared to a comprehensive loss of $500,054 or $0.0035 per share for the 2017 period. The weighted average number of shares outstanding was 136,353,318 for three-months period ended November 30, 2018 compared to 122,749,321 for three-months period ended November 30, 2017.
Nine-Months Period Ended November 30, 2018 Compared to Nine-Months Period Ended November 30, 2017
Total Revenue.We did not generate any revenue during the nine-months periodssix months ended November 30, 2018August 31, 2019 or November 30, 2017.2018.
Operating expenses.expenses: During the nine-months periodsix months ended November 30, 2018,August 31, 2019, we incurred operating expenses in the amount of $1,181,258,$1,556,916 compared to operating expenses incurred during the comparable 2017 periodsix months ended August 31, 2018 of $1,644,983 (a decrease$905,251 (an increase of $463,725)$651,665). Operating expenses included:include: (i) general and administrative of $364,388 (2017: $300,818)$387,559 (2018: $268,227); and (ii) research and development expenses of $493,466 (2017: $599,766); and (iii) stock-based compensation of $323,404 (2017: $744,399)$1,169,357 (2018: $637,024). General and administrative expenses increased by $63,570 mainly$119,332 due to the hiring of annew stock options as compensation in general and administrative consultant.services. Research and development expenses decreased by $106,300$532,333 due to efforts to streamline the services of existing consultants. Stock based compensation also decreased by $420,995 as there was no allocation of the fair value of 5,486,500new stock options granted in 2017.
Net Loss. Thus, during the nine-months period ended November 30, 2018, a net loss of ($1,181,258) was incurred, compared to a net loss of ($1,644,983)as compensation for the nine months ended November 30, 2017.
Translation Adjustment. During the nine-months period ended November 30, 2018, we incurred a translation adjustment of $107,932 compared to ($104,305) for the 2017 period, representing change in the foreign exchange rate as a result of translating transactionresearch and balances of our Canadian-based subsidiary.
Comprehensive loss. This resulted in a comprehensive loss of $1,289,190 or $0.0088 per share for the nine-months period ended November 30, 2018 compared to a comprehensive loss of $1,540,678 or $0.0137 per share for the 2017 period. The weighted average number of shares outstanding was 134,776,302 for nine-months period ended November 30, 2018 compared to 120,909,775 for nine-months period ended November 30, 2017.development services.
Liquidity and Capital Resources
As of November 30, 2018August 31, 2019
As at November 30, 2018,August 31, 2019, our current assets were $42,724$20,919 and our current liabilities were $2,896,597,$3,659,629, which resulted in a working capital deficit of $2,853,873. At November 30, 2018,$3,638,710. As of August 31, 2019, current assets were comprised of: (i) $10,878$8,533 in cash; and (ii) $31,846$12,386 in prepaid expenses and other receivables, whiledeposits. Also as of August 31, 2019, current liabilities were comprised of: (i) $23,716$133,315 in accounts payable; (ii) $20,256 inpayable and accrued liabilities; (iii) $2,204,153(ii) $2,838,171 in loans payable; (iv) $78,941payable and (iii) $688,143 due to related parties; and (v) $569,531 due to shareholder.party.
As of November 30, 2018,August 31, 2019, our total assets were $69,832$43,060 comprised of: (i) current assets of $42,724;$20,919; and (ii) equipment, net of depreciation of $27,108.$22,141. The decrease in total assets during the nine-months periodsix months ended November 30, 2018August 31, 2019 from the fiscal year ended February 28, 20182019 was primarily due to a decreasedecreases in cashprepaid expenses and deposits and the depreciated value of $13,130.equipment.
As of November 30, 2018,August 31, 2019, our total liabilities were $2,896,597$3,659,629 comprised of current liabilities. The increase of $19,518 in total liabilities during the nine-months period ended November 30, 2018 from fiscal year ended February 28, 2018 was primarily due to increases in accounts payable of $12,184 and loans payable of $169,482, offset by decreases in accrued liabilities of $8,387, due to related parties of $97,042, and amounts due to a shareholder of $56,719.
Stockholders’ deficit increased from ($2,793,193) at$3,232,026 as of February 28, 20182019 to ($2,826,765) at November 30, 2018.$3,616,569 as of August 31, 2019.
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Cash Flows from Operating Activities
We have generated negative cash flows from operating activities. For the nine-months periodsix months ended November 30, 2018,August 31, 2019, net cash flows used in operating activities was ($848,392)$355,316 compared to ($942,751)$578,386 for the comparable 2017 period. Net cash flows used in operating activities consisted primarily of net loss of ($1,181,258) (2017: $1,644,983), which was adjusted by stock-based compensation of $323,404 (2017: $744,399) and depreciation of $9,545 (2017: $17,780). Net cash flows used in operating activities was further changed by: (i) an increase of $5,227 (2017: $11,105) in prepaid and other receivables; (ii) an increase of $12,866 (2017: $3,836) in accounts payable; and (iii) a decrease of ($7,722) (2017: ($52,678)) in accrued liabilities.
Cash Flows from Investing Activities
For the nine-months periodsix months ended November 30, 2018, we used $5,616 for the purchase of equipment, as compared to $11,998 used in 2017 for the purchase of equipment.August 31, 2018.
Cash Flows from Financing Activities
Net cash flows provided from financing activities during the nine-months periodsix months ended November 30, 2018August 31, 2019 was $839,720,$355,316, which consisted of: $625,000 in proceeds from issuance of shares and $250,247$335,770 in proceeds from loans payable, offset by (i) ($1,218)and $50,000 in due to related parties and (ii) ($34,309) due to a shareholder.proceeds from the issuance of common stock. During the nine-months periodsix months ended November 30, 2017,August 31, 2018, cash flows provided by financing activities was $1,100,441,$674,218, which consisted of $873,163 in proceeds$625,000 from the issuance of shares $166,687 inand $51,992 from the proceeds of loans, payable, and $69,552 due to a shareholder, which was offset by ($8,961) due to related parties.
Material Commitments
The balancesbalance due to a related parties and shareholder areparty is interest free, unsecured and are repayable on demand. The balancesbalance due to a related parties and shareholders areparty is mainly in connection with the services and financing provided for the development of an online complaint resolution platform.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements during the quartersix months ended November 30, 2018August 31, 2019 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.
Plan of Operation
As at November 30, 2018,August 31, 2019, we had an accumulateda working capital deficit of $51,339,859$3,638,710 and we will require additional financing in order to enable us to proceed with our plan of operations.
When we will require additional financing, there There can be no assurance that additional financing will be available to us or that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due. We are pursuing various alternatives to meet our immediate and long-term financial requirements.
We anticipate continuing to rely on equity sales of our common stock and loans in order to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our planned business activities.
Our auditor has issued a going concern opinion.opinion on our financial statements for the fiscal year ended February 28, 2019. Additionally, at August 31, 2019, the Company has a working capital deficit of $3,638,710, and has an accumulated deficit of $53,441,434 since inception. Furthermore, during the six months ended August 31, 2019, the Company used $355,316 in operating activities. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we generate sufficient revenues. There is no assurance we will ever reach that point. In the meantime, the continuation of the Company is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations and the attainment of profitable operations.
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Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations.
We require approximately $1,500,000 for the next 12 months as a reporting issuer and additional funds are required. Before generation of revenue, the additional funding may come from equity financing from the sale of our common stock or loans from management or related third parties. In the event we do not raise sufficient capital to implement ourits planned operations or divest, your entire investment could be lost.
We have not paid any sums for public relations or investor relations.
Recent Accounting Pronouncements
Please seeAs reflected in Note 4 — “Summary2 of Significant Accounting Policies”the Notes to the Interim Condensed CombinedConsolidated Financial Statements, there have been recent accounting pronouncements or changes in accounting pronouncements that impacted the six months ended August 31, 2019 or which are expected to impact future periods as follows:
In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a discussionlessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the effectsright-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases existing at, or entered into after, the beginning of recently issued accounting pronouncements.the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the consolidated financial statements.
Critical Accounting PoliciesIn August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s financial statements.
OurThe Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. To apply these principles, we must make estimates and judgments that affect our reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. In many instances, we reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. To the extentdoes not believe that there are any other new accounting pronouncements that have been issued that might have a material differences between these estimates and actual results, ourimpact on its financial conditionposition or results of operations will be affected. We base our estimates and judgments on historical experience and other assumptions that we believe to be reasonable at the time and under the circumstances, and we evaluate these estimates and judgments on an ongoing basis. We refer to accounting estimates and judgments of this type as critical accounting policies, judgments, and estimates. Management believes there have been no material changes during the three months ended November 30, 2018 to the critical accounting policies reported in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2018.operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of November 30, 2018.August 31, 2019. Based on such evaluation, we have concluded that, as of such date and for the reason described below, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.
Because of our limited operations, we have a limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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The Company currently is not a party to any material legal proceedings and, to the Company’s knowledge; no such proceedings are threatened or contemplated.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Private PlacementShare Exchange
During the three-months periodthree months ended November 30, 2018,August 31, 2019, we issued 435,000sold 250,000 shares of common stock pursuantat $0.20 per share to a debt settlement agreement finalized on May 30, 2018. The shares were valued at $91,350, based on the market price of the shares on the date of settlement.one individual.
The securities referenced above were issued in reliance on the exemption from registration affordafforded by Regulation S promulgated under the Securities Act as a transaction by an issuer not involving a public offering.Act. Such shares of common stock havewill not beenbe registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The investors acknowledgedare acknowledging that the securities to be issued have not been registered under the Securities Act, that they understoodunderstand the economic risk of an investment in the securities, and that they have had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
Except as set forth in this Item 2, there were no unregistered securities sold by us during the quarter ended November 30, 2018August 31, 2019 that were not otherwise disclosed in a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
See Part II, Item 2 of this Form 10-QNone.
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The following exhibits are filed as part of this Form 10-Q:
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101** |
| Interactive data files pursuant to Rule 405 of Regulation S-T. |
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** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: | By: | /s/ Richard Hue | |
| Richard Hue | ||
| Chief Executive Officer, President,
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